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 UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 Washington,
D.C. 20549

 FORM

 ANNUAL
 REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For
the fiscal year ended December 31, 2023

 or

 TRANSITION
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For
the transition period from ________ to ________

 Commission
File Number 001-39678

MEDTECH INC.

 (Exact
name of Registrant as specified in its charter)

 Texas

 59-2219994

 (State
 or other jurisdiction of

 (I.R.S.
 Employer

 incorporation
 or organization)

 Identification
 No.)

 1200
Summit Ave, Suite 414, Fort Worth, Texas 76102

 (Address
of principal executive offices)

 (817) 529-2300

 (Registrant's
telephone number, including area code)

 Securities
registered pursuant to Section 12(b) of the Act:

 Title
 of each class

 Trading
 Symbol(s)

 Name
 of each exchange on which registered

 Common
 Stock, $0.001 par value

 SMTI

 The
 Nasdaq Capital Market

 Securities
registered pursuant to Section 12(g) of the Exchange Act: None

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
 No

by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes No

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company" and "emerging growth" company in Rule 12b-2 of the Exchange Act.

 Large
 accelerated filer

 Accelerated
 filer

 Non-accelerated
 filer

 Smaller
 reporting company

 Emerging
 growth company

 If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered
public accounting firm that prepared or issued its audit report.

 If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 The
aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2023, based
on the $40.10 closing price as of such date was approximately $ 151,156,822.

 As
of March 22, 2024, 8,622,805 shares of the Issuer's common stock, $0.001 par value per share, were issued and outstanding.

 DOCUMENTS
INCORPORATED BY REFERENCE

 The
information required by Part III of this Annual Report on Form 10-K, to the extent not set forth herein, is incorporated by reference
to the registrant's Definitive Proxy Statement on Schedule 14A relating to the 2024 Annual Meeting of Shareholders which will be
filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Annual Report on Form
10-K relates.

MEDTECH INC.

 Form

 For
the Year Ended December 31, 2023

 Page

 PART
 I.

 ITEM

 BUSINESS

 ITEM
 1A

 RISK FACTORS

 ITEM
 1B

 UNRESOLVED STAFF COMMENTS

 ITEM
 1C

 CYBERSECURITY

 ITEM

 PROPERTIES

 ITEM

 LEGAL PROCEEDINGS

 ITEM

 MINE SAFETY DISCLOSURES

 PART
 II.

 ITEM

 MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 ITEM

 RESERVED

 ITEM

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

 ITEM
 7A

 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 ITEM

 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 ITEM

 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 ITEM
 9A

 CONTROLS AND PROCEDURES

 ITEM
 9B

 OTHER INFORMATION

 ITEM
 9C

 DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 PART
 III.

 ITEM

 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 ITEM

 EXECUTIVE COMPENSATION

 ITEM

 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 ITEM

 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 ITEM

 PRINCIPAL ACCOUNTING FEES AND SERVICES

 PART
 IV.

 ITEM

 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 ITEM

 FORM 10-K SUMMARY

 Sanara,
Sanara MedTech, our logo and other trademarks or service marks appearing in this report are the property of Sanara MedTech Inc. Trade
names, trademarks and service marks of other companies appearing in this report are the property of their respective owners. Solely for
convenience, the trademarks, service marks and trade names included in this report are without the, or other applicable
symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable
law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.

otherwise indicated, "Sanara MedTech," "Sanara," the "Company," "our," "us,"
or "we," refer to Sanara MedTech Inc. and its consolidated subsidiaries.

 CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 This
report 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. 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 implement our comprehensive wound and skincare strategy through acquisitions and investments and our ability to realize
 the anticipated benefits of such acquisitions and investments;

 our
 ability to meet our future capital requirements;

 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 develop and commercialize new products and products under development, including the manufacturing, distribution, marketing
 and sale of such products;

 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;

 our
 ability to manage product inventory in an effective and efficient manner;

 the
 failure of third-party assessments to demonstrate desired outcomes in proposed endpoints;

 our
 ability to successfully expand into wound and skincare virtual consult and other services;

 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, regulations and reimbursement policies relating to the labeling, marketing and sale of
 our products and our planned expansion into wound and skincare virtual consult and other services 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.

 All
forward-looking statements speak only as of the date on which they are made. For a more detailed discussion of these and other factors
that may affect our business, see the discussion in "Item 1A. Risk Factors" and "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations" in this report. We caution that the foregoing list of factors is
not exclusive, and new factors may emerge, or changes to the foregoing factors may occur, that could impact our business. We do not undertake
any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this report, except
to the extent required by applicable securities laws.

 PART
I

 Item
1. BUSINESS

 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, chronic wound and skincare markets. Our products, services and technologies are designed
to achieve our goal of providing better clinical outcomes at a lower overall cost for patients regardless of where they receive care.
We strive to be one of the most innovative and comprehensive providers of effective surgical, wound and skincare solutions and are continually
seeking to expand our offerings for patients requiring treatments across the entire continuum of care in the United States.

 We
currently market several products across surgical and chronic wound care applications and have multiple products in our pipeline. On
August 1, 2023, we acquired, among other things, the underlying intellectual property of, as well as the rights to manufacture and sell,
CellerateRX Surgical Activated Collagen ("CellerateRX Surgical"), our primary product, and HYCOL Hydrolyzed Collagen ("HYCOL")
from Applied Nutritionals, LLC ("Applied") for human wound care use (such transaction, the "Applied Asset Purchase").
Prior to such time, we had licensed the rights to these products through a sublicense agreement (the "Sublicense Agreement")
with CGI Cellerate RX, LLC ("CGI Cellerate RX"), an affiliate of The Catalyst Group, Inc. ("Catalyst"), both
of which are related parties. In connection with the asset purchase, Applied assigned its license agreement with CGI Cellerate RX to
a wholly owned subsidiary of the Company. We also license certain products from Rochal Industries, LLC ("Rochal") and Cook
Biotech Inc. ("Cook Biotech").

 In
April 2022, we entered into a merger agreement through which Precision Healing Inc. ("Precision Healing") became a wholly
owned subsidiary of the Company. Precision Healing is developing a diagnostic imager and lateral flow assay ("LFA") for assessing
a patient's wound and skin conditions. This comprehensive wound and skin assessment technology is designed to quantify biochemical
markers to determine the trajectory of a wound's condition to enable better diagnosis and treatment protocol. In December 2023,
we received 510(k) clearance from the U.S. Food and Drug Administration ("FDA") for the Precision Healing diagnostic imager.
We are evaluating regulatory pathways for the Precision Healing LFA.

 In
July 2022, we entered into a membership interest purchase agreement with Scendia Biologics, LLC ("Scendia") and Ryan Phillips
("Phillips") pursuant to which we acquired 100% of the issued and outstanding membership interests in Scendia from Phillips.
Since our acquisition of Scendia, we have been selling a full line of regenerative and orthobiologic technologies including (i) TEXAGEN
Amniotic Membrane Allograft ("TEXAGEN"), (ii) BiFORM Bioactive Moldable Matrix ("BiFORM"), (iii) ACTIGEN Verified
Inductive Bone Matrix ("ACTIGEN") and (iv) ALLOCYTE Advanced Cellular Bone Matrix ("ALLOCYTE").

 In
November 2022, we established a partnership with InfuSystem Holdings, Inc. ("InfuSystem") focused on delivering a complete
wound care solution targeted at improving patient outcomes, lowering the cost of care, and increasing patient and provider satisfaction.
The partnership enables InfuSystem to offer innovative products including negative pressure wound therapy ("NPWT")
devices and supplies and our advanced wound care product line and associated services to new customers.

 In
November 2023, we launched BIASURGE Advanced Surgical Solution ("BIASURGE"). BIASURGE is a no-rinse, advanced surgical solution
used for wound irrigation. It contains an antimicrobial preservative effective against a broad spectrum of pathogenic microorganisms.
BIASURGE is indicated for use in the mechanical cleansing and removal of debris, including microorganisms, from surgical wounds.

 Comprehensive
Value-Based Care Strategy

 In
June 2020, we formed a subsidiary, United Wound and Skin Solutions, LLC (formerly known as "WounDerm"), to hold certain investments
and operations in wound and skincare virtual consult services. In 2023, WounDerm was renamed and is now doing business as "Tissue
Health Plus" ("THP"). THP is continuing its mission to simplify skin health, starting with wound care through a refined
business plan. Through THP, we plan 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 care ("VBC") primary care companies, with Medicare Advantage payers as
the initial target segment for this program.

 THP's
programs are expected to enable payers to divest wound care spend risk, reduce wound related hospitalizations and improve patient quality
of life. THP plans to coordinate delivery of community and home-based wound care for its managed patients. Community based care spans
a variety of settings including physician offices, skilled nursing homes, 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.

 We
anticipate that THP's customer contracts will have three-to-five-year terms. These contracts are expected to incorporate a mix
of value-based pricing methodologies including episodic, "per member per month", and "fee for value" pricing.
We believe this approach is aligned with the financial goals of the payers and will help deliver outstanding clinical outcomes for the
patients.

 Our
vision for our comprehensive approach consists of three key sets of planned capabilities:

 (a)
 Care
 Hub – This virtual patient monitoring, care coordination and navigation center
 is expected to help doctors and nurses support their patients throughout their wound care journey, from
 prevention to treatment. We expect to have Care Hub staffed by wound care certified nurse
 practitioners ("NPs") and registered nurses ("RNs"), incorporating
 care delivery best practices from partnerships with Direct Dermatology Inc. ("DirectDerm")
 and certain physician-led multispecialty wound care groups. With NPs leading the care hub,
 RNs would assume the role of wound specialists, providing patients with expert review and support
 of the overarching plan of care on each patient's journey through the process. In addition,
 care navigators are expected to serve as a primary point of contact for patients and their
 providers, coordinating care, managing appointments and ensuring seamless communication among
 all team members.

 (b)
 Managed
 Services Organization ("MSO") Network – With respect to patient-side
 wound care, our plan is that THP's programs would be performed by a network of third-party
 providers who will be contracted through managed services agreements. These providers would
 include podiatrists, wound care provider groups, primary care physicians, and home health
 agencies. The providers in the THP network are expected to leverage THP's standard
 of care, patient education and tools to deliver optimal patient outcomes with high predictability
 and efficiency.

 (c)
 Technology
 Platform – THP's technology platform will focus on scaling workflows of THP's Care Hub and MSO Network through
 automation and integration. We expect the technology platform to enable enhanced patient empowerment and self-healthcare. We anticipate
 that our technology platform will leverage our technology investments and partnerships with Precision Healing, Pixalere Healthcare, Inc.
 ("Pixalere") and others, by leveraging modern technology including artificial intelligence and machine learning. Our
 platform technology is expected to manage program economics, standards of care, patient monitoring, wound assessments, network
 performance monitoring, and revenue cycle management. We expect that each of these components will work in concert with each other,
 constantly improving economics and care delivery.

 We are seeking a partner to facilitate commercialization
of Tissue Health Plus and share in the cost of development of the program.

 Market
Scale

 A
study by a physician at the Department of Surgery for the Indiana University Health Comprehensive Wound Center found that approximately
8.2 million patients suffer from surgical and chronic wounds each year in the United States. Furthermore, according to an article published
by the American College of Surgeons and Surgical Infection Society, in the United States, the annual treatment cost projections for all
wounds is approximately $28 billion with the estimated annual cost of surgical site infections ranging from $3.5 billion to $10 billion.
Looking at the target markets for our specific products, according to SmartTRAK Advanced Wound Care, the U.S. advanced dressings market
is estimated to be $1.3 billion and the U.S. wound biologics market is estimated to be $2 billion. The U.S. teledermatology market alone
is estimated to grow from $5 billion in 2019 to $45 billion by 2027 according to a research report by Fortune Business Insights.

 Summary
of Our Product, Service and Technology Offerings and Development Programs

 We
are committed to developing and commercializing innovative products that address the challenges physicians face in diagnosing and treating
wound and skincare ailments. Our surgical products, CellerateRX Surgical, TEXAGEN, BiFORM, ACTIGEN, ALLOCYTE, ALLOCYTE Plus Advanced
Viable Bone Matrix ("ALLOCYTE Plus"), BIASURGE, FORTIFY TRG Tissue Repair Graft ("FORTIFY TRG"), and FORTIFY
FLOWABLE Extracellular Matrix ("FORTIFY FLOWABLE") are used in a wide range of surgical specialties to help promote patient
healing and reduce the risk of complications. CellerateRX Surgical products, TEXAGEN products, FORTIFY TRG, and FORTIFY FLOWABLE are
used in specialties including cardiothoracic, colorectal, general surgery, hand, head and neck, high-risk obstetrics and gynecology,
Mohs surgery, neurosurgery, oncology, orthopedic (hip and knee, sports, spine, joint, foot and ankle, ortho trauma and ortho oncology),
plastic/reconstructive, podiatric, urology, and vascular. BiFORM, ACTIGEN, ALLOCYTE, and ALLOCYTE Plus are used in orthopedic specialties
including hip and knee, sports, spine, joint, foot and ankle, ortho trauma and ortho oncology. Currently, substantially all of our revenue
is derived from the sale of surgical products.

 In
2021, we launched FORTIFY TRG and FORTIFY FLOWABLE, which we license from Cook Biotech. FORTIFY TRG and FORTIFY FLOWABLE, are currently
510(k) cleared for use in the surgical segment. We believe that both products are a complementary offering to CellerateRX Surgical and
we are working to increase both the number of contract opportunities and facility approvals to drive further sales growth.

 In
July 2022, through the acquisition of Scendia, we expanded our surgical product offerings to include regenerative and orthobiologic technologies.
We chose to focus our sales and marketing on four key products: TEXAGEN, BiFORM, ACTIGEN and ALLOCYTE. As part of the integration of
Scendia into Sanara, we are continuing to work to add facility approvals for these products.

 During
the third quarter of 2022, we began to experience supply issues with the ALLOCYTE product line. From the fourth quarter of 2022 through
September of 2023, we were unable to fill certain orders for this product, which negatively impacted our sales growth. The supply constraint
was caused by significant supplier limits on qualifying eligible donor tissue and supplier necessity to subcontract all processing to
secondary suppliers. We have since expanded the ALLOCYTE product line with the release of ALLOCYTE Plus, which is processed by an alternative
supplier with in-house processing capabilities. Our first sales of ALLOCYTE Plus occurred in October 2023.

 In
November 2023, we launched BIASURGE. BIASURGE is a no-rinse, advanced surgical solution used for wound irrigation. It contains an antimicrobial
preservative that is effective against a broad spectrum of pathogenic microorganisms. BIASURGE is indicated for use in mechanical cleansing
and removal of debris, including microorganisms, from surgical wounds.

 In
December 2023, we entered into an exclusive license agreement with Tufts University ("Tufts") to develop and commercialize
certain new bioactive collagen peptide-based applications using patented technology licensed from Tufts. We believe the licensed technology,
supported by the expertise of our research and development team, will help us expand our product offering of collagen products.

 Our
post-acute wound care products, HYCOL, BIAKO S Antimicrobial Skin and Wound Cleanser ("BIAKO S AWC") and BIAKO S
Antimicrobial Wound Gel ("BIAKO S AWG"), are targeted for use across the continuum of care, including home health, hospice,
physician offices, retail, skilled nursing facilities ("SNFs"), and wound care clinics. Our post-acute wound care products
are indicated for use on stage I-IV pressure ulcers, diabetic foot ulcers ("DFUs"), venous stasis, arterial, post-surgical
wounds, first- and second-degree burns and donor sites. BIAKO S AWC is also available in an irrigation bottle (BIAKO S Antimicrobial
Skin and Wound Irrigation Solution) that can be used in conjunction with NPWT instillation and dwell as well as other wound irrigation
needs.

 Further,
we have a robust pipeline of products under development to further expand our position in the surgical and wound care markets. We
believe our pipeline initiatives will deepen our comprehensive portfolio of offerings and allow us to build product and technology
platforms related to hydrolyzed collagen, wound bed preparation, and antimicrobials in the surgical and wound care
markets.

 Strategy

 Drive additional market penetration as well as geographic expansion for our products. We are actively working to expand our geographic
footprint across the entire United States. We also intend to leverage our comprehensive product, services and technology-based offerings
portfolio and relationships with key constituents to deepen our presence in the surgical, wound and skincare markets. We believe the
breadth and flexibility of the products we offer allow us to address a wide variety of surgical site needs, wound types and sizes and
offer significant new opportunities for sales growth. In addition, we believe that as we continue to offer new products, services and
technology-based offerings, our salesforce's ability to reach additional customers in new and existing geographic regions while
penetrating further in existing customer accounts will be enhanced.

 Launch new innovative products. We are actively developing additional proprietary products for the surgical and chronic wound
and skincare markets. We expect these products and services to deepen our portfolio of technologies to improve surgical site outcomes
and treat chronic wounds. We are focused on offering additional products and services that are more efficacious than competing products
and services and provide a stronger value proposition (lower total cost to heal and less time to heal, leading to reduced costs to the
healthcare system).

 Seek and establish partnerships and product, services and/or technology acquisitions. We plan to continue to seek and establish
partnerships in the United States and internationally to provide innovative products, services and technologies. We believe that partnerships
will be a key driver of our growth in the future. We also intend to selectively pursue acquisitions of businesses and technologies that
complement our existing strategy and footprint.

 Seek and establish partnerships with Medicare Advantage, at-risk payors and other types of healthcare at-risk models. We believe
we have assembled the products, services and technologies to offer a comprehensive strategy to help improve outcomes and lower wound
care costs across the continuum of care. Looking ahead, we plan to leverage these capabilities to partner with value-based care models
to aid in the treatment of their wound care patients who currently are a significant cost for the healthcare system and challenging population
to heal.

 Capture patients throughout the entire continuum of care. We intend to continue expanding our platform to aid in treating wound
and skincare patients as they progress through the healing process in all care settings. We formed Tissue Health Plus to hold certain
investments in technologies and operations in wound and skincare virtual consult services. We believe our service offerings will allow
us to collect and analyze large amounts of data on patient conditions and outcomes that will improve treatment protocols and ultimately
lead to more evidence-based healing formularies to improve outcomes in the future. We anticipate that this data will also enable us to
participate in the creation of new standards of care that promote patient compliance and enable direct dialogue between patients, clinicians
and payors, resulting in greater satisfaction for patients, their caregivers, clinicians and payors.

 Competitive
Strengths

 Attractive markets for surgical and chronic wound care. We believe the surgical and chronic wound care markets will continue to
see accelerated growth given favorable global tailwinds that include an aging population, increasing costs of health care, recognition
of difficult-to-treat infection threats such as biofilms, and the increasing prevalence of diabetes and obesity. We believe there will
be growing adoption of our products due to their clinical efficacy and cost effectiveness for all key constituents compared to traditional
wound care products.

 Comprehensive solution for improved wound care outcomes. We are dedicated to offering a comprehensive portfolio of products, services
and technologies to improve wound care treatment outcomes. We believe we are the only company that will be able to provide a comprehensive
solution for wound care which includes a wound and skin specific electronic medical record ("EMR"), virtual consult services with expert wound care providers and dermatologists,
propriety diagnostics and highly efficacious proprietary products allowing us to effectively treat wound care patients in any care setting.

 Wound care products for all care settings. Our wound care product portfolio allows clinicians to personalize solutions to meet
the needs of individual wound care patients in all care settings including acute (hospitals and long-term acute care hospitals) and post-acute
(wound care clinics, physician offices, SNFs, home health, hospice, podiatrists and retail).

 Innovative pipeline and proven clinical performance. We have a robust pipeline of surgical, wound and skincare products that we
expect to market in the near term. We believe the efficacy of our offerings will be proven via statistically significant collected and
analyzed clinical and health economic outcomes data, resulting in expanded adoption of our products at a lower overall cost to payors.

 Proven executive leadership team with a long-term track record of value creation. We are led by a dedicated and seasoned management
team with significant industry experience who have successfully executed our strategic implementation to date by launching new products
and technologies through investment in new areas of growth. We believe our management team has the vision and experience to implement
our future growth strategy.

 Market
Opportunities for Our Products, Services and Technology-Based Offerings

 According
to a study published by the Value in Health journal, roughly 15% of the Medicare beneficiary population has chronic nonhealing wounds.
Chronic wounds do not advance through the phases of healing in a normal progression and do not show significant progress toward healing
in 30 days. Factors contributing to the chronicity of the wound may include pressure/friction, trauma, insufficient blood flow and oxygenation
in locations such as the lower extremities, increased bacterial load, excessive proteases, degraded growth factors, matrix metalloproteinases,
senescent/aberrant cells or inappropriate treatment. Examples of chronic wounds include DFUs, venous leg ulcers ("VLUs"),
arterial ulcers, pressure ulcers and hard-to-heal surgical/traumatic wounds. In each of the various wound types, the presence of biofilms
is a frequent cause for chronicity of wounds and the removal of biofilms is a crucial step to commence healing. Biofilms need to be eradicated
to prevent further deterioration of the wound that may result in additional negative patient outcomes. If not effectively treated, these
wounds can lead to potentially severe complications, including further infection, osteomyelitis, fasciitis, amputation and increased
mortality. Chronic wounds are primarily seen in the elderly population. For example, a 2019 study published in Advances in Wound Care
reported that in the United States, 3% of the population over the age of 65 had open wounds. According to the same study, in 2020, the
U.S. government estimated that the elderly population totaled 55 million people, suggesting that chronic wounds will continue to be an
increasingly persistent problem in this population. Four common chronic and other hard-to-heal wounds are:

 Surgical/traumatic wounds. Surgical wounds form as a result of various types of surgical procedures such as investigative or corrective,
minor or major, open (traditional) or minimal access surgery, elective or emergency, and incisions (simple cuts) or excision (removal
of tissue), among others. Traumatic wounds form as a result of cuts, lacerations or puncture wounds, which have caused damage to the
skin and underlying tissue. Severe traumatic wounds may require surgical intervention to close the wound and stabilize the patient. Surgical/traumatic
hard-to-heal wounds develop for various reasons, such as local surgical complications, suboptimal closure techniques, presence of foreign
materials, exposed bones or tendons and infection. In the United States, millions of people receive post-surgical wound care annually,
and the typical operative patient has comorbidities that create challenges with post-operative wound healing.

 Diabetic Foot Ulcers. Diabetes can lead to a reduction in blood flow, which can cause patients to lose sensation in their feet
and may prevent them from noticing injuries, sometimes leading to the development of DFUs, which are open sores or ulcers on the feet
that may take several weeks to heal, if ever. According to the 2020 National Diabetes Statistics Report by the Center for Disease Control
and Prevention, in the United States alone, over 34 million people, or approximately 10% of the population, suffer from diabetes, a chronic,
life-threatening disease.

 Venous Leg Ulcers. VLUs develop as a result of vascular insufficiency, or the inability for the vasculature of the leg to return
blood back toward the heart properly and, according to a 2013 report published by the International Journal of Tissue Repair and Regeneration,
VLUs affect approximately 600,000 people per year in the United States alone. These ulcers usually form on the sides of the lower leg,
above the ankle and below the calf, and are slow to heal and often recur if preventative steps are not taken. The risk of VLUs can be
increased as a result of a blood clot forming in the deep veins of the legs, obesity, smoking, lack of physical activity or work that
requires many hours of standing.

 Pressure Injury/Ulcers. Pressure injury/ulcers are injuries to the skin and underlying tissue resulting from prolonged pressure,
or pressure in combination with shear or friction. Constant pressure on an area of skin reduces blood supply to the area and over time
can cause the skin to break down and form an open ulcer. These often occur in patients who are hospitalized or confined to a chair or
bed and most often form on the skin over bony areas, where there is little cushion between the bone and the skin, such as heels, ankles,
hips and the tailbone. Annually, 2.5 million pressure injury/ulcers are treated in the United States in acute care facilities alone,
according to a 2006 study published in the Journal of the American Medical Association.

 Sanara
Products

 We
market and distribute surgical, wound and skincare products and services to physicians, hospitals, clinics, and post-acute care settings.
Our products are primarily sold in the U.S. surgical tissue repair and advanced wound care markets. We believe we have the ability to
drive our product pipeline from concept to preclinical and clinical development while meeting quality and regulatory requirements. We
are constantly seeking long-term strategic partnerships with a focus on products that improve outcomes at a lower overall cost.

 CellerateRX Surgical is a medical hydrolysate of Type I bovine 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
powder is sterilized, packaged and designed specifically for use in the operating room or other sterile environment. CellerateRX Surgical
products are primarily purchased by hospitals and ambulatory surgical centers for use by surgeons on surgical wounds. The predominance
of CellerateRX Surgical products are used for a variety of surgical wounds, including those associated with orthopedic, spine, trauma
and oncologic procedures. Additional surgical wounds that may benefit from the use of CellerateRX Surgical include cardiovascular, gynecologic,
urologic and plastic/reconstructive related procedures.

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. 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). 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 who suffer exorbitant costs for readmission of these patients within 30 days of surgery.

 HYCOL
products are a medical hydrolysate of Type I bovine collagen intended for the management of full and partial thickness wounds
including pressure ulcers, venous and arterial leg ulcers and DFUs. HYCOL is primarily used in or targeted to post-acute care
settings such as home health, SNFs, wound clinics and physician offices and is currently eligible for reimbursement under Medicare
Part B. HYCOL provides the benefit of hydrolyzed collagen directly in the wound bed. Therefore, unlike with the body's own
native collagen or native collagen products, the body does not have to break HYCOL down before use, which is extremely beneficial
when treating elderly and otherwise compromised patients with comorbidities such as diabetes and peripheral vascular
disease.

AWC is a 510(k) cleared, patented product that contains synergistic ingredients that have been shown to impact mature biofilm
microbes. BIAK S AWC is indicated for the mechanical removal of debris, dirt, foreign materials, and microorganisms from
wounds including stage I-IV pressure ulcers, DFUs, post-surgical wounds, first- and second-degree burns, as well as grafted and
donor sites. BIAK S AWC is effective in killing planktonic microbes and immature and mature bacterial and fungal biofilms
within the wound. In addition, safety studies demonstrated that BIAK S AWC is biocompatible and supports the wound healing
environment. BIAK S AWC is also available in an irrigation bottle (BIAK S Antimicrobial Skin and Wound Irrigation
Solution) that can be used in conjunction with NPWT instillation and dwell as well as other wound irrigation needs.

AWG is an antimicrobial hydrogel wound dressing that can be used alone or in combination with BIAK S AWC. The BIAK S AWG
is also 510(k) cleared and the product launched in November 2020 to complement BIAK S AWC.

AWC and BIAK S AWG are effective against planktonic microbes as well as immature and mature biofilms within the wound. When used
together, the cleanser can be used initially to clean a wound and disrupt biofilms (removing 99% in 10 minutes). The gel can then be
applied and remains in the wound for up to 72 hours, helping to continue disrupting biofilm microbes. In a study conducted in 2020, BIAK S
AWG, in combination with BIAK S AWC, was compared to a number of commercially available wound cleansers to treat chronic wounds
such as pressure, diabetic and venous ulcers. The BIAK S combination of cleansing and gel dressing demonstrated a reduction in
the biofilm microbes by 7.5 logs (>99.99% reduction).

 BIASURGE
is a no-rinse advanced surgical solution used for wound irrigation. It contains an antimicrobial preservative effective against a broad
spectrum of pathogenic microorganisms. BIASURGE is indicated for use in the mechanical cleansing and removal of debris, including microorganisms,
from surgical wounds. First sales of BIASURGE occurred in early November 2023.

 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. First sales of this product
occurred in the fourth quarter of 2021.

 FORTIFY
FLOWABLE is an advanced wound care device that presents Small Intestine Submucosa Extracellular Matrix technology in a way that can fill
irregular wound shapes and depths. FORTIFY FLOWABLE is indicated for the management of wounds including: partial and full-thickness wounds,
pressure ulcers, venous leg ulcers, diabetic foot ulcers, chronic vascular ulcers, tunneled/undermined wounds, surgical wounds (donor
sites/grafts, post-Mohs surgery, post-laser surgery, podiatric, wound dehiscence sites), traumatic wounds (abrasions, lacerations, second-degree
burns, and skin tears) and draining wounds. FORTIFY FLOWABLE is provided sterile and is intended for one-time use. It is a 510(k) cleared
product. First sales of this product occurred in the first quarter of 2022.

 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 verified inductive allograft putty with conformable handling
properties. ALLOCYTE and ALLOCYTE Plus are human allograft cellular bone matrices containing bone-derived progenitor cells and conformable
bone fibers. These viable cellular allografts are ready to use upon thawing and have fibrous handling properties.

Published Studies on CellerateRX Surgical

Surgical is a medical hydrolysate of Type I bovine collagen indicated for the management of surgical, traumatic, and partial- and full-thickness
wounds as well as first- and second-degree burns. CellerateRX Surgical is sterilized, packaged and designed, specifically for use in
the operating room (or sterile field), including additional sterility validation. It can be applied in the operating room to surgical
wounds that may result from a wide variety of surgical procedures to support the wound healing environment.

 An animal study model by the Indiana University Center
for Regenerative Medicine and Engineering and the McGowan Institute for Regenerative Medicine was published in Advances in Wound Care
 in September of 2023. The study, titled "Hydrolyzed Collagen Powder Dressing Improves Wound Inflammation, Perfusion, and Breaking
Strength of Repaired Tissue," demonstrated the effects of CellerateRX Surgical powder on resolution of wound inflammation, perfusion,
closure, and breaking strength of the repaired skin. Moreover, the study provided translational research validating published clinical
case series and further highlighting mechanistic effects of hydrolyzed collagen. Future empirical and clinical research revealing the
unique support hydrolyzed collagen provides the wound environment is currently ongoing.

 Several
research findings involving CellerateRX Surgical powder have been noted in scientific literature. For example, in November 2021, Dr.
William Hotchkiss published a retrospective study of 154 patients in JSM Neurosurgery and Spine, in which patients underwent spinal surgery
and CellerateRX Surgical was utilized in the surgical wound. The study found a lower wound dehiscence rate in a high-risk patient population,
when compared to previously published wound complication rates in the literature. Another retrospective case study regarding the use
of CellerateRX Surgical was recently published by Dr. Alex Gitelman in November 2022. This study of 54 patients undergoing spinal surgery
demonstrated no incidence of surgical wound complication.

 In
a retrospective study published in the Journal of Surgery in October 2023, the impact of CellerateRX Surgical collagen on surgical site
infection rates in elective multispecialty surgical procedures was case matched 1:3 for a total of 5,335 patients and demonstrated an
overall reduction of 59% in surgical site infection rates. This reduction was most pronounced in the clean cases with a 69% decrease
in surgical site infection rates.

 Intellectual
Property

 Since
the acquisitions of Rochal and Precision Healing and the Applied Asset Purchase, our research and development activities have included
internally developing additional proprietary products, services and technologies for the surgical and chronic wound and skincare markets
and actively working with third-party research and development partners from which we license products. For our internally developed
products, we seek patent protection for our inventions in order to protect and differentiate our products and technologies and establish
a defense against third-party infringement claims. With the aim of optimizing commercial and regulatory success, our proprietary technology
and innovative applications thereof are protected by product, system, process, and method-of-use patent claims. We believe that our granted
patents and pending applications collectively protect our internally developed intellectual property, both in terms of our existing products,
as well as our anticipated pipeline of new offerings.

 In
July 2021, we acquired certain assets from Rochal, including intellectual property. With respect to the assets we acquired from Rochal
and products developed following the Rochal acquisition, our patent portfolio includes, among others, eight issued U.S. patents, including
U.S. Patent No. 8,829,053 entitled "Biocidal Compositions and Methods of Using the Same" (expiring December 7, 2031) relating
to BIAKO S AWC, BIAKO S AWG and BIASURGE Surgical Wash, as well as over 100 issued patents in foreign jurisdictions. Following
our acquisition by merger of Precision Healing in April 2022, described in further detail below, our patent portfolio now includes, among
others, five pending U.S. patent applications as well as one pending international patent application. Following the Applied Asset Purchase
in August 2023, described in further detail below, our portfolio also now includes, among others, nine additional U.S. patent applications,
five trademarks, four 510(k) clearances and various domain names.

 In
addition to the above patents, our pending patent applications and new filings are representative of our ongoing efforts to broaden our
portfolio as we continue developing new products for the surgical and chronic wound and skincare markets. We intend to further grow our
patent portfolio by continuing to patent new products as they are developed, to defend intellectual property as we believe necessary
by actively pursuing any infringements, to pursue the commercial opportunities our patents provide for our innovations, and to continue
to develop our brands and trademarks.

 Sales
and Marketing

 As
of December 31, 2023, we employed 39 field sales representatives covering 42 states. Our field sales representatives are recruited based on their
previous industry experience and professional performance. We constantly evaluate new markets and sales opportunities to add to our
sales teams as warranted.

 Field
sales representatives are initially trained through an internal learning management system, "SanaraU", which gives them further
product and surgical specialty training including wound etiology, operating room etiquette and credentialing requirements. After completing
their internal training, new hire field sales representatives participate in field training with experienced field trainers to get insights
into best practice as well as real world training. The initial training period lasts approximately eight weeks. Field sales representatives
are supported by regular updated training modules on product information and best practices.

 A
key component of our sales and marketing efforts involves working with physicians and clinicians to champion our products in their facilities.
We work closely with surgeons and health system stakeholders to demonstrate the efficacy and beneficial impact of our surgical products
and successfully navigate the hospital value analysis committee approval process, allowing our products to be sold in those facilities.
Similarly, we work with clinicians to demonstrate the efficacy of our wound care products in their respective care settings. If our sales
and marketing efforts are successful, the clinicians then advocate for the use of our products when medically necessary.

 Manufacturing,
Supply and Production

 We
do not own or operate our own manufacturing facilities. We rely on contract
manufacturing for our products. Our contract manufacturing strategy is intended to drive cost leverage through scale and avoid the high
capital outlays and fixed costs associated with constructing and operating manufacturing facilities. Our manufacturing partners have
internal compliance processes to maintain the high quality and reliability of our products. We do source some packaging and marketing
materials separate from our licensing partners.

 During
the third quarter of 2022, we began to experience supply issues with the ALLOCYTE product line. The supply constraint was caused by significant
supplier limits on qualifying eligible donor tissue and supplier necessity to subcontract all processing to secondary suppliers. From
the fourth quarter of 2022 through September 2023, we were unable to fill certain orders for this product, which negatively impacted our
sales. We have since expanded the ALLOCYTE product line with the release of ALLOCYTE Plus, which is processed by an alternative supplier
with in-house processing capabilities. Our first sales of ALLOCYTE Plus occurred in October 2023. We have a sufficient supply of ALLOCYTE
Plus to meet currently expected demand and believe we have measures in place to regularly stock the product in the future.

 Reimbursement,
Clinical Validation and Clinical Utility

 We
do not promote our products based on their reimbursement status, however, we are mindful of the benefits of a favorable reimbursement
coverage status to increase patient access and support our research and development efforts to supply the highest efficacy solutions.

 Three
of our chronic wound care products (BIAK S AWG, HYCOL Hydrolyzed Collagen Powder and HYCOL Hydrolyzed Collagen Gel) have Healthcare
Common Procedure Coding System A codes and are eligible for reimbursement through Medicare Part B. There is currently no reimbursement
for BIAK S AWC and BIAK S Antimicrobial Skin and Wound Irrigation Solution.

 We
anticipate that our THP strategy, once launched, will provide a significant amount of patient data to help us measure our products'
effectiveness on improving patient outcomes while simultaneously reducing healthcare costs. We believe our reimbursement strategy, including
establishing the clinical validation, clinical utility and health economics of our products, will allow us to drive improved reimbursement
coverage for our products and technologies.

 Competition

 The
wound care market is served by several large, multi-product line companies as well as a number of small companies. Our products compete
with primary dressings, advanced wound care products, collagen matrices and other biopharmaceutical products. Manufacturers and distributors
of competitive products include Smith & Nephew plc, Medline Industries, Inc., ConvaTec Group plc, M lnlycke Health Care AB,
3M Company, Integra LifeSciences Holdings Corporation and numerous others. Many of our competitors are significantly larger than we are
and have greater financial and personnel resources.

 With
respect to our comprehensive value-based care strategy, THP plans to offer a comprehensive wound care and dermatology strategy to expand
cost-effective, high-quality wound and skincare to all patients throughout the care setting continuum. Although novel in its comprehensive
offerings and solutions, there are existing competitors for each of the verticals in which THP plans to offer services and solutions.
Any clinical wound care or dermatology physician provider group that has incorporated telemedicine into their practice could be considered
competitive. However, most of these groups are not offering VBC contracts to payers, integrating prevention into their programs, or enabling
continuity across the different settings of care. Examples of large wound care specialty practices may include Vohra Physician Group,
Healogics Specialty Physicians and WoundTech.

