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6. SHAREHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2020

Shareholders' equity

SHAREHOLDERS' EQUITY

Preferred Stock

On March 13, 2019, the Company established a new series of preferred stock consisting of 1,200,000 shares of Series F Convertible Preferred Stock, par value of $10.00 per share. Each share of Series F Convertible Preferred Stock is convertible at the option of the holder, at any time, into 2 shares of common stock. Additionally, each holder of Series F Convertible Preferred Stock is entitled to vote on all matters submitted for a vote of the Company’s shareholders with votes equal to the number of shares of common stock into which such holder’s Series F Convertible Preferred shares could then be converted. The Series F Convertible Preferred Stock ranks senior to the Company’s common stock as to the payment of dividends (if any) and the distribution of assets. Upon liquidation of the Company, holders of Series F Convertible Preferred Stock are entitled to a liquidation preference of $5.00 per share.

On February 7, 2020, Catalyst converted its entire holdings of Sanara MedTech Inc.’s 30-month $1,500,000 convertible promissory note and 1,136,815 shares of Series F Convertible Preferred Stock into shares of the Company’s common stock. The Company issued an aggregate of 2,452,731 shares of common stock in the conversions. After the conversions, Catalyst and its affiliates control the voting of a total of 3,416,587 shares of the Company’s common stock, which represents 54.4% of the 6,279,610 shares of common stock outstanding as of September 30, 2020. As of September 30, 2020, there were no shares of Series F Convertible Preferred Stock outstanding.

Common Stock

On May 10, 2019 the Company effected a 1-for-100 reverse stock split of the Company’s issued and outstanding shares of common stock. Concurrent with the reverse stock split, the Company changed its corporate name from Wound Management Technologies, Inc. to Sanara MedTech Inc.

The reverse stock split was previously approved by shareholders of a majority of the Company’s outstanding voting stock on March 21, 2019. On May 10, 2019, the Company’s common stock began trading on the OTCQB market under the symbol “WNDMD” and traded under that symbol until June 6, 2019, at which time the Company changed its trading symbol to “SMTI”. The post-split common stock is traded under a new CUSIP number 79957L100. In connection with the reverse stock split, the Company also made a corresponding adjustment to the Company’s authorized capital stock to reduce the authorized common stock to 20,000,000 shares and the authorized preferred stock to 2,000,000 shares, effective May 10, 2019.

The reverse stock split did not change a shareholder’s ownership percentage of the Company's common stock, except for the small effect where the reverse stock split would result in a shareholder owning a fractional share. No fractional shares were issued as a result of the reverse split. Shareholders who were otherwise entitled to receive a fractional share received a cash payment based on the market price of a share of the common stock on May 13, 2019.

On October 15, 2019, Company closed a private placement of 1,204,820 shares of its common stock at a price of $8.30 per share. All shares sold by the Company were newly issued shares. The purchasers in the offering were related party entities to three members of the Company’s Board of Directors.

On February 21, 2020, the Company filed a Registration Statement on Form S-8 which registered an aggregate of 2,000,000 shares of its common stock that may be issued under the Sanara MedTech Inc. 2014 Omnibus Long-Term Incentive Plan. The Registration Statement on Form S-8 also covers such additional and indeterminate number of securities as may become issuable pursuant to the provisions of the plan relating to adjustments for changes resulting from a share dividend, share split or similar change. At the Company’s Annual Meeting of Shareholders held on July 9, 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 229,212 shares had been issued under the LTIP Plan and 1,770,788 were available to issue as of September 30, 2020.

Restricted Stock Awards

During the first quarter of 2020, the Company issued a total of 180,100 shares of restricted common stock to Company employees, directors, and certain consultants of the Company. The restricted share awards were issued under the Company’s 2014 Long Term Incentive Plan and are subject to certain vesting provisions and other terms and conditions set forth in each recipient’s restricted stock agreement. During the second quarter of 2020, the Company issued an additional 1,000 shares of restricted common stock to an officer of the Company. Restricted shares forfeited during the second quarter totaled 1,430. During the third quarter of 2020, the Company issued 16,396 shares of restricted common stock to certain employees of the Company. Restricted shares forfeited during the third quarter totaled 188. The fair value of each award is based on the closing price of the Company’s common stock on the respective grant dates. The Company recognizes compensation expense for stock awards on a straight-line basis over the vesting period of the award. Share-based compensation expense of $872,662 was recognized in selling, general and administrative expenses during the nine months ended September 30, 2020. No share-based expense was recognized during the nine months ended September 30, 2019.

At September 30, 2020, there was $1,537,238 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 1.9 years.

Below is a summary of restricted stock activity for the nine months ended September 30, 2020:

		For the Nine Months Ended
		September 30, 2020
						Weighted Average
		Shares				Grant Date Fair Value
Non-vested at beginning of period			-			$	-
Granted			197,496				12.88
Vested			(35,919	)			11.16
Forfeited			(1,618	)			11.15
Non-vested at September 30, 2020			159,959			$	13.28

Stock Options

A summary of the status of the stock options at September 30, 2020 and changes during the nine-month period then ended is presented below:

		For the Nine Months Ended
		September 30, 2020
						Weighted Average
		Options				Exercise Price				Weighted Average
Outstanding at beginning of period			11,500			$	6.00
Granted			-				-
Exercised			-				-
Forfeited			-				-
Expired			-				-
Outstanding at September 30, 2020			11,500				6.00				2.3

Exercisable at September 30, 2020			11,500			$	6.00				2.3