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SHAREHOLDERS’ EQUITY
 9 Months Ended
Sep. 30, 2022
Equity [Abstract]  
SHAREHOLDERS’ EQUITY

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 481,195 shares had been issued under the LTIP Plan and 1,518,805 were available for issuance as of September 30, 2022.

 

In January 2021, the Company entered into an Equity Exchange Agreement (the “Exchange Agreement”) whereby the Company acquired the remaining equity interests in Woundyne Medical, LLC (“Woundyne”) in exchange for the issuance of an aggregate of 29,536 shares of the Company’s common stock with a fair value of $1,000,000. The acquisition of the outstanding equity interests of Woundyne was accounted for as an asset acquisition. The primary asset acquired by the Company is the Woundyne software platform which allows data related to chronic and surgical wounds to be tracked, monitored, and interfaced with the software user’s electronic medical records. Woundyne has no other material assets, liabilities, or revenues. The issuance of these shares was recorded as the cost of acquiring internal use software. The Company subsequently changed the name of Woundyne Medical, LLC to WounDerm, LLC.

 

In February 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Cantor Fitzgerald & Co. as representative of several underwriters named therein (collectively, the “Underwriters”), pursuant to which the Company agreed to issue and sell an aggregate of 1,100,000 shares of the Company’s common stock to the Underwriters at a price to the public of $25.00 per share, less underwriting discounts and commissions (the “Offering”). Pursuant to the Underwriting Agreement, the Company granted the Underwriters a 30-day option to purchase up to an additional 165,000 shares of common stock at the public offering price, less underwriting discounts and commissions, which the Underwriters exercised in full. The Offering, including the purchase of the 165,000 additional shares of common stock, closed in February 2021.

 

The net proceeds to the Company from the Offering were approximately $28.9 million, after (i) giving effect to the Underwriter’s full exercise of its option to purchase additional shares of common stock, and (ii) deducting the underwriting discounts and commissions and offering expenses payable by the Company. Through an insured cash sweep service, the net proceeds have been deposited in accounts insured by the Federal Deposit Insurance Corporation.

 

Following the closing of the Offering in February 2021, the Company made a $750,000 milestone payment to Rochal in the form of 20,834 shares of the Company’s common stock (see Note 6).

 

In July 2021, the Company entered into an asset purchase agreement with Rochal, effective July 1, 2021, pursuant to which the Company purchased certain assets of Rochal, including, among others, certain of Rochal’s intellectual property, furniture and equipment, supplies, rights and claims, other than certain excluded assets, all as more specifically set forth in the asset purchase agreement. In exchange for the acquired assets, the Company paid to Rochal (i) $496,100 in cash and (ii) 14,369 shares of the Company’s common stock, and assumed certain net liabilities of $3,900. Based on the trading price of the Company’s common stock on July 14, 2021, the fair value of the equity consideration transferred was determined to be $584,244.

 

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 non-accredited 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.

 

 

Pursuant 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 4 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 $7.3 million, subject to customary post-closing adjustments. The consideration consisted of (i) approximately $1.3 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 shall be withheld, issued, and released to the Seller after closing as and to the extent provided in the purchase agreement to satisfy the Seller’s indemnification obligations, if any.

 

In addition to the cash consideration and the stock consideration, the purchase agreement provides that the Seller 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 the Seller 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. See Note 5 for more information regarding the acquisition of Scendia.

 

Restricted Stock Awards

 

During the nine months ended September 30, 2022, the Company issued 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 172,986 shares, net of forfeitures, of restricted common stock to employees and directors of the Company. The fair value of these awards was $4,305,323 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 $683,202 and $228,786 was recognized in “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Operations during the three months ended September 30, 2022 and 2021 and $1,971,537 and $852,226 was recognized during the nine months ended September 30, 2022, and 2021. 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.

 

At September 30, 2022, there was $2,999,731 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 0.9 years.

 

Below is a summary of restricted stock activity for the nine months ended September 30, 2022:

 

   For the Nine Months Ended 
   September 30, 2022 
   Shares  

Weighted Average Grant Date Fair Value

 
Non-vested at beginning of period   161,450   $18.13 
Granted   178,857    24.78 
Vested   (142,221)   20.09 
Forfeited   (5,871)   21.52 
Non-vested at September 30, 2022   192,215   $22.76 

 

 

Stock Options

 

A summary of the status of outstanding stock options at September 30, 2022, and changes during the nine-month period then ended is presented below:

 

   For the Nine Months Ended 
   September 30, 2022 
   Options   Weighted Average Exercise
Price		  

Weighted Average

Remaining
Contract Life

 
Outstanding at beginning of period   11,500   $6.00      
Granted or assumed   144,191    10.71      
Exercised   -    -      
Forfeited   -    -      
Expired   -    -      
Outstanding at September 30, 2022   155,691   $10.36    7.5 
                
Exercisable at September 30, 2022   155,691   $10.36    7.5 

 

Warrants

 

A summary of the status of outstanding warrants to purchase common stock at September 30, 2022, and changes during the nine-month period then ended is presented below:

 

   For the Nine Months Ended 
   September 30, 2022 
      Weighted Average   Weighted Average 
   Warrants   Exercise
Price		   Remaining
Contract Life		 
Outstanding at beginning of period    -   $ -       
Granted or assumed   16,725    10.80      
Exercised   -    -      
Forfeited   -    -      
Expired   -    -      
Outstanding at September 30, 2022   16,725   $10.80    8.0 
                
Exercisable at September 30, 2022   16,725   $10.80    8.0