 Licensing
and Distribution Agreements

Surgical Activated Collagen

 In
August 2018, we entered into an exclusive, world-wide Sublicense Agreement with CGI Cellerate RX to distribute CellerateRX Surgical and
HYCOL products into the surgical and wound care markets. Pursuant to the Sublicense Agreement, we paid royalties of 3-5% of annual collected
net sales of CellerateRX Surgical and HYCOL. In August 2023, we acquired the underlying intellectual property of, as well as the rights
to manufacture and sell, CellerateRX Surgical and HYCOL products from Applied. In connection with this acquisition, Applied assigned
its license agreement with CGI Cellerate RX to a wholly owned subsidiary of the Company and no further royalties are due to Applied thereunder.

Antimicrobial Wound Gel and BIAK S Antimicrobial Skin and Wound Cleanser

 In
July 2019, we executed a license agreement with Rochal pursuant to which we acquired an exclusive world-wide license to market, sell
and further develop antimicrobial products for the prevention and treatment of microbes on the human body utilizing certain Rochal patents
and pending patent applications (the "BIAK S License Agreement"). Currently, the products covered by the BIAK S
License Agreement are BIAK S AWG and BIAK S AWC. Both products are 510(k) cleared. Our Executive Chairman is a director of
Rochal, and indirectly a significant shareholder of Rochal, and through the potential exercise of warrants, a majority shareholder of
Rochal. Another one of our directors is also a director and significant shareholder of Rochal.

commitments under the terms of the BIAK S License Agreement include:

 We
 pay Rochal a royalty of 2-4% of net sales. The minimum annual royalty due to Rochal was $130,000
 in 2023 and will increase by $10,000 each subsequent calendar year up to a maximum amount
 of $150,000.

 We
 could pay an additional annual royalty based on specific net profit targets from sales of
 the licensed products, subject to a maximum of $1,000,000 during any calendar year.

previously terminated by the parties, the BIAK S License Agreement expires with the related patents in December 2031. Under this
agreement, we paid $130,000 and $120,000 in royalties for the years ended December 31, 2023 and 2022, respectively.

 CuraShield
Antimicrobial Barrier Film and No Sting Skin Protectant

 In
October 2019, we executed a license agreement with Rochal pursuant to which we acquired an exclusive world-wide license to market, sell
and further develop certain antimicrobial barrier film and skin protectant products for use in the human health care market utilizing
certain Rochal patents and pending patent applications (the "ABF License Agreement"). Currently, the products covered by
the ABF License Agreement are CuraShield Antimicrobial Barrier Film and a no sting skin protectant product.

commitments under the terms of the ABF License Agreement include:

 The
 Company will pay Rochal a royalty of 2-4% of net sales. The minimum annual royalty due to
 Rochal will be $50,000 beginning with the first full calendar year following the year in
 which first commercial sales of the products occur. The annual minimum royalty will increase
 by $5,000 each subsequent calendar year up to a maximum amount of $75,000.

 We
 could pay additional royalties annually based on specific net profit targets from sales of
 the licensed products, subject to a maximum of $500,000 during any calendar year.

previously terminated or extended by the parties, the ABF License Agreement will terminate upon expiration of the last U.S. patent in
October 2033. No commercial sales or royalties have been recognized under this agreement as of December 31, 2023.

 Debrider
License Agreement

 In
May 2020, we executed a product license agreement with Rochal, pursuant to which we acquired an exclusive world-wide license to market,
sell and further develop a debrider for human medical use to enhance skin condition or treat or relieve skin disorders, excluding uses
primarily for beauty, cosmetic, or toiletry purposes (the "Debrider License Agreement").

commitments under the terms of the Debrider License Agreement include:

 Upon
 FDA clearance of the licensed products, we will pay Rochal $500,000 in cash and an additional
 $1,000,000, which, at our option, may be paid in any combination of cash and our common stock.

 We
 will pay Rochal a royalty of 2-4% of net sales. The minimum annual royalty due to Rochal
 will be $100,000 beginning with the first full calendar year following the year in which
 first commercial sales of the licensed products occur and increase by $10,000 each subsequent
 calendar year up to a maximum amount of $150,000.

 We
 could pay additional royalties annually based on specific net profit targets from sales of
 the licensed products, subject to a maximum of $1,000,000 during any calendar year.

previously terminated or extended by the parties, the Debrider License Agreement will expire in October 2034. No commercial sales or
royalties have been recognized under this agreement as of December 31, 2023.

 Cook
Biotech Marketing and Distribution Agreement

 In
December 2020, we entered into a marketing and distribution agreement with Cook Biotech whereby we were appointed as the exclusive distributor
in the United States of certain Cook Biotech advanced biologic products. FORTIFY TRG and FORTIFY FLOWABLE are for use in the surgical
care segment.

 Under
the terms of the agreement, we purchase the products from Cook Biotech at initial transfer prices stipulated in the agreement. Cook Biotech
may update the transfer prices annually based on changes in the US Producer's Price Index. Minimum annual order quantities are
agreed upon by both parties after each year of the contract term. While the term of the agreement ends in June 2024, the agreement provides
for automatic two-year renewal terms if notice of nonrenewal is not given by one party at least one year prior to the end of the initial
term or renewal term that is then in effect. As of December 31, 2023, a notice of nonrenewal had not been provided by either Cook Biotech
or us.

 Tufts
University License Agreement

 In
December 2023, we signed an exclusive license agreement with 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 have
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. Pursuant
to 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.

 Government
Regulation

 Our
operations are subject to comprehensive federal, state and local laws and regulations in the jurisdictions in which we or our research
and development partners or affiliates do business. The laws and regulations governing our business and interpretations of those laws
and regulations are subject to frequent change. Our ability to operate profitably will depend in part upon our ability, and that of our
research and development partners and affiliates, to operate in compliance with applicable laws and regulations. The laws and regulations
relating to medical products and healthcare services that apply to our business and that of our partners and affiliates continue to evolve,
and we must, therefore, devote significant resources to monitoring developments in legislation, enforcement, and regulation in such areas.
As the applicable laws and regulations change, we are likely to make conforming modifications in our business processes from time to
time. We cannot provide assurance that a review of our business by courts or regulatory authorities will not result in determinations
that could adversely affect our operations or that the regulatory environment will not change in a way that restricts our operations.

 FDA
Regulation

 Our
medical products and operations are regulated by the FDA and other federal and state agencies. Most of the products we currently market
are regulated as medical devices in the United States under the Federal Food, Drug, and Cosmetic Act ("FDCA"), as implemented
and enforced by the FDA. The FDA regulates the development, testing, manufacturing, labeling, packaging, storage, installation, servicing,
advertising, promotion, marketing, distribution, import, export and market surveillance of our medical devices.

 In
addition, we market certain products for use in surgical wound care regulated by the FDA under Section 361 of the Public Health Service
Act ("PHSA") (42 U.S.C. § 264) and 21 C.F.R. Part 1271.

 Device
Premarket Regulatory Requirements

 Before
being introduced into the U.S. market, each medical device must obtain marketing clearance or approval from the FDA through the 510(k)
premarket notification process, the de novo classification process (summarized below), or the premarket approval application ("PMA")
process, unless they are determined to be Class I devices or to otherwise qualify for an exemption from one of these available forms
of premarket review and authorization by the FDA. Under the FDCA, medical devices are classified into one of three classes—Class
I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of control needed to
provide reasonable assurance of safety and effectiveness. Classification of a device is important because the class to which a device
is assigned determines, among other things, the necessity and type of FDA review required prior to marketing the device. Class I devices
are those for which reasonable assurance of safety and effectiveness can be assured by adherence to general controls that include compliance
with the applicable portions of the FDA's Quality System Regulation ("QSR"), as well as regulations requiring facility
registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading labeling, advertising
and promotional materials. The Class I designation also applies to devices for which there is insufficient information to determine that
general controls are sufficient to provide reasonable assurance of the safety and effectiveness of the device or to establish special
controls to provide such assurance, but that are not life-supporting or life-sustaining or for a use which is of substantial importance
in preventing impairment of human health, and that do not present a potential unreasonable risk of illness or injury.

 Class
II devices are those for which general controls alone are insufficient to provide reasonable assurance of safety and effectiveness and
there is sufficient information to establish "special controls." These special controls can include performance standards,
post-market surveillance requirements, patient registries and FDA guidance documents describing device-specific special controls. While
most Class I devices are exempt from the 510(k) premarket notification requirement, most Class II devices require a 510(k) premarket
notification prior to commercialization in the United States; however, the FDA has the authority to exempt Class II devices from the
510(k) premarket notification requirement under certain circumstances. As a result, manufacturers of most Class II devices must submit
510(k) premarket notifications to the FDA under Section 510(k) of the FDCA (21 U.S.C. § 360(k)) in order to obtain the necessary
clearance to market or commercially distribute such devices. To obtain 510(k) clearance, manufacturers must submit to the FDA adequate
information demonstrating that the proposed device is "substantially equivalent" to a predicate device already on the market.
A predicate device is a legally marketed device that is not subject to PMA, meaning, (i) a device that was legally marketed prior to
May 28, 1976 ("preamendments device") and for which a PMA is not required, (ii) a device that has been reclassified from
Class III to Class II or I, or (iii) a device that was found substantially equivalent through the 510(k) process. If the FDA agrees that
the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance to commercially
market the device. If there is no adequate predicate to which the manufacturer can compare its proposed device, the proposed device is
automatically classified as a Class III device. In such cases, the device manufacturer must then fulfill the more rigorous PMA requirements
or can request a risk-based classification determination for the device in accordance with the de novo classification process.

 The
 de novo classification process allows a manufacturer whose novel device is automatically classified into Class III to request
down-classification of its device to Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring
the submission and approval of a PMA. Under the Food and Drug Administration Safety and Innovation Act of 2012 ("FDASIA"),
the FDA is required to classify a device within 120 days following receipt of the de novo classification request. If the manufacturer
seeks reclassification into Class II, the classification request must include a draft proposal for special controls that are necessary
to provide a reasonable assurance of the safety and effectiveness of the medical device. The FDA may reject the classification request
if it identifies a legally marketed predicate device that would be appropriate for a 510(k) or determines that the device is not low
to moderate risk or that general controls would be inadequate to control the risks and special controls cannot be developed.

 Devices
that are intended to be life sustaining or life supporting, devices that are implantable, devices that present a potential unreasonable
risk of harm or are of substantial importance in preventing impairment of health and devices that are not substantially equivalent to
a predicate device are placed in Class III and generally require FDA approval through the PMA process, unless the device is a preamendments
device not yet subject to a regulation requiring premarket approval. The PMA process is more demanding than the 510(k) premarket notification
process. For a PMA, the manufacturer must demonstrate through extensive data, including data from preclinical studies and clinical trials,
that the device is safe and effective. The PMA must also contain a full description of the device and its components, a full description
of the methods, facilities and controls used for manufacturing, and proposed labeling. Following receipt of a PMA, the FDA determines
whether the application is sufficiently complete to permit a substantive review. If the FDA accepts the application for review, it has
180 days under the FDCA to complete its review of a PMA, although in practice, the FDA's review often takes significantly longer,
and can take up to several years. Before approving a PMA, the FDA generally also performs an on-site inspection of manufacturing facilities
for the product to ensure compliance with the QSR.

 Thus
far, all of the medical devices that we currently market and distribute have been cleared through 510(k) premarket notifications. We
also are continuing to work through the development process for a number of products in our pipeline. Our autolytic debrider product
and a sterile antimicrobial surgical wash product are currently under development. We are in discussions concerning the best path for
seeking clearance and approval for these products. In December 2023, we received 510(k) clearance from the FDA for the Precision Healing
diagnostic imager. We are currently evaluating commercial and regulatory pathways for the Precision Healing LFA.

 Clinical
trials are almost always required to support PMAs and are sometimes required to support 510(k) submissions. All clinical investigations
of devices to determine safety and effectiveness must be conducted in accordance with the FDA's investigational device exemption
("IDE") regulations that govern investigational device labeling, prohibit promotion of the investigational device and specify
recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. If the device presents a "significant
risk," as defined by the FDA, the agency requires the device sponsor to submit an IDE application to the FDA, which must become
effective prior to commencing human clinical trials. The IDE will automatically become effective 30 days after receipt by the FDA, unless
the FDA denies the application or notifies the company that the investigation is on hold and may not begin until the sponsor provides
supplemental information about the investigation that satisfies FDA's concerns. If the FDA determines that there are deficiencies
or other concerns with an IDE that require modification of the study, the FDA may permit a clinical trial to proceed under a conditional
approval. In addition, the study must be approved by, and conducted under the oversight of, an institutional review board ("IRB"),
for each clinical site. If the device presents a non-significant risk to the patient according to criteria established by the FDA as
part of the IDE regulations, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without
separate authorization from the FDA, but must still comply with abbreviated IDE requirements, such as monitoring the investigation, ensuring
that the investigators obtain informed consent, and labeling and record-keeping requirements.

 Device
Postmarket Regulatory Requirements

 After
a device is cleared or approved for commercialization, and prior to marketing, numerous regulatory requirements apply to the various
entities responsible for preparing a device for distribution, including the manufacturer (including specification developer), contract
manufacturers, relabelers/repackagers, sterilizers and initial importer, as applicable. These include:

 establishment
 registration and device listing;

 development
 of a quality management system, including establishing and implementing procedures to design
 and manufacture devices in compliance with the QSR (unless a device category is exempt from
 this requirement by the FDA, such as in the case of many Class I devices);

 labeling
 regulations that prohibit the promotion of products for uncleared or unapproved uses (known
 as off-label uses), as well as requirements to provide accurate and non-misleading information
 and adequate information on both risks and benefits of the device;

 FDA's
 unique device identification requirements that call for a unique device identifier on device
 labels, packages, and in some cases, on the device itself, and submission of data to the
 FDA's Global Unique Device Identification Database;

 medical
 device reporting regulations that require manufacturers to report to the FDA if a device
 may have caused or contributed to a death or serious injury or malfunctioned in a way that
 would likely cause or contribute to a death or serious injury if it were to recur;

 corrections
 and removal reporting regulations that require manufacturers report to the FDA field corrections
 and product recalls or removals if undertaken to reduce a risk to health posed by the device
 or to remedy a violation of the FDCA that may present a risk to health; and

 postmarket
 surveillance regulations, which apply to Class II or Class III devices if the FDA has issued
 a postmarket surveillance order and the failure of the device would be reasonably likely
 to have serious adverse health consequences, the device is expected to have significant use
 in the pediatric population, the device is intended to be implanted in the human body for
 more than one year, or the device is intended to be used to support or sustain life and to
 be used outside a user facility.

 Our
research and development partners and their contract manufacturers may be subject to periodic scheduled or unscheduled inspections by
the FDA. If we are required to register with the FDA, by becoming the manufacturer or specification developer of any medical device for
instance, then we also may be subject to such inspections by the FDA. If the FDA believes we or any of our research and development partners
or their contract manufacturers are not in compliance with the QSR, or other postmarket requirements, it has broad authority to take
significant enforcement actions to compel compliance. Specifically, if the FDA determines that we or our research and development partners
or their contract manufacturers failed to comply with applicable regulatory requirements, the agency can take a variety of compliance
or enforcement actions, which may result in any of the following sanctions:

 untitled
 letters, warning letters, fines, injunctions, consent decrees and civil penalties;

 customer
 notifications or repair, replacement or refunds;

 mandatory
 recalls, withdrawals, or administrative detention or seizure of our products;

 operating
 restrictions or partial suspension or total shutdown of production;

 refusing
 or delaying requests for 510(k) marketing clearance or approval of premarket approval applications
 relating to new products or modified products;

 reclassifying
 a 510(k)-cleared device or withdrawing PMA approval;

 refusal
 to grant export approvals for our products; or

 pursuing
 criminal prosecution.

 Any
such enforcement action by the FDA would have a material adverse effect on our business. In addition, these regulatory controls, as well
as any changes in FDA policies, can affect the time and cost associated with the development, introduction, and continued availability
of new products.

 HCT/P
Regulatory Requirements

 Some
of the products we currently market are regulated as biologics, more specifically as human cells, tissues, and cellular and tissue-based
products ("HCT/Ps"). They include (i) TEXAGEN, (ii) BiFORM, (iii) ACTIGEN, (iv) ALLOCYTE and (v) ALLOCYTE Plus. HCT/Ps are
regulated by the FDA's Center for Biologics Evaluation and Research ("CBER") or Center for Devices and Radiological
Health ("CDRH") depending on the type of product, how it is manufactured and its intended uses. HCT/Ps that meet all of the
criteria described in 21 C.F.R. § 1271.10(a) are regulated by the CBER under Section 361 of the PHSA (42 U.S.C. § 264) and
21 C.F.R. Part 1271 only ("361 products"). Although 361 products do not require premarket review by the FDA prior to commercialization,
manufacturers of 361 products must register with the FDA, submit a list of HCT/Ps manufactured, and comply with current good tissue practices
("cGTP"), among other things.

 Federal
Trade Commission Regulatory Oversight

 Our
advertising for our products and services is subject to federal truth-in-advertising laws enforced by the Federal Trade Commission (the
"FTC"), as well as comparable state consumer protection laws. Under the Federal Trade Commission Act ("FTC Act"),
the FTC is empowered, among other things, to (a) prevent unfair methods of competition and unfair or deceptive acts or practices in or
affecting commerce; (b) seek monetary redress and other relief for conduct injurious to consumers; and (c) gather and compile information
and conduct investigations relating to the organization, business, practices, and management of entities engaged in commerce. The FTC
has very broad enforcement authority, and failure to abide by the substantive requirements of the FTC Act and other consumer protection
laws can result in administrative or judicial penalties, including civil penalties, injunctions affecting the manner in which we would
be able to market services or products in the future, or criminal prosecution.

 Fraud
and Abuse and Transparency Laws and Regulations

 Our
business activities (and the business activities of our research and development partners and affiliates), including, but not limited
to, research, sales, promotion, distribution and medical education, are subject to regulation by numerous federal and state regulatory
and law enforcement authorities in the United States, including the Department of Justice, the Department of Health and Human Services
and its various divisions, CMS, the Health Resources and Services Administration, the Department of Veterans Affairs, the Department
of Defense, and state and local governments. Our business activities must comply with numerous healthcare laws, including, but not limited
to, anti-kickback and false claims laws and regulations as well as data privacy and security laws and regulations, which are described
below.

 The
federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting,
or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing,
leasing, ordering, or arranging for or recommending the purchase, lease, furnishing, or order of any item or service reimbursable under
Medicare, Medicaid, or other federal healthcare programs, in whole or in part. The term "remuneration" has been interpreted
broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical
manufacturers on one hand and prescribers, purchasers, formulary managers, and beneficiaries on the other. There are certain statutory
exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn
narrowly, and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases, or recommendations
may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular
applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead,
the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances.
Several courts have interpreted the statute's intent requirement to mean that if any one purpose of an arrangement involving remuneration
is to induce referrals of federal healthcare covered business, the statute has been violated. The Patient Protection and Affordable Care
Act, of 2010, as amended (the "ACA"), modified the intent requirement under the Anti-Kickback Statute to a stricter standard,
such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have
committed a violation. In addition, the ACA also provided that a violation of the federal Anti-Kickback Statute is grounds for the government
or a whistleblower to assert that a claim for payment of items or services resulting from such violation constitutes a false or fraudulent
claim for purposes of the federal civil False Claims Act (the "FCA"). The ACA further created new federal requirements for
reporting, by applicable manufacturers of covered drugs, payments and other transfers of value to physicians and teaching hospitals,
and ownership and investment interests held by physicians and other healthcare providers and their immediate family members.

 The
federal civil FCA, prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false
or fraudulent claim for payment to, or approval by, the federal government, knowingly making, using, or causing to be made or used a
false record or statement material to a false or fraudulent claim to the federal government, or avoiding, decreasing, or concealing an
obligation to pay money to the federal government. A claim includes "any request or demand" for money or property presented
to the U.S. government. The civil FCA has been used to assert liability on the basis of kickbacks and other improper referrals, improperly
reported government pricing metrics such as Best Price or Average Manufacturer Price, or submission of inaccurate information required
by government contracts, improper use of Medicare provider or supplier numbers when detailing a provider of services, improper promotion
of off-label uses not expressly approved by the FDA in a drug's label, and allegations as to misrepresentations with respect to
the products supplied or services rendered. Several pharmaceutical and other healthcare companies have further been sued under these
laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product.
Intent to deceive is not required to establish liability under the civil FCA; however, a change in Department of Justice policy now prohibits
enforcement actions for knowing violations of law based on noncompliance with agency subregulatory guidance. Civil FCA actions may be
brought by the government or may be brought by private individuals on behalf of the government, called "qui tam" actions.
If the government decides to intervene in a qui tam action and prevails in the lawsuit, the individual will share in the proceeds from
any fines or settlement funds. If the government declines to intervene, the individual may pursue the case alone. Since 2004, these FCA
lawsuits against pharmaceutical companies have increased significantly in volume and breadth, leading to several substantial civil and
criminal settlements, as much as $3.0 billion, regarding certain sales practices and promoting off-label drug uses. Civil FCA liability
may be imposed for Medicare or Medicaid overpayments, for example, overpayments caused by understated rebate amounts, that are not refunded
within 60 days of discovering the overpayment, even if the overpayment was not caused by a false or fraudulent act.

 The
government may further prosecute conduct constituting a false claim under the criminal FCA. The criminal FCA prohibits the making or
presenting of a claim to the government knowing such claim to be false, fictitious, or fraudulent and, unlike the civil FCA, requires
proof of intent to submit a false claim. The civil monetary penalties statute is another potential statute under which drug and device
companies may be subject to enforcement. Among other things, the civil monetary penalties statute imposes fines against any person who
is determined to have presented, or caused to be presented, claims to a federal healthcare program that the person knows, or should know,
is for an item or service that was not provided as claimed or is false or fraudulent.

 HIPAA
also created federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud
or to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under
the custody or control of, a healthcare benefit program, regardless of whether the payor is public or private, knowingly and willfully
embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense, and
knowingly and willfully falsifying, concealing, or covering up by any trick or device a material fact or making any materially false
statements in connection with the delivery of, or payment for, healthcare benefits, items, or services relating to healthcare matters.
The ACA, as amended, modified the intent requirement under the certain portions of these federal criminal statutes such that a person
or entity no longer needs to have actual knowledge of the statute or specific intent to violate it. The ACA further created federal requirements
for reporting, by applicable manufacturers of covered therapeutics, payments and other transfers of value to physicians and teaching
hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members.

 Many
states have also adopted laws similar to each of the above federal laws, which may be broader in scope and apply to items or services
reimbursed by any third-party payor, including commercial insurers, and some have transparency laws that require reporting price increases
and related information. Certain state laws also regulate manufacturers' use of prescriber-identifiable data. Certain states also
require implementation of commercial compliance programs and compliance with the pharmaceutical industry's voluntary compliance
guidelines and the applicable compliance guidance promulgated by the federal government, or otherwise restrict payments or the provision
of other items of value that may be made to healthcare providers and other potential referral sources; impose restrictions on marketing
practices; or require drug manufacturers to track and report information related to payments, gifts, and other items of value to physicians
and other healthcare providers. These laws may affect our future sales, marketing, and other promotional activities by imposing administrative
and compliance burdens.

 If
our operations are found to be in violation of any of the laws or regulations described above or any other laws that apply to us, we
may be subject to penalties or other enforcement actions, including criminal and significant civil monetary penalties, damages, fines,
disgorgement, imprisonment, exclusion from participation in government healthcare programs, corporate integrity agreements, debarment
from receiving government contracts or refusal of new orders under existing contracts, reputational harm, diminished profits and future
earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business
and our results of operations.

 Telemedicine
Standards, and Related Laws and Guidelines

 We
have entered into a professional services agreement with and made a minority investment in DirectDerm, a dermatology telemedicine company
based in California, which has an exclusive network of dermatologists.

 The
delivery of telemedicine services directly or through contractual relationships is subject to various federal, state, and local laws,
regulations and approvals, relating to, among other things, the health provider licensure, adequacy and continuity of medical care, medical
practice standards (including specific requirements when providing healthcare utilizing telemedicine technologies and consulting services
among providers), medical records maintenance, personnel supervision, and prerequisites for the prescription of medication. The application
of some of these laws to telemedicine is unclear and subject to differing interpretation. Further, laws and regulations specific to delivering
medical services utilizing telemedicine technologies continues to evolve with some states incorporating modality and consent requirements
for certain telemedicine encounters.

 Telemedicine
services also implicate state corporate practice of medicine and fee-splitting laws which vary from state to state and are not always
consistent among states. In addition, these requirements are subject to broad powers of interpretation, enforcement discretion by state
regulators, and, in some cases, dated (yet still valid) case law. Some of these requirements may apply to us or our partners, even if
we do not have a physical presence in the state, based solely on the engagement of a provider licensed in the state or the provision
of telemedicine to a resident of the state. However, regulatory authorities or other parties, including providers in our affiliated provider
network, may assert that, despite these arrangements, we are engaged in the corporate practice of medicine or that our contractual arrangements
with affiliated physician groups constitute unlawful fee-splitting. In this event, failure to comply could lead to adverse judicial or
administrative action against us and/or our providers, civil or criminal penalties, receipt of cease-and-desist orders from state regulators,
loss of provider licenses, or the need to make changes to the arrangements with our affiliated provider network; each of which could
interfere with our business or prompt other materially adverse consequences.

 U.S.
Federal and State Health Information Privacy and Security Laws

 There
are numerous U.S. federal and state laws and regulations related to the privacy and security of personally identifiable information ("PII"),
including health information. In particular, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health
Act, and its respective implementing regulations, establishes privacy and security standards that limit the use and disclosure of protected
health information ("PHI"), and require the implementation of administrative, physical, and technical safeguards to ensure
the confidentiality, integrity and availability of individually identifiable health information in electronic form. Our affiliated network
providers and our hospital, health system and other provider clients are all regulated as covered entities under HIPAA. Since the effective
date of the HIPAA Omnibus Final Rule on September 23, 2013, HIPAA's requirements are also directly applicable to the independent
contractors, agents and other "business associates" of covered entities that create, receive, maintain or transmit PHI in
connection with providing services to covered entities. We are a business associate under HIPAA when we are working on behalf of our
affiliated providers.

 Violations
of HIPAA may result in civil and criminal penalties. A single breach incident can result in violations of multiple standards. We must
also comply with HIPAA's breach notification rule. Under the breach notification rule, covered entities must notify affected individuals
without unreasonable delay in the case of a breach of unsecured PHI, which may compromise the privacy, security or integrity of the PHI.
In addition, notification must be provided to Health and Human Services ("HHS") and the local media in cases where a breach
affects more than 500 individuals. Breaches affecting fewer than 500 individuals must be reported to HHS on an annual basis. The regulations
also require business associates of covered entities to notify the covered entity of breaches by the business associate.

 State
attorneys general also have the right to prosecute HIPAA violations committed against residents of their states. While HIPAA does not
create a private right of action that would allow individuals to sue in civil court for a HIPAA violation, its standards have been used
as the basis for the duty of care in state civil suits, such as those for negligence or recklessness in misusing personal information.
In addition, HIPAA mandates that HHS conduct periodic compliance audits of HIPAA covered entities and their business associates for compliance.
It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive
a percentage of the Civil Monetary Penalty fine paid by the violator. In light of the HIPAA Omnibus Final Rule, recent enforcement activity,
and statements from HHS, we expect increased federal and state HIPAA privacy and security enforcement efforts. HIPAA also required HHS
to adopt national standards establishing electronic transaction standards that all healthcare providers must use when submitting or receiving
certain healthcare transactions electronically.

 Many
states in which we or our research and development partners may operate also have laws that protect the privacy and security of sensitive
and personal information, including health information. These laws may be similar to or even more protective than HIPAA and other federal
privacy laws. For example, the laws of the State of California are more restrictive than HIPAA. Where state laws are more protective
than HIPAA, we must comply with the state laws to which we are subject, in addition to HIPAA. In certain cases, it may be necessary to
modify our planned operations and procedures to comply with these more stringent state laws. Not only may some of these state laws impose
fines and penalties upon violators, but also some, unlike HIPAA, may afford private rights of action to individuals who believe their
personal information has been misused.

 In
addition to HIPAA and state health information privacy laws, we may be subject to other state and federal privacy laws, including laws
that prohibit unfair privacy and security practices and deceptive statements about privacy and security and laws that place specific
requirements on certain types of activities, such as data security and texting.

 In
recent years, there have been a number of well-publicized data breaches involving the improper use and disclosure of PII and PHI. Many
states have responded to these incidents by enacting laws requiring holders of personal information to maintain safeguards and to take
certain actions in response to a data breach, such as providing prompt notification of the breach to affected individuals and state officials.
In addition, under HIPAA and pursuant to the related contracts that we enter into with our business associates, we must report breaches
of unsecured PHI to our contractual partners following discovery of the breach. Notification must also be made in certain circumstances
to affected individuals, federal authorities and others.

 Employees

 As
of December 31, 2023, we had a staff of 107 full-time employees and 1 part-time employee.

 Corporate
Information

 We
were incorporated in Texas on December 14, 2001. Our principal executive offices are located at 1200 Summit Ave, Suite 414, Fort Worth,
Texas 76102, telephone number (817) 529-2300. Our website address is www.sanaramedtech.com. Information accessed through our website
is not incorporated into this annual report and is not a part of this annual report.

 Available
Information

 The
Company electronically files reports with the Securities and Exchange Commission (the "SEC"). The SEC maintains an Internet
site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC. Copies of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
and amendments to those reports filed or furnished to the SEC are also available free of charge through the Company's investor
relations website ( as soon as reasonably practicable after electronically filing with
or otherwise furnishing such information to the SEC, and are available in print to any shareholder who requests it.

 Item
1A. RISK FACTORS

 The
risks below are those that we believe are the material risks that we currently face but are not the only risks facing us and our business.
If any of these risks actually occur, our business, financial condition and results of operations could be materially adversely affected.
Below is a summary of our risk factors with a more detailed discussion following.

 We
 have had a history of losses, which may continue as we expand our selling efforts.

 Our
 revenue growth for a particular period is difficult to predict, and a shortfall in forecasted
 revenues may harm our operating results.

 Our
 current comprehensive wound and skincare strategy involves growth through acquisitions and
 investments, which requires us to incur substantial costs and potential liabilities for which
 we may never realize the anticipated benefits.

 Our
 indebtedness could adversely affect our financial condition and prevent us from fulfilling
 our obligations.

 Our
 outstanding indebtedness is subject to certain operating and financial covenants that restrict
 our business and financing activities and may adversely affect our cash flow and our ability
 to operate our business.

 to manage our growth strategy could harm our business.

 We
 may fail to realize all the anticipated benefits of the Applied Asset Purchase, or such benefits
 may take longer to realize than expected.

 If
 we are unable to compete within our markets or our products, services and technologies do
 not gain market acceptance, our financial condition and operating results could suffer.

 Security
 breaches and other disruptions could compromise our information and expose us to liability,
 which would cause our business and reputation to suffer.

 If
 we fail to maintain an effective system of internal controls over financial reporting, we
 may not be able to accurately report our financial results or prevent fraud and our business
 may be harmed and our stock price may be adversely impacted.

 We
 rely heavily on our research and development partners to design, manufacture and supply the
 products we have licensed for marketing. If we or one of our partners fails to perform adequately,
 fulfill our needs, or comply with regulations, we may be required to incur significant costs
 or even be subject to enforcement actions. We also may face significant delays in our product
 introductions and commercialization.

 Our
 revenue generated from the sale of Scendia products is heavily dependent on license agreements
 with certain manufacturers, and the termination of any of these license agreements could
 harm our business.

 Certain
 of our product candidates are still under development and we may not be able to successfully
 commercialize any of these product candidates.

 Our
 future success will largely depend on our ability to maintain and further grow clinical acceptance
 and adoption of our products, and we may be unable to adequately educate healthcare practitioners
 on the use and benefits of our products.

 Disruption
 of, or changes in, our distribution model or customer base could harm our sales and margins.

 Interruptions
 in the supply of our products or inventory loss may adversely affect our business, financial
 condition and results of operations.

 If
 we are unable to manage product inventory in an effective manner, our profitability could
 be impaired.

 of any third-party assessments to demonstrate desired outcomes in proposed endpoints could
 have a negative impact on our business performance.

 Increased
 prices for, or unavailability of, raw materials used in our products could adversely affect
 our business, financial condition and results of operations.

 Our
 planned expansion into wound and skincare virtual consult and other services could have a
 material adverse effect on our business, financial condition and results of operations.

 Our
 planned expansion into wound and skincare virtual consult and other services will require
 entrance into several markets in which we have little or no experience, which may not be
 successful and could be costly.

 Our
 planned expansion into the telehealth business is dependent on our relationships with affiliated
 professional entities to provide physician services, and our business would be adversely
 affected if those relationships were disrupted.

 and frequent state legislative and regulatory changes specific to telemedicine may present
 us with additional requirements and state compliance costs, with potential operational impacts
 in certain jurisdictions.

 If
 we are unable to adequately protect our intellectual property rights, we may not be able
 to compete effectively.

 Surgical is not currently protected by any pending patent application or any unexpired patent.
 Currently the substantial majority of our net revenue is derived from the sale of CellerateRX
 Surgical. CellerateRX Surgical may be subject to competition from the sale of substantially
 equivalent products that could adversely affect our business and operations.

 We
 are heavily dependent on technologies and products we have licensed from third parties, and
 we may need to license technologies and products in the future, and if we fail to obtain
 licenses we need, or fail to comply with our payment and other obligations in the agreements
 under which we in-license intellectual property and other rights from third parties, we could
 lose our ability to develop and commercialize our products.

 We
 may be found to infringe on or violate intellectual property rights of others.

 Our
 business is affected by numerous regulations relating to the development, manufacture, distribution,
 labeling, marketing and sale of our products.

 We
 are subject to various governmental regulations relating to the labeling, marketing and sale
 of our products.

 If
 we fail to obtain or experience significant delays in obtaining regulatory clearances or
 approvals to market future medical device products, we will be unable to commercialize these
 products until such clearance or approval is obtained.

 Delays
 in or changes to the FDA clearance and approval processes or ongoing regulatory requirements
 could make it more difficult for us to obtain FDA clearance or approval of new products or
 comply with ongoing requirements.

 to obtain or maintain adequate reimbursement or insurance coverage for drugs, if any, could
 limit our ability to market those drugs and decrease our ability to generate revenue. Changes
 in reimbursement policies and regulations by governmental or other third-party payors may
 have an adverse impact on the use of our products.

 We
 rely heavily on our research and development partners to comply with applicable laws and
 regulations relating to product classification and when and what types of FDA marketing authorization
 are needed to lawfully commercialize a new or updated medical product in the United States.

 We
 and our employees and contractors are subject, directly or indirectly, to federal, state
 and foreign healthcare fraud and abuse laws, including false claims laws. If we are unable
 to comply, or have not fully complied, with such laws, we could face substantial penalties.

 We
 and our or our research and development partners' use and disclosure of PII, including
 health information, is subject to federal and state privacy and security regulations, and
 our failure to comply with those regulations or to adequately secure the information we hold
 could have a material adverse effect on our client base, business, financial condition and
 results of operations.

 Our
 officers, employees, independent contractors, principal investigators, consultants and commercial
 partners may engage in misconduct or activities that are improper under other laws and regulations,
 which would create liability for us.

 We
 could be adversely affected if healthcare reform measures substantially change the market
 for medical care or healthcare coverage in the United States.

 Defects,
 failures or quality issues associated with our products could lead to product recalls or
 safety alerts, adverse regulatory actions, product liability lawsuits and other litigation
 and negative publicity that could materially adversely affect our reputation, business, results
 of operations and financial condition.

 Risks
Related to How We Operate Our Business

 We
have had a history of losses, which may continue as we expand our selling efforts.

 We
have incurred net losses in most years since we began our current operations in 2004. We plan to continue making significant investments
in our sales force and clinical programs, which substantially increase our operating expenses. Consequently, we will need to continue
our revenue growth to become profitable in future periods. If we fail to achieve profitability, our stock price may decline, and you
may lose part or all of your investment.

 Our
revenue growth for a particular period is difficult to predict, and a shortfall in forecasted revenues may harm our operating results.

 Because
we are a relatively small company, our revenue growth and, consequently, results of operations are difficult to predict. We plan our
operating expense levels based primarily on forecasted revenue levels. A shortfall in revenue could lead to operating results being below
expectations as we may not be able to quickly reduce our fixed expenses in response to short-term revenue shortfalls. We have experienced
fluctuations in revenue and operating results from quarter to quarter and anticipate that these fluctuations will continue until we achieve
a critical mass with our product and service sales. These fluctuations can result from a variety of factors, including:

 economic
 conditions worldwide, including increases in inflation, as well as economic conditions specific
 to the healthcare industry, which could affect the ability of surgical and post-acute facilities
 to purchase our products and could result in a reduction in elective operative procedures;

 governmental
 regulations, including those adopted in response to the COVID-19 pandemic or other potential
 outbreaks;

 the
 uncertainty surrounding our ability to attract new customers and retain existing customers;

 changes
 in reimbursement rates for our products by government and private insurers;

 the
 length and variability of our sales cycle, especially gaining approvals for the use of our
 products in additional hospitals and surgery centers, which makes it difficult to forecast
 the quarter in which our sales will occur;

 issues
 including delays in the sourcing of our products;

 the
 timing of regulatory approvals;

 the
 timing of operating expense relating to the expansion of our business and operations;

 changes
 in the pricing of our products and those of our competitors;

 the
 development of new wound care products or product enhancements by our competitors; and

 actual
 events, circumstances, outcomes and amounts differing from assumptions and estimates used
 in preparing our operating plan and how well we execute our strategy and operating plans.

 As
a consequence, operating results for a particular future period are difficult to predict and prior results are not necessarily indicative
of future results. Any of the foregoing factors, or any other factors discussed elsewhere herein, could have a material adverse effect
on our business.

 Our
current comprehensive wound and skincare strategy involves growth through acquisitions and investments, which requires us to incur substantial
costs and potential liabilities for which we may never realize the anticipated benefits.

 We
may be unable to continue implementing our growth strategy, and our strategy ultimately may be unsuccessful. We engage in evaluations
of potential acquisitions and investments and are in various stages of discussion regarding possible acquisitions, certain of which,
if consummated, could be significant to us. Any new acquisition or investment could result in material transaction expenses, increased
interest and amortization expense, increased depreciation expense and increased operating expense, any of which could have a material
adverse effect on our operating results. In addition, if we are unable to integrate businesses and operations that we have acquired or
will acquire in the future, our profitability could suffer. These acquisitions and investments also involve other risks, including diversion
of management resources otherwise available for the running of our business and the development of our business, as well as risks associated
with entering markets in which our marketing teams and sales force has limited experience or where experienced distribution alliances
are not available. We may not be able to identify suitable acquisition or investment candidates in the future, obtain acceptable financing
or consummate any future acquisitions or investments. In addition, certain potential acquisitions may be subject to antitrust and competition
laws, which could impact our ability to pursue strategic acquisitions and could result in mandated divestitures. If we are unsuccessful
in our comprehensive wound and skincare strategy, we may be unable to meet our financial targets and our financial performance could
be materially and adversely affected.

to manage our growth strategy could harm our business.

 Our
ability to successfully implement our business plan and develop, market and sell our surgical, wound and skincare products, services
and technologies requires an effective plan for managing our future growth. We plan to increase the scope of our operations at a rapid
rate. Future expansion efforts will be expensive and may strain our internal operating resources. To manage future growth effectively,
we must maintain and enhance our financial and accounting systems and controls, integrate new personnel and manage expanded operations.
If we do not manage growth properly, it could harm our operating results and financial condition.

 We
may fail to realize all the anticipated benefits of the Applied Asset Purchase, or such benefits may take longer to realize than expected.

 We
may fail to realize all of the anticipated benefits of the Applied Asset Purchase, including expected operational, research and development
and cost synergies, or such benefits may not be achieved within the anticipated timeframe. In addition, in connection with the Applied
Asset Purchase, we acquired control of the manufacturing of our CellerateRX Surgical and HYCOL products, which was previously controlled
by the Sellers. If we are unable to maintain or replace the Sellers' manufacturing process, our sales of CellerateRX Surgical and
HYCOL products could be jeopardized.

 Furthermore,
we have incurred significant transaction costs in connection with the Applied Asset Purchase, including payment of certain fees and expenses
incurred in connection with the Applied Asset Purchase and the financing of the Applied Asset Purchase, and our future financial results
could be impacted if the intangible assets we acquired in the Applied Asset Purchase become impaired. The failure to realize the anticipated
benefits of the Applied Asset Purchase or any of our other recent acquisitions could cause an interruption of, or a loss of momentum
in, our operations and could result in a material adverse effect on our financial condition, results of operations or cash flows.

 If
we are unable to compete within our markets or our products, services and technologies do not gain market acceptance, our operating results
and financial condition could suffer.

 Competition
from other medical device companies is significant and we could be significantly affected by new product introductions and other activities
of market participants. We compete with other companies in acquiring rights to products or technologies from third-party developers.
In addition, many specialized products companies have formed collaborations with large, established companies to support research, development
and commercialization of wound care products which may be competitive with ours. Academic institutions, government agencies and other
public and private research organizations are also conducting research activities and may commercialize wound care products on their
own or through joint ventures. Although our products have performed well in customer evaluations, we are a relatively unknown brand in
a market dominated by companies with extensive product lines and large customer bases. We may not, even with more efficacious products,
be able to secure contracts and achieve significant growth with large national accounts.

 In
addition, if the anticipated full launch of our wound and skincare virtual consult and other service offerings is successful, we will
face competition from other telehealth providers. The public health emergency caused by the COVID-19 pandemic has led to the widespread
adoption of telemedicine for most health care clinical specialties, including wound care and dermatology. As such, any clinical wound
care or dermatology physician and/or provider group that has incorporated telemedicine into their practice could be considered competitive.
If we are unable to compete with other telehealth providers, our operating results and financial condition may suffer.

 Several
factors may limit the market acceptance of our products, services and technologies, including the timing of regulatory approvals and
market entry relative to competitive products, services and technologies, the availability of alternative products, services and technologies,
the price of our products, services and technologies relative to alternative products, services and technologies, the availability of
third-party reimbursement and the extent of marketing efforts by third-party distributors or agents that we retain. Our products, services
or technologies may not receive market acceptance in a commercially viable period of time, if at all. Furthermore, our competitors may
develop products, services or technologies that are more effective or achieve greater market acceptance than those being developed by
us, which would render our products, services and technologies less competitive or obsolete.

 Our
competitors enjoy several competitive advantages over us, including but not limited to:

 large
 and established distribution networks in the United States and/or in international markets;

 greater
 financial, managerial and other resources for products research and development, sales and
 marketing efforts and protecting and enforcing intellectual property rights;

 greater
 name recognition;

 larger
 consumer bases;

 more
 expansive portfolios of products and intellectual property rights; and

 greater
 experience in obtaining and maintaining regulatory approvals and/or clearances from the FDA
 and other regulatory agencies.

 The
presence of competition in our market may lead to pricing pressure which would make it more difficult to sell our products, services
and technologies at a profitable price or may prevent us from selling our products at all. Our failure to compete effectively would have
a material adverse effect on our business.

 Security
breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation
to suffer.

 In
the ordinary course of our business, we use networks to collect and store sensitive data, including intellectual property, proprietary
business information and important information of our customers, suppliers and business partners, as well as personally identifiable
information of our customers and employees. The secure processing, maintenance and transmission of this information is critical to our
operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached
due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there
could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in the loss
of existing customers, difficulty in attracting new customers, backlash from negative public relations, legal claims or proceedings,
liability under laws that protect the privacy of personal information, and regulatory penalties. Further, such access, disclosure or
loss may cause disruption of our operations and the services we provide to customers, damage to our reputation, and cause a loss of confidence
in our products and services, which could adversely affect our business.

 We
have programs, processes and technologies in place to prevent, detect, contain, respond to and mitigate security related threats and
potential incidents. We undertake considerable ongoing improvements to our systems, connected devices and information-sharing products
in order to minimize vulnerabilities, in accordance with industry and regulatory standards. Because the techniques used to obtain unauthorized
access change frequently and can be difficult to detect, anticipating, identifying or preventing these intrusions or mitigating them
if and when they occur, may be challenging.

 If
we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial
results or prevent fraud and our business may be harmed and our stock price may be adversely impacted.

 Effective
internal controls over financial reporting are necessary for us to provide reliable financial reports and to effectively prevent fraud.
Any inability to provide reliable financial reports or to prevent fraud could harm our business. The Sarbanes-Oxley Act of 2002 (the
"Sarbanes-Oxley Act") requires management to evaluate and assess the effectiveness of our internal control over financial
reporting. In order to comply with the requirements of the Sarbanes-Oxley Act, we are required to continuously evaluate and, where appropriate,
enhance our policies, procedures and internal controls. If we fail to maintain the adequacy of our internal controls over financial reporting,
we could be subject to litigation or regulatory scrutiny and investors could lose confidence in the accuracy and completeness of our
financial reports. If we fail to fully comply with the requirements of the Sarbanes-Oxley Act or our management concludes that our internal
controls over financial reporting are not effective, our business may be harmed and our stock price may decline. In addition, because
of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements.

 Risks
Related to Our Indebtedness

 Our
indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations.

 A
significant portion of our future cash flow is required to pay interest and principal on our outstanding indebtedness, and we may be
unable to generate sufficient cash flow from operations, or have future borrowings available, to enable us to repay our indebtedness
or to fund other liquidity needs. Among other consequences, this indebtedness could:

 require
 us to use a significant percentage of our cash flow from operations for debt service and the satisfaction of repayment obligations,
 and not for other purposes, such as funding working capital and capital expenditures or making future acquisitions;

 cause
 our interest expense to increase if there is a general increase in interest rates, because our indebtedness bears interest
 at floating rates;

 limit
 our flexibility in planning for or reacting to changes in our business and limit our ability to exploit future business opportunities;
 and

 cause
 us to be more highly leveraged than some of our competitors, which may place us at a competitive disadvantage.

 Our
outstanding indebtedness is subject to certain operating and financial covenants that restrict our business and financing activities
and may adversely affect our cash flow and our ability to operate our business.

 The
Loan Agreement requires us as guarantor and Sanara MedTech Applied Technologies, LLC, a wholly owned subsidiary of the Company ("SMAT"),
to maintain compliance with certain operating and financial covenants, which provide that we or SMAT, among other things, may not, subject
to certain exceptions:

 create
 or permit the existence of additional liens on our assets;

 enter
 into any pledge agreements or arrangements;

 with
 respect to SMAT, make investments in or provide capital contributions to other entities;

 enter
 into a merger or consolidation or acquire any assets outside of the ordinary course of business;

 dispose
 of a material part of our assets or property or enter into any sale-leaseback transactions;

 with
 respect to SMAT, pay dividends or distributions of our capital stock, without the prior written consent of the Bank;

 make
 or permit to remain outstanding any loans;

 change
 the nature of our business;

 enter
 into transactions with affiliates other than in the ordinary course of business on an arm's-length basis; or

 amend,
 modify or obtain or grant a waiver of any provision of any document or instrument evidencing or securing any of our subordinated
 indebtedness.

 In
addition, starting with the quarter ending September 30, 2023, SMAT is required to maintain a minimum Debt Service Coverage Ratio of
1.2 to 1.0, which ratio is calculated as of the last day of the applicable fiscal quarter. SMAT is also required to maintain as of the
end of each fiscal quarter a maximum Cash Flow Leverage Ratio of not more than (a) 4.5 to 1.0 as of the last day of the fiscal quarter
ending on September 30, 2023, (b) 4.0 to 1.0 as of the last day of each fiscal quarter ending on December 31, 2023, and March 31, 2024,
(c) 3.5 to 1.0 as of the last day of each fiscal quarter ending on June 30, 2024, and September 30, 2024, and (d) 3.0 to 1.0 as of the
last day of each fiscal quarter thereafter.

 Further,
in the event that SMAT fails to comply with its financial covenants, we are required to contribute cash to SMAT in an amount equal to
the amount required to satisfy the financial covenants. During the three months ended September 30, 2023 and December 31, 2023, we contributed
an immaterial amount of cash to SMAT to ensure that SMAT was in compliance with the financial covenants under the Loan Agreement as of
September 30, 2023 and December 31, 2023. If we are required to make additional cash contributions to SMAT in future periods, we may
not have sufficient funds available to fulfill such obligation.

 A
breach of any of the covenants under our loan agreements, subject to certain cure periods, will result in an event of default, which
could cause all of our outstanding indebtedness under the Loan Agreement to become immediately due and payable, and a default interest
rate of an additional 5.0% per annum may be applied to the outstanding loan balance. If our indebtedness is accelerated, we cannot be
certain that we will have sufficient funds available to pay the accelerated indebtedness or that we will have the ability to refinance
the accelerated indebtedness on terms favorable to us or at all.

 As
a result of the negative covenants contained in the Loan Agreement and the need for cash to pay interest and principal amortization payments
required under the Loan Agreement, the Company may not have access to cash it otherwise would have for working capital, capital expenditures,
acquisitions, general corporate purposes or other purposes.

to the Loan Agreement, SMAT is subject to restrictions on making certain payments, including dividends, other distributions and loans,
to the Company. As a result, although SMAT may use its cash to repay the Term Loan, the Company may not have access to cash it otherwise
would have for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes.

 If
our Executive Chairman ceases to serve as the Chairman of the Board of Directors of the Company or SMAT, such event could result in an
event of default under the Loan Agreement.

 The
Loan Agreement provides that if Ron Nixon, our Executive Chairman, ceases to serve as Chairman of the Board of Directors of the Company
or SMAT, an event of default will occur under the Loan Agreement, unless a successor, acceptable to the Bank, is elected or appointed
within 10 business days of such event. If such an event were to occur and we are unable to find a replacement suitable to the Bank, we
would be in default and all of our outstanding indebtedness could become immediately due and payable, and a default interest rate of
an additional 5.0% per annum may be applied to the outstanding loan balance.

 Risks
Related to Our Products and Our Product Pipeline

 We
rely heavily on our research and development partners to design, manufacture and supply the products we have licensed for marketing.
If we or one of our partners fails to perform adequately, fulfill our needs, or comply with regulations, we may be required to incur
significant costs or even be subject to enforcement actions. We may also face significant delays in our product introductions and commercialization.

 While
we expect to have the capability to develop certain of our pipeline in-house, we do not currently own any facility that may be used as
a manufacturing and processing facility, and therefore rely heavily on our research and development partners, from whom we license most
of the products we currently commercialize, to design, manufacture and supply such products.

 We
and our research and development partners responsible for manufacturing our products and their contract manufacturers are obliged to
operate in accordance with FDA's current good manufacturing practices ("cGMP"), current good tissue practices ("cGTP"),
and the QSR, as applicable, as well as other regulations applicable to medical product manufacturers. The manufacture of regulated medical
products in compliance with cGMP, cGTP, and the QSR, as applicable, requires significant expertise and capital investment, including
the development of advanced manufacturing techniques and process controls. Manufacturers of medical products often encounter difficulties
in production, including difficulties with production costs and yields, quality control, including product stability and quality assurance
testing, shortages of qualified personnel, as well as compliance with strictly enforced regulatory requirements, other federal and state
regulatory requirements and foreign regulations. If we or our research and development partners or their contract manufacturers were
to encounter any of these difficulties or otherwise fail to comply with their obligations to us or under applicable regulations, our
ability to commercialize our products would be jeopardized.

 We
and the manufacturers of certain of our products may be unable to comply with applicable FDA, state and foreign regulatory requirements.
The FDA or similar foreign regulatory agencies may also implement new standards at any time or change their interpretation and enforcement
of existing standards for manufacture, packaging or testing of regulated products. We have little control over the manufacturers'
compliance with these regulations and standards. Our failure or a failure of any of our current or future research and development partners
or their contract manufacturers to establish and follow cGMP, cGTP, and the QSR, as applicable, and to document their adherence to such
practices may lead to significant delays in obtaining marketing authorization of future products or the ultimate launch of products.
Failure by us or our current or future partners or manufacturers to comply with applicable regulations could also result in sanctions
being imposed on us or our partners, including fines, injunctions, civil penalties, failure of the government to grant marketing authorization,
delays, suspension or withdrawal of authorization, seizures or recalls of products, operating restrictions, and criminal prosecutions.
If the safety of any product supplied is compromised due to the manufacturers' failure to adhere to applicable laws or for other
reasons, we may not be able to successfully commercialize our products. Any of these factors could cause a delay of commercialization
of our products, entail higher costs or impair our reputation.

 Our
revenue generated from the sale of Scendia products is heavily dependent on license agreements with certain manufacturers, and the termination
of any of these license agreements could harm our business.

 In
July 2022, we entered into a membership interest purchase agreement with Scendia and the Seller, pursuant to which we acquired 100% of
the issued and outstanding membership interests in Scendia from the Seller. Scendia provides clinicians and surgeons with a full line
of regenerative and orthobiologic technologies including (i) TEXAGEN, (ii) BiFORM, (iii) ACTIGEN and (iv) ALLOCYTE. We rely on license
agreements with certain manufacturers in order to sell Scendia products. These license agreements are nonexclusive and generally have
a term between one and five years. The license agreements are subject to renewal; however, the manufacturers may determine not to renew
the agreements or to terminate the contracts pursuant to their terms. We cannot be certain that these license agreements will continue
to be available to us or will be available to us on reasonable terms. If any of these agreements are terminated, we may be unable to
reacquire the necessary license on satisfactory terms or at all. The loss of, or inability to maintain, any of these license agreements
could negatively impact our ability to sell Scendia products, which could have a material adverse effect on our business, financial condition
and results of operations.

 Certain
of our product candidates are still under development, and we may not be able to successfully commercialize any of these product candidates.

 Our
pipeline contains products and product candidates for mitigation of opportunistic pathogens and biofilm, wound re-epithelialization and
closure, necrotic tissue debridement, and cell compatible substrates. We may also decide to develop other product candidates. Certain
of our research and development programs are in developmental stages. One or more of our product candidates may fail to meet safety and
efficacy standards in human testing, even if those product candidates are found to be effective in animal studies. To develop and commercialize
product candidates, we must provide the FDA and foreign regulatory authorities with human clinical and nonclinical animal data that demonstrate
adequate safety and effectiveness. To generate this data, we will have to subject our product candidates to significant additional research
and development efforts, including extensive nonclinical studies and clinical testing. Our approach to product discovery may not be effective
or may not result in the development of any product. It can take several years for a product to be approved and we may not be successful
in bringing any therapeutic candidates to the market. A new product candidate may appear promising at an early stage of development or
after clinical trials and never reach the market, or it may reach the market and not sell, for a variety of reasons. For example, the
product may:

 be
 shown to be ineffective or to cause harmful side effects during preclinical testing or clinical trials;

 fail
 to receive regulatory approval on a timely basis or at all;

 be
 difficult to manufacture on a large scale;

 not
 be economically viable;

 not
 be prescribed by doctors or accepted by patients;

 fail
 to receive a sufficient level of reimbursement from government, insurers or other third-party payors; or

 infringe
 on intellectual property rights of any other party.

 If
our delivery platform technologies or product development efforts fail to generate product candidates that lead to the successful development
and commercialization of products, or if the product candidates we have (or may in the future) acquired are not approved or cleared for
commercialization in the United States or, otherwise experience adverse regulatory action, our business and financial condition will
be materially adversely affected.

 Our
future success will largely depend on our ability to maintain and further grow clinical acceptance and adoption of our products, and
we may be unable to adequately educate healthcare practitioners on the use and benefits of our products.

 Healthcare
practitioners play a significant role in determining the course of a patient's treatment and, ultimately, the type of products,
if any, that will be used to treat the patient. As a result, our commercial success is heavily dependent on our ability to educate practitioners
on the use of our products in both surgical and post-acute care settings. Acceptance and adoption of our products in our markets depends
on educating healthcare practitioners as to the distinctive characteristics, benefits, safety, clinical efficacy and cost-effectiveness
of our products, including potential comparisons to our competitors' products, and on training healthcare practitioners in the
proper application of our products. If we are not successful in convincing healthcare practitioners of the merits and advantages of our
products compared to our competitors' products, they may not use our products and we will be unable to increase our sales and sustain
growth or profitability.

 Convincing
healthcare practitioners to dedicate the time and energy necessary to properly train to use new products and techniques is challenging
as healthcare practitioners may be hesitant to change their medical practices, and we may not be successful in these efforts. If healthcare
practitioners are not properly trained, they may use our products ineffectively, resulting in unsatisfactory patient outcomes, negative
publicity or lawsuits against us. Accordingly, even if our products show superior benefits, safety or efficacy, based on head-to-head
clinical trials, in comparison to alternative treatments, our success will depend on our ability to gain and maintain market acceptance
for our products. If we fail to do so, our sales will not grow and our business, financial condition and results of operations will be
adversely affected. We may not have adequate resources to effectively educate the medical community and our efforts may not be successful
due to physician resistance or negative perceptions regarding our products.

 Disruption
of, or changes in, our distribution model or customer base could harm our sales and margins.

 If
we fail to manage the distribution of our products properly, there may be a material adverse effect on our business. Furthermore, a change
in the mix of our customers between service provider and enterprise, or a change in the mix of direct and indirect sales, could adversely
affect our business. Several factors could result in disruption of or changes in our distribution model or customer base, which could
harm our sales and margins. For instance, we compete with some of our resellers through our direct sales, which may lead these channel
partners to use other suppliers that do not compete with them. In addition, some of our resellers may have insufficient financial resources
and may not be able to withstand changes in business conditions. If either of these situations were to occur, our reseller channels would
weaken, which would result in a material adverse effect on our business.

 Interruptions
in the supply of our products or inventory loss may adversely affect our business, financial condition and results of operations.

 Our
products are manufactured using technically complex processes requiring specialized facilities, highly specific raw materials and other
production constraints. The complexity of these processes, as well as strict company and government standards for the manufacture and
storage of our products, subjects us to production risks. In addition to ongoing production risks, process deviations or unanticipated
effects of approved process changes may result in noncompliance with regulatory requirements including stability requirements or specifications.
Most of our products must be stored and transported within a specified temperature range. For example, if environmental conditions deviate
from that range, our products' remaining shelf-lives could be impaired or their safety and efficacy could be adversely affected,
making them unsuitable for use. These deviations may go undetected. Severe weather conditions and natural disasters may make compliance
with these processes and maintenance of these standards more difficult, and climate change threatens more extreme weather events, which
could increase our production risks. The occurrence of actual or suspected production and distribution problems can lead to lost inventories,
and in some cases recalls, with consequential reputational damage and the risk of product liability. The investigation and remediation
of any identified problems can cause production delays and result in substantial additional expenses. Any unforeseen failure in the storage
of our products or loss in supply could result in a loss of our market share and negatively affect our revenues and operations.

 In
addition, Scendia operates a state-licensed and FDA registered tissue bank for the storage and distribution of allograft tissue-based
products to hospitals, surgery centers and clinicians across the United States. During the third quarter of 2022, we began to experience
supply issues with the ALLOCYTE product line. From the fourth quarter of 2022 through September or 2023, we were unable to fill certain
orders for this product, which negatively impacted our sales growth. The supply constraint was caused by significant supplier limits
on qualifying eligible donor tissue and supplier necessity to subcontract all processing to secondary suppliers. While we have since
expanded the ALLOCYTE product line with the release of ALLOCYTE Plus, which is processed by an alternative supplier with in-house processing
capabilities, any prolonged disruptions to the supply of our products or inventory could materially affect our business, financial condition
and results of operations.

 If
we are unable to manage product inventory in an effective and efficient manner, our profitability could be impaired.

 Many
factors affect the efficient use and planning of product inventory, such as effectiveness of predicting demand, effectiveness of preparing
manufacturing to meet demand, efficiently meeting product mix and product demand requirements and product expiration. Our products have
a shelf life of between 18 months and 5 years. If we are unable to manage our product inventory efficiently or within expected budget
goals or keep sufficient finished and in-process product on hand to meet demand, our operating margins and long-term growth prospects
could be impaired.

 We
place orders with our suppliers based on forecasts of demand and, in some instances, may acquire additional inventory to accommodate
anticipated demand. Our forecasts are based on management's judgment and assumptions, each of which may introduce error into our
estimates. If we overestimate customer demand, our excess or obsolete inventory may increase significantly, which would reduce our gross
margin and adversely affect our financial results. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity
is available, we would miss revenue opportunities and potentially lose market share and damage our customer relationships.

of any third-party assessments to demonstrate desired outcomes in proposed endpoints could have a negative impact on our business performance.

 Our
collaborators regularly conduct clinical studies designed to test a variety of endpoints associated with product performance and use
across a number of applications. If a clinical study conducted by us or our collaborators fails to demonstrate statistically significant
results supporting performance, use benefits or compelling health economic outcomes from using our products, physicians may elect not
to use our products as a treatment for conditions that may benefit from them. Furthermore, in the event of an adverse clinical study
outcome, our products may not achieve "standard-of-care" designations, where they exist, for the conditions in question,
which could deter the adoption of our products. Also, if serious adverse events are reported during the conduct of a study, it could
affect continuation of the study, product marketing authorization by regulatory authorities and product adoption by healthcare professionals
or could cause regulatory authorities to impose other restrictions on the product or require additional warning or precaution statements
to appear on the product labeling. If we or our collaborators are unable to develop a body of statistically significant evidence from
our clinical studies, whether due to adverse results or the inability to complete properly designed studies, public and private payors
could refuse to cover our products, limit the manner in which they cover our products, or reduce the price they are willing to pay or
reimburse for our products.

 Increased
prices for, or unavailability of, raw materials used in our products could adversely affect our business, financial condition and results
of operations.

 Our
profitability is affected by the prices of the raw materials used in the manufacture of our products. These prices may fluctuate based
on a number of factors beyond our control, including changes in supply and demand, general economic conditions, labor costs, fuel related
delivery costs, competition, import duties, excises and other indirect taxes, currency exchange rates, and government regulation. Due
to the highly competitive nature of the healthcare industry and the cost containment efforts of our customers and third-party payors,
we may be unable to pass along cost increases for key components or raw materials through higher prices to our customers. If the cost
of key components or raw materials increases, and we are unable fully to recover these increased costs through price increases or offset
these increases through other cost reductions, we could experience lower margins and profitability. Significant increases in the prices
of raw materials that cannot be recovered through productivity gains, price increases or other methods could adversely affect our business,
results of operations and financial condition.

 Risks
Related to Our Planned Expansion into Wound and Skincare Virtual Consult and Other Services

 Our
planned expansion into wound and skincare virtual consult and other services, including THP programs, could have a material adverse effect
on our business, financial condition and results of operations.

 Our
planned expansion into wound and skincare virtual consult and other services, including our planned THP programs, subjects us to risks
associated with the use of new and novel technologies, operational, financial, regulatory, legal and reputational risks, as well as the
risk that we may be unable to timely or successfully launch our service offerings. The success of these operations depends upon our ability
to commercialize our service offerings, and our failure to do so could negatively affect our ability to generate revenue from these activities.

 Our
planned expansion into wound and skincare virtual consult and other services will require entrance into several markets in which we have
little or no experience, which may not be successful and could be costly.

 As
part of our planned expansion into wound and skincare virtual consult services, we will be required to enter into other markets in which
we have little to no experience, including EMR, telehealth and healthcare diagnostics. While we intend to expand our staff with individuals
with more experience in the EMR, telehealth and diagnostic markets and will closely scrutinize individuals we engage, we may not be able
to retain or continue to hire well-qualified and experienced individuals or our assessment of individuals we retain may not be accurate.
As we enter new markets, we will face new technological and operational risks and challenges with which we are unfamiliar and may incur
significant costs. Entering new markets requires substantial management efforts and skills to mitigate these risks and challenges. Our
lack of experience with certain of these new markets may result in unsuccessful new market entries. If we do not manage our entry into
new markets properly, these costs and risks could harm our business, financial condition or results of operations.

 Our
planned expansion into the telehealth business, is dependent on our relationships with affiliated professional entities to provide physician
services, and our business would be adversely affected if those relationships were disrupted.

 There
is a risk that U.S. state authorities in some jurisdictions may find that any future contractual relationships we enter into with our
affiliated professional entities who provide telehealth services violate laws prohibiting the corporate practice of medicine and professional
fee-splitting laws. These laws generally prohibit the practice of medicine by lay persons or entities or sharing of professional fees
with lay persons and are intended to prevent unlicensed persons or entities from interfering with or inappropriately influencing a physician's
professional judgment. The corporate practice of medicine prohibition exists in some form, by statute, regulation, board of medicine
or attorney general guidance, or case law, in most states and is subject to change and to evolving interpretations by state boards of
medicine, state attorneys general and state courts. As such, we will be required to continually monitor our compliance with laws in every
jurisdiction in which we plan to operate, and we cannot guarantee that subsequent interpretation of the corporate practice of medicine
laws will not circumscribe our future business operations. State corporate practice of medicine doctrines could also subject physicians
to penalties for aiding the corporate practice of medicine, which could discourage physicians from participating in our network of providers.

 Due
to the prevalence of the corporate practice of medicine doctrine, including in the states where we plan to conduct our telehealth business,
we expect to continue contracting with provider-entities through management services agreements. Although we expect that these relationships
will continue, we cannot guarantee that they will. A material change in our relationships with these provider entities, whether resulting
from a dispute among the parties, a change in government regulation, or the loss of these affiliations, could impair our ability to provide
services to our future clients and could have a material adverse effect on our business, financial condition and results of operations.
Any scrutiny, investigation or litigation with regard to our future arrangements with these professional entities could have a material
adverse effect on our business, financial condition, and results of operations.

and frequent state legislative and regulatory changes specific to telemedicine may present us with additional requirements and state
compliance costs, with potential operational impacts in certain jurisdictions.

 The
state laws and regulations specific to telemedicine vary from state to state and are continually evolving. In some cases, these laws
and regulations target "direct to consumer" telehealth service offerings rather than specialty consultative services, such
as our planned acute telemedicine service offerings, and incorporate informed consent, modality, medical records and follow up care and
other requirements. Thus, where new legislation and regulations apply to our planned expansion into telemedicine services, we may incur
costs to monitor, evaluate, and modify operational processes for compliance. All such activities will increase our costs and could, in
certain circumstances, impact our ability to make telemedicine services available in a particular state.

 Risks
Related to Intellectual Property

 If
we are unable to adequately protect our intellectual property rights, we may not be able to compete effectively.

 Part
of our success depends on our and our research development partners' ability to protect proprietary rights to technologies used
in certain of our products. We and our research development partners rely on patents, copyrights, trademarks and trade secret laws to
establish and maintain proprietary rights in our technology and products. However, these legal means afford only limited protection and
may not adequately protect our or our research development partners' rights or permit us to gain or keep a competitive advantage.
Patents and patent applications for the products we have may not be sufficient or broad enough to prevent competitors from introducing
similar products into the market. Our or our research development partners' patents or attempts to enforce them may not be upheld
by the courts and the damages or other remedies awarded if we were to prevail in upholding such patents may not be commercially meaningful.
Efforts to enforce any of our or our research development partners' proprietary rights could be time-consuming and expensive, which
could adversely affect our business and prospects and divert management's attention. There can be no assurance that our or our
research and development partners' proprietary rights will not be challenged, invalidated or circumvented or that such rights will
in fact provide competitive advantages to us.

 Furthermore,
the issuance of a patent, while presumed valid and enforceable, is not conclusive as to its validity or its enforceability and it may
not provide us with adequate proprietary protection or competitive advantages against competitors with similar products. Competitors
may also be able to design around our patents. Other parties may develop and obtain patent protection for more effective technologies,
designs or methods. In addition, we may not be able to prevent the unauthorized disclosure or use of our technical knowledge or trade
secrets by consultants, vendors, former employees and current employees.

 Patent
rights are territorial, and patent protection extends only to those countries where we have issued patents. Filing, prosecuting and defending
patents on our products and product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive,
and our intellectual property rights in some countries outside the United States could be less or more extensive than those in the United
States, and their litigation processes differ. Competitors may successfully challenge or avoid our patents or manufacture products in
countries where we have not applied for patent protection. Changes in the patent laws in the United States or other countries may diminish
the value of our patent rights. As a result of these and other factors, the scope, validity, enforceability, and commercial value of
our and our research development partners' patent rights are uncertain and unpredictable.

 The
patent positions of life sciences companies, including our and our research development partners' patent positions, involve complex
legal and factual questions, and, therefore, the issuance, scope, validity and enforceability of any patent claims that we and our research
development partners may obtain cannot be predicted with certainty. Patents, if issued, may be challenged, deemed unenforceable, invalidated,
or circumvented. A third-party may submit prior patents, or we may become involved in opposition, derivation, reexamination, inter partes
review, post-grant review, supplemental examination, or interference proceedings challenging our patent rights or the patent rights of
our licensors or development partners. The costs of defending or enforcing our proprietary rights in these proceedings can be substantial,
and the outcome can be uncertain. An adverse determination in any such submission or proceeding could reduce the scope of, or invalidate,
our patent rights, allow third parties to commercialize our technology or products and compete directly with us, or reduce our ability
to manufacture or commercialize products. Furthermore, if the scope or strength of protection provided by our patents and patent applications
is threatened, it could discourage companies from collaborating with us to license, develop or commercialize current or future products.
The ownership of our proprietary rights could also be challenged.

 Our
and our research development partners' ability to enforce our respective patent rights depends on the ability to detect infringement.
It is difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult
or impossible to obtain evidence of infringement in a competitor's or potential competitor's product, particularly in litigation
in countries other than the United States that do not provide an extensive discovery procedure.

Surgical is not currently protected by any pending patent application or any unexpired patent. Currently the substantial majority of
our net revenue is derived from the sale of CellerateRX Surgical. CellerateRX Surgical may be subject to competition from the sale of
substantially equivalent products that could adversely affect our business and operations.

 Our
CellerateRX Surgical products, from which we derive a substantial majority of our net revenue, have no patent protection, and therefore,
in order to continue to obtain commercial benefits from CellerateRX Surgical, we will rely on product manufacturing trade secrets, know-how
and related nonpatent intellectual property, such as potential regulatory rights that would require various resources to separately obtain.
The effect of CellerateRX Surgical's lack of patent protection depends, among other things, upon the nature of the market and the
position of our products in the market from time to time, the size of the market, the complexities and economics of manufacturing a competitive
product and applicable regulatory approval requirements. In the event that competition develops substantially equivalent products, this
competition could have a material adverse effect on our business, financial condition and operating results. Trade secret protection
is effective only against wrongful acquisition, use or disclosure of confidential information. A competitor can avoid a claim of trade
secret misappropriation by showing independent development without use of a trade secret owner's information, however, this typically
requires some time, effort and financial resources to develop independently. The entrance into the market of a product substantially
equivalent to CellerateRX Surgical may erode our product's market share, which may have a material adverse effect on our business,
financial condition and results of operations.

 We
are heavily dependent on technologies and products we have licensed from third parties, and we may need to license technologies and products
in the future, and if we fail to obtain licenses we need, or fail to comply with our payment and other obligations in the agreements
under which we in-license intellectual property and other rights from third parties, we could lose our ability to develop and commercialize
our products.

 We
are heavily dependent on licenses from our research and development partners for most of our technologies and products and are party
to license agreements with Rochal and a marketing and distribution agreement with Cook Biotech. Our license agreements require that we
comply with various obligations and provisions, and that we pay royalties to the sublicensor or licensor, as applicable, based on our
net sales of the sublicensed and licensed products.

 No
assurance can be given that our existing license agreements or marketing and distribution agreement will continue to be extended on reasonable
terms or at all. In addition, we expect we will need to license intellectual property, technology and products from third parties in
the future and that these licenses will be material to our business. No assurance can be given that we will meet our minimum performance
obligations or generate sufficient revenue or raise additional financing to meet our payment obligations in our agreements with Rochal
and Cook Biotech or other license or marketing and distribution agreements we enter into with third parties in the future. Any failure
to meet our minimum performance obligations or make the payments required by our agreements may permit the licensor or supplier to terminate
the agreement. If we were to lose or otherwise be unable to maintain these licenses or marketing and distribution agreements for any
reason, it would halt our ability to commercialize one or more of our pipeline products. Furthermore, such loss of these licenses or
marketing and distribution agreements may enable development of new products that may compete with our pipeline products, and our competitors
may gain proprietary position. Any of the foregoing could result in a material adverse effect on our business or results of operations.

 In
certain cases, we may rely on our licensors to conduct prosecution, maintenance and/or defense of patents or trademarks on our behalf.
Our ability to ensure that these patents and trademarks are properly prepared, prosecuted, maintained, enforce or defended is therefore
limited, which may adversely affect our licensed intellectual property rights. Any failure by our licensors to properly prepare, prosecute,
maintain, enforce, and defend patents or trademarks or other licensed rights could materially harm our ability to protect our products,
thereby materially reducing our potential profits.

 We
may be found to infringe on or violate the intellectual property rights of others.

 We
may not have identified all patents, published applications or published literature that affect our business either by blocking our ability
to commercialize our products or R&D candidates, by preventing the patentability of one or more aspects of our products or R&D
candidates to us or our licensors, or by covering the same or similar technologies that may affect our ability to market our products
and R&D candidates. For example, we (or the licensor of a product or R&D candidate to us) may not have conducted a patent clearance
search sufficient to identify potentially obstructing third party patent rights. Moreover, patent applications in the United States are
maintained in confidence for up to 18 months after their filing. In some cases, however, patent applications remain confidential in the
USPTO, for the entire time prior to issuance as a U.S. patent. Patent applications filed in countries outside of the United States are
not typically published until at least 18 months from their first filing date. Similarly, publication of discoveries in the scientific
or patent literature often lags behind actual discoveries. We cannot be certain that we or our licensors were the first to invent, or
the first to file, patent applications covering our products and candidates. We also may not know if our competitors filed patent applications
for technology covered by our pending applications or if we were the first to invent the technology that is the subject of our patent
applications. Competitors may have filed patent applications or received patents and may obtain additional patents and proprietary rights
that block or compete with our patents.

 Such
third parties, including customers, may in the future assert claims or initiate litigation related to exclusive patent, copyright, trademark
and other intellectual property rights to technologies and related standards that are relevant to us, our operations and our products.
These assertions may emerge over time as a result of our growth and the general increase in the pace of patent claim assertions, particularly
in the United States. Because of the existence of a large number of patents in the healthcare field, the secrecy of some pending patent
applications and the rapid rate of issuance of new patents, we believe that it is not economically practical or even possible to determine
in advance whether a product or any of its components is completely free of infringement of the patent rights of others even when we
take reasonably objective steps to determine hat relevant patent rights might exist and, if so, to evaluate such patent rights relative
to our proposed and actual products and methods with patent counsel. The asserted claims or initiated litigation can include claims against
us or our manufacturers, suppliers or customers alleging infringement of their proprietary rights with respect to our existing or future
products or components of those products. We may not have sufficient resources to bring these actions to a successful conclusion. In
addition, intellectual property litigation or claims could force us to cease developing, selling or otherwise commercializing one or
more of our products; to pay substantial damages for past use of the asserted intellectual property; to obtain a license from the holder
of the asserted intellectual property, which may not be available on reasonable terms, if at all; and redesign, or rename in the case
of trademark claims, our product(s) to avoid such third party rights, which may not be possible or which could be costly and time-consuming.
Any of these risks coming to fruition could have a material adverse effect on our business, results of operations, financial condition
and prospects. Regardless of the merit of these claims, they can be time-consuming, result in costly litigation and diversion of technical
and management personnel, or require us to develop a noninfringing technology or enter into license agreements. Where claims are made
by customers, resistance even to unmeritorious claims could damage customer relationships. There can be no assurance that licenses will
be available on acceptable terms and conditions, if at all, or that our indemnification by our suppliers will be adequate to cover our
costs if a claim were brought directly against us or our customers. Furthermore, because of the potential for high court awards that
are not necessarily predictable and the resources required to engage in a full defense of such allegations, it is not unusual to find
even arguably unmeritorious claims settled for significant amounts. If any infringement or other intellectual property claim made against
us by any third party is successful, or if we fail to develop noninfringing technology or license the proprietary rights on commercially
reasonable terms and conditions, our business could be materially and adversely affected.

 Risks
Related to Regulations

 Our
business is affected by numerous regulations relating to the development, manufacture, distribution, labeling, marketing and sale of
our products.

 Government
regulation by the FDA and similar agencies in other countries is a significant factor in the development, manufacturing and marketing
of our products and in the acquisition or licensing of new products. Complying with government regulations is often time consuming and
expensive and may involve delays or actions adversely impacting the marketing and sale of our current or future products.

 Following
initial regulatory approval or clearance of any products that we or our research and development partners may develop, we and/or our
research and development partners will be subject to continuing regulatory review, including, but not limited to:

 appropriate
 establishment registration and product listing requirements;

 FDA's
 cGMP, cGTP and QSR regulations, which govern the methods used in, and the facilities and
 controls used for, the design, manufacture, packaging, labeling, storage, installation, and
 servicing of finished devices, drugs and/or biologics, as applicable;

 FDA
 labeling requirements, which mandate the inclusion of certain content in medical product
 labels and labeling, and which also prohibit the promotion of products for uncleared or unapproved,
 i.e., "off-label," indications;

 adverse
 event reporting regulations, which, generally, require applicable establishments (such as
 manufacturers and importers, among others) report to the FDA any adverse reactions, events,
 or experiences that meet the FDA's reporting thresholds for the given product type
 (e.g., under FDA's adverse-event reporting regulations under its device framework,
 adverse events must be reported if they may have caused or contributed to a death or serious
 injury or malfunctioned in a way that would likely cause or contribute to a death or serious
 injury if it were to recur); and

 the
 Reports of Corrections and Removals regulation, which requires that manufacturers and importers
 report to the FDA corrective actions and product removals (both of which are defined under
 applicable regulations) that meet the definition of a "recall" if undertaken
 to reduce a risk to health posed by the product or to remedy a violation of the FDCA that
 may present a risk to health and that manufacturers and importers keep records of recalls
 that they determine to be not reportable.

to comply with applicable regulatory requirements can result in, among other things, the FDA or other governmental authorities:

 imposing
 fines and penalties on us;

 preventing
 us from manufacturing or selling our products;

 delaying
 or denying pending applications for approval or clearance of our products or of new uses
 or modifications to our existing products, or withdrawing or suspending current approvals
 or clearances;

 ordering
 or requesting a recall of our products;

 issuing
 warning letters, untitled letters, or "It has Come to Our Attention" letters;

 imposing
 operating restrictions, including a partial or total shutdown of production or investigation
 of any or all of our products;

 refusing
 to permit to import or export of our products;

 detaining
 or seizing our products;

 obtaining
 injunctions preventing us from manufacturing or distributing any or all of our products;

 commencing
 criminal prosecutions or seeking civil penalties; and

 requiring
 changes in our advertising and promotion practices.

 In
addition, private consumer and competitor litigation tends to follow FDA enforcement actions and publications, such that a company that
is targeted by FDA or another regulatory body is also at an increased risk of facing civil litigation (often in the form of class actions).

 The
manufacturing facilities we or our research and development partners use (and may use) to make any of our FDA-regulated products are
or may become subject to periodic review and inspection by the FDA. If a previously unknown problem with a product or a manufacturing
or laboratory facility used or contracted by us or one of our research and development partners is discovered, the FDA may impose restrictions
on that product or on the manufacturing facility, including requiring us and/or our research and development partner to withdraw the
product from the market. Any changes to an approved or cleared product, including the way it is manufactured or promoted, often requires
FDA review and separate approval or clearance before the product, as modified, may be marketed. In addition, for products we develop
in the future, we and our contract manufacturers may be subject to ongoing FDA requirements for submission of safety and other post-market
approval information. If we violate regulatory requirements at any stage, whether before or after marketing approval or clearance is
obtained, we may be fined, be forced to remove a product from the market or experience other adverse consequences, which would materially
harm our financial results. Additionally, due to limitations imposed on us by the scope of the cleared or approved indications or intended
use of our products and by FDA and Federal Trade Commission ("FTC") regulations relating to promotional claims, we may not
be able to obtain the labeling claims necessary or desirable for product promotion.

 Distribution
of our products outside the United States is subject to extensive government regulation. These regulations, including the requirements
for marketing authorizations or product licenses necessary to bring a medical product to market, the time required for regulatory review
and the sanctions imposed for violations, vary from country to country. We do not know whether we will obtain the marketing authorizations
or product licenses necessary to market our products in such countries or that we will not be required to incur significant costs in
obtaining or maintaining these regulatory approvals.

 We
are subject to various governmental regulations relating to the labeling, marketing and sale of our products.

 Both
before and after a product is commercially released, we have ongoing responsibilities under regulations promulgated by the FDA, the FTC,
and similar U.S. and foreign regulations governing product labeling and advertising, distribution, sale and marketing of our products.
Medical devices and biological products may only be marketed or promoted for the uses and indications set forth in the approved or cleared
product labeling. A number of enforcement actions have been taken against companies that promoted products for "off-label"
uses (i.e., uses that are not described in the approved or cleared labeling), including actions alleging that claims submitted to government
healthcare programs for reimbursement of products that were promoted for "off-label" uses are fraudulent in violation of
the Federal False Claims Act or other federal and state statutes and that the submission of those claims was caused by off-label promotion.
The failure to comply with prohibitions on off-label promotion can result in significant monetary penalties, revocation or suspension
of a company's business license, suspension of sales of certain products, product recalls, civil or criminal sanctions, exclusion
from participating in federal healthcare programs, or other enforcement actions. In the United States, allegations of such wrongful conduct
could also result in a corporate integrity agreement with the U.S. government that imposes significant administrative obligations and
costs.

 If
we fail to obtain or experience significant delays in obtaining regulatory clearances or approvals to market future medical device products,
we will be unable to commercialize these products until such clearance or approval is obtained.

 The
developing, testing, manufacturing, marketing and selling of medical devices is subject to extensive regulation by governmental authorities
in the United States and other countries. The process of obtaining regulatory clearance and approval of certain medical technology products
is costly and time consuming. Inherent in the development of new medical products is the potential for delay because product testing,
including clinical evaluation, is typically required, especially for drugs, biologics and high-risk devices, before such products can
be approved for human use. With respect to medical devices, such as those that we currently market, before a new medical device, or a
new indicated use of, or claim for, an existing product can be marketed (unless it is a Class I device), it must first receive either
premarket clearance under Section 510(k) of the FDCA or approval of a PMA from the FDA, or be reclassified and receive marketing authorization
through the de novo classification process, unless an exemption applies.

 In
the 510(k)-clearance process, the FDA must determine that the proposed device is "substantially equivalent" to a Class I
or II device legally on the market, known as a "predicate" device, with respect to intended use, technology, safety and effectiveness
to clear the proposed device for marketing. Clinical data is sometimes required to support substantial equivalence for certain device
types. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device for its intended use based, in
part, on extensive data including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data. The PMA
process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable
devices. If a device is novel and there is no appropriate predicate to which the applicant can demonstrate substantial equivalence, the
device will be automatically classified as a Class III device and require approval through the PMA process prior to commercialization,
unless the applicant submits a de novo classification request demonstrating that the novel device should be reclassified into
Class I or II. Demonstrating that a novel device should be reclassified to Class I or II from Class III typically requires extensive
information and data on the benefits and risks of the device, including performance data and frequently data from one or more clinical
studies. The 510(k), PMA and de novo classification approval processes can be expensive and lengthy.

to comply with applicable regulatory requirements can result in, among other things, suspension or withdrawal of clearances or approvals,
seizure or recall of products, injunctions against the manufacture, holding, distribution, marketing and sale of a product and civil
and criminal sanctions. Furthermore, changes in existing regulations or the adoption of new regulations could prevent us from obtaining,
or affect the timing of, future regulatory clearances or approvals. Meeting regulatory requirements and evolving government standards
may delay marketing of any new products developed by us for a considerable period of time, impose costly procedures upon our activities
and result in a competitive advantage to larger companies that compete against us.

 The
FDA or other regulatory agencies may not clear or approve any products developed by us on a timely basis, or at all, or, if granted,
clearance or approval may entail limiting the indicated uses for which we may market the product, which could limit the potential market
for any of these products.

 Delays
in or changes to the FDA clearance and approval processes or ongoing regulatory requirements could make it more difficult for us to obtain
FDA clearance or approval of new products or comply with ongoing requirements.

 New
government regulations may be enacted and changes in FDA policies and regulations and, their interpretation and enforcement, could prevent
or delay regulatory clearance or approval of new products. We cannot predict the likelihood, nature or extent of adverse government regulation
that may arise from future legislation or administrative action, either in the United States or abroad. Therefore, we do not know whether
we or our research and development partners will be able to continue to comply with such regulations or whether the costs of such compliance
will have a material adverse effect on our business. Changes could, among other things, require different labeling, monitoring of patients,
interaction with physicians, education programs for patients or physicians, curtailment of necessary supplies, or limitations on product
distribution. These changes, or others required by the FDA could have an adverse effect on our business, and specifically, on the sales
of affected products. The evolving and complex nature of regulatory science and regulatory requirements, the broad authority and discretion
of the FDA and the generally high level of regulatory oversight results in a continuing possibility that from time to time, we will be
adversely affected by regulatory actions despite ongoing efforts and commitment to achieve and maintain full compliance with all regulatory
requirements. If we or our research and development partners are not able to maintain regulatory compliance, we may not be permitted
to market our products and our business would suffer.

to obtain or maintain adequate reimbursement or insurance coverage for drugs, if any, could limit our ability to market those drugs and
decrease our ability to generate revenue. Changes in reimbursement policies and regulations by governmental or other third-party payors
may have an adverse impact on the use of our products.

 The
pricing, coverage, and reimbursement of our products, if any, must be sufficient to support our commercial efforts and other development
programs, and the availability and adequacy of coverage and reimbursement by third-party payors, including governmental and private insurers,
are essential for most patients to be able to afford medical treatments. Sales of our products depend substantially, both domestically
and abroad, on the extent to which the costs of our products, if any, will be paid for or reimbursed by health maintenance, managed care,
and similar healthcare management organizations, or government payers and private payors. If coverage and reimbursement are not available,
or are available only in limited amounts, we may have to subsidize or provide medical products for free or we may not be able to successfully
commercialize our products.

 A
significant portion of our wound care products are purchased principally for the Medicare and Medicaid eligible population by hospital
outpatient clinics, wound care clinics, durable medical equipment ("DME") suppliers and SNFs, which typically bill various
third-party payors, primarily state and federal healthcare programs (e.g., Medicare and Medicaid), and managed care plans, for the products
and services provided to their patients. Although the majority of our wound care products are currently eligible for reimbursement under
Medicare Part B, adjustments to our reimbursement amounts or a change in CMS's reimbursement policies could have an adverse effect
on our market opportunities in this area. The ability of our customers to obtain appropriate reimbursement for products and services
from third-party payors is critical to the success of our business because reimbursement status affects which products our customers
purchase. In addition, our ability to obtain reimbursement approval in foreign jurisdictions may affect our ability to expand our product
offerings internationally.

 Third-party
payors have adopted, and are continuing to adopt, a number of policies intended to curb rising healthcare costs. These policies include
the imposition of conditions of payment by foreign, state and federal healthcare programs as well as private insurance plans, and the
reduction in reimbursement amounts applicable to specific products and services.

 Changes
in healthcare systems in the United States or internationally in a manner that significantly reduces reimbursement for procedures using
our products or denies coverage for these procedures would also have an adverse impact on the acceptance of our products and the prices
which our customers are willing to pay for them.

 Moreover,
increasing efforts by governmental and private payors in the United States and abroad to limit or reduce healthcare costs may result
in restrictions on coverage and the level of reimbursement for new medical products and, as a result, they may not cover or provide adequate
payment for our products. We expect to experience pricing pressures in connection with our products due to the increasing trend toward
managed healthcare, including the increasing influence of health maintenance organizations and additional legislative changes. The downward
pressure on healthcare costs in general, and prescription drugs or biologics in particular, has and is expected to continue to increase
in the future. As a result, profitability of our current or future products may be more difficult to achieve.

 We
rely heavily on our research and development partners to comply with applicable laws and regulations relating to product classification
and when and what types of FDA marketing authorizations are needed to lawfully commercialize a new or updated medical product in the
United States.

 We
rely heavily on our research and development partners, from whom we license most of the products we currently commercialize, to determine
the appropriate classification for each such product and to comply with applicable regulations related to obtaining the proper marketing
authorization. With respect to each medical device product we license, our respective research and development partner designs the product
and determines whether the device should be classified as a Class I, II, or III device and the appropriate FDA marketing authorization
pathway to pursue (i.e., 510(k), PMA or de novo classification). In addition, we rely on our research and development partners
to determine whether specific legal or regulatory definitions or exemptions apply to particular medical products, which individually
may be subject to FDA oversight as a device, drug, biologic or human cellular or tissue-based product. The FDA has broad regulatory authority
to interpret and enforce the laws and regulations that govern medical products in commercial distribution, and any adverse determination
by the FDA relating to one of our licensed products could require significant cost and effort to comply.

 For
example, our research and development partner, Cook Biotech, from whom we have the right to exclusively distribute three biologic products
for surgical and wound care applications, has determined that one such product, VIM Amnion Matrix, is intended for homologous use as
a wound covering or barrier. It is possible that the FDA, after evaluating the product, promotional claims and other information pertinent
to the FDA's determination of the product's intended use, may not agree with Cook Biotech's conclusion that the VIM
Amnion Matrix product is intended for homologous use, which would change the legal framework under which the product is regulated and
may require Cook Biotech and us to incur substantial costs and expend significant effort to bring the product into compliance with applicable
regulations. Such action by the FDA may also require us to cease marketing operations relating to the VIM Amnion Matrix product until
the appropriate corrections are complete. We are subject to similar reliance and risks in connection with our recent acquisition of Scendia,
which is an FDA-registered tissue bank with a biologics pipeline comprised of several regenerative and orthobiologic technologies, as
we did not have prior experience in obtaining marketing authorizations in this particular segment of the skin- and wound-care industry.

 Similarly,
some of the devices that we market under a license (or that we have acquired or have, otherwise, obtained commercialization rights in
the United States) have been updated or modified since their initial 510(k) clearance. Depending on the nature of the updates or modifications
made to a 510(k)-cleared device, the FDA may require the submission (and clearance) of a new 510(k). More specifically, any modification
that could significantly affect the cleared device's safety or effectiveness, or that would constitute a significant change in
its intended use, will require a new 510(k) clearance. The FDA requires device manufacturers to make the initial determination as to
whether a proposed modification to a cleared device requires a new 510(k) submission, but the FDA can review any such decision not to
submit a new 510(k) (if it becomes aware of the modifications during an inspection or otherwise) and may disagree with the manufacturer's
determination that the given modification(s) did not require new clearance. If the FDA finds that a manufacturer has improperly marketed
a modified device (for which the FDA has determined that a new 510(k) is required) under the original device's 510(k), the FDA
may mandate that the manufacturer cease marketing and/or recall the modified device until the requisite clearance is obtained, in addition
to one or more other enforcement actions. FDA may disagree with our partners' decisions not to submit new 510(k) notifications
for those of our 510(k)-cleared devices that have been updated or modified since their initial clearance, in which case, we may be subject
to a wide range of FDA enforcement actions, including, but not limited to, warning letters, fines, and other penalties, and our business
will be adversely affected, as we would likely be required to cease commercialization (and, possibly, conduct a recall) of the modified
product(s) at-issue and may incur additional expenses in connection with the preparation and submission of a new 510(k).

 We
and our employees and contractors are subject, directly or indirectly, to federal, state and foreign healthcare fraud and abuse laws,
including false claims laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

 Our
operations are subject to various federal, state and foreign fraud and abuse laws. These laws may affect our operations, including the
financial arrangements and relationships through which we market, sell and distribute our products. U.S. federal and state laws that
affect our ability to operate include, but are not limited to:

 the
 federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from
 knowingly and willfully soliciting, receiving, offering or paying any remuneration (including
 any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or
 in kind in return for, the purchase, recommendation, leasing or furnishing of an item or
 service reimbursable under a federal healthcare program, such as the Medicare and Medicaid
 programs;

 federal
 civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among
 other things, individuals or entities from knowingly presenting, or causing to be presented,
 claims for payment or approval from Medicare, Medicaid, or other government payors that are
 false or fraudulent;

 Section
 242 of HIPAA codified at 18 U.S.C. § 1347, which created new federal criminal statutes
 that prohibit a person from knowingly and willfully executing a scheme or from making false
 or fraudulent statements to defraud any healthcare benefit program (i.e., public or private);

 federal
 transparency laws, including the so-called federal "sunshine" law, which requires
 the tracking and disclosure to the federal government by pharmaceutical and medical device
 manufacturers of payments and other transfers of value to physicians and teaching hospitals
 as well as ownership and investment interests that are held by physicians and their immediate
 family members; and

 state
 law equivalents of each of these federal laws, such as anti-kickback and false claims laws
 that may apply to items or services reimbursed by any third-party payer, including commercial
 insurers, state laws that require pharmaceutical and medical device companies to comply with
 their industry's voluntary compliance guidelines and the applicable compliance guidance
 promulgated by the federal government or otherwise restrict certain payments that may be
 made to healthcare providers and other potential referral sources, state laws that require
 drug and medical device manufacturers to report information related to payments and other
 transfers of value to physicians and other healthcare providers or marketing expenditures,
 state laws that prohibit giving gifts to licensed healthcare professionals and state laws
 governing the privacy and security of health information in certain circumstances, many of
 which differ from each other in significant ways and may not have the same effect, thus complicating
 compliance efforts in certain circumstances, such as specific disease states.

 In
particular, activities and arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent
fraud, waste and other abusive practices. These laws and regulations may restrict or prohibit a wide range of activities or other arrangements
related to the development, marketing or promotion of products, including pricing and discounting of products, provision of customer
incentives, provision of reimbursement support, other customer support services, provision of sales commissions or other incentives to
employees and independent contractors and other interactions with healthcare practitioners, other healthcare providers and patients.

 Because
of the breadth of these laws and the narrow scope of the statutory or regulatory exceptions and safe harbors available, our business
activities could be challenged under one or more of these laws. Relationships between medical product manufacturers and health care providers
are an area of heightened scrutiny by the government. We engage in various activities, including the conduct of speaker programs to educate
physicians, the provision of reimbursement advice and support to customers, and the provision of customer and patient support services,
that have been the subject of government scrutiny and enforcement action within the medical device industry.

 Government
expectations and industry best practices for compliance continue to evolve and past activities may not always be consistent with current
industry best practices. Further, there is a lack of government guidance as to whether various industry practices comply with these laws,
and government interpretations of these laws continue to evolve, all of which create compliance uncertainties. Any noncompliance could
result in regulatory sanctions, criminal or civil liability and serious harm to our reputation. Although we have a comprehensive compliance
program designed to ensure that our employees' and commercial partners' activities and interactions with healthcare professionals
and patients are appropriate, ethical, and consistent with all applicable laws, regulations, guidelines, policies and standards, it is
not always possible to identify and deter misconduct, and the precautions we take to detect and prevent this activity may not be effective
in preventing such conduct, mitigating risks, or reducing the chance of governmental investigations or other actions or lawsuits stemming
from a failure to comply with these laws or regulations.

 If
a government entity opens an investigation into possible violations of any of these laws (which may include the issuance of subpoenas),
we would have to expend significant resources to defend ourselves against the allegations. Allegations that we, our officers, or our
employees violated any one of these laws can be made by individuals called "whistleblowers" who may be our employees, customers,
competitors or other parties. Government policy is to encourage individuals to become whistleblowers and file a complaint in federal
court alleging wrongful conduct. The government is required to investigate all of these complaints and decide whether to intervene. If
the government intervenes and we are required to pay damages, which in such cases are typically set at three times the actual monetary
damages, to the government, the whistleblower, as a reward, is awarded a percentage of such damages or any settlement amount. If the
government declines to intervene, the whistleblower may proceed on their own and, if they are successful, they will receive a percentage
of any judgment or settlement amount the company is required to pay. The government may also initiate an investigation on its own. If
any such actions are instituted against us, those actions could have a significant impact on our business, including the imposition of
significant fines, and other sanctions that may materially impair our ability to run a profitable business. In particular, if our operations
are found to be in violation of any of the laws described above or if we agree to settle with the government without admitting to any
wrongful conduct or if we are found to be in violation of any other governmental regulations that apply to us, we, our officers and employees
may be subject to sanctions, including civil and criminal penalties, damages, fines, exclusion from participation in government health
care programs, such as Medicare and Medicaid, imprisonment, the curtailment or restructuring of our operations and the imposition of
a corporate integrity agreement, any of which could adversely affect our business, results of operations and financial condition.

 We
and our research and development partners' use and disclosure of PII, including health information, is subject to federal and state
privacy and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could
have a material adverse effect on our client base, business, financial condition and results of operations.

 Numerous
state and federal laws and regulations, including HIPAA, govern the collection, dissemination, use, privacy, confidentiality, security,
availability and integrity of PII, including protected health information. HIPAA establishes a set of basic national privacy and security
standards for the protection of PHI by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered
entities, and the business associates with whom such covered entities contract for services, which likely includes us. HIPAA requires
healthcare providers and business associates to develop and maintain policies and procedures with respect to PHI that is used or disclosed,
including the adoption of administrative, physical, and technical safeguards to protect such information. HIPAA also implemented the
use of standard transaction code sets and standard identifiers that covered entities must use when submitting or receiving certain electronic
healthcare transactions, including activities associated with the billing and collection of healthcare claims. HIPAA imposes mandatory
penalties for certain violations. HIPAA also authorizes state attorneys general to file suit on behalf of their residents. Courts will
be able to award damages, costs and attorneys' fees related to violations of HIPAA in such cases. While HIPAA does not create a
private right of action allowing individuals to sue us in civil court for violations of HIPAA, its standards have been used as the basis
for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

 In
addition, HIPAA mandates that the Secretary of HHS conduct periodic compliance audits of HIPAA covered entities or business associates
for compliance with the HIPAA Privacy and Security Standards. HIPAA further requires that patients be notified of any unauthorized acquisition,
access, use or disclosure of their unsecured PHI that compromises the privacy or security of such information, with certain exceptions
related to unintentional or inadvertent use or disclosure by employees or authorized individuals. HIPAA specifies that such notifications
must be made without unreasonable delay and in no case later than 60 calendar days after discovery of the breach. If a breach affects
500 patients or more, it must be reported to HHS without unreasonable delay, and HHS will post the name of the breaching entity on its
public web site. Breaches affecting 500 patients or more in the same state or jurisdiction must also be reported to the local media.
If a breach involves fewer than 500 people, the covered entity must record it in a log and notify HHS at least annually.

 Numerous
other federal and state laws protect the confidentiality, privacy, availability, integrity and security of PII, including PHI. These
laws in many cases are more restrictive than, and may not be preempted by, the HIPAA rules and may be subject to varying interpretations
by courts and government agencies, creating complex compliance issues for us and our clients and potentially exposing us to additional
expense, adverse publicity and liability. In addition, new health information standards, whether implemented pursuant to HIPAA, congressional
action or otherwise, could have a significant effect on the manner in which we must handle healthcare related data, and the cost of complying
with standards could be significant. If we do not comply with existing or new laws and regulations related to PHI, we could be subject
to criminal or civil sanctions.

 Because
of the extreme sensitivity of the PII we or our partners may store and transmit, the security features of our technology platforms are
very important. If our security measures, some of which may be managed by third parties, are breached or fail, unauthorized persons may
be able to obtain access to sensitive client and patient data, including HIPAA-regulated PHI. As a result, our reputation could be severely
damaged, adversely affecting client or investor confidence. Clients may curtail their use of or stop using our products and services,
which would cause our business to suffer. In addition, we could face litigation, damages for contract breach, penalties and regulatory
actions for violation of HIPAA and other applicable laws or regulations and significant costs for remediation, notification to individuals
and for measures to prevent future occurrences. Any potential security breach could also result in increased costs associated with liability
for stolen assets or information, repairing system damage that may have been caused by such breaches, incentives offered to client or
other business partners in an effort to maintain our business relationships after a breach and implementing measures to prevent future
occurrences, including organizational changes, deploying additional personnel and protection technologies, training employees and engaging
third-party experts and consultants. While we maintain insurance covering certain security and privacy damages and claim expenses, our
coverage may not be sufficient to compensate for all liability.

 Our
officers, employees, independent contractors, principal investigators, consultants and commercial partners may engage in misconduct or
activities that are improper under other laws and regulations, which would create liability for us.

 We
are exposed to the risk that our officers, employees, independent contractors (including contract research organizations ("CROs")),
principal investigators, consultants and commercial partners may engage in fraudulent conduct or other illegal activity and/or may fail
to disclose unauthorized activities to us. Misconduct by these parties could include, but is not limited to, intentional, reckless and/or
negligent failures to comply with:

 the
 laws and regulations of the FDA and its foreign counterparts requiring, among other things,
 compliance with good manufacturing practice and/or quality system requirements, post-market
 vigilance reporting, product marketing authorization requirements, facility registration
 requirements, the reporting of true, complete and accurate information to such regulatory
 bodies, including but not limited to safety problems associated with the use of our products;

 laws
 and regulations of the FDA and its foreign counterparts concerning the conduct of clinical
 trials and the protection of human research subjects, including but not limited to good clinical
 practices;

 other
 laws and regulations of the FDA and its foreign counterparts relating to the manufacture,
 processing, packing, holding, investigating or distributing in commerce of medical devices,
 biological products and/or HCT/Ps;

 manufacturing
 standards we have established; or

 healthcare
 fraud and abuse laws, including but not limited to, the Anti-Kickback Statute, the Stark
 Law, the FCA, and state law equivalents.

 In
particular, companies involved in the manufacture of medical products are subject to laws and regulations intended to ensure that medical
products that will be used in patients are safe and effective, and, specifically, that they are not adulterated or misbranded, that they
are properly labeled, and have the identity, strength, quality and purity that which they are represented to possess. Further, companies
involved in the research and development of medical products are subject to extensive laws and regulations intended to protect research
subjects and ensure the integrity of data generated from clinical trials and of the regulatory review process. Any misconduct in any
of these areas, whether by our own employees or by contractors, vendors, business associates, consultants, or other entities acting as
our agents, could result in regulatory sanctions, criminal or civil liability and serious harm to our reputation. Although we have a
comprehensive compliance program designed to ensure that our employees', CRO partners', principal investigators', consultants',
and commercial partners' activities and interactions with healthcare professionals and patients are appropriate, ethical, and consistent
with all applicable laws, regulations, guidelines, policies and standards, it is not always possible to identify and deter misconduct,
and the precautions we take to detect and prevent this activity may not be effective in preventing such conduct, mitigating risks, or
reducing the chance of governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or
regulations. If any such actions are instituted against us, or our CRO partners, principal investigators, consultants, or commercial
partners, those actions could have a significant impact on our business, including the imposition of significant fines, and other sanctions
that may materially impair our ability to run a profitable business.

 We
could be adversely affected if healthcare reform measures substantially change the market for medical care or healthcare coverage in
the United States.

 Third
party payors, governmental authorities, and other applicable stakeholders have developed, and are continuing to develop, increasingly
sophisticated methods of controlling healthcare costs. In both the United States and certain foreign jurisdictions, there have been numerous
legislative and regulatory changes to the healthcare system that could impact our ability to sell our products profitably. In particular,
the Affordable Care Act was enacted in the United States in 2010, and various analogous or similarly intended state laws, as well as
a number of executive, legislative, and judicial challenges have followed in the years since. There remains substantial uncertainty and
continued evolution with regard to healthcare reform measures, and we cannot predict the effect that any current or future such measure
will have on our business. Complying with any new or amended legislation, policies, rulings, or other relevant healthcare cost-containment
and/or transparency requirements may be time-intensive and expensive, which could have a material adverse effect on our business.

 There
have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at
containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts
of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs
of healthcare and/or impose price controls may adversely affect the demand for some or all of the products we currently market or may
commercialize in the future, if any, including: our ability to receive or set a price that we believe is fair for our products; our ability
to generate revenue and achieve or maintain profitability; the level of taxes that we are required to pay; and the availability of capital.
We expect that existing healthcare reform legislation, and any similar measures implemented in the future, will result in additional
reductions in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement, and new payment methodologies.
This could lower the prices that we are able to charge or receive for our products and/or may create additional challenges in relation
to reimbursement/coverage. Any denial in coverage or reduction in reimbursement from Medicare or other government-funded programs may
result in a similar denial or reduction in payments from private payors, which may prevent us from being able to generate sufficient
revenue, attain profitability or commercialize our product candidates, if approved.

 Defects,
failures or quality issues associated with our products could lead to product recalls or safety alerts, adverse regulatory actions, product
liability lawsuits and other litigation and negative publicity that could materially adversely affect our reputation, business, results
of operations and financial condition.

 Quality
is extremely important to us and our customers due to the serious and costly consequences of product failure. Quality and safety issues
may occur with respect to any of our products, and our future operating results will depend on our ability to maintain an effective quality
control system and effectively train and manage our workforce with respect to our quality system. The development, manufacture and control
of medical products are subject to extensive and rigorous regulation by numerous government agencies, including the FDA and similar foreign
agencies. Compliance with these regulatory requirements is subject to continual review and is monitored rigorously through periodic inspections
by the FDA and foreign regulatory authorities. The FDA and foreign regulatory authorities may also require post-market testing and surveillance
to monitor the performance of products cleared or approved for use in their jurisdictions. Our manufacturing facilities and those of
our suppliers and independent sales agencies are also subject to periodic regulatory inspections. If the FDA or other regulatory authority
were to conclude that we or our suppliers have failed to comply with any of these requirements, it could institute a wide variety of
enforcement actions, ranging from a public warning letter to more severe sanctions, such as product recalls or seizures, withdrawals,
monetary penalties, consent decrees, injunctive actions to halt the manufacture or distribution of products, import detentions of products
made outside the United States, export restrictions, restrictions on operations or other civil or criminal sanctions. Civil or criminal
sanctions could be assessed against our officers, employees, or us. Any adverse regulatory action, depending on its magnitude, may restrict
us from effectively manufacturing, marketing, and selling our products.

 Relatedly,
although we have contractual indemnity from the manufacturers of our current products for certain liability claims related to their production,
we could face product liability lawsuits or other similar proceedings relating to actual or alleged injuries, defects, deficiencies,
failures, and/or representations relating to our products that could fall outside of the scope of the contractual indemnities. We do
not have, and do not anticipate obtaining, contractual indemnification from parties supplying raw materials or parties marketing the
products we sell. In any event, indemnification from the manufacturers of our products or from any other party is limited by the terms
of the indemnity and by the creditworthiness of the indemnifying party. A successful product liability or other applicable claim or series
of claims brought against us could result in judgments, fines, damages and liabilities that could have a material adverse effect on our
business. We may incur significant expense investigating and defending these claims, even if they do not result in liability. Moreover,
even if no judgments, fines, damages or liabilities are imposed on us, our reputation could suffer as result of any such claim, which
could have a material adverse effect on our business.

 Product
liability insurance for the healthcare industry may become prohibitively expensive, to the extent it is available at all. We may not
be able to maintain such insurance on acceptable terms or be able to secure increased coverage as commercialization of our products progresses,
nor can we be sure that existing or future claims against us will be covered by our product liability insurance. In the event that we
do not have adequate insurance or contractual indemnification, product liability claims relating to defective products could have a material
adverse effect on our business.

 In
addition, we cannot predict the results of future legislative activity or future court decisions, any of which could increase regulatory
requirements, subject us to government investigations or expose us to unexpected litigation. Any regulatory action or litigation, regardless
of the merits, may result in substantial costs, divert management's attention from other business concerns and place additional
restrictions on our sales or the use of our products. In addition, negative publicity, including regarding a quality or safety issue,
could damage our reputation, reduce market acceptance of our products, cause us to lose customers and decrease demand for our products.
Any actual or perceived quality issues may also result in issuances of physician's advisories against our products or cause us
to conduct voluntary recalls. Any product defects or problems, regulatory action, litigation, negative publicity or recalls could disrupt
our business and have a material adverse effect on our business, results of operations and financial condition.

 Risks
Related to Ownership of Our Common Stock

 The
issuance of shares upon the exercise of derivative securities or as earnout payments may cause immediate and substantial dilution to
our existing shareholders.

 As
of December 31, 2023, we had approximately 110,617 shares of common stock that were issuable upon the exercise of vested outstanding
stock options and warrants. The issuance of shares upon the exercise of these stock options and warrants may result in dilution to the
equity interest and voting power of holders of our common stock.

 In
the future, we may also issue additional shares of common stock or other securities convertible into or exchangeable for shares of common
stock. For instance, certain of the product license agreements we have entered with third parties require us to make payments to such
third parties upon the occurrence of certain events. Pursuant to these product license agreements, we may choose to make such payments
in shares of our common stock. In addition, the Precision Healing merger agreement and the Scendia membership interest purchase agreement
require us to pay up to an aggregate of $20.0 million upon the achievement of certain performance thresholds. In each case and subject
to certain limitations, the earnout consideration is payable in cash or, at our election, in shares of our common stock.

 The
issuance of additional shares of our common stock may substantially dilute the ownership interests of our existing shareholders. Furthermore,
sales of a substantial amount of our common stock in the public market, or the perception that these sales may occur, could reduce the
market price of our common stock. This could also impair our ability to raise additional capital through the sale of our securities.

 It
is possible that we will require additional capital to meet our financial obligations and support business growth, and this capital might
not be available on acceptable terms or at all.

 We
intend to continue to make significant investments to support our business growth and expect to require additional funds to respond to
business challenges. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional
funds through future issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution,
and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.
Any debt financing that we secure in the future could involve restrictive covenants relating to our capital raising activities and other
financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities,
including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable
to obtain adequate financing or financing on terms satisfactory to us when and if we require it, our ability to continue to support our
business growth and to respond to business challenges could be significantly impaired, and our business may be harmed.

 The
trading price of the shares of our common stock is highly volatile, and purchasers of our common stock could incur substantial losses.

 The
market price of our common stock has been and is likely to continue to be highly volatile and could fluctuate widely in response to various
factors, many of which are beyond our control, including the following:

 technological
 innovations or new products and services by us or by our competitors, including announcements
 by us or our competitors of significant contracts, acquisitions, strategic partnerships or
 capital commitments;

 additions
 or departures of key personnel;

 changes
 in expectations as to our future financial performance;

 sales
 of our common stock;

 our
 ability to execute our business plan;

 loss
 of any strategic relationship;

 industry
 developments;

 changes
 in financial estimates by any securities analysts who follow our common stock, our failure
 to meet these estimates or failure of those analysts to initiate or maintain coverage of
 our common stock;

 general
 market conditions, including market volatility and inflation;

 fluctuations
 in stock market prices and trading volumes of similar companies;

 economic,
 political and other external factors;

 period-to-period
 fluctuations in our financial results;

 applicable
 regulatory developments in the United States and foreign countries, both generally or specific
 to us and our products; and

 intellectual
 property, product liability or other litigation against us.

 Although
publicly traded securities are subject to price and volume fluctuations, it is likely that our common stock will experience these fluctuations
to a greater degree than the securities of more established and better capitalized organizations.

 Our
common stock does not have a vigorous trading market, and you may not be able to sell your securities at or near ask prices, or at all.

 Although
there is a public market for our common stock, trading volume has been historically low, which could impact our stock price and your
ability to sell shares of our common stock at or near ask prices, or at all. We can give no assurance that a more active and liquid public
market for the shares of our common stock will develop in the future.

 The
potential sale of large amounts of common stock may have a negative effect upon the market value of our shares.

 Sales
of a significant number of shares of our common stock in the public market or the perception that these sales might occur could harm
the market price of our common stock and make it more difficult for us to raise funds through future offerings of common stock. As additional
shares of our common stock become available for resale in the public market, the supply of our common stock will increase, which could
decrease the price of our common stock.

 We
have not paid, and we are unlikely to pay, cash dividends on our securities in the near future. Because we have no current plans to pay
cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your common
stock for a price greater than that which you paid for it.

 We
have not paid and do not currently intend to pay dividends on our common stock, which may limit the current return available on an investment
in our stock. Future dividends on our stock, if any, will depend on our future earnings, capital requirements, financial condition and
such other factors as our management may consider relevant. Currently, we intend to retain earnings, if any, to increase our net worth
and reserves. Consequently, shareholders will only realize an economic gain on their investment in our common stock if the price appreciates.
Shareholders should not purchase our common stock expecting to receive cash dividends. Because we currently do not pay dividends, and
there may be limited trading in our common stock, shareholders may not have any manner to liquidate or receive any payment on their common
stock. Therefore, our failure to pay dividends may cause shareholders to not see any return on their common stock even if we are successful
in our business operations. In addition, because we do not pay dividends, we may have trouble raising additional funds, which could affect
our ability to expand our business operations.

 A
few of our existing shareholders own a large percentage of our voting stock and have control over matters requiring shareholder approval
and may delay or prevent a change in control or otherwise lead to actual or potential conflicts of interest.

 As
of March 22, 2024, our directors beneficially owned, including through their affiliates, approximately 53% of our outstanding common
stock. As a result, our directors and their affiliates could have the ability to exert substantial influence over all matters requiring
approval by our shareholders, including (i) the election and removal of directors, (ii) any proposed merger, consolidation or sale of
all or substantially all of our assets as well as other corporate transactions and (iii) any amendment to our Certificate of Formation,
as amended (the "Certificate of Formation"). This concentration of control could be disadvantageous to other shareholders
having different interests. This significant concentration of share ownership may adversely affect the trading price for our common stock
because investors sometimes perceive disadvantages in owning stock in companies with controlling shareholders.

 In
addition, our Certificate of Formation contains a provision which under the Texas Business Organizations Code (the "TBOC")
could allow the shareholders who own a majority of our common stock to approve certain major transactions without the approval of other
shareholders that otherwise would be required under Texas corporation law.

 Our
Certificate of Formation includes provisions limiting the personal liability of our directors for breaches of fiduciary duties under
Texas law.

 Our
Certificate of Formation contains a provision eliminating a director's personal liability to the fullest extent permitted under
Texas law. Pursuant to the TBOC, a corporation has the power to indemnify its directors and officers against judgments and certain expenses
other than judgments that are actually and reasonably incurred in connection with a proceeding, provided that there is a determination
that the individual acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation
and, with respect to any criminal proceeding, had no reasonable cause to believe the individual's conduct was unlawful. However,
no indemnification may be made in respect of any proceeding in which such individual is liable to the corporation or improperly received
a personal benefit and is found liable for willful misconduct, breach of the duty of loyalty owed to the corporation, or an act or omission
deemed not to be committed in good faith.

 The
principal effect of the limitation on liability provision is that a shareholder will be unable to prosecute an action for monetary damages
against a director unless the shareholder can demonstrate a basis for liability for which indemnification is not available under the
TBOC. This provision, however, should not limit or eliminate our rights or any shareholder's rights to seek nonmonetary relief,
such as an injunction or rescission, in the event of a breach of a director's fiduciary duty. This provision will not alter a director's
liability under federal securities laws. The inclusion of this provision in our Certificate of Formation may discourage or deter shareholders
or management from bringing a lawsuit against directors for a breach of their fiduciary duties, even though such an action, if successful,
might otherwise have benefited us and our shareholders.

 Texas
law, our Certificate of Formation and our Amended and Restated Bylaws contain anti-takeover provisions that could delay or discourage
takeover attempts that shareholders may consider favorable.

 Under
our Certificate of Formation, our board of directors can authorize the issuance of preferred stock, which could diminish the rights of
holders of our common stock and make a change of control of the Company more difficult even if it might benefit our shareholders. The
board of directors is authorized to issue shares of preferred stock in one or more series and to fix the voting powers, preferences and
other rights and limitations of the preferred stock. Accordingly, we may issue shares of preferred stock with a preference over our common
stock with respect to dividends or distributions on liquidation or dissolution, or that may otherwise adversely affect the voting or
other rights of the holders of common stock. Issuances of preferred stock, depending upon the rights, preferences and designations of
the preferred stock, may have the effect of delaying, deterring or preventing a change of control, even if that change of control might
benefit our shareholders.

 In
addition, provisions of our Certificate of Formation and our Amended and Restated Bylaws ("Bylaws") may delay or
discourage transactions involving an actual or potential change in our control or change in our management, including transactions
in which shareholders might otherwise receive a premium for their shares, or transactions that our shareholders might otherwise deem
to be in their best interests. For example, our Certificate of Formation and Bylaws (i) do not provide for cumulative voting rights
(therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect
all of the directors standing for election, if they should so choose), (ii) require that special meetings of the shareholders be
called by the Chairman of the board of directors, the President or the board of directors, or by the holders of not less than
twenty-five percent (25%) of all the shares issued, outstanding and entitled to vote, (iii) permit our board of directors to alter,
amend or repeal our Bylaws or to adopt new bylaws, and (iv) enable our board of directors to increase the number of persons serving
as directors and to fill vacancies created as a result of the increase by a majority vote of the directors present at a meeting of
directors.

 While
we are subject to the provisions of Title 2, Chapter 21, Subchapter M of the TBOC, which provides that a Texas corporation that qualifies
as an "issuing public corporation" (as defined in the TBOC) may not engage in specified types of business combinations, including
mergers, consolidations and asset sales, with a person, or an affiliate or associate of that person, who is an "affiliated shareholder,"
the restrictions in Title 2, Chapter 21, Subchapter M of the TBOC do not apply to us because we have elected, in the manner provided
under the TBOC, not to be subject to such provisions.

 Our
failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a delisting of our common stock.

 Our
shares of common stock are currently listed for trading on The Nasdaq Capital Market under the symbol "SMTI." If we fail
to satisfy the continued listing requirements of The Nasdaq Stock Market, LLC ("Nasdaq"), such as the corporate governance
requirements, the shareholder's equity requirement or the minimum closing bid price requirement, Nasdaq may take steps to delist
our common stock. Such a delisting or even notification of failure to comply with such requirements would likely have a negative effect
on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event
of a delisting, we expect that we would take actions to restore our compliance with Nasdaq's listing requirements, but we can provide
no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve
the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future
noncompliance with Nasdaq's listing requirements.

 ITEM
1B. UNRESOLVED STAFF COMMENTS

 None.

 ITEM
1C. CYBERSECURITY

 We
recognize the critical importance of cybersecurity in safeguarding sensitive information and maintaining operational resilience. We have
processes for assessing, identifying and managing cybersecurity risks, which are built into our information technology function and are
designed to help protect our information assets and operations from internal and external cyber threats, protect employee and customer
information from unauthorized access or attack, as well as secure our networks and systems.

 The
Audit Committee of the Board of Directors (the "Audit Committee") is responsible for overseeing cybersecurity risk and periodically
updates our Board of Directors on such matters. The Audit Committee receives periodic updates from management regarding cybersecurity
matters and is notified between such updates regarding any significant new cybersecurity threats or incidents. We do not believe that
there are currently any known risks from cybersecurity threats that are reasonably likely to materially affect us or our business strategy,
results of operations or financial condition.

 As
a company, we leverage the National Institute of Standards and Technology (NIST) Cybersecurity Framework to align with industry best
practices and to develop policies and procedures, which include a Cybersecurity Response Plan focusing on detection, validation, mitigation,
recovery, and refinement. In addition to the Cybersecurity Response Plan, we provide cybersecurity awareness training to our employees,
including training on social engineering, phishing, password protection, confidential data protection, mobile security, and incident
reporting, to help prevent and reduce the impact of potential cybersecurity events.

 We
have strategically invested resources and tools to combat the ever-changing cyber threat landscape. These investments include growing
our internal technology team headcount and bolstering our partnerships with entities with external expertise, resulting in increased
protection, monitoring, and response capabilities. We have also made investments to carry cybersecurity insurance that provides additional
protection and resources to reduce a cybersecurity event's impact and potential losses.

 Our
technology and management teams meet regularly with key internal and external stakeholders to review cybersecurity concerns and areas
for continued focus and improvement.

 We
face risks from cybersecurity threats that could have a material adverse effect on our business, financial condition, results of
operations, cash flows or reputation. To date, we have not experienced any cyber incidents that have had a material adverse effect on our business, financial condition, results of operations, or cash flows. See "Risk Factors – Risks Related to
Our Business – Security breaches and other disruptions could compromise our information and expose us to liability, which
would cause our business and reputation to suffer."

 ITEM
2. PROPERTIES

 We
do not own any buildings or other real property. We have three material operating leases for office space. Our leased office space in
Fort Worth, Texas consists of approximately 11,414 square feet of rentable space located in Summit Office Park, a twin-building, mid-rise,
242,000 square foot office park located on the perimeter of the Fort Worth central business district. In March and September of 2023,
we amended our primary office lease to obtain additional space, as well as to extend the lease term. The lease has a remaining lease
term of 84 months as of December 31, 2023.

 Our
leased office space in San Antonio, Texas consists of approximately 7,289 square feet of rentable space located in a 14,500 square foot
office park in an industrial district in San Antonio, Texas. This lease has a remaining lease term of 20 months as of December 31, 2023.

 Our
leased office space in Orlando, Florida represents a lease we assumed in connection with our acquisition of Scendia. The lease consists
of approximately 7,684 square feet in a 22,947 square foot office building. However, we are co-tenants in the lease with an unaffiliated
company with our share of the lease being agreed to as 40% or approximately 3,074 square feet. The lease has a remaining term of 23 months
as of December 31, 2023.

 We
periodically enter into operating lease contracts for office space and equipment. Arrangements are evaluated at inception to determine
whether such arrangements constitute a lease. In accordance with the transition guidance of Accounting Standards Codification Topic No.
842, such arrangements are included in our balance sheet as of January 1, 2020.

 See
Note 8 to the consolidated financial statements for additional information on our operating leases.

 ITEM
3. LEGAL PROCEEDINGS

 From
time to time, we may be involved in claims and legal actions that arise in the ordinary course of business. To our knowledge, there are
no material pending legal proceedings to which we are a party or of which any of our property is the subject.

 ITEM
4. MINE SAFETY DISCLOSURES

 This
item is not applicable.

 PART
II

 ITEM
5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 Our
common stock is traded on The Nasdaq Capital Market under the trading symbol "SMTI." The closing price of our common stock
as reported by Nasdaq on March 22, 2024, was $37.41.

 Record
Holders

 As
of March 22, 2024, there were 283 shareholders of record and there were 8,622,805 shares of common stock issued and outstanding. The
number of shareholders of record does not reflect the number of persons or entities who held stock in nominee or street name through
various brokerage firms.

 Dividends

 We
have never declared or paid any cash dividends on our common stock and we do not intend to pay cash dividends in the foreseeable future.
We currently expect to retain any future earnings to fund our operations and the expansion of our business.

Sales of Unregistered Securities

 There
were no sales of unregistered securities during the year ended December 31, 2023 that were not previously reported on a Quarterly Report
on Form 10-Q or a Current Report on Form 8-K.

 Issuer
Purchases of Equity Securities

 We
did not repurchase any of our equity securities during the fourth quarter of the fiscal year ended December 31, 2023.

 ITEM
6. RESERVED

 ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 The
following discussion and analysis contains forward-looking statements about future revenues, operating results, plans and expectations.
Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties
and our results could differ materially from the results anticipated by our forward-looking statements as a result of many known or unknown
factors, including, but not limited to, those factors discussed in Part I, Item 1A. Risk Factors. Also, please read the "Cautionary
Statement Regarding Forward-Looking Statements" set forth at the beginning of this Annual Report on Form 10-K.

 In
addition, the following discussion should be read in conjunction with Part I of this Annual Report on Form 10-K as well as our Consolidated
Financial Statements and the related Notes to Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K.

 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, chronic wound and skincare markets. Our products, services and technologies are designed
to achieve our goal of providing better clinical outcomes at a lower overall cost for patients regardless of where they receive care.
We strive to be one of the most innovative and comprehensive providers of effective surgical, wound and skincare solutions and are continually
seeking to expand our offerings for patients requiring treatments across the entire continuum of care in the United States.

 We
currently market several products across surgical and chronic wound care applications and have multiple products in our pipeline. On
August 1, 2023, we acquired, among other things, the underlying intellectual property of, as well as the rights to manufacture and sell,
CellerateRX Surgical Activated Collagen ("CellerateRX Surgical"), our primary product, and HYCOL Hydrolyzed Collagen ("HYCOL")
from Applied Nutritionals, LLC ("Applied") for human wound care use (for more information regarding this acquisition, see
the "Recent Acquisitions" section below). Prior to such time, we had licensed the rights to these products through a sublicense
agreement (the "Sublicense Agreement") with CGI Cellerate RX, LLC ("CGI Cellerate RX"), an affiliate of The Catalyst
Group, Inc. ("Catalyst"), both of which are related parties. In connection with the asset purchase, Applied assigned its
license agreement with CGI Cellerate RX to a wholly owned subsidiary of the Company. We also license certain products from Rochal Industries,
LLC ("Rochal") and Cook Biotech Inc. ("Cook Biotech").

 In
April 2022, we entered into a merger agreement through which Precision Healing Inc. ("Precision Healing") became a wholly
owned subsidiary of the Company. Precision Healing is developing a diagnostic imager and lateral flow assay ("LFA") for assessing
a patient's wound and skin conditions. This comprehensive wound and skin assessment technology is designed to quantify biochemical
markers to determine the trajectory of a wound's condition to enable better diagnosis and treatment protocol. In December 2023,
we received 510(k) clearance from the U.S. Food and Drug Administration ("FDA") for the Precision Healing diagnostic imager.
We are currently evaluating regulatory pathways for the Precision Healing LFA.

 In
July 2022, we entered into a membership interest purchase agreement with Scendia Biologics, LLC ("Scendia") and Ryan Phillips
("Phillips") pursuant to which we acquired 100% of the issued and outstanding membership interests in Scendia from Phillips.
Since our acquisition of Scendia, we have been selling a full line of regenerative and orthobiologic technologies including (i) TEXAGEN
Amniotic Membrane Allograft ("TEXAGEN"), (ii) BiFORM Bioactive Moldable Matrix ("BiFORM"), (iii) ACTIGEN Verified
Inductive Bone Matrix ("ACTIGEN") and (iv) ALLOCYTE Advanced Cellular Bone Matrix ("ALLOCYTE").

 In
November 2022, we established a partnership with InfuSystem Holdings, Inc. ("InfuSystem") focused on delivering a complete
wound care solution targeted at improving patient outcomes, lowering the cost of care, and increasing patient and provider satisfaction.
The partnership is expected to enable InfuSystem to offer innovative products, including Cork Medical, LLC's negative pressure
wound therapy devices and supplies, and our advanced wound care product line and associated services to new customers.

 In
November 2023, we launched BIASURGE Advanced Surgical Solution ("BIASURGE"). BIASURGE is a no-rinse, advanced surgical solution
used for wound irrigation. It contains an antimicrobial preservative effective against a broad spectrum of pathogenic microorganisms.
BIASURGE is indicated for use in the mechanical cleansing and removal of debris, including microorganisms, from surgical wounds.

 Comprehensive
Value-Based Care Strategy

 In
June 2020, we formed a subsidiary, United Wound and Skin Solutions, LLC (formerly known as "WounDerm"), to hold certain investments
and operations in wound and skincare virtual consult services. In 2023, WounDerm was renamed and is now doing business as "Tissue
Health Plus" ("THP"). THP is continuing its current mission to simplify skin health, starting with wound care through
a refined business plan. Through THP, we plan 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 care ("VBC") primary care companies, with Medicare Advantage
payers as the initial target segment for this program.

 THP's
programs are expected to enable payers to divest wound care spend risk, reduce wound related hospitalizations and improve patient quality
of life. THP plans to coordinate delivery of community and home-based wound care for its managed patients. Community based care spans
a variety of settings including physician offices, skilled nursing homes, 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.

 We
anticipate that THP's customer contracts will have three-to-five-year terms. These contracts are expected to incorporate a mix
of value-based pricing methodologies including episodic, "per member per month", and "fee for value" pricing.
We believe this approach is aligned with the financial goals of the payers and will help deliver outstanding clinical outcomes for the
patients.

 Our
vision for our comprehensive approach consists of three key sets of planned capabilities:

 (a)
 Care
 Hub – This virtual patient monitoring, care coordination and navigation center
 is expected to help doctors and nurses support their patients throughout their wound care journey, from
 prevention to treatment. We expect to have Care Hub staffed by wound care certified nurse
 practitioners ("NPs") and registered nurses ("RNs"), incorporating
 care delivery best practices from partnerships with Direct Dermatology Inc. ("DirectDerm")
 and certain physician-led multispecialty wound care groups. With NPs leading the care hub,
 RNs are expected to be the wound specialists, providing patients with expert review and support of the overarching
 plan of care on each patient's journey through the process. In addition, care navigators are expected to serve as a primary point of contact
 for patients and their providers, coordinating care, managing appointments and ensuring seamless
 communication among all team members.

 (b)
 Managed
 Services Organization ("MSO") Network – With respect to patient-side
 wound care, our plan is that THP's programs would be performed by a network of third-party
 providers who will be contracted through managed services agreements. These providers would
 include podiatrists, wound care provider groups, primary care physicians and home health
 agencies. The providers in the THP network are expected to leverage THP's standard
 of care, patient education and tools to deliver optimal patient outcomes with high predictability
 and efficiency.

 (c)
 Technology
 Platform – THP's technology platform will focus on scaling workflows of THP's Care Hub and MSO Network through automation
 and integration. We expect the THP technology platform to enable enhanced patient empowerment
 and self-healthcare. We anticipate that our platform will leverage our technology investments
 and partnerships with Precision Healing, Pixalere Healthcare, Inc. ("Pixalere")
 and others, by leveraging modern technology including artificial intelligence and machine
 learning. Our platform technology is expected to manage program economics, standards of care,
 patient monitoring, wound assessments, network performance monitoring, and revenue cycle
 management. We expect that each of these components will work in concert with each other,
 constantly improving economics and care delivery.

 We
are seeking a partner to facilitate commercialization of Tissue Health Plus and share in the cost of development of the program. Excluding noncash items, our full year operating expenses for THP in 2023 were approximately $5.2 million.

Acquisitions

 Precision
Healing

 In
April 2022, we closed a merger transaction with Precision Healing, pursuant to which Precision Healing became a wholly owned subsidiary
of the Company. Precision Healing is developing a diagnostic imager and LFA for assessing a patient's wound and skin conditions.
This comprehensive wound and skin assessment technology is designed to quantify biochemical markers to determine the trajectory of a
wound's condition to enable better diagnosis and treatment protocol.

to the merger agreement, among other things, we agreed to (i) pay the holders of Precision Healing common stock and preferred stock closing
consideration consisting of 165,738 shares of our common stock, which was issued to accredited investors, and $125,966 in cash, which
was paid to stockholders who were not accredited investors (ii) pay approximately $0.6 million of transaction expenses on behalf of the
equity holders of Precision Healing, (iii) assume all outstanding options and warrants of Precision Healing and (iv) pay, subject to
the achievement of certain performance thresholds, earnout consideration of up to $10.0 million which is payable in cash or, at our election,
is payable to accredited investors in shares of our common stock.

 Scendia

 In
July 2022, we entered into a membership interest purchase agreement by and among the Company, Scendia and Seller pursuant to which we
acquired 100% of the issued and outstanding membership interests in Scendia from the Seller. Scendia provides clinicians and surgeons
with a full line of regenerative and orthobiologic technologies. Beginning in early 2022, we began co-promoting certain products with
Scendia, including: (i) TEXAGEN, (ii) BiFORM, (iii) ACTIGEN, and (iv) ALLOCYTE. Prior to the acquisition, Scendia owned 50% of the issued
and outstanding membership interests in Sanara Biologics, LLC ("Sanara Biologics"), and we owned the remaining 50% of the
membership interests. As a result of the acquisition, we indirectly acquired all the interests in Sanara Biologics, such that we now
hold 100% of the issued and outstanding equity interests in Sanara Biologics.

to the purchase agreement, the aggregate consideration at closing for the acquisition was $7.6 million, which consisted of (i) a $1.6
million cash payment, subject to certain adjustments, and (ii) 291,686 shares of our common stock, with an agreed upon value of $6.0
million. Pursuant to the purchase agreement, at closing, we withheld 94,798 shares of common stock with an agreed upon value of $1.95
million (the "Indemnity Holdback Shares"), which such Indemnity Holdback Shares were withheld to the extent provided in the
purchase agreement to satisfy Phillips' indemnification obligations and subsequently issued and released to Phillips in July 2023.

 In
addition to the cash and stock consideration, the purchase agreement provides that Phillips is entitled to receive two potential earnout
payments, payable on an annual basis, not to exceed $10.0 million in the aggregate. The earnout consideration is payable to Phillips
in cash or, at our election, in up to 486,145 shares of our common stock upon the achievement of certain performance thresholds relating
to net revenue attributable to sales of Scendia products during the two-year period following the closing. We made the first earnout
payment of approximately $693,000 in cash in August 2023. We expect the final earnout payment to be made in the third quarter of 2024.

 Applied
Asset Purchase

 On
August 1, 2023, we entered into an Asset Purchase Agreement (the "Applied Purchase Agreement") by and among the Company,
as guarantor, Sanara MedTech Applied Technologies, LLC, a wholly owned subsidiary of the Company ("SMAT"), Applied, The Hymed
Group Corporation ("Hymed" and together with Applied, the "Sellers"), and Dr. George D. Petito (the "Owner"),
pursuant to which SMAT acquired certain assets of the Sellers and the Owner including the Sellers' and Owner's inventory,
intellectual property, manufacturing and related equipment, goodwill, rights and claims, other than certain excluded assets, all as more
specifically set forth in the Applied Purchase Agreement (collectively, 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 (such transaction, the "Applied Asset Purchase"). The Applied Purchased Assets include the underlying
intellectual property of, as well as the rights to manufacture and sell, CellerateRX Surgical and HYCOL products for human wound care
use.

 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 (the "Stock Closing Consideration")
with an agreed upon value of $3.0 million and (iii) $2.5 million in cash (the "Installment Payments"), to be paid in four
equal installments on each of the next four anniversaries of the closing of the Applied Asset Purchase (the "Closing").

 In
addition to the Cash Closing Consideration, Stock Closing Consideration and Installment Payments, the Applied Purchase Agreement provides
that the Sellers are entitled to receive up to an additional $10.0 million (the "Applied Earnout"), which is payable to the
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 Sellers have not earned
the entirety of the Applied Earnout, SMAT shall pay the 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.

 In
connection with the Applied Asset Purchase and pursuant to the Applied Purchase Agreement, effective August 1, 2023, we entered into
a professional services agreement (the "Petito Services Agreement") with the Owner, pursuant to which the Owner, as an independent
contractor, agreed to provide certain services to us, including, among other things, assisting with the development of products already
in development and assisting with research, development, formulation, invention and manufacturing of any future products (the "Petito
Services"). As consideration for the Petito Services, the Owner is entitled to receive: (i) a base salary of $12,000 per month
during the term of the Petito Services Agreement, (ii) a royalty payment equal to three percent (3%) of the actual collections from net
sales of certain products the Owner develops or co-develops that reach commercialization, (iii) a royalty payment equal to five percent
(5%) for the first $50.0 million in aggregate collections from net sales of certain future products and a royalty payment of two and
one-half percent (2.5%) on aggregate collections from net sales of certain future products on any amounts exceeding $50.0 million but
up to $100.0 million, (iv) $500,000 in cash in the event that 510(k) clearance is issued for any future product accepted by the Company
and (v) $1.0 million in cash in the event that a U.S. patent is issued for a certain product; provided that with respect to the incentive
payments described in (iv) and (v) of the foregoing, the Owner shall not earn more than $2.5 million. The Petito Services Agreement has
an initial term of three years and is subject to automatic successive one-month renewals unless earlier terminated in accordance with
its terms. The Petito Services Agreement may be terminated upon the Owner's death or disability or by us or the Owner "For
Cause" (as defined in the Petito Services Agreement); provided, however, that the base salary described in (i) of the foregoing
paragraph shall survive termination through the three-year initial term and the royalty payments and incentive payments described in
(ii)-(v) of the foregoing paragraph shall survive termination of the Petito Services Agreement.

Developments

 Loan
Agreement

 In
connection with the entry into the Applied Purchase Agreement, on August 1, 2023, we, as guarantor, and SMAT, as borrower, entered into
a loan agreement (the "Loan Agreement") with Cadence Bank (the "Bank") providing for, among other things, an
advancing term loan in the aggregate principal amount of $12.0 million (the "Term Loan"). Pursuant to the Loan Agreement,
the Bank agreed to make, at any time and from time to time prior to February 1, 2024, one or more advances to SMAT. On August 1, 2023,
the Bank made an advance under the Term Loan for $9.75 million, the proceeds of which were used to fund the Cash Closing Consideration
for the Applied Asset Purchase. For more information regarding the Loan Agreement, see the "Liquidity and Capital Resources"
section below.

 Tufts
University License Agreement

 In
December 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 have 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. Pursuant to 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.

 Components
of Results of Operations

 Sources
of Revenues

 Our
revenue is derived primarily from sales of our soft tissue repair and bone fusion products to hospitals and other acute care facilities.
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 from the customer and our product
is received by the customer.

 Revenue
streams from product sales and royalties are summarized below for the years ended December 31, 2023 and 2022.

 2023

 2022

 Soft tissue repair products

 $
 54,836,410

 $
 41,653,954

 Bone fusion products

 9,952,432

 3,987,891

 Royalty revenue

 201,000

 201,000

 Total Net Revenue

 $
 64,989,842

 $
 45,842,845

 We
recognize royalty revenue from a development and licensing agreement with BioStructures, LLC. We record revenue each calendar quarter
as earned per the terms of the agreement which stipulates that we will receive quarterly royalty payments of at least $50,250. Under
the terms of the development and license agreement, royalties of 2.0% are recognized on sales of products containing our patented resorbable
bone hemostasis. The minimum annual royalty due to us is $201,000 per year through the end of 2023. These royalties are payable in quarterly
installments of $50,250. To date, royalties related to this development and licensing agreement have not exceeded the annual minimum
of $201,000 ($50,250 per quarter).

 Cost
of Goods Sold

 Cost
of goods sold consists primarily of the acquisition costs from the manufacturers of our licensed products, raw material costs for certain
components sourced directly by us, 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") expenses consist primarily of salaries, sales commissions, benefits, bonuses and
stock-based compensation. SG&A also includes outside legal counsel fees, audit fees, insurance premiums, rent and other corporate
expenses. We expense all SG&A expenses as incurred.

 Research
and development ("R&D") expenses include costs related to enhancements to our currently available products and additional
investments in our product, services and technologies development pipeline. This includes personnel-related expenses, including salaries
and benefits for all personnel directly engaged in R&D activities, contracted services, materials, prototype expenses and allocated
overhead, which is comprised of lease expense and other facilities related costs. We expense R&D costs as incurred. We generally
expect that R&D expenses will increase as we continue to support product enhancements and to bring new products to market.

 Depreciation
and amortization expenses include 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.

 Change
in fair value of earnout liabilities represents our measurement of the change in fair value at the balance sheet date of our earnout
liabilities that were established at the time of our Precision Healing and Scendia acquisitions.

 Other
Income (Expense)

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

 Results
of Operations

 Net
Revenues. For the year ended December 31, 2023, we generated net revenues of $65.0 million compared to net revenues of $45.8
million for the year ended December 31, 2022, a 42% increase from the prior year. The higher net revenue for 2023 was primarily due to
increased sales of soft tissue repair products, including CellerateRX, and bone fusion products as a result of our increased market penetration, geographic expansion, and our continuing strategy to expand our independent
distribution network in both new and existing U.S. markets.

 During
the third quarter of 2022, we began to experience supply issues with the ALLOCYTE product line. The amount of qualifying eligible donor
tissue was significantly reduced industry wide due to the stringent screening required. During the fourth quarter of 2022 and the nine
months ended September 30, 2023, we were unable to fill certain orders for this product, which negatively impacted our sales growth.
The supply constraint was caused by significant supplier limits on qualifying eligible donor tissue and supplier necessity to subcontract
all processing to secondary suppliers. We have since expanded the ALLOCYTE product line with the release of ALLOCYTE Plus, which is processed
by an alternative supplier with in-house processing capabilities. Our first sales of ALLOCYTE Plus occurred in October 2023. We have
a sufficient supply of ALLOCYTE Plus to meet currently expected demand and believe we have measures in place to regularly stock the product
in the future.

 Cost
of goods sold. Cost of goods sold for the year ended December 31, 2023, was $7.9 million, compared to costs of goods sold of
$6.4 million for the year ended December 31, 2022. The increase in cost of goods sold for 2023 was primarily due to higher sales volume
as a result of organic sales growth. Gross margins were approximately 88% and 86% for the years ended
December 31, 2023 and 2022, respectively. The gross margins for 2023 included lower margins realized on sales of certain bone fusion products, partially
offset by higher margins realized due to the elimination in consolidation of the CellerateRX Surgical royalty expense under the Sublicense
Agreement.

 Selling,
general and administrative expenses. SG&A expenses for the year ended December 31, 2023, were $57.0 million compared to SG&A
expenses of $46.0 million for the year ended December 31, 2022. The higher SG&A expenses for 2023 were primarily due to higher direct sales and marketing expenses, which accounted
for approximately $8.0 million, or 76% of the increases compared to the prior year period. The higher direct sales and marketing expenses
for 2023 was primarily attributable to an increase in sales commissions of $6.9 million as a result of higher product sales. The year-ended
2023 included $1.2 million of increased costs as a result of sales force expansion and operational support. Our 2023 SG&A expenses also included $0.4 million of costs associated with an acquisition opportunity that we
abandoned during the first quarter of 2024. We expect our SG&A
expenses to decline as a percentage of net revenues as our sales growth outpaces the costs of sales force expansion and corporate overhead.

 Research
and development expenses. R&D expenses for the year ended December 31, 2023, were $4.1 million compared to $3.4 million
for the year ended December 31, 2022. The higher R&D expenses in 2023 were primarily due to costs related to the Precision
Healing diagnostic imager and LFA. R&D expenses for 2023 also included costs associated with ongoing development projects for
our products in development.

 Depreciation
and amortization expense. Depreciation and amortization expense for the year ended December 31, 2023, was $3.7 million compared
to $2.4 million for the year ended December 31, 2022. The increase in depreciation and amortization expense during 2023 was primarily
due to the amortization of intangible assets acquired as part of the Precision Healing, Scendia and Applied transactions.

 Change
in fair value of earnout liabilities. Change in fair value of earnout liabilities was a benefit of $3.4 million for the year
ended December 31, 2023 compared to expense of $0.3 million for the year ended December 31, 2022. The current year benefit is as a result
of a decrease in the estimated fair value of the earnout liabilities established at the time of our Precision Healing and Scendia acquisitions.
The decrease in the estimated fair value was due to a change in the discount factor utilized in the valuation models, a decrease in the
projected undiscounted amounts to be paid, as well as adjustments to the projected timing of the payments to be made, partially offset
by accretion. The prior year period expenses were due to the accretion of the earnout liabilities.

 Other
income (expense). Other income (expense) for the year ended December 31, 2023 was $0.2 million compared to $1.4 million for
the year ended December 31, 2022. Other income (expense) for 2023 included interest expense, and amortization of debt issuance costs related
to the Term Loan entered into in conjunction with the Applied Asset Purchase. The higher other income (expense) in 2022 was primarily due to
a $1.0 million loss recognized due to the dissolution of our subsidiary, Sanara Pulsar, LLC ("Sanara Pulsar"). Sanara
Pulsar had minimal sales since its inception and was dissolved effective December 2022. The higher other income (expense) was also due to the
recognition of $0.4 million of loss from our equity method investment in Precision Healing prior to our acquisition of the remaining
interest in April 2022.

 Loss
before income taxes. We had a loss before income taxes of $4.4 million for the year ended December 31, 2023, compared to a
loss before income taxes of $13.9 million for the year ended December 31, 2022. The lower loss in 2023 was due to increased gross profits
and changes in fair value of earnout liabilities, partially offset by higher SG&A costs, higher R&D
expenses, and higher amortization of our acquired intangible assets as discussed above.

 Income
tax benefit. We recognized net deferred tax liabilities associated with the Precision Healing and Scendia transactions. As of
December 31, 2022, prior to consideration of these deferred tax liabilities, we had net deferred tax assets in excess of the deferred
tax liabilities being recognized, however, a 100% valuation allowance had previously been provided against our net deferred tax assets.
As a result of the recording of the net deferred tax liabilities related to the Precision Healing merger and Scendia acquisition, we
have reviewed the valuation allowance and determined that it should be reduced by the amount of the net deferred tax liabilities that
were recognized. This resulted in recognition of an income tax benefit of $5.8 million recognized for the year ended December 31, 2022.

 Net
loss. For the year ended December 31, 2023, we had a net loss of $4.4 million, compared to a net loss of $8.1 million for the
year ended December 31, 2022. The lower net loss in 2023 was primarily due to additional gross profit realized on higher 2023 revenues.

 Liquidity
and Capital Resources

 Cash
on hand at December 31, 2023 was $5.1 million, compared to $9.0 million at December 31, 2022. Historically, we have financed our operations
primarily from the sale of equity securities. In February 2023, we entered into a Controlled Equity Offering SM Sales Agreement
(the "Sales Agreement") with Cantor Fitzgerald & Co., as sales agent ("Cantor"), pursuant to which we could
offer and sell from time to time, to or through Cantor, shares of our common stock having an aggregate offering price of up to $75.0
million.

 Sales
of the shares, pursuant to the Sales Agreement, were made in sales deemed to be an "at the market offering" as defined in
Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. Upon delivery of a placement notice and subject to the terms
and conditions of the Sales Agreement, Cantor agreed to use commercially reasonable efforts consistent with its normal trading and sales
practices, applicable state and federal law, rules and regulations and the rules of The Nasdaq Capital Market to sell the shares from
time to time based upon our instructions, including any price, time period or size limits specified by us. We had no obligation to sell
any of the shares under the Sales Agreement and could suspend or terminate the offering of our common stock pursuant to the Sales Agreement
upon notice to Cantor and subject to other conditions. Pursuant to the Sales Agreement, we paid Cantor a commission of 3.0% of the aggregate
gross proceeds from each sale of the shares.

 In
2023, we sold an aggregate of 26,143 shares of common stock for gross proceeds of approximately $1.1 million and net proceeds of approximately
$1.0 million pursuant to the Sales Agreement. We paused the offering at the end of the first quarter of 2023 and did not reactivate it
during the remainder of 2023. The Registration Statement on Form S-3 relating to this offering expired in January 2024.

 On
August 1, 2023, we, as guarantor, and SMAT, as borrower, entered into the Loan Agreement with the Bank providing for, among other things,
a Term Loan in the aggregate principal amount of up to $12.0 million, which was evidenced by an advancing promissory note. Pursuant to
the Loan Agreement, the Bank agreed to make, at any time and from time to time prior to February 1, 2024, one or more advances to SMAT.
On August 1, 2023, the Bank made an advance under the Term Loan for $9.75 million, the proceeds of which were used to fund the Cash Closing
Consideration for the Applied Asset Purchase. For more information regarding the Loan Agreement, see the "Loan Agreement"
section below.

 We
expect our future needs for cash to include funding potential acquisitions, further developing our products, services and technologies
pipeline and clinical studies, expanding our sales force, repayment of debt as it becomes due and for general corporate purposes. If
we seek to consummate acquisitions in the future, we expect to finance such acquisitions with the proceeds from equity or debt issuances.
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
twelve months.

 Precision
Healing Merger

 In
November 2020, we entered into agreements to purchase shares of Series A Convertible Preferred Stock (the "Series A Stock")
of Precision Healing for an aggregate purchase price of $600,000. In 2021, we made additional purchases of Series A Stock: $600,000 in
February, $500,000 in June, $500,000 in October, and $600,000 in December.

 In
April 2022, we closed a merger transaction with Precision Healing pursuant to which Precision Healing became our wholly owned subsidiary.
Pursuant to the terms of the merger agreement, holders of Precision Healing common stock and preferred stock, other than the Company,
were entitled to receive closing consideration, consisting of $125,966 in cash, which was paid to stockholders who were not accredited
investors, 165,738 shares of our common stock, which was paid only to accredited investors, and the payment in cash of approximately
$0.6 million of transaction expenses of Precision Healing. We recorded the issuance of the 165,738 shares to accredited investors and
cash payments to nonaccredited investors based on the closing price per share of our common stock on April 4, 2022, which was $30.75.

 Upon
the closing of the merger, the outstanding Precision Healing options previously granted under the Precision Healing Inc. 2020 Stock Option
and Grant Plan (the "Precision Healing Plan") converted, pursuant to their terms, into options to acquire an aggregate of
144,191 shares of our common stock with a weighted exercise price of $10.71 per share. These options expire between August 2030 and April
2031. In addition, outstanding and unexercised Precision Healing warrants converted into rights to receive warrants to purchase (i) 4,424
shares of our common stock with an initial exercise price of $7.32 per share and an expiration date of April 22, 2031, and (ii) 12,301
shares of our common stock with an initial exercise price of $12.05 per share and an expiration date of August 10, 2030. Concurrent with
the assumption of the Precision Healing Plan, we terminated the ability to offer future awards under the Precision Healing Plan.

to the merger agreement, upon the achievement of certain performance thresholds, the securityholders of Precision Healing, including
the holders of options and warrants to purchase Precision Healing common stock and certain persons promised options to purchase Precision
Healing common stock, are also entitled to receive payments of up to $10.0 million, which was accounted for as contingent consideration
pursuant to Accounting Standards Codification Topic 805, Business Combinations. The earnout consideration is payable in cash or, at our
election, is payable to accredited investors in shares of our common stock at a price per share equal to the greater of (i) $27.13 or
(ii) the average closing price of our common stock for the 20 trading days prior to the date such earnout consideration is due and payable.
Pursuant to the merger agreement, a minimum percentage of the earnout consideration may be required to be issued to accredited investors
in shares of our common stock for tax purposes. The amount and composition of the portion of earnout consideration payable is subject
to adjustment and offsets as set forth in the merger agreement. We do not anticipate making an earnout consideration payment prior to
January 2025.

 Scendia
Acquisition

 In
July 2022, we entered into a membership interest purchase agreement by and among the Company, Scendia and Phillips pursuant to which,
and in accordance with the terms and conditions set forth therein, we acquired 100% of the issued and outstanding membership interests
in Scendia from Phillips.

to the purchase agreement, Phillips was entitled to receive closing consideration consisting of (i) approximately $1.6 million of cash,
subject to certain adjustments, and (ii) 291,686 shares of our common stock. Pursuant to the purchase agreement, at closing, we withheld
94,798 shares of common stock with an agreed upon value of $1.95 million (the "Indemnity Holdback Shares"), which such Indemnity
Holdback Shares were withheld to the extent provided in the purchase agreement to satisfy Phillips' indemnification obligations
and subsequently issued and released to Phillips in July 2023.

 In
addition to the cash consideration and the stock consideration, the purchase agreement provides that Phillips is entitled to receive
two potential earnout payments, payable on an annual basis, not to exceed $10.0 million in the aggregate. The earnout consideration is
payable to Phillips in cash or, at our election, in up to 486,145 shares of our common stock upon the achievement of certain performance
thresholds relating to net revenue attributable to sales of Scendia products during the two-year period following the closing. We made
the first earnout payment of approximately $693,000 in cash in August 2023. We expect the final earnout payment to be made in the third
quarter of 2024.

 Applied
Asset Purchase

 On
August 1, 2023, we entered into the Applied Purchase Agreement by and among the Company, SMAT, Hymed, Applied and the Owner, pursuant
to which SMAT acquired the Applied Purchased Assets and assumed certain Assumed Liabilities upon the terms and subject to the conditions
set forth in the Applied Purchase Agreement. The transaction closed on August 1, 2023. The Applied Purchased Assets were purchased for
an initial aggregate purchase price of $15.25 million, consisting of (i) $9.75 million in cash, (ii) 73,809 shares of our common stock,
with an agreed upon value of $3.0 million and (iii) $2.5 million in cash, to be paid in four equal installments on each of the next four
anniversaries of the Closing.

 In
addition to the Cash Closing Consideration, Stock Closing Consideration and Installment Payments, the Applied Purchase Agreement provides
that the Sellers are entitled to receive up to an additional $10.0 million, which is payable to the 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 Sellers have not earned the entirety of the Applied Earnout,
SMAT shall pay the Sellers 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.

 Since
the closing of the Applied Asset Purchase, we make intercompany royalty payments to SMAT at the same rate as set forth in the Sublicense
Agreement. SMAT intends to use the royalties received to repay borrowings under the Term Loan. As described under "Loan Agreement"
below, SMAT is required to maintain compliance with certain maintenance covenants and is limited in its ability to distribute or lend
cash to the Company without consent of the Bank.

 Loan
Agreement

 In
connection with the entry into the Applied Purchase Agreement, on August 1, 2023, we, as guarantor, and SMAT, as borrower, entered into
the Loan Agreement with the Bank providing for, among other things, a Term Loan in the aggregate principal amount of $12.0 million, which
was evidenced by an advancing promissory note. Pursuant to the Loan Agreement, the Bank agreed to make, at any time and from time to
time prior to February 1, 2024, one or more advances to SMAT.

 The
proceeds of the advances under the Loan Agreement were used for working capital and for purposes of financing up to one hundred percent
(100%) of the Cash Closing Consideration and Installment Payments for the Applied Asset Purchase and related fees and expenses, including
any subsequent payments that may be due to the Sellers after the Closing. On August 1, 2023, the Bank, at the request of SMAT, made an
advance for $9.75 million. The proceeds from the advance were used to fund the Cash Closing Consideration for the Applied Asset Purchase.

 Advances
under the Term Loan will begin amortizing in monthly installments commencing on August 5, 2024. All remaining unpaid balances under the
Term Loan are due and payable in full on August 1, 2028 (the "Maturity Date"). SMAT may prepay amounts due under the Term
Loan. All accrued but unpaid interest on the unpaid principal balance of outstanding advances is due and payable monthly, beginning on
September 5, 2023 and continuing monthly on the fifth day of each month thereafter until the Maturity Date. The unpaid principal balance
of outstanding advances bears interest, subject to certain conditions, at the lesser of the Maximum Rate (as defined in the Loan Agreement)
or the Base Rate, which is for any day, a rate per annum equal to the term secured overnight financing rate (Term SOFR) (as administered
by the Federal Reserve Bank of New York) for a one-month tenor in effect on such day plus three percent (3.0%).

 The
obligations of SMAT under the Loan Agreement and the other loan documents delivered in connection therewith are guaranteed by us and
are secured by a first priority security interest in substantially all of the existing and future assets of SMAT.

 The
Loan Agreement contains customary representations and warranties and certain covenants that limit (subject to certain exceptions) the
ability of SMAT and us to, among other things, (i) create, assume or guarantee certain liabilities, (ii) create, assume or suffer liens
securing indebtedness, (iii) make or permit loans and advances, (iv) acquire any assets outside the ordinary course of business, (v)
consolidate, merge or sell all or a material part of its assets, (vi) pay dividends or other distributions on, or redeem or repurchase,
interest in an obligor, including us as guarantor, (vii) cease, suspend or materially curtail business operations or (viii) engage in
certain affiliate transactions. In addition, the Loan Agreement contains financial covenants that require SMAT to maintain (i) a minimum
Debt Services Coverage Ratio and (ii) a maximum Cash Flow Leverage Ratio, in each case, as defined and calculated according to the procedures
set forth in the Loan Agreement. Pursuant to the Loan Agreement, in the event that SMAT fails to comply with the financial covenants
described above, we are required to contribute cash to SMAT in an amount equal to the amount required to satisfy the financial covenants.
SMAT is limited in its ability to distribute or lend cash to the Company without consent of the Bank.

to the Loan Agreement, starting with the three months ended September 30, 2023 and for each quarter thereafter, SMAT will be required
to maintain a minimum Debt Service Coverage Ratio (as defined below) of 1.2 to 1.0, which ratio is calculated as of the last day of the
applicable fiscal quarter. The "Debt Service Coverage Ratio" is the ratio of (a) the sum of the following during the preceding
twelve (12) month period, subject to annualization in certain circumstances: (i) earnings before interest, taxes, depreciation, amortization,
stock compensation expense and gains or losses on sales of assets outside the ordinary course of business ("EBITDA") minus
(ii) capital expenditures, minus (iii) cash taxes, minus (iv) dividends and distributions, to (b) the sum of (i) the current portion
of long-term debt, (ii) Installment Payments made during the preceding twelve (12) month period and (iii) interest expense during the
preceding twelve (12) month period, subject to annualization in certain circumstances. As of December 31, 2023, following an immaterial cash contribution
from Sanara, SMAT's Debt Service Coverage Ratio was 1.3 to 1.0.

 The
Loan Agreement also requires SMAT to, subject to certain conditions, maintain a maximum Cash Flow Leverage Ratio (as defined below) of
not more than (a) 4.5 to 1.0 as of the last day of the fiscal quarter ending on September 30, 2023, (b) 4.0 to 1.0 as of the last day
of each fiscal quarter ending on December 31, 2023, and March 31, 2024, (c) 3.5 to 1.0 as of the last day of each fiscal quarter ending
on June 30, 2024, and September 30, 2024, and (d) 3.0 to 1.0 as of the last day of each fiscal quarter thereafter. The "Cash Flow
Leverage Ratio" is the ratio of all Funded Debt (as defined in the Loan Agreement) to certain multiples of EBITDA during the preceding
twelve (12) month period, subject to annualization in certain circumstances. SMAT was in compliance with all financial covenants under
the Loan Agreement as of December 31, 2023. As of December 31, 2023, following an immaterial cash contribution from Sanara, SMAT's Cash Flow
Leverage Ratio was 4.0 to 1.0.

 The
Loan Agreement also contains customary events of default. If such an event of default occurs, the Bank would be entitled to take various
actions, including the acceleration of amounts due under the Loan Agreement and actions permitted to be taken by a secured creditor.

 Cash
Flow Analysis

 For
the year ended December 31, 2023, net cash used in operating activities was $3.2 million compared to $5.6 million used in operating activities
for the year ended December 31, 2022. The lower use of cash in 2023 was due to net revenue growth outpacing the growth of our cash operating
expenses and timing of cash expenditures for certain accrued payables and prepaids.

 For
the year ended December 31, 2023, net cash used in investing activities was $10.2 million compared to $3.5 million used in investing
activities during the year ended December 31, 2022. The higher use of cash used in investing activities during 2023 was primarily due
to cash paid pursuant to the Applied Asset Purchase.

 For
the year ended December 31, 2023, net cash provided by financing activities was $9.6 million as compared to $0.6 million used in financing
activities for the year ended December 31, 2022. The cash provided by financing activities during 2023 was due to net loan proceeds of
$9.7 million utilized for the Applied Asset Purchase and net proceeds received pursuant to sales of our common stock of $0.9 million,
partially offset by the Scendia earnout payment of $0.7 million and the net settlement of equity-based awards, which totaled $0.1 million.

 Material
Transactions with Related Parties

Surgical Sublicense Agreement

 We
have an exclusive, world-wide sublicense to distribute CellerateRX Surgical and HYCOL products into the surgical and wound care markets
from an affiliate of Catalyst, CGI Cellerate RX, which, prior to the Applied Asset Purchase, licensed the rights to CellerateRX from
Applied. Sales of CellerateRX Surgical comprised the substantial majority of our sales during the twelve months ended December 31, 2023
and 2022. Prior to the Applied Asset Purchase discussed above, we paid royalties based on the annual Net Sales of licensed products (as
defined in the Sublicense Agreement) consisting of 3% of all collected Net Sales each year up to $12.0 million, 4% of all collected Net
Sales each year that exceed $12.0 million up to $20.0 million, and 5% of all collected Net Sales each year that exceed $20.0 million.
For the year ended December 31, 2023 and 2022, royalty expense was $1.0 million and $1.8 million, respectively, under the terms of this
agreement. Ronald T. Nixon, our Executive Chairman, is the founder and managing partner of Catalyst.

 In
August 2023, we acquired the underlying intellectual property of, as well as the rights to manufacture and sell, CellerateRX Surgical
and HYCOL products from Applied. In connection with this acquisition, Applied assigned its license agreement with CGI Cellerate RX to
a wholly owned subsidiary of the Company and no further royalties will be due to Applied thereunder. Since the Closing of the Applied
Asset Purchase, we indirectly make intercompany royalty payments to SMAT at the same rate as set forth in the Sublicense Agreement. These
intercompany royalty payments and the offsetting cost of goods sold were eliminated in consolidation effective as of August 1, 2023.

 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 for 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 paid once per month. The consulting agreement has an initial term of three years, unless earlier terminated by us,
and is subject to renewal. Ms. Salamone is a director of the Company, 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 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").

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. We incurred $174,486 of costs pursuant to the Catalyst Services Agreement during 2023.

 Receivables
and Payables

 We
had outstanding related party receivables totaling $8,400 at December 31, 2023, and $98,548 at December 31, 2022. We had outstanding
related party payables totaling $77,805 at December 31, 2023, and $34,036 at December 31, 2022.

 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 will have a material impact on our future results of operations.

 Critical
Accounting Estimates

 Our
discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated
financial statements requires us 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. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable
under the circumstances. The results of these assumptions form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Under different assumptions or conditions, actual results may differ from
these estimates.

 We
have identified certain significant accounting estimates which involve a higher degree of judgment and complexity in making certain estimates
and assumptions that affect amounts reported in our consolidated financial statements, as summarized below.

 Revenue
Recognition

 We
recognize revenue in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers.
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 we expect 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, we satisfy a
 performance obligation

 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. We recorded inventory obsolescence
expense of $406,812 in 2023 and $540,090 in 2022. The allowance for obsolete and slow-moving inventory had a balance of $446,917 at December
31, 2023, and $523,832 at December 31, 2022.

 Goodwill

 The
excess of purchase price over the fair value of identifiable net assets acquired in business combinations is recorded as goodwill. As
of December 31, 2023 and 2022, all of our goodwill relates to the acquisition of 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. We 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 we 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 years ended December 31, 2023 and 2022.

 Impairment
of Long-Lived Assets

 Long-lived
assets, including certain identifiable intangibles held and to be used by us, are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of such assets may not be recoverable. We continuously evaluate the recoverability
of our long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-lived assets and provide
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, undiscounted 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. No impairment
was recorded during the years ended December 31, 2023 and 2022.

 Investments
in Equity Securities

 Our
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 of the same issuer.

 We
apply the equity method of accounting for investments when we have 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. Our proportionate
share of the net income (loss) resulting from these investments is reported under the line item captioned "Share of losses from
equity method investment" in our Consolidated Statements of Operations. Our equity method investment is adjusted each period for
our share of the investee's income or loss and dividend paid, if any. We classify distributions received from our equity method
investment using the cumulative earnings approach on the Consolidated Statements of Cash Flows. As a result of the Precision Healing
merger in April 2022, we did not have any investments which are recorded applying the equity method of accounting as of December 31,
2023 or 2022.

 We
reviewed the carrying value of our investments and have determined there was no impairment or observable price changes as of and for
the years ended December 31, 2023 and 2022.

 Income
Taxes

 We
account for income taxes in accordance with ASC Topic No. 740, Income Taxes. This standard requires us to provide a net deferred tax
asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting
and any available operating loss or tax credit carry forwards. A valuation allowance is provided if it is more likely than not that some
or all of a net deferred tax asset will not be realized.

 We
recognized net deferred tax liabilities associated with the Precision Healing merger and the Scendia acquisition. As of the dates of
these acquisitions, prior to consideration of these acquired deferred tax liabilities, we had net deferred tax assets in excess of the
deferred tax liabilities being recognized, however, a 100% valuation allowance had previously been provided against our net deferred
tax assets. As a result of the recording of the net deferred tax liabilities related to the Precision Healing merger and Scendia acquisition,
we reviewed the valuation allowance and determined that it should be reduced by the amount of the deferred tax liabilities that were
recognized. This resulted in a 2022 income tax benefit of $5.8 million.

 A
100% valuation allowance has been provided for the remaining net deferred tax assets as of December 31, 2023 and 2022, as our ability
to generate sufficient taxable income in the future is uncertain.

 Off-Balance
Sheet Arrangements

 None.

 ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 As
a smaller reporting company, we are not required to provide this information.

 ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

to Consolidated Financial Statements

 Report of Independent Registered Public Accounting Firm (Weaver and Tidwell, L.L.P. PCAOB No. 410)

 Consolidated Balance Sheets

 Consolidated Statements of Operations

 Consolidated Statements of Changes in Shareholders' Equity

 Consolidated Statements of Cash Flows

 Notes to Consolidated Financial Statements

 F- 1

 Report
of Independent Registered Public Accounting Firm

 Board
of Directors and Shareholders

 Sanara
MedTech Inc.

 Opinion
on the Consolidated Financial Statements

 We
have audited the accompanying consolidated balance sheets of Sanara MedTech Inc. and subsidiaries (collectively, the Company) as of December
31, 2023 and 2022, and the related consolidated statements of operations, changes in shareholders' equity and cash flows for each
of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023
in conformity with accounting principles generally accepted in the United States of America.

 Basis
for Opinion

 These
financial statements are the responsibility of the entity's management. Our responsibility is to express an opinion on the entity's
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the entity's internal control over financial reporting. Accordingly, we express no such opinion.

 Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 Critical
Audit Matters

 The
critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated
or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 Applied Asset Purchase (Refer to Note 5 to the financial statements)

 Critical
Audit Matter Description

 The
Company entered into an asset purchase agreement to acquire certain assets from the Sellers (as defined in Note 5). Management has recorded
the acquisition as an asset acquisition due to its determination that substantially all of the fair value of the assets acquired was
concentrated in a group of similar identifiable assets.

 We
identified the determination of the fair values of the acquired intangible assets as a critical audit matter because of the subjective
process when developing the estimated fair values. This in turn led to significant auditor judgment and subjectivity in performing procedures
relating to the valuation of acquired intangible assets and consideration paid, and significant audit effort was necessary in evaluating
the significant assumptions relating to the estimates, including the timing and amounts of future cash flows. In addition, the audit
effort involved the use of professionals with specialized skill and knowledge.

 How
the Critical Audit Matter Was Addressed in the Audit

 Our
audit procedures related to the Company's estimated fair values included the following, among others:

We obtained an understanding of the design and implementation of management's controls over the acquisition, including the fair
value of the acquired intangible assets.

We obtained and evaluated the relevant asset purchase agreement to evaluate the completeness of the identified assets.

With the assistance of our internal fair value specialists, we evaluated the appropriateness of the methodologies applied in determining
the fair values of the acquired intangible assets, and the reasonableness of the significant inputs and assumptions used by management,
and the skills, knowledge and experience of the fair value specialists engaged by management to assist in determining the fair value
of the acquired intangible assets. This testing included inquiries with management, evaluation of the methods applied by management's
specialists, consideration of positive and negative evidence impacting management's forecasts and assumptions, and evaluation of
relevant market and industry factors.

We evaluated management's determination that substantially all of the value of the acquired assets was concentrated in a single
asset or group of similar assets, and management's conclusion that the transaction should therefore be accounted for as an asset
acquisition.

 We
have served as the Company's auditor since 2021.

 /s/
 Weaver and Tidwell, L.L.P.

 Austin,
Texas

 March

 F- 2

 CONSOLIDATED
BALANCE SHEETS

 2023

 2022

 Assets

 Current assets

 Cash

 $
 5,147,216

 $
 8,958,995

 Accounts receivable, net

 8,474,965

 6,805,761

 Accounts receivable – related parties

 8,400

 98,548

 Accounts receivable

 8,400

 98,548

 Royalty receivable

 49,344

 99,594

 Inventory, net

 4,717,533

 3,549,000

 Prepaid and other assets

 608,411

 1,104,611

 Total current assets

 19,005,869

 20,616,509

 Long-term assets

 Intangible assets, net

 44,926,061

 31,509,980

 Goodwill

 Investment in equity securities

 Right of use assets – operating leases

 1,995,204

 806,402

 Property and equipment, net

 1,257,956

 1,416,436

 Total long-term assets

 54,865,280

 40,418,877

 Total assets

 $
 73,871,149

 $
 61,035,386

 Liabilities and shareholders' equity

 Current liabilities

 Accounts payable

 $
 1,924,082

 $
 1,392,701

 Accounts payable – related parties

 77,805

 34,036

 Accounts payable

 77,805

 34,036

 Accrued bonuses and commissions

 7,676,770

 7,758,284

 Accrued royalties and expenses

 2,047,678

 2,144,475

 Earnout liabilities – current

 1,100,000

 1,162,880

 Current portion of debt

 580,357

 -

 Operating lease liabilities – current

 361,185

 313,933

 Total current liabilities

 13,767,877

 12,806,309

 Long-term liabilities

 Long-term debt, net of current portion

 9,113,123

 -

 Earnout liabilities – long-term

 2,723,001

 6,003,811

 Operating lease liabilities – long-term

 1,737,445

 505,291

 Other long-term liabilities

 1,941,686

 -

 Total long-term liabilities

 15,515,255

 6,509,102

 Total liabilities

 29,283,132

 19,315,411

 Commitments and contingencies (Note 10)

 -

 Shareholders' equity

 Common Stock: $ 0.001 par value, 20,000,000 shares authorized; 8,535,239 issued and outstanding as of December 31, 2023 and 8,299,957 issued and outstanding as of December 31, 2022

 8,535

 8,300

 Additional paid-in capital

 72,860,556

 65,213,987

 Accumulated deficit

 ( 28,036,814
)

 ( 23,394,757
)

 Total Sanara MedTech shareholders' equity

 44,832,277

 41,827,530

 Equity attributable to noncontrolling interest

 ( 244,260
)

 ( 107,555
)

 Total shareholders' equity

 44,588,017

 41,719,975

 Total liabilities and shareholders' equity

 $
 73,871,149

 $
 61,035,386

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 3

 CONSOLIDATED
STATEMENTS OF OPERATIONS

 Year Ended

 2023

 2022

 Net Revenue

 $
 64,989,842

 $
 45,842,845

 Cost of goods sold

 7,852,686

 6,360,851

 Gross profit

 57,137,156

 39,481,994

 Operating expenses

 Selling, general and administrative expenses

 56,994,753

 45,976,328

 Research and development

 4,132,425

 3,367,032

 Depreciation and amortization

 3,675,026

 2,371,068

 Change in fair value of earnout liabilities

 ( 3,449,895
)

 284,746

 Total operating expenses

 61,352,309

 51,999,174

 Operating loss

 ( 4,215,153
)

 ( 12,517,180
)

 Other income (expense)

 Interest expense and other

 ( 475,783
)

 -

 Share of losses from equity method investment

 -

 ( 379,633
)

 Gain (loss) on disposal of investment

 251,034

 ( 1,040,311
)

 Total other income (expense)

 ( 224,749
)

 ( 1,419,944
)

 Loss before income taxes

 ( 4,439,902
)

 ( 13,937,124
)

 Income tax benefit

 -

 5,844,796

 Net loss

 ( 4,439,902
)

 ( 8,092,328
)

 Less: Net loss attributable to noncontrolling interest

 ( 136,705
)

 ( 154,831
)

 Net loss attributable to Sanara MedTech shareholders

 $
 ( 4,303,197
)

 $
 ( 7,937,497
)

 Net loss per share of common stock, basic and diluted

 $
 ( 0.52
)

 $
 ( 1.00
)

 Weighted average number of common shares outstanding, basic and diluted

 8,278,949

 7,906,794

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 4

 CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

 Capital

 Deficit

 Interest

 Equity

 Common Stock

 Additional

 Total

 $0.001 par value

 Paid-In

 Accumulated

 Noncontrolling

 Shareholders'

 Capital

 Deficit

 Interest

 Equity

 Balance at December 31, 2021

 7,676,662

 $
 7,677

 $
 45,867,768

 $
 ( 15,235,044
)

 $
 ( 488,397
)

 $
 30,152,004

 Issuance of common stock for acquisitions

 457,424

 11,128,053

 -

 ( 2,638
)

 11,125,872

 Issuance of common stock options and warrants for acquisitions

 -

 -

 4,612,645

 -

 -

 4,612,645

 Share-based compensation

 173,959

 3,790,643

 -

 -

 3,790,817

 Net settlement and retirement of equity-based awards

 ( 8,088
)

 ( 8
)

 ( 185,122
)

 ( 222,216
)

 -

 ( 407,346
)

 Distribution to noncontrolling interest member

 -

 -

 -

 -

 ( 220,000
)

 ( 220,000
)

 Dissolution of investment

 -

 -

 -

 -

 758,311

 758,311

 Net loss

 -

 -

 -

 ( 7,937,497
)

 ( 154,831
)

 ( 8,092,328
)

 Balance at December 31, 2022

 8,299,957

 $
 8,300

 $
 65,213,987

 $
 ( 23,394,757
)

 $
 ( 107,555
)

 $
 41,719,975

 Balance

 8,299,957

 $
 8,300

 $
 65,213,987

 $
 ( 23,394,757
)

 $
 ( 107,555
)

 $
 41,719,975

 Share-based compensation

 100,829

 3,442,622

 -

 -

 3,442,722

 Net settlement and retirement of equity-based awards

 34,501

 203,031

 ( 338,860
)

 -

 ( 135,794
)

 Issuance of common stock for acquisitions

 73,809

 3,089,571

 -

 -

 3,089,645

 Issuance of common stock in equity offering

 26,143

 911,345

 -

 -

 911,371

 Net loss

 -

 -

 -

 ( 4,303,197
)

 ( 136,705
)

 ( 4,439,902
)

 Balance at December 31, 2023

 8,535,239

 $
 8,535

 $
 72,860,556

 $
 ( 28,036,814
)

 $
 ( 244,260
)

 $
 44,588,017

 Balance

 8,535,239

 $
 8,535

 $
 72,860,556

 $
 ( 28,036,814
)

 $
 ( 244,260
)

 $
 44,588,017

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 5

 CONSOLIDATED
STATEMENTS OF CASH FLOWS

 2023

 2022

 Year Ended

 2023

 2022

 Cash flows from operating activities:

 Net loss

 $
 ( 4,439,902
)

 $
 ( 8,092,328
)

 Adjustments to reconcile net loss to net cash used in operating activities:

 Depreciation and amortization

 3,675,026

 2,371,068

 Loss on disposal of property and equipment

 -

 2,634

 Bad debt expense

 202,941

 280,000

 Inventory obsolescence

 406,812

 540,090

 Share-based compensation

 3,442,722

 2,702,633

 Noncash lease expense

 342,972

 263,518

 Loss on equity method investment

 -

 379,633

 (Gain) Loss on disposal of investment

 ( 251,034
)

 1,040,311

 Benefit from deferred income taxes

 -

 ( 5,844,796
)

 Accretion of finance liabilities

 98,926

 -

 Amortization of debt issuance costs

 5,138

 -

 Change in fair value of earnout liabilities

 ( 3,449,895
)

 284,746

 Changes in operating assets and liabilities:

 Accounts receivable, net

 ( 1,821,895
)

 ( 2,250,223
)

 Accounts receivable – related parties

 90,148

 ( 18,761
)

 Inventory, net

 ( 1,545,339
)

 ( 517,271
)

 Prepaid and other assets

 496,200

 ( 159,592
)

 Accounts payable

 531,380

 ( 301,966
)

 Accounts payable – related parties

 43,768

 ( 121,781
)

 Accrued royalties and expenses

 ( 739,645
)

 1,156,073

 Accrued bonuses and commissions

 ( 81,513
)

 2,994,512

 Operating lease liabilities

 ( 252,366
)

 ( 263,370
)

 Net cash used in operating activities

 ( 3,245,556
)

 ( 5,554,870
)

 Cash flows from investing activities:

 Purchases of property and equipment

 ( 265,246
)

 ( 147,015
)

 Proceeds from disposal of property and equipment

 1,549

 Purchases of intangible assets

 -

 ( 600,000
)

 Investment in equity securities

 -

 ( 250,000
)

 Acquisitions, net of cash acquired

 ( 9,942,750
)

 ( 2,516,164
)

 Net cash used in investing activities

 ( 10,207,346
)

 ( 3,511,630
)

 Cash flows from financing activities:

 Loan proceeds, net

 9,688,341

 -

 Equity offering net proceeds

 911,371

 -

 Net settlement of equity-based awards

 ( 135,794
)

 ( 407,346
)

 Cash payment of finance and earnout liabilities

 ( 822,795
)

 -

 Distribution to noncontrolling interest member

 -

 ( 220,000
)

 Net cash provided by (used in) financing activities

 9,641,123

 ( 627,346
)

 Net decrease in cash

 ( 3,811,779
)

 ( 9,693,846
)

 Cash, beginning of period

 8,958,995

 18,652,841

 Cash, end of period

 $
 5,147,216

 $
 8,958,995

 Cash paid during the period for:

 Interest

 $
 283,948

 $

 Supplemental noncash investing and financing activities:

 Right of use assets obtained in exchange for lease obligations

 1,531,773

 -

 Equity issued for acquisitions

 3,089,645

 15,738,518

 Earnout and other liabilities generated by acquisitions

 3,759,642

 6,882,151

 Investment in equity securities converted in asset acquisition

 -

 1,803,440

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 6

 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

 NOTE
1 – NATURE OF BUSINESS AND BACKGROUND

 Sanara
MedTech Inc. (together with its wholly owned and majority owned subsidiaries on a consolidated basis, the "Company")
is a medical technology company focused on developing and commercializing transformative technologies to improve clinical outcomes and reduce
healthcare expenditures in the surgical, chronic wound and skincare markets. Each of the Company's products, services and technologies
are designed to achieve the Company's goal of providing better clinical outcomes at a lower overall cost for patients regardless
of where they receive care. The Company strives to be one of the most innovative and comprehensive providers of effective surgical, wound
and skincare solutions and is continually seeking to expand its offerings for patients requiring treatments across the entire continuum
of care in the United States.

 NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Principles
of Consolidation

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

 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 Accounting Standards Codification ("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 per share is
computed by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding. Diluted
income per share is computed similarly to basic income 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 current and prior period calculations as their
inclusion would have been anti-dilutive during the years ended December 31, 2023 and 2022 due to the Company's net loss.

 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 for the years ended December 31, 2023 and 2022 as such shares would have had an anti-dilutive effect:

OF COMPUTATION OF DILUTED NET LOSS PER SHARE

 As of December 31,

 2023

 2022

 Stock options (a)

 93,892

 146,191

 Warrants (b)

 Unvested restricted stock

 144,211

 181,102

 Anti-dilutive securities

 144,211

 181,102

 (a)
 underlying stock options assumed pursuant to the merger agreement with Precision Healing,
 Inc. ("Precision Healing") in April 2022. See Note 3 for more information regarding
 the Precision Healing merger.

 (b)
 underlying warrants assumed pursuant to the merger agreement with Precision Healing in April
 2022. See Note 3 for more information regarding the Precision Healing merger.

 F- 7

 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
2023 or 2022.

 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.

 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 are summarized below for the years ended December 31, 2023 and 2022.

 SCHEDULE OF REVENUE FROM PRODUCT SALES AND ROYALTIES

 2023

 2022

 2023

 2022

 Soft tissue repair products

 $
 54,836,410

 $
 41,653,954

 Bone fusion products

 9,952,432

 3,987,891

 Royalty revenue

 201,000

 201,000

 Total Net Revenue

 $
 64,989,842

 $
 45,842,845

 The
Company recognizes royalty revenue from a development and license agreement with BioStructures, LLC. The Company records revenue each
calendar quarter as earned per the terms of the agreement, which stipulates the Company will receive quarterly royalty payments of at
least $ 50,250. Under the terms of the development and license agreement, royalties of 2.0 % are recognized on sales of products containing
the Company's patented resorbable bone hemostasis. The minimum annual royalty due to the Company is $ 201,000 per year through the
end of 2023. These royalties are payable in quarterly installments of $ 50,250. To date, royalties related to this development and license
agreement have not exceeded the annual minimum of $ 201,000 ($ 50,250 per quarter).

 F- 8

 Accounts
Receivable Allowances

 Accounts
receivable are typically due within 30 days of invoicing. The Company establishes an allowance for doubtful accounts 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 recorded bad debt expense of $ 202,941
and $ 280,000
in 2023 and 2022, respectively. The allowance for doubtful accounts was $ 528,030
at December 31, 2023 and $ 325,089
at December 31, 2022. Bad debt 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 $ 3,820
at December 31, 2023 and $ 4,761
at December 31, 2022. 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 $ 406,812 in 2023 and $ 540,090 in 2022. The allowance for obsolete and slow-moving inventory had a balance of
$ 446,917 at December 31, 2023, and $ 523,832 at December 31, 2022.

 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

 2023

 2022

 Computers

 3 - 5 years

 $
 194,788

 $
 172,154

 Office equipment

 3 - 7 years

 201,785

 87,225

 Furniture and fixtures

 5 - 10 years

 304,338

 258,414

 Leasehold improvements

 2 - 5 years

 134,170

 19,631

 Internal use software

 5 years

 1,618,999

 1,618,998

 Property and equipment, gross

 2,454,080

 2,156,422

 Less accumulated depreciation

 ( 1,196,124
)

 ( 739,986
)

 Property and equipment, net

 $
 1,257,956

 $
 1,416,436

 Depreciation
expense related to property and equipment was $ 456,138 and $ 407,769 for the year ended December 31, 2023 and 2022, respectively.

 F- 9

 Internal
Use Software

 The
Company accounts for costs incurred to develop or acquire computer software for internal use in accordance with ASC Topic 350-40, Intangibles
– Goodwill and Other. The Company capitalizes the costs incurred during the application development stage, which generally includes
third-party developer fees to design the software configuration and interfaces, coding, installation and testing.

 The
Company begins capitalization of qualifying costs when both the preliminary project stage is completed and management has authorized
further funding for the completion of the project. 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. Capitalized development costs are classified
as "Property and equipment, net" in the Consolidated Balance Sheets and are depreciated over the estimated useful life of
the software, which is generally five years.

 Goodwill

 The
excess of purchase price over the fair value of identifiable net assets acquired in business combinations is recorded as goodwill. As
of December 31, 2023 and December 31, 2022, all of the Company's goodwill relates to the acquisition of Scendia Biologics, LLC
("Scendia") (see Note 4). 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 year ended December
31, 2023 and 2022.

 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 to be 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, undiscounted 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. No impairment was recorded during the years ended December 31, 2023 and 2022.

 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 of 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.
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 investment" in the Company's Consolidated Statements of Operations. The Company's
equity method investment is 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 investment using the cumulative earnings approach in the
Company's Consolidated Statements of Cash Flows. As a result of the Precision Healing merger in April 2022 (see Note 3), as of
December 31, 2022, the Company does not have any investments which are recorded applying the equity method of accounting.

 The
Company has reviewed the carrying value of its investments and has determined there was no impairment or observable price changes as
of December 31, 2023 and 2022.

 F- 10

 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 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 carrying value of the Company's debt, which has variable interest rates determined
each month, approximates fair value based on instruments with similar terms (Level 2 inputs). The fair value of the contingent earnout
consideration and the acquisition date fair value of goodwill and intangibles related to the acquisitions discussed in Notes 3, 4 and
5 are based on Level 3 inputs.

 Liabilities
for contingent consideration for the Company's Precision Healing, Scendia and Applied acquisitions are measured at fair value each
reporting period, with the acquisition-date fair value included as part of the consideration transferred. Subsequent changes in fair
value for the Precision Healing and Scendia acquisitions are reported under the line item captioned "Change in fair value of earnout
liabilities" in the Company's Consolidated Statements of Operations. Due to the Applied Asset Purchase being accounted for
as an asset acquisition and given that the transaction did not include contingent shares, subsequent revaluations of contingent consideration
for the Applied acquisition results in an adjustment to the contingent consideration liability and the intellectual property intangible
asset with a cumulative catch-up amortization adjustment. The current year changes in fair value of earnout liabilities below are as
a result of a net decrease in the estimated fair value of the earnout liabilities established at the time of the Company's Precision
Healing and Scendia acquisitions. The current year revaluation of earnout liability is a result of a decrease in the estimated earnout
liability established at the time of the Company's Applied 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

 Balance at December 31, 2022

 $
 7,166,691

 Additions

 893,000

 Changes in fair value of earnout liabilities

 ( 3,449,895
)

 Revaluation of earnout liability

 ( 94,000
)

 Settlements

 ( 692,795
)

 Balance at December 31, 2023

 $
 3,823,001

 F- 11

 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.

 Stock-based
Compensation

 The
Company accounts for stock-based compensation to employees and nonemployees in accordance with ASC Topic 718, Compensation – Stock
Compensation ("ASC 718"). Stock-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 stock-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 and benefits for all personnel
directly engaged in R&D activities, contracted services, materials, prototype expenses and allocated overhead which is comprised
of 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
June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments - Credit Losses
(Topic 326). This update amends the impairment model by requiring entities to use a forward-looking approach based on expected
losses to estimate credit losses for most financial assets and certain other instruments that are not measured at fair value through
net income. The Company adopted the new guidance effective January 1, 2023. The adoption did not have a material impact on the
Company's consolidated financial position, results of operations or cash flows.

Accounting Pronouncements

 In
November 2023, the FASB issued 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 is currently evaluating the effect of this pronouncement on its
disclosures.

 In
December 2023, the 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 16, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective
application is permitted. The Company is currently evaluating the effect of this pronouncements on its disclosures.

 NOTE
3 – PRECISION HEALING MERGER

 In
April 2022, the Company entered into a merger agreement by and among the Company, United Wound and Skin Solutions, LLC, a Delaware limited
liability company and wholly owned subsidiary of the Company, Precision Healing, PH Merger Sub I, Inc., a Delaware corporation, PH Merger
Sub II, LLC, a Delaware limited liability company, and Furneaux Capital Holdco, LLC (d/b/a BlueIO), solely in its capacity as the representative
of the securityholders of Precision Healing. On April 4, 2022 (the "Closing Date"), the merger parties closed the transactions
contemplated by the merger agreement and Precision Healing became a wholly owned subsidiary of the Company.

 Precision
Healing is developing a diagnostic imager and lateral flow assay for assessing a patient's wound and skin conditions. This comprehensive
skin and wound assessment technology is designed to quantify biochemical markers to determine the trajectory of a wound's condition
to enable better diagnosis and treatment protocol. To date, Precision Healing has not generated revenues.

to the terms of the merger agreement, holders of Precision Healing common stock and preferred stock, other than the Company, were entitled
to receive closing consideration, consisting of $ 125,966 in cash, which was paid to stockholders who were not accredited investors, 165,738
shares of the Company's common stock, which was paid only to accredited investors, and the payment in cash of approximately $ 0.6
million of transaction expenses of Precision Healing. The Company recorded the issuance of the 165,738 shares to accredited investors
and cash payments to nonaccredited investors based on the closing price per share of the Company's common stock on the Closing
Date, which was $ 30.75.

 On
the Closing Date, the outstanding Precision Healing options previously granted under the Precision Healing Inc. 2020 Stock Option and
Grant Plan (the "Precision Healing Plan") converted, pursuant to their terms, into options to acquire an aggregate of 144,191
shares of Company common stock with a weighted exercise price of $ 10.71 per share. These options expire between August 2030 and April
2031. In addition, outstanding and unexercised Precision Healing warrants converted into rights to receive warrants to purchase (i) 4,424
shares of Company common stock with an initial exercise price of $ 7.32 per share and an expiration date of April 22, 2031, and (ii) 12,301
shares of the Company's common stock with an initial exercise price of $ 12.05 per share and an expiration date of August 10, 2030.

to the merger agreement, the Company assumed sponsorship of the Precision Healing Plan, effective as of the Closing Date, as well as
the outstanding awards granted thereunder, the award agreements evidencing the grants of such awards and the remaining shares available
under the Precision Healing Plan, in each case adjusted in the manner set forth in the merger agreement to such awards. Concurrent with
the assumption of the Precision Healing Plan, the Company terminated the ability to offer future awards under the Precision Healing Plan.

 F- 12

to the merger agreement, upon the achievement of certain performance thresholds, the securityholders of Precision Healing, including
the holders of options and warrants to purchase Precision Healing common stock and certain persons promised options to purchase Precision
Healing common stock, are also entitled to receive payments of up to $ 10.0 million, which was accounted for as contingent consideration
pursuant to ASC 805. The earnout consideration is payable in cash or, at the Company's election, is payable to accredited investors
in shares of Company common stock at a price per share equal to the greater of (i) $ 27.13 or (ii) the average closing price of Company
common stock for the 20 trading days prior to the date such earnout consideration is due and payable. Pursuant to the merger agreement,
a minimum percentage of the earnout consideration may be required to be issued to accredited investors in shares of Company common stock
for tax purposes. The amount and composition of the portion of earnout consideration payable is subject to adjustment and offsets as
set forth in the merger agreement.

 As
the contingent earnout payments are not subject to any specific individual performance by the shareholders, the contingent shares are
not subject to ASC 718. Further, as the contingent consideration was negotiated as part of the transfer of assets, the obligation was
measured at fair value and included in the total purchase consideration transferred. Additionally, the contingent earnout payments meet
the criteria under ASC Topic 480, Distinguishing Liabilities from Equity ("ASC 480") as the monetary value of the shares
to be issued is predominantly based on the exercise contingency (i.e., revenue targets). Accordingly, the consideration is classified
as a liability and will be remeasured at its estimated fair value at each reporting period with the subsequent change in fair value recognized
as a gain or loss in accordance with ASC 480.

 The
total purchase consideration as determined by the Company was as follows:

 SCHEDULE OF PURCHASE CONSIDERATIONS

 Consideration

 Equity Shares

 Dollar Value

 Fair value of Sanara common shares issued

 165,738

 $
 5,096,444

 Fair value of assumed options

 144,191

 4,109,750

 Fair value of assumed warrants

 502,895

 Cash paid to nonaccredited investors

 125,370

 Cash paid for fractional shares

 Carrying value of equity method investment in Precision Healing

 1,803,440

 Fair value of contingent earnout consideration

 3,882,151

 Direct transaction costs

 1,061,137

 Total purchase consideration

 $
 16,581,783

 Based
on guidance provided by ASC 805, the Company recorded the Precision Healing merger as an asset acquisition due to the determination that
substantially all the fair value of the assets acquired was concentrated in a group of similar identifiable assets. The Company believes
the "substantially all" criterion was met with respect to the acquired intellectual property based on the Company's
valuation models. These models assigned value to the acquired intellectual property based on estimated future cash flows. Accordingly,
the Company accounted for the merger as an asset acquisition.

 The
purchase consideration, plus transaction costs, was allocated to the individual assets according to their fair values as a percentage
of the total fair value of the assets purchased, with no goodwill recognized. Based on the estimated fair value of the gross assets acquired,
the total fair value of the net assets acquired was primarily attributable to, and classified as, finite-lived intellectual property
and assembled workforce in the second quarter of 2022. The total purchase consideration was allocated based on the relative estimated
fair value of such assets as follows:

 SCHEDULE OF PURCHASE CONSIDERATION ON FAIR VALUE OF ASSETS ACQUIRED

 Description

 Cash

 $
 32,202

 Net working capital (excluding cash)

 ( 308,049
)

 Fixed assets, net

 9,228

 Deferred tax assets

 278,661

 Intellectual property

 20,325,469

 Assembled workforce

 664,839

 Deferred tax liabilities

 ( 4,420,567
)

 Net assets acquired

 $
 16,581,783

 F- 13

 NOTE
4 – SCENDIA PURCHASE AGREEMENT

 In
July 2022, the Company entered into a membership interest purchase agreement by and among the Company, Scendia, a Delaware limited liability
company, and Ryan Phillips ("Phillips") pursuant to which, and in accordance with the terms and conditions set forth therein,
the Company acquired 100 % of the issued and outstanding membership interests in Scendia from Phillips.

 Scendia
provides clinicians and surgeons with a full line of regenerative and orthobiologic technologies for their patients through certain customer
accounts. Beginning in early 2022, the Company began co-promoting certain products with Scendia, including: (i) TEXAGEN Amniotic Membrane
Allograft, (ii) BiFORM Bioactive Moldable Matrix, (iii) ACTIGEN Verified Inductive Bone Matrix and (iv) ALLOCYTE Advanced Cellular Bone
Matrix. Prior to the acquisition, Scendia owned 50 % of the issued and outstanding membership interests in Sanara Biologics, LLC ("Sanara
Biologics"), and the Company owned the remaining 50 % of the membership interests. As a result of the acquisition, the Company indirectly
acquired all the interests in Sanara Biologics, such that the Company now holds 100 % of the issued and outstanding equity interests in
Sanara Biologics.

to the purchase agreement, Phillips was entitled to receive closing consideration consisting of (i) approximately $ 1.6 million of cash,
subject to certain adjustments, and (ii) 291,686 shares of common stock of the Company. Pursuant to the purchase agreement, at closing,
the Company withheld 94,798 shares of common stock with an agreed upon value of $ 1.95 million (the "Indemnity Holdback Shares"),
which such Indemnity Holdback Shares were withheld to the extent provided in the purchase agreement to satisfy Phillips' indemnification
obligations and subsequently issued and released to Phillips in July 2023.

 In
addition to the cash consideration and the stock consideration, the purchase agreement provides that Phillips is entitled to receive
two potential earnout payments, payable on an annual basis, not to exceed $ 10.0 million in the aggregate, which was accounted for as
contingent consideration pursuant to ASC 805. The earnout consideration is payable to Phillips in cash or, at the Company's election,
in up to 486,145 shares of the Company's common stock upon the achievement of certain performance thresholds relating to net revenue
attributable to sales of Scendia products during the two-year period following the closing. The Company made the first earnout payment
of approximately $ 693,000 in cash in August 2023.

 As
the contingent earnout payments are not subject to any specific individual performance by Phillips, the contingent shares are not subject
to ASC 718. Further, as the contingent consideration was negotiated as part of the transfer of assets, the obligation was measured at
fair value and included in the total purchase consideration transferred. Additionally, the contingent earnout payments meet the criteria
under ASC 480, as the monetary value of the shares to be issued is predominantly based on the exercise contingency (i.e., revenue targets).
Accordingly, the contingent consideration is classified as a liability at its estimated fair value at each reporting period with the
subsequent change in fair value recognized as a gain or loss in accordance with ASC 480.

 The
total purchase consideration, subject to typical post-closing adjustments, as determined by the Company was as follows:

 SCHEDULE OF PURCHASE CONSIDERATIONS

 Consideration

 Equity Shares

 Dollar Value

 Fair value of Sanara common shares issued

 291,686

 $
 6,032,066

 Cash consideration

 1,562,668

 Fair value of contingent earnout consideration

 3,000,000

 Total purchase consideration

 $
 10,594,734

 F- 14

 Based
on guidance provided by ASC 805, the Company recorded the Scendia acquisition as a business combination. The purchase consideration was
allocated to the individual assets according to their fair values as a percentage of the total fair value of the net assets purchased.
The excess of the purchase consideration over the net assets purchased was recorded as goodwill. The total purchase consideration was
allocated as follows:

 SCHEDULE OF PURCHASE CONSIDERATION ON FAIR VALUE OF ASSETS ACQUIRED

 Description

 Cash

 $
 201,406

 Net working capital (excluding cash)

 1,294,499

 Fixed assets, net

 42,300

 Noncontrolling interest in Sanara Biologics, LLC

 2,638

 Customer relationships

 7,155,000

 Deferred tax liabilities

 ( 1,702,890
)

 Goodwill

 Net assets acquired

 $
 10,594,734

 The
goodwill acquired consists of expected synergies from the acquisition to the Company's overall corporate strategy. The Company
does not expect any of the goodwill to be deductible for income tax purposes. The Company incurred acquisition costs of approximately
$ 187,000 in 2022, which is included in "Selling, general and administrative expenses" in the accompanying Consolidated Statements
of Operations.

 NOTE
5 – APPLIED ASSET PURCHASE

 On
August 1, 2023, the Company entered into an Asset Purchase Agreement (the "Applied Purchase Agreement") by and among the
Company, as guarantor, Sanara MedTech Applied Technologies, LLC, a Texas limited liability company and wholly owned subsidiary of the
Company ("SMAT"), The Hymed Group Corporation, a Delaware corporation ("Hymed"), Applied Nutritionals, LLC, a
Delaware limited liability company ("Applied", and together with Hymed, the "Sellers"), and Dr. George D. Petito
(the "Owner"), pursuant to which SMAT acquired certain assets of the Sellers and the Owner, including, among others, the
Sellers' and Owner's inventory, intellectual property, manufacturing and related equipment, goodwill, rights and claims,
other than certain excluded assets, all as more specifically set forth in the Applied Purchase Agreement (collectively, 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 (such transaction, the "Applied Asset Purchase"). The
Applied Purchased Assets include the underlying intellectual property of, as well as the rights to manufacture and sell, CellerateRX
Surgical Activated Collagen ("CellerateRX Surgical") and HYCOL Hydrolyzed Collagen ("HYCOL") products for human
wound care use.

 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 the Company's common stock (the "Stock Closing
Consideration") with an agreed upon value of $ 3.0 million and (iii) $ 2.5 million in cash (the "Installment Payments"),
to be paid in four equal installments on each of the next four anniversaries of the closing of the Applied Asset Purchase (the "Closing").

 Prior
to the Closing, the Company licensed certain of its products from Applied through a sublicense agreement (the "Sublicense Agreement")
with CGI Cellerate RX, LLC ("CGI Cellerate RX"), a related party (see Note 14 for additional information regarding transactions
with related parties). Pursuant to the Sublicense Agreement, the Company has an exclusive, world-wide sublicense to distribute CellerateRX
Surgical and HYCOL products into the surgical and wound care markets. In connection with the Applied Asset Purchase, Applied assigned
its license agreement with CGI Cellerate RX to SMAT. Since the Closing of the Applied Asset Purchase, Sanara indirectly makes intercompany
royalty payments to SMAT at the same rate as set forth in the Sublicense Agreement. Effective August 1, 2023, these intercompany royalty
payments and the offsetting cost of goods sold are eliminated on a consolidated basis.

 In
addition to the Cash Closing Consideration, Stock Closing Consideration and Installment Payments, the Applied Purchase Agreement provides
that the Sellers are entitled to receive up to an additional $ 10.0 million (the "Applied Earnout"), which is payable to the
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 Sellers have not earned
the entirety of the Applied Earnout, SMAT shall pay the 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.

 In
connection with the Applied Asset Purchase and pursuant to the Applied Purchase Agreement, effective August 1, 2023, the Company entered
into a professional services agreement (the "Petito Services Agreement") with the Owner, pursuant to which the Owner, as
an independent contractor, agreed to provide certain services to the Company, including, among other things, assisting with the development
of products already in development and assisting with research, development, formulation, invention and manufacturing of any future products
(the "Petito Services"). As consideration for the Petito Services, the Owner is entitled to receive: (i) a base salary of
$12,000 per month during the term of the Petito Services Agreement, (ii) a royalty payment equal to three percent (3%) of the actual
collections from net sales of certain products the Owner develops or co-develops that reach commercialization, (iii) a royalty payment
equal to five percent (5%) for the first $50.0 million in aggregate collections from net sales of certain future products and a royalty
payment of two and one-half percent (2.5%) on aggregate collections from net sales of certain future products on any amounts exceeding
$50.0 million but up to $100.0 million, (iv) $500,000 in cash in the event that 510(k) clearance is issued for any future product accepted
by the Company and (v) $1.0 million in cash in the event that a U.S. patent is issued for a certain product; provided that with respect
to the incentive payments described in (iv) and (v) of the foregoing, the Owner shall not earn more than $2.5 million.

 F- 15

 The
Petito Services Agreement has an initial term of three years and is subject to automatic successive one-month renewals unless earlier
terminated in accordance with its terms. The Petito Services Agreement may be terminated upon the Owner's death or disability or
by the Company or the Owner "For Cause" (as defined in the Petito Services Agreement); provided, however, that the base salary
described in (i) of the foregoing paragraph shall survive termination through the three-year initial term and the royalty payments and
incentive payments described in (ii)-(v) of the foregoing paragraph shall survive termination of the Petito Services Agreement.

 As
the contingent consideration was negotiated as part of the transfer of assets, the contingent obligation was measured at fair value and
included in the total purchase consideration transferred. Accordingly, since the Applied Asset Purchase was accounted for as an asset
acquisition and did not include contingent shares, the contingent consideration is classified as a liability at its estimated fair value
at each reporting period with subsequent revaluations recognized as an adjustment to the intellectual property intangible asset and the
earnout liability with a cumulative catch up amortization adjustment.

 The
total purchase consideration for the Applied Asset Purchase as determined by the Company was as follows:

OF ASSET PURCHASE CONSIDERATIONS

 Consideration

 Equity Shares

 Dollar Value

 Cash Closing Consideration

 $
 9,750,000

 Fair value of Stock Closing Consideration

 73,809

 3,089,645

 Fair value of Installment Payments

 2,040,808

 Cash paid for inventory

 30,007

 Fair value of Petito Services Agreement defined payments

 825,834

 Fair value of Petito Services Agreement contingent consideration

 893,000

 Direct transaction costs

 162,743

 Total purchase consideration

 $
 16,792,037

 Based
on guidance provided by ASC 805, the Company recorded the Applied Asset Purchase as an asset acquisition due to the determination that
substantially all the fair value of the assets acquired was concentrated in a group of similar identifiable assets. The Company believes
the "substantially all" criterion was met with respect to the acquired intellectual property being the only significant asset
acquired. Accordingly, the Company accounted for the transaction as an asset acquisition.

 The
purchase consideration, plus transaction costs, was allocated to the individual assets according to their fair values as a percentage
of the total fair value of the assets purchased, with no goodwill recognized. Based on the estimated fair value of the gross assets acquired,
the total fair value of the net assets acquired was primarily attributable to, and classified as, finite-lived intellectual property
in the third quarter of 2023. The total purchase consideration was allocated based on the relative estimated fair value of such assets
as follows:

OF PURCHASE CONSIDERATION ON FAIR VALUE OF ASSETS ACQUIRED

 Description

 Inventory

 $
 30,007

 Equipment

 33,062

 Intellectual property

 16,728,968

 Net assets acquired

 $
 16,792,037

 F- 16

 NOTE
6 – GOODWILL AND INTANGIBLES, NET

 The
changes in the carrying amount of the Company's goodwill were as follows:

 SCHEDULE OF CHANGES IN THE CARRYING AMOUNT OF THE GOODWILL

 Total

 Balance as of December 31, 2021

 $
 -

 Scendia Acquisition

 Balance as of December 31, 2022

 Acquisitions

 -

 Balance as of December 31, 2023

 $

 The
carrying values of the Company's intangible assets were as follows for the periods presented:

OF FINITE LIVED INTANGIBLE ASSETS

 December 31, 2022

 Accumulated

 Accumulated

 Cost

 Amortization

 Net

 Cost

 Amortization

 Net

 Amortizable Intangible Assets:

 Product Licenses

 $
 4,793,879

 $
 ( 1,342,626
)

 $
 3,451,253

 $
 4,793,879

 $
 ( 980,583
)

 $
 3,813,296

 Patents and Other IP

 38,570,549

 ( 3,181,186
)

 35,389,363

 21,935,580

 ( 1,492,057
)

 20,443,523

 Customer relationships and other

 7,947,332

 ( 1,861,887
)

 6,085,445

 7,947,332

 ( 694,171
)

 7,253,161

 Total

 $
 51,311,760

 $
 ( 6,385,699
)

 $
 44,926,061

 $
 34,676,791

 $
 ( 3,166,811
)

 $
 31,509,980

 As
of December 31, 2023, the weighted-average amortization period for finite-lived intangible assets was 14.5 years. Amortization expense
related to intangible assets was $ 3,218,888 and $ 1,963,299 for the year ended December 31, 2023 and 2022, respectively. The estimated
remaining amortization expense as of December 31, 2023 for finite-lived intangible assets is as follows:

 SCHEDULE OF FUTURE AMORTIZATION EXPENSE

 2024

 $
 3,889,804

 2025

 3,889,804

 2026

 3,872,548

 2027

 3,758,696

 2028

 3,725,454

 Thereafter

 25,789,755

 Total

 $
 44,926,061

 The
Company has reviewed the carrying value of intangible assets and has determined there was no impairment during either of the years ended
December 31, 2023 or 2022.

 NOTE
7 – 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 of the
same issuer.

 In
July 2020, the Company made a $ 500,000 long-term investment to purchase certain nonmarketable securities consisting of 7,142,857 Series
B-2 Preferred Shares of Direct Dermatology Inc. ("DirectDerm"), representing approximately 2.9 % ownership of DirectDerm at
that time. Through this investment, the Company received exclusive rights to utilize DirectDerm's technology in all acute and post-acute
care settings such as skilled nursing facilities, home health and wound clinics. In 2021, the Company purchased an additional 3,571,430
shares of DirectDerm's Series B-2 Preferred for $ 250,000. In March 2022, the Company purchased an additional 3,571,429 shares of
DirectDerm's Series B-2 Preferred for $ 250,000. The Company's ownership of DirectDerm was approximately 8.1 % as of December
31, 2023. The Company does not have the ability to exercise significant influence over DirectDerm's operating and financial activities.

 F- 17

 In
November 2020, the Company entered into agreements to purchase certain nonmarketable securities consisting of 150,000 shares of Series
A Convertible Preferred Stock (the "Series A Stock") of Precision Healing for an aggregate purchase price of $ 600,000. The
Series A Stock was convertible into 150,000 shares of common stock of Precision Healing and had a senior liquidation preference relative
to the common shareholders. This initial investment represented approximately 12.6 % ownership of Precision Healing's outstanding
voting securities. In February 2021, the Company invested $ 600,000 to purchase 150,000 additional shares of Series A Stock which was
convertible into 150,000 shares of common stock of Precision Healing. This resulted in ownership of approximately 22.4 % of Precision
Healing's outstanding voting securities. With this level of significant influence, the Company transitioned to the equity method
of accounting for this investment. In June 2021, the Company invested $ 500,000 for 125,000 additional shares of Series A Stock, which
increased the Company's ownership of Precision Healing's outstanding voting securities to approximately 29.0 %. In October
and in December of 2021, 125,000 and 150,000 more shares of Series A Stock were purchased for $ 500,000 and $ 600,000, respectively.

 As
discussed above, in April 2022, the Company closed a merger transaction with Precision Healing pursuant to which Precision Healing became
a wholly owned subsidiary of the Company (see Note 3 for more information). As a result of the merger, the Company's equity method
investment in Precision Healing ceased in April 2022. The Company recorded $379,633 as its share of the loss from this equity method
investment in 2022 for the period prior to acquisition.

 In
June 2021, the Company invested $ 2,084,278 to purchase 278,587 Class A Preferred Shares (the "Shares") of Canada based Pixalere
Healthcare Inc. ("Pixalere"). The Shares are convertible into approximately 27.3 % of the outstanding equity of Pixalere.
Pixalere provides a cloud-based wound care software tool that empowers nurses, specialists and administrators to deliver better care
for patients. In connection with the Company's purchase of the Pixalere Shares, Pixalere granted Pixalere Healthcare USA, LLC ("Pixalere
USA"), a subsidiary of the Company, a royalty-free exclusive license to use the Pixalere software and platform in the United States.
In conjunction with the grant of the license, the Company issued Pixalere a 27.3 % equity ownership interest in Pixalere USA valued at
$ 93,879.

 The
Company has reviewed the characteristics of the Pixalere Shares in accordance with ASC Topic 323, Investments – Equity Method and
Joint Ventures. Due to the substantive liquidation preferences of the Shares over Pixalere's common stock, the Pixalere Shares
are not "in-substance" common stock, and therefore, the Company will not utilize the equity method of accounting for this
investment. In accordance with ASC Topic 321, Investments - Equity Securities, this investment was reported at cost as of December
31, 2023.

 The
following summarizes the Company's investments for the periods presented:

OF INVESTMENTS

 December 31, 2022

 Carrying Amount

 Economic Interest

 Carrying Amount

 Economic Interest

 Equity Method Investment

 Precision Healing Inc.

 $
 -

 -
 %

 $
 -

 -
 %

 Cost Method Investments

 Direct Dermatology, Inc.

 1,000,000

 1,000,000

 Pixalere Healthcare Inc.

 2,084,278

 2,084,278

 Total Cost Method Investments

 Total Investments

 $

 $

 F- 18

 The
following summarizes the loss from the equity method investment reflected in the Consolidated Statements of Operations:

 SCHEDULE OF LOSS FROM EQUITY METHOD INVESTMENT

 2023

 2022

 2023

 2022

 Investment

 Precision Healing Inc.

 $
 -

 $
 ( 379,633
)

 Total

 $
 -

 $
 ( 379,633
)

 Loss from equity method
 investment

 $
 -

 $
 ( 379,633
)

 NOTE
8 – OPERATING LEASES

 The
Company periodically enters operating lease contracts for office space and equipment. Arrangements are evaluated at inception to determine
whether such arrangements constitute a lease. Right of use assets ("ROU assets") represent the right to use an underlying
asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease
ROU assets and liabilities were recognized on the transition date based on the present value of lease payments over the respective lease
term, with the office space ROU asset adjusted for deferred rent liability.

 The
Company has three material operating leases for office space. In March and September of 2023, the Company amended its primary office
lease to obtain additional space, as well as extend the term. The leases have remaining lease terms of 84, 20 and 37 months as of December
31, 2023. For practical expediency, the Company has elected to not recognize as ROU assets and lease liabilities related to short-term
leases.

 In
accordance with ASC Topic 842, Leases, the Company has recorded ROU assets of $ 1,995,204 and a related lease liability of $ 2,098,630
as of December 31, 2023. The Company recorded lease expense of $ 434,066 for the year ended December 31, 2023 for its leased assets and
$ 297,136 for the year ended December 31, 2022. Cash paid for amounts included in the measurement of operating lease liabilities was $ 380,576
for the year ended December 31, 2023 and $ 296,988 for the year ended December 31, 2022. The present value of the Company's operating
lease liabilities as of December 31, 2023 is shown below.

 Maturity
of Operating Lease Liabilities

 SCHEDULE OF OPERATING LEASE LIABILITY

 Year

 Total

 2024

 $
 505,017

 2025

 532,053

 2026

 379,529

 2027

 297,947

 2028

 295,689

 Thereafter

 604,050

 Total lease payments

 $
 2,614,285

 Less imputed interest

 ( 515,655
)

 Present Value of Lease Liabilities

 $
 2,098,630

 Operating lease liabilities – current

 $
 361,185

 Operating lease liabilities – long-term

 $
 1,737,445

 As
of December 31, 2023, the Company's operating leases have a weighted average remaining lease term of 5.9 years and a weighted average
discount rate of 7.6 %.

 F- 19

 NOTE
9 – DEBT AND CREDIT FACILITIES

 Term
Loan

 In
connection with the entry into the Applied Purchase Agreement, on August 1, 2023, SMAT, as borrower, and the Company, as guarantor, entered
into a loan agreement (the "Loan Agreement") with Cadence Bank (the "Bank") providing for, among other things,
an advancing term loan in the aggregate principal amount of $ 12.0 million (the "Term Loan"), which was evidenced by an advancing
promissory note. Pursuant to the Loan Agreement, the Bank agreed to make, at any time and from time to time prior to February 1, 2024,
one or more advances to SMAT.

 The
proceeds of the advances under the Loan Agreement will be used for working capital and for purposes of financing up to one hundred percent
( 100 %) of the Cash Closing Consideration and Installment Payments for the Applied Asset Purchase and related fees and expenses, including
any subsequent payments that may be due to the Sellers after the Closing. On August 1, 2023, the Bank, at the request of SMAT, made an
advance for $ 9.75 million. The proceeds from the advance were used to fund the Cash Closing Consideration for the Applied Asset Purchase.

 Advances
under the Term Loan will begin amortizing in monthly installments commencing on August 5, 2024. All remaining unpaid balances under the
Term Loan are due and payable in full on August 1, 2028 (the "Maturity Date"). SMAT may prepay amounts due under the Term
Loan. All accrued but unpaid interest on the unpaid principal balance of outstanding advances is due and payable monthly, beginning on
September 5, 2023 and continuing monthly on the fifth day of each month thereafter until the Maturity Date. The unpaid principal balance
of outstanding advances bears interest, subject to certain conditions, at the lesser of the Maximum Rate (as defined in the Loan Agreement)
or the Base Rate, which is for any day, a rate per annum equal to the term secured overnight financing rate (Term SOFR) (as administered
by the Federal Reserve Bank of New York) for a one-month tenor in effect on such day plus three percent ( 3.0 %).

 The
obligations of SMAT under the Loan Agreement and the other loan documents delivered in connection therewith are guaranteed by the Company
and are secured by a first priority security interest in substantially all of the existing and future assets of SMAT.

 The
Loan Agreement contains customary representations and warranties and certain covenants that limit (subject to certain exceptions) the
ability of SMAT and the Company to, among other things, (i) create, assume or guarantee certain liabilities, (ii) create, assume or suffer
liens securing indebtedness, (iii) make or permit loans and advances, (iv) acquire any assets outside the ordinary course of business,
(v) consolidate, merge or sell all or a material part of its assets, (vi) pay dividends or other distributions on, or redeem or repurchase,
interest in an obligor, including the Company, as guarantor (vii) cease, suspend or materially curtail business operations or (viii)
engage in certain affiliate transactions. In addition, the Loan Agreement contains financial covenants that require SMAT to maintain
(i) a minimum Debt Services Coverage Ratio of 1.2 to 1.0 as of the last day of each applicable fiscal quarter and (ii) a maximum Cash
Flow Leverage Ratio of not more than (a) 4.5 to 1.0 as of the last day of the fiscal quarter ending on September 30, 2023, (b) 4.0 to
1.0 as of the last day of each fiscal quarter ending on December 31, 2023 and March 31, 2024, (c) 3.5 to 1.0 as of the last day of each
fiscal quarter ending June 30, 2024 and September 30, 2024 and (d) 3.0 to 1.0 as of the last day of each fiscal quarter thereafter. Pursuant
to the Loan Agreement, in the event that SMAT fails to comply with the financial covenants described above, the Company is required to
contribute cash to SMAT in an amount equal to the amount required to satisfy the financial covenants. During the year ended December
31, 2023, the Company contributed an immaterial amount of cash to SMAT in order to permit SMAT to be in compliance with the financial
covenants under the Loan Agreement.

 The
Loan Agreement contains customary events of default. If such an event of default occurs, the Bank would be entitled to take various actions,
including the acceleration of amounts due under the Loan Agreement and actions permitted to be taken by a secured creditor.

 The
table below presents the components of outstanding debt for the periods presented:

 As
of December 31, 2023, the interest rate on the advance under the Term Loan was 8.3 %.

OF LONG-TERM DEBT

 2023

 2022

 Term Loan

 $
 9,750,000

 $
 -

 Total debt

 9,750,000

 -

 Less: debt issuance costs, net of accumulated amortization of $ 5,138 and zero

 ( 56,520
)

 -

 Long-term debt

 9,693,480

 -

 Less: Current portion of long-term debt

 580,357

 -

 Long-term debt

 $
 9,113,123

 $
 -

 F- 20

 The
table below presents the aggregate maturities of the Company's outstanding debt as of December 31, 2023:

OF MATURITIES OUTSTANDING DEBT

 Year

 Total

 2024

 $
 580,357

 2025

 1,625,000

 2026

 1,950,000

 2027

 1,950,000

 2028

 3,644,643

 Thereafter

 -

 Total debt

 $
 9,750,000

 In
connection with the Term Loan, the Company incurred $ 61,658
 in debt issuance costs during year ended December
31, 2023. Debt issuance costs are amortized to "Interest expense and other" on the Consolidated Statement of Operations over
the life of the debt to which they pertain. The total unamortized debt issuance costs were $ 56,520
 and zero
 as of December 31, 2023 and December 31, 2022, respectively. Debt issuance costs are included in "Long-term debt, net of
current portion" on the Consolidated Balance Sheets. Amortization expense related to debt issuance costs was $ 5,138
 and zero for the year ended
December 31, 2023 and 2022, respectively.

 Revolving
Line of Credit

 In
January 2021, the Company entered into a loan agreement (the "Loan Agreement") with Cadence Bank, N.A. ("Cadence")
providing for a $ 2.5 million revolving line of credit. Pursuant to the terms of the Loan Agreement, the revolving line of credit was
set to mature on January 13, 2023 and was secured by substantially all of the Company's assets. Effective March 25, 2022, the Company
terminated the Loan Agreement and released Cadence from any obligation to make advances under the Loan Agreement. No amounts of principal,
interest or other fees and expenses were owed by the Company as of the termination date.

 NOTE
10 - COMMITMENTS AND CONTINGENCIES

 License
Agreements and Royalties

Surgical

 In
August 2018, the Company entered an exclusive, world-wide sublicense agreement with CGI Cellerate RX, LLC ("CGI Cellerate RX")
to distribute CellerateRX Surgical and HYCOL products into the surgical and wound care markets. Pursuant to the sublicense agreement,
the Company pays royalties of 3-5% of annual collected net sales of CellerateRX Surgical and HYCOL. As amended in January 2021, the term
of the sublicense extends through May 2050, with automatic successive year-to-year renewal terms thereafter so long as the Company's
Net Sales (as defined in the sublicense agreement) each year are equal to or in excess of $1,000,000. If the Company's Net Sales
fall below $1,000,000 for any year after the initial expiration date, CGI Cellerate RX will have the right to terminate the sublicense
agreement upon written notice.

 Under
this agreement, royalty expense, which is recorded in "Cost of goods sold" in the accompanying Consolidated Statements of
Operations, totaled $ 991,099 and $ 1,771,219, respectively for the years ended December 31, 2023 and 2022. Sales of CellerateRX Surgical
comprised the substantial majority of the Company's sales during 2023 and 2022.

 As
discussed further in Note 5, on August 1, 2023, the Company purchased certain assets from Applied, including the rights to manufacture
and sell CellerateRX Surgical and HYCOL products. In connection with the Applied Asset Purchase, Applied assigned its license agreement
with CGI Cellerate RX to SMAT. Since the Closing, Sanara indirectly makes intercompany royalty payments to SMAT at the same rate as set
forth in the Sublicense Agreement. Effective August 1, 2023, these intercompany royalty payments and the offsetting cost of goods sold
are eliminated on a consolidated basis.

 F- 21

Antimicrobial Wound Gel and BIAK S Antimicrobial Skin and Wound Cleanser

 In
July 2019, the Company executed a license agreement with Rochal Industries, LLC ("Rochal"), a related party, pursuant to
which the Company acquired an exclusive world-wide license to market, sell and further develop antimicrobial products for the prevention
and treatment of microbes on the human body utilizing certain Rochal patents and pending patent applications (the "BIAK S
License Agreement"). Currently, the products covered by the BIAK S License Agreement are BIAK S Antimicrobial Wound
Gel and BIAK S Antimicrobial Skin and Wound Cleanser. Both products are 510(k) cleared.

commitments under the terms of the BIAK S License Agreement include:

 The
 Company pays Rochal a royalty of 2 - 4 % of net sales. The minimum annual royalty due to Rochal
 was $ 120,000 for 2022 and will increase by $ 10,000 each subsequent calendar year up to a
 maximum amount of $ 150,000.

 The
 Company pays additional royalty annually based on specific net profit targets from sales
 of the licensed products, subject to a maximum of $ 1,000,000 during any calendar year.

previously terminated by the parties, the BIAK S License Agreement expires with the related patents in December 2031.

 Under
this agreement, royalty expense, which is recorded in "Cost of goods sold" in the accompanying Consolidated Statements of
Operations, was $ 130,000 and $ 120,000 for the years ended December 31, 2023 and 2022, respectively. The Company's Executive Chairman
is a director of Rochal, and indirectly a significant shareholder of Rochal, and through the potential exercise of warrants, a majority
shareholder of Rochal. Another one of the Company's directors is also a director and significant shareholder of Rochal.

 CuraShield
Antimicrobial Barrier Film and No Sting Skin Protectant

 In
October 2019, the Company executed a license agreement with Rochal pursuant to which the Company acquired an exclusive world-wide license
to market, sell and further develop certain antimicrobial barrier film and skin protectant products for use in the human health care
market utilizing certain Rochal patents and pending patent applications (the "ABF License Agreement"). Currently, the products
covered by the ABF License Agreement are CuraShield Antimicrobial Barrier Film and a no sting skin protectant product.

commitments under the terms of the ABF License Agreement include:

 The
 Company will pay Rochal a royalty of 2 - 4 % of net sales. The minimum annual royalty due to
 Rochal will be $ 50,000 beginning with the first full calendar year following the year in
 which first commercial sales of the products occur. The annual minimum royalty will increase
 by 10 % each subsequent calendar year up to a maximum amount of $ 75,000.

 The
 Company will pay additional royalties annually based on specific net profit targets from
 sales of the licensed products, subject to a maximum of $ 500,000 during any calendar year.

previously terminated or extended by the parties, the ABF License Agreement will terminate upon expiration of the last U.S. patent in
October 2033. No commercial sales or royalties have been recognized under this agreement as of December 31, 2023.

 Debrider
License Agreement

 In
May 2020, the Company executed a product license agreement with Rochal, pursuant to which the Company acquired an exclusive world-wide
license to market, sell and further develop a debrider for human medical use to enhance skin condition or treat or relieve skin disorders,
excluding uses primarily for beauty, cosmetic, or toiletry purposes (the "Debrider License Agreement").

commitments under the terms of the Debrider License Agreement include:

 Upon
 FDA clearance of the licensed products, the Company will pay Rochal $ 500,000 in cash and
 an additional $ 1,000,000, which at the Company's option may be paid in any combination
 of cash and its common stock.

 The
 Company will pay Rochal a royalty of 2 - 4 % of net sales. The minimum annual royalty due to
 Rochal will be $ 100,000 beginning with the first full calendar year following the year in
 which first commercial sales of the licensed products occur and increase by 10 % each subsequent
 calendar year up to a maximum amount of $ 150,000.

 The
 Company will pay additional royalty annually based on specific net profit targets from sales
 of the licensed products, subject to a maximum of $ 1,000,000 during any calendar year.

previously terminated or extended by the parties, the Debrider License Agreement will expire in October 2034. No commercial sales or
royalties have been recognized under this agreement as of December 31, 2023.

 F- 22

 Rochal
Asset Acquisition

 The
Company entered into an asset purchase agreement with Rochal effective July 1, 2021, pursuant to which the Company purchased certain
assets of Rochal. Pursuant to the asset purchase agreement, for the three-year period after the effective date, Rochal is entitled to
receive consideration for any new product relating to the business that is directly and primarily based on an invention conceived and
reduced to practice by a member or members of Rochal's science team. For the three-year period after the effective date, Rochal
is also entitled to receive an amount in cash equal to twenty-five percent of the proceeds received for any Grant (as defined in the
asset purchase agreement) by either the Company or Rochal. In addition, the Company agreed to use commercially reasonable efforts to
perform Minimum Development Efforts (as defined in the asset purchase agreement) with respect to certain products under development,
which if obtained, will entitle the Company to intellectual property rights from Rochal in respect of such products.

 Precision
Healing Merger Agreement

 In
April 2022, the Company closed a merger transaction with Precision Healing pursuant to which Precision Healing became a wholly owned
subsidiary of the Company. Pursuant to the terms of the merger agreement, holders of Precision Healing common stock and preferred stock,
other than the Company, were entitled to receive closing consideration, consisting of $ 125,966 in cash consideration, which was paid
to stockholders who were not accredited investors, 165,738 shares of the Company's common stock, which was paid only to accredited
investors, and the payment in cash of approximately $ 0.6 million of transaction expenses of Precision Healing. The Company recorded the
issuance of the 165,738 shares to accredited investors and cash payments to nonaccredited investors based on the closing price per share
of the Company's common stock on April 4, 2022, which was $ 30.75.

 Upon
the closing of the merger, the Precision Healing outstanding options previously granted under the Precision Healing Plan converted, pursuant
to their terms, into options to acquire an aggregate of 144,191 shares of Company common stock with a weighted exercise price of $ 10.71
per share. These options expire between August 2030 and April 2031. In addition, outstanding and unexercised Precision Healing warrants
converted into rights to receive warrants to purchase (i) 4,424 shares of Company common stock with an initial exercise price of $ 7.32
per share and an expiration date of April 22, 2031, and (ii) 12,301 shares of the Company's common stock with an initial exercise
price of $ 12.05 per share and an expiration date of August 10, 2030. Concurrent with the assumption of the Precision Healing Plan, the
Company terminated the ability to offer future awards under the Precision Healing Plan.

to the merger agreement, upon the achievement of certain performance thresholds, the securityholders of Precision Healing, including
the holders of options and warrants to purchase Precision Healing common stock and certain persons promised options to purchase Precision
Healing common stock, are also entitled to receive payments of up to $ 10.0 million, which was accounted for as contingent consideration
pursuant to ASC 805. The earnout consideration is payable in cash or, at the Company's election, is payable to accredited investors
in shares of Company common stock at a price per share equal to the greater of (i) $ 27.13 or (ii) the average closing price of Company
common stock for the 20 trading days prior to the date such earnout consideration is due and payable. Pursuant to the merger agreement,
a minimum percentage of the earnout consideration may be required to be issued to accredited investors in shares of Company common stock
for tax purposes. The amount and composition of the portion of earnout consideration payable is subject to adjustment and offsets as
set forth in the merger agreement. See Note 3 for more information regarding the merger with Precision Healing.

 Scendia
Purchase Agreement

 In
July 2022, the Company closed the Scendia acquisition pursuant to which Scendia became a wholly owned subsidiary of the Company. Pursuant
to the purchase agreement, the aggregate consideration for the acquisition at closing was approximately $ 7.6 million, subject to customary
post-closing adjustments. The consideration consisted of (i) approximately $ 1.6 million of cash, subject to certain adjustments, and
(ii) 291,686 shares of common stock of the Company. Pursuant to the purchase agreement, at closing, the Company withheld 94,798 Indemnity
Holdback Shares, which such Indemnity Holdback Shares were withheld to the extent provided in the purchase agreement to satisfy Phillips'
indemnification obligations and subsequently issued and released to Phillips in July 2023.

 In
addition to the cash consideration and the stock consideration, the purchase agreement provides that Phillips is entitled to receive
two potential earnout payments, payable on an annual basis, not to exceed $ 10.0 million in the aggregate, which was accounted for as
contingent consideration pursuant to ASC 805. The earnout consideration is payable to Phillips in cash or, at the Company's election,
in up to 486,145 shares of the Company's common stock upon the achievement of certain performance thresholds relating to net revenue
attributable to sales of Scendia products during the two-year period following the closing. The Company made the first earnout payment
of approximately $ 693,000 in cash in August 2023. The Company expects the final earnout payment to be made in the third quarter of 2024.
See Note 4 for more information regarding the acquisition of Scendia.

 F- 23

 Applied
Asset Purchase

 On
August 1, 2023, the Company closed the Applied Asset Purchase. The Applied Purchased Assets were purchased for an initial aggregate purchase
price of $ 15.25 million, consisting of (i) the Cash Closing Consideration, (ii) the Stock Closing Consideration and (iii) the Installment
Payments.

 In
addition to the Cash Closing Consideration, Stock Closing Consideration and Installment Payments, the Applied Purchase Agreement provides
that the Sellers are entitled to receive the Applied Earnout, which is payable to the 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 Sellers have not earned the entirety of the Applied Earnout,
SMAT shall pay the Sellers 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.

 In
connection with the Applied Asset Purchase and pursuant to the Applied Purchase Agreement, effective August 1, 2023, the Company entered
into the Petito Services Agreement with the Owner, pursuant to which the Owner, as an independent contractor, agreed to provide the Petito
Services. As consideration for the Petito Services, the Owner is entitled to receive: (i) a base salary of $12,000 per month during the
term of the Petito Services Agreement, (ii) a royalty payment equal to three percent (3%) of the actual collections from net sales of
certain products the Owner develops or codevelops that reach commercialization, (iii) a royalty payment equal to five percent (5%) for
the first $50.0 million in aggregate collections from net sales of certain future products and a royalty payment of two and one-half
percent (2.5%) on aggregate collections from net sales of certain future products on any amounts exceeding $50.0 million but up to $100.0
million, (iv) $500,000 in cash in the event that 510(k) clearance is issued for any future product accepted by the Company and (v) $1.0
million in cash in the event that a U.S. patent is issued for a certain product; provided that with respect to the incentive payments
described in (iv) and (v) of the foregoing, the Owner shall not earn more than $2.5 million.

 The
Petito Services Agreement has an initial term of three years and is subject to automatic successive one-month renewals unless earlier
terminated in accordance with its terms. The Petito Services Agreement may be terminated upon the Owner's death or disability or
by the Company or the Owner "For Cause" (as defined in the Petito Services Agreement); provided, however, that the base salary
described in (i) of the foregoing paragraph shall survive termination through the three-year initial term and the royalty payments and
incentive payments described in (ii)-(v) of the foregoing paragraph shall survive termination of the Petito Services Agreement.

 Other
Commitments

 On
December 20, 2023, the Company 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, the Company formed a new
subsidiary, Sanara Collagen Peptides, LLC ("SCP") and has 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 related to this arrangement as of December 31, 2023.

 NOTE
11 – SHAREHOLDERS' EQUITY

 Common
Stock

 At
the Company's Annual Meeting of Shareholders held in July 2020, the Company approved the Restated 2014 Omnibus Long Term Incentive
Plan (the "LTIP Plan") in which the Company's directors, officers, employees and consultants are eligible to participate.
A total of 580,497 shares had been issued under the LTIP Plan and 1,419,503 were available for issuance as of December 31, 2023.

 In
April 2022, the Company closed a merger transaction with Precision Healing pursuant to which Precision Healing became a wholly owned
subsidiary of the Company. Pursuant to the terms of the merger agreement, holders of Precision Healing common stock and preferred stock,
other than the Company, were entitled to receive closing consideration, consisting of $ 125,966 in cash consideration, which was paid
to stockholders who were not accredited investors, 165,738 shares of the Company's common stock, which was paid only to accredited
investors, and the payment in cash of approximately $ 0.6 million of transaction expenses of Precision Healing. The Company recorded the
issuance of the 165,738 shares to accredited investors and cash payments to nonaccredited investors based on the closing price per share
of the Company's common stock on April 4, 2022, which was $ 30.75.

 Upon
the closing of the merger, the Precision Healing outstanding options previously granted under the Precision Healing Plan converted, pursuant
to their terms, into options to acquire an aggregate of 144,191 shares of Company common stock with a weighted exercise price of $ 10.71
per share. These options expire between August 2030 and April 2031. In addition, outstanding and unexercised Precision Healing warrants
converted into rights to receive warrants to purchase (i) 4,424 shares of the Company's common stock with an initial exercise price
of $ 7.32 per share and an expiration date of April 22, 2031, and (ii) 12,301 shares of the Company's common stock with an initial
exercise price of $ 12.05 per share and an expiration date of August 10, 2030. Concurrent with the assumption of the Precision Healing
Plan, the Company terminated the ability to offer future awards under the Precision Healing Plan.

 F- 24

to the merger agreement, upon the achievement of certain performance thresholds, the securityholders of Precision Healing, including
the holders of options and warrants to purchase Precision Healing common stock and certain persons promised options to purchase Precision
Healing common stock, are also entitled to receive payments of up to $ 10.0 million, which was accounted for as contingent consideration
pursuant to ASC 805. The earnout consideration is payable in cash or, at the Company's election, is payable to accredited investors
in shares of Company common stock at a price per share equal to the greater of (i) $ 27.13 or (ii) the average closing price of Company
common stock for the 20 trading days prior to the date such earnout consideration is due and payable. Pursuant to the merger agreement,
a minimum percentage of the earnout consideration may be required to be issued to accredited investors in shares of Company common stock
for tax purposes. The amount and composition of the portion of earnout consideration payable is subject to adjustment and offsets as
set forth in the merger agreement. See Note 3 for more information regarding the merger with Precision Healing.

 In
July 2022, the Company closed the Scendia acquisition pursuant to which Scendia became a wholly owned subsidiary of the Company. Pursuant
to the purchase agreement, the aggregate consideration at closing for the acquisition was approximately $ 7.6 million, subject to customary
post-closing adjustments. The consideration consisted of (i) approximately $ 1.6 million of cash, subject to certain adjustments, and
(ii) 291,686 shares of common stock of the Company. Pursuant to the purchase agreement, at closing, the Company withheld 94,798 Indemnity
Holdback Shares, which such Indemnity Holdback Shares were withheld to the extent provided in the purchase agreement to satisfy Phillips'
indemnification obligations and subsequently issued and released to Phillips in July 2023.

 In
addition to the cash consideration and the stock consideration, the purchase agreement provides that Phillips is entitled to receive
two potential earnout payments, payable on an annual basis, not to exceed $ 10.0 million in the aggregate, which was accounted for as
contingent consideration pursuant to ASC 805. The earnout consideration is payable to Phillips in cash or, at the Company's election,
in up to 486,145 shares of the Company's common stock upon the achievement of certain performance thresholds relating to net revenue
attributable to sales of Scendia products during the two-year period following the closing. The Company made the first earnout payment
of approximately $ 693,000 in cash in August 2023. See Note 4 for more information regarding the acquisition of Scendia.

 In
February 2023, the Company entered into a Controlled Equity Offering SM Sales Agreement (the "Sales Agreement")
with Cantor Fitzgerald & Co., as sales agent ("Cantor"), pursuant to which the Company could offer and sell from time
to time, to or through Cantor, shares of the Company's common stock having an aggregate offering price of up to $ 75,000,000.

 Sales
of the shares were made in sales deemed to be an "at the market offering" as defined in Rule 415(a)(4) promulgated under
the Securities Act of 1933, as amended. Upon delivery of a placement notice and subject to the terms and conditions of the Sales Agreement,
Cantor agreed to use commercially reasonable efforts consistent with its normal trading and sales practices, applicable state and federal
law, rules and regulations and the rules of The Nasdaq Capital Market to sell the shares from time to time based upon the Company's
instructions, including any price, time period or size limits specified by the Company. The Company had no obligation to sell any of
the shares under the Sales Agreement and could suspend or terminate the offering of its common stock pursuant to the Sales Agreement
upon notice to Cantor and subject to other conditions. Cantor's obligations to sell the shares under the Sales Agreement were subject
to satisfaction of certain conditions, including customary closing conditions. Pursuant to the Sales Agreement, the Company paid Cantor
a commission of 3.0 % of the aggregate gross proceeds from each sale of the shares.

 In
2023, the Company sold an aggregate of 26,143 shares of common stock for gross proceeds of approximately $ 1.1 million and net proceeds
of approximately $ 0.9 million pursuant to the Sales Agreement. The Company paused the offering at the end of the first quarter of 2023
and did not reactivate it during the remainder of 2023. The Form S-3 registration statement for this offering expired at the end of 2023.

 On
August 1, 2023, the Company closed the Applied Asset Purchase. Included in the purchase price was 73,809 shares of the Company's
common stock. See Note 5 for more information regarding the acquisition of Applied.

 Restricted
Stock Awards

 The
Company issues restricted stock awards under the LTIP Plan which are subject to certain vesting provisions and other terms and conditions
set forth in each recipient's respective restricted stock agreement. The Company granted and issued 100,829 shares, net of forfeitures,
of restricted common stock to employees, directors, and certain advisors of the Company under the LTIP Plan during the year ended December
31, 2023. The fair value of these awards was $ 4,045,377 based on the closing price of the Company's common stock on the respective
grant dates, which will be recognized as compensation expense on a straight-line basis over the vesting period of the awards.

 Share-based
compensation expense of $ 3,442,722 and $ 2,702,633 was recognized in "Selling, general and administrative expenses" in the
accompanying Consolidated Statements of Operations during the years ended December 31, 2023 and 2022, respectively. Equity awards totaling
$ 1,038,183, which were accrued as a liability as of December 31, 2021, were reclassed to equity in 2022 upon settlement of these awards.

 F- 25

 At
December 31, 2023, there was $ 2,877,664 of total unrecognized share-based compensation expense related to unvested share-based equity
awards. Unrecognized share-based compensation expense is expected to be recognized over a weighted-average period of 0.1 years.

 Below
is a summary of restricted stock activity for the year ended December 31, 2023:

 SUMMARY
OF RESTRICTED STOCK ACTIVITY

 Weighted Average Grant Date Fair Value

 Nonvested at beginning of period

 181,102

 $
 22.89

 Granted

 118,912

 39.14

 Vested

 ( 137,720
)

 23.75

 Forfeited

 ( 18,083
)

 33.66

 Nonvested at December 31, 2023

 144,211

 $
 34.07

 Stock
Options

 A
summary of the status of outstanding stock options at December 31, 2023 and changes during the year then ended is presented below:

 SCHEDULE OF STOCK OPTION ACTIVITY

 Weighted Average

 Weighted Average

 Options

 Exercise

 Price

 Remaining

Contract Life

 Outstanding at beginning of period

 146,191

 $
 10.65

 Granted or assumed

 -

 -

 Exercised

 ( 52,299
)

 11.41

 Forfeited

 -

 -

 Expired

 -

 -

 Outstanding at December 31, 2023

 93,892

 $
 10.22

 6.8

 Exercisable at December 31, 2023

 93,892

 $
 10.22

 6.8

 F- 26

 Warrants

 A
summary of the status of outstanding warrants to purchase common stock at December 31, 2023 and changes during the year then ended is
presented below:

 SCHEDULE OF WARRANTS TO PURCHASE COMMON STOCK

 Weighted Average

 Weighted Average

 Exercise

 Remaining

 Warrants

 Price

 Contract Life

 Outstanding at beginning of period

 $
 10.80

 Granted or assumed

 -

 -

 Exercised

 -

 -

 Forfeited

 -

 -

 Expired

 -

 -

 Outstanding at December 31, 2023

 $
 10.80

 6.8

 Exercisable at December 31, 2023

 $
 10.80

 6.8

 NOTE
12 – CUSTOMERS AND SUPPLIERS

 The
Company had no customers in 2023 that accounted for at least 10 % of the Company's annual sales or whose accounts receivable balance
exceeded 10 % of the year-end balance. The Company had no customers in 2022 that accounted for at least 10 % of Company's annual
sales and whose accounts receivable exceeded 10 % of the year-end balance.

 The
Company's principal revenue producing products are purchased from one manufacturer. If this supplier became unable to provide finished
goods inventory in a timely manner, the Company's business, operating results, and financial condition could be materially adversely
affected.

 NOTE
13 – INCOME TAXES

 The
Company accounts for income taxes in accordance with ASC Topic No. 740, Income Taxes. This standard requires the Company to provide a
net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book
and tax accounting and any available operating loss or tax credit carry forwards.

 As
discussed in Notes 3 and 4, the Company recognized net deferred tax liabilities associated with the Precision Healing merger and the
Scendia acquisition. As of the dates of these acquisitions, prior to consideration of these acquired deferred tax liabilities, the Company
had net deferred tax assets in excess of the deferred tax liabilities being recognized, however, a 100 % valuation allowance had previously
been provided against the Company's net deferred tax assets. As a result of the recording of the net deferred tax liabilities related
to the Precision Healing merger and Scendia acquisition, the Company reviewed the valuation allowance and determined that it should be
reduced by the amount of the deferred tax liabilities that were recognized. This resulted in a year-to-date income tax benefit of $ 5.8
million for the year ending December 31, 2022.

 After
applying the provisions of Section 382 of the Internal Revenue Code, the unexpired net operating loss ("NOL") carryforward
at December 31, 2023 was approximately $ 55.7 million, of which, approximately $ 27.0 million, generated in 2017 and prior, will expire
between 2024 and 2037. Under the Tax Cuts and Jobs Act, the NOL generated from 2018 through 2023, of approximately $ 28.7 million, will
have an indefinite carryforward period but can generally only be used to offset 80% of taxable income in any particular year. The Company
may be subject to certain limitations in its annual utilization of NOL carry forwards to off-set future taxable income pursuant to Section
382 of the Internal Revenue Code, which could result in NOLs expiring unused.

 The
components of the deferred income tax assets and liabilities consisted of the following:

OF DEFERRED TAX ASSETS

 2023

 2022

 As of December 31,

 2023

 2022

 Deferred tax assets

 Net operating loss carry forwards

 $
 12,467,570

 $
 6,818,547

 Research and development costs

 2,119,193

 707,076

 Stock compensation expense

 711,598

 232,250

 Accrued expenses

 528,148

 -

 Lease liability

 512,668

 -

 Contingent liability

 221,028

 -

 Acquisition liability

 176,629

 -

 Bad debt and other reserves

 129,924

 92,286

 Inventory reserves

 109,176

 43,678

 Other temporary differences

 203,340

 26,102

 Total deferred tax assets

 17,179,274

 7,919,939

 Deferred tax liabilities

 Depreciation and amortization

 ( 6,180,688
)

 ( 5,919,626
)

 Right of Use assets

 ( 487,402
)

 -

 Accrued expenses

 ( 424,423
)

 ( 26,903
)

 Contingent liability

 ( 130,802
)

 -

 Other temporary differences

 ( 166,712
)

 -

 Valuation allowance

 ( 9,789,247
)

 ( 1,973,410
)

 Net deferred tax asset

 $
 -

 $
 -

 A
 100 % valuation allowance has been provided for all deferred tax assets, as the ability of the Company to generate sufficient taxable
income in the future is uncertain.

 F- 27

 Reconciliations
of the expected federal income tax benefit based on the statutory income tax rate of 21% to the actual benefit for the years ended December
31, 2023 and 2022 are listed below.

OF INCOME TAX EXPENSE (BENEFIT)

 2023

 2022

 2023

 2022

 Expected federal income tax (expense) benefit

 $
 ( 903,220
)

 $
 2,851,758

 State and local taxes, net of federal (expense) benefit

 ( 226,714
)

 -

 Fair value adjustments

 ( 819,270
)

 -

 Share-based compensation

 ( 557,168
)

 ( 249,516
)

 Other permanent differences

 118,765

 -

 NOL carryover adjusted for expiration

 -

 46,936

 Equity method investment loss

 -

 ( 79,723
)

 Meals and entertainment

 -

 ( 4,843
)

 Research and development costs

 -

 ( 707,076
)

 Other temporary differences

 -

 329,829

 NOL carryover adjustments

 ( 5,148,128
)

 -

 Intangibles

 ( 720,407
)

 -

 Other true ups

 ( 230,474
)

 -

 Changes in tax rates

 673,449

 -

 Change in valuation allowance

 7,813,167

 3,657,431

 Income tax (expense) benefit

 $
 -

 $
 5,844,796

 All
tax years starting with 2021 are open for examination.

 NOTE
14 – RELATED PARTIES

Sublicense Agreement

 The
Company has an exclusive, world-wide sublicense to distribute CellerateRX Surgical and HYCOL products into the surgical and wound care
markets from an affiliate of The Catalyst Group, Inc. ("Catalyst"), CGI Cellerate RX, which licenses the rights to CellerateRX
Surgical and HYCOL from Applied. Sales of CellerateRX have comprised the substantial majority of the Company's sales during 2023
and 2022. In January 2021, the Company amended the term of the sublicense agreement to extend the term to May 17, 2050, with automatic
successive one-year renewals so long as annual net sales of the licensed products exceed $ 1,000,000. The Company pays royalties based
on the annual Net Sales of licensed products (as defined in the sublicense agreement) consisting of 3% of all collected Net Sales each
year up to $12,000,000, 4% of all collected Net Sales each year that exceed $12,000,000 up to $20,000,000, and 5% of all collected Net
Sales each year that exceed $20,000,000.

 As
discussed further in Note 5, on August 1, 2023, the Company purchased certain assets from Applied, including the underlying intellectual
property of, as well as the rights to manufacture and sell, CellerateRX Surgical and HYCOL products. In connection with the Applied Asset
Purchase, Applied assigned its license agreement with CGI Cellerate RX to SMAT. Since the Closing, Sanara indirectly makes intercompany
royalty payments to SMAT at the same rate as set forth in the Sublicense Agreement. Ronald T. Nixon, the Company's Executive Chairman,
is the founder and managing partner of Catalyst.

 F- 28

 Product
License Agreements

 In
July 2019, the Company executed a license agreement with Rochal, a related party, whereby the Company acquired an exclusive world-wide
license to market, sell and further develop antimicrobial products for the prevention and treatment of microbes on the human body utilizing
certain Rochal patents and pending patent applications. Currently, the products covered by the BIAK S License Agreement are BIAK S
Antimicrobial Wound Gel and BIAK S Antimicrobial Skin and Wound Cleanser. Both products are 510(k) cleared. Mr. Nixon is a director
of Rochal, and indirectly a significant shareholder of Rochal, and through the potential exercise of warrants, a majority shareholder
of Rochal. Another one of the Company's directors is also a director and significant shareholder of Rochal.

 In
October 2019, the Company executed the ABF License Agreement with Rochal whereby the Company acquired an exclusive world-wide license
to market, sell and further develop certain antimicrobial barrier film and skin protectant products for use in the human health care
market utilizing certain Rochal patents and pending patent applications. Currently, the products covered by the ABF License Agreement
are CuraShield Antimicrobial Barrier Film and a no sting skin protectant product.

 In
May 2020, the Company executed a product license agreement with Rochal, whereby the Company acquired an exclusive world-wide license
to market, sell and further develop a debrider for human medical use to enhance skin condition or treat or relieve skin disorders, excluding
uses primarily for beauty, cosmetic, or toiletry purposes.

 See
Note 10 for more information on these product license agreements.

 Consulting
Agreement

 Concurrent
with the Rochal asset purchase, in July 2021, the Company entered into a consulting agreement with Ann Beal Salamone pursuant to which
Ms. Salamone agreed to provide the Company 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 for the consulting services to be provided
to the Company, Ms. Salamone is entitled to receive an annual consulting fee of $ 177,697, with payments to be paid once per month. The
consulting agreement has an initial term of three years, unless earlier terminated by the Company, and is subject to renewal. 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, the Company entered into a Transaction Advisory Services Agreement (the "Catalyst Services Agreement") effective
March 1, 2023 with 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 the Company in connection with any merger, acquisition,
recapitalization, divestiture, financing, refinancing, or other similar transaction in which the Company may be, or may consider becoming,
involved, and any such additional services as mutually agreed upon in writing by and between Catalyst and the Company (the "Catalyst
Services").

to the Catalyst Services Agreement, the Company 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 the Company's Board of Directors. The Company incurred $ 174,486 of costs pursuant to the Catalyst Services Agreement in the
year ended December 31, 2023.

 F- 29

 ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 None.

 ITEM
9A. CONTROLS AND PROCEDURES

 Evaluation
of Disclosure Controls and Procedures

 We
maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports
that we file or submit to the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified by the SEC's
rules and forms, and that information is accumulated and communicated to our management, including our principal executive and principal
financial officers (whom we refer to in this periodic report as our Certifying Officers), as appropriate to allow timely decisions regarding
required disclosure. Our management evaluated, with the participation of our Certifying Officers, the effectiveness of our disclosure
controls and procedures as of December 31, 2023, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying
Officers concluded that, as of December 31, 2023, our disclosure controls and procedures were effective.

 Management's
Report on Internal Control over Financial Reporting

 Management
is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of the consolidated financial statements for external reporting purposes in
accordance with generally accepted accounting principles.

 Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls
may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
over time.

 Management
believes that our policies and procedures provide reasonable assurance that our operations are conducted with a high standard of business
ethics. In management's opinion, our financial statements present fairly, in all material respects, our financial position, results
of operations, and cash flows. Management recognizes that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives. Management applies its judgment in evaluating the cost-benefit relationship
of possible controls and procedures.

 The
Company's management, specifically its Certifying Officers, has assessed the effectiveness of the Company's internal control
over financial reporting as of December 31, 2023 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control – Integrated Framework (2013) and SEC guidance on conducting such assessments. Based on this
assessment, management has concluded that the Company's internal control over financial reporting was effective as of December
31, 2023.

 Changes
in Internal Control over Financial Reporting

 There
were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2023 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting. We will continue to evaluate
the effectiveness of internal controls and procedures on an on-going basis.

 No
Attestation Report of Registered Public Accounting Firm

 This
Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant
to the rules of the SEC that permit us to provide only management's report in this Annual Report on Form 10-K.

 ITEM
9B. OTHER INFORMATION

 None.

 ITEM
9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 Not
applicable.

 PART
III

 ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 The
information required in response to this Item 10 is incorporated herein by reference to our Definitive Proxy Statement on Schedule 14A
to be filed with the SEC no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

 ITEM
11. EXECUTIVE COMPENSATION

 The
information required in response to this Item 11 is incorporated herein by reference to our Definitive Proxy Statement on Schedule 14A
to be filed with the SEC no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

 ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 The
information required in response to this Item 12 is incorporated herein by reference to our Definitive Proxy Statement on Schedule 14A
to be filed with the SEC no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

 ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 The
information required in response to this Item 13 is incorporated herein by reference to our Definitive Proxy Statement on Schedule 14A
to be filed with the SEC no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

 ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 The
information required by this Item 14 is incorporated herein by reference to our Definitive Proxy Statement on Schedule 14A to be filed
with the SEC no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

 PART
IV

 ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 (a)
 Financial
 Statements

 Refer
to Index to Financial Statements appearing on page F-1.

 (b)
 Financial
 Statement Schedules

 No
financial statement schedules are provided because the information called for is not required or is shown in the financial statements
or the notes thereto.

 (c)
 Exhibits

 The
exhibits listed below are filed or incorporated by reference as a part of this report.

 Exhibit
 No.

 Description

 2.1#

 Asset Purchase Agreement, dated July 14, 2021, by and between Sanara MedTech Inc., as Purchaser, and Rochal Industries, LLC, as Seller (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 19, 2021).

 2.2#

 Agreement and Plan of Merger, dated April 1, 2022, by and among Sanara MedTech Inc., United Wound and Skin Solutions, LLC, Precision Healing Inc., PH Merger Sub I, Inc., PH Merger Sub II, LLC and Furneaux Capital Holdco, LLC (d/b/a BlueIO) (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on April 4, 2022).

 2.3#

 Membership Interest Purchase Agreement, dated July 1, 2022, by and among Sanara MedTech Inc., Scendia Biologics, LLC and Ryan Phillips (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on July 5, 2022).

 2.4#

 Asset Purchase Agreement, dated August 1, 2023, by and among Sanara MedTech Inc., Sanara MedTech Applied Technologies, LLC, The Hymed Group Corporation, Applied Nutritionals, LLC and Dr. George D. Petito (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on August 2, 2023).

 3.1

 Articles of Incorporation of Sanara MedTech Inc. (as amended through December 30, 2020) (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K filed on March 30, 2021).

 3.2

 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on March 22, 2024).

 4.1

 Description of Securities (incorporated by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K filed March 30, 2021).

 10.1.1

 Sanara MedTech Inc. Restated 2014 Omnibus Long Term Incentive Plan dated February 10, 2020 effective upon shareholder approval on July 9, 2020 (incorporated by reference to Exhibit 10.1.1 to the Company's Annual Report on Form 10-K filed on March 20, 2023).

 10.1.2

 Form of Restricted Stock Award Agreement for Employees under the Sanara MedTech Inc. Restated 2014 Omnibus Long Term Incentive Plan (incorporated by reference to Exhibit 10.1.2 to the Company's Annual Report on Form 10-K filed on March 30, 2021).

 10.1.3

 Form of Restricted Stock Award Agreement for Outside Directors under the Sanara MedTech Inc. Restated 2014 Omnibus Long Term Incentive Plan (2022) (incorporated by reference to Exhibit 10.1.3 to the Company's Annual Report on Form 10-K filed on March 20, 2023).

 10.1.4

 Form of Restricted Stock Award Agreement for Employees under the Sanara MedTech Inc. Restated 2014 Omnibus Long Term Incentive Plan (2023) (incorporated by reference to Exhibit 10.1.4 to the Company's Annual Report on Form 10-K filed on March 20, 2023).

 10.2

 Amended and Restated Employment Agreement, dated April 28, 2022, by and between Sanara MedTech Inc. and Zachary B. Fleming (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 29, 2022).

 10.3

 Employment Agreement, dated April 28, 2022, by and between Sanara MedTech Inc. and Michael D. McNeil (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on April 29, 2022).

 10.4

 Contribution Agreement dated August 27, 2018 between Wound Care Innovations, LLC and Catalyst Cellerate RX, LLC (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed November 14, 2018).

 10.5

 Operating Agreement dated August 27, 2018 between Wound Care Innovations, LLC and Catalyst Cellerate RX, LLC (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed November 14, 2018).

 10.6.1

 Sublicense Agreement dated August 27, 2018 between Catalyst Cellerate RX, LLC and Cellerate, LLC (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed November 14, 2018).

 10.6.2

 First Amendment of Sublicense Agreement dated May 31, 2019, between Cellerate, LLC, as Sublicensee, and CGI Cellerate RX, LLC, as Sublicensor (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed January 26, 2021).

 10.6.3

 Second Amendment of Sublicense Agreement dated January 26, 2021, between Cellerate, LLC, as Sublicensee, and CGI Cellerate RX, LLC, as Sublicensor (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed January 26, 2021).

 10.7.1

 Exclusive License Agreement dated July 8, 2019 between Sanara MedTech Inc. and Rochal Industries, LLC (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on August 14, 2019).

 10.7.2

 Amendment No. 1 to Exclusive License Agreement dated May 4, 2020 between Sanara MedTech Inc. and Rochal Industries, LLC (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on November 13, 2020).

 10.8

 Exclusive License Agreement dated October 1, 2019 between Sanara MedTech Inc. and Rochal Industries, LLC (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on November 14, 2019).

 10.9

 Exclusive License Agreement dated May 4, 2020 between Sanara MedTech Inc. and Rochal Industries, LLC (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on May 12, 2020).

 10.10

 Consulting Agreement, dated July 14, 2021, by and between Sanara MedTech Inc. and Ann Beal Salamone (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of the Company filed on July 19, 2021 by the Company with the SEC).

 10.11

 Common Stock Warrant, issued by Sanara MedTech Inc. to Furneaux Capital Holdco, LLC (d/b/a BlueIO) on April 4, 2022 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 8, 2022).

 10.12

 Common Stock Warrant, issued by Sanara MedTech Inc. to Furneaux Capital Holdco, LLC (d/b/a BlueIO) on April 4, 2022 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on April 8, 2022).

 10.13

 Precision Healing Inc. 2020 Stock Option and Grant Plan (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on April 8, 2022).

 10.14

 Controlled Equity Offering SM Sales Agreement, dated February 24, 2023, by and between Sanara MedTech Inc. and Cantor Fitzgerald & Co. (incorporated by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filed on February 24, 2023).

 10.15

 Transaction Advisory Services Agreement, dated March 1, 2023, by and between Sanara MedTech Inc. and The Catalyst Group, Inc. (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K filed on March 20, 2023).

 10.16+

 Professional Services Agreement, dated August 1, 2023, by and between Sanara MedTech Inc. and Dr. George D. Petito (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 2, 2023).

 10.17+

 Loan Agreement, dated August 1, 2023, between Sanara MedTech Applied Technologies, LLC, Sanara MedTech Inc. and Cadence Bank (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on August 2, 2023).

 21.1*

 List of Subsidiaries.

 23.1*

 Consent of Weaver and Tidwell, L.L.P.

 31.1*

 Certification of Principal Executive Officer in accordance with 18 U.S.C. Section 1350, as adopted by Section 302 of the Sarbanes-Oxley Act of 2002.

 31.2*

 Certification of Principal Financial Officer in accordance with 18 U.S.C. Section 1350, as adopted by Section 302 of the Sarbanes-Oxley Act of 2002.

 32.1**

 Certification of Principal Executive Officer in accordance with 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

 32.2**

 Certification of Principal Financial Officer in accordance with 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

 97.1*

 Sanara MedTech Inc. Compensation Recovery Policy.

 101.INS

 101.SCH

 101.CAL

 101.DEF

 101.LAB

 101.PRE

 Cover

 *
Filed herewith.

 #
Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K.
A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission or its staff upon
request. If indicated on the first page of such agreement, certain confidential information has been excluded pursuant to Item 601(b)(2)(ii)
of Regulation S-K. Such excluded information is not material and is the type that the Company treats as private or confidential.

 +
Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted
schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission or its staff upon request. Certain confidential
information has been excluded pursuant to Item 601(b)(10)(iv) of Regulation S-K. Such excluded information is not material and is the
type that the Company treats as private or confidential.

 **
The certifications attached as Exhibit 32.1 and Exhibit 32.2 are not deemed "filed" with the Securities and Exchange Commission
and are not to be incorporated by reference into any filing of Sanara MedTech Inc. under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of
any general incorporation language contained in such filing.

Identifies a management contract or compensatory plan.

 ITEM
16. FORM 10-K SUMMARY

 None.

 SIGNATURES

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

 MEDTECH INC.

 March

 By:

 /s/
 Michael D. McNeil

 Michael
 D. McNeil

 Chief
 Financial Officer

 (Principal
 Financial Officer and duly authorized officer)

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

 Signature

 Title

 Date

 /s/
 Zachary B. Fleming

 Chief
 Executive Officer (Principal Executive Officer)

 March

 Zachary
 B. Fleming

 /s/
 Michael D. McNeil

 Chief
 Financial Officer (Principal Financial and Accounting Officer)

 March

 Michael
 D. McNeil

 /s/
 Ronald T. Nixon

 Chairman

 March

 Ronald
 T. Nixon

 /s/
 Robert DeSutter

 March

 Robert
 DeSutter

 /s/
 Roszell Mack III

 March

 Roszell
 Mack III

 /s/
 Eric D. Major

 March

 Eric
 D. Major

 /s/
 Sara Ortwein

 March

 Sara
 Ortwein

 /s/
 Ann Beal Salamone

 March

 Ann
 Beal Salamone

 /s/
 James W. Stuckert

 March

 James
 W. Stuckert

 /s/
 Eric D. Tanzberger

 March

 Eric
 D. Tanzberger