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SHAREHOLDERS’ EQUITY
 9 Months Ended
Sep. 30, 2023
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 587,465 shares had been issued under the LTIP Plan and 1,412,535 were available for issuance as of September 30, 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 average 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 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 may 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, if any, pursuant to the Sales Agreement, may be 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 has no obligation to sell any of the shares under the Sales Agreement and may at any time 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 are subject to satisfaction of certain conditions, including customary closing conditions. Pursuant to the Sales Agreement, the Company will pay Cantor a commission of 3.0% of the aggregate gross proceeds from each sale of the shares.

 

During the three months ended September 30, 2023, the Company did not sell any shares of common stock pursuant to the Sales Agreement. During the nine months ended September 30, 2023, the Company sold an aggregate of 26,143 shares of common stock for gross proceeds of approximately $1,066,000 and net proceeds of approximately $1,034,000 pursuant to the Sales Agreement.

 

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.

 

Restricted Stock Awards

 

During the nine months ended September 30, 2023, 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 107,797 shares, net of forfeitures, of restricted common stock to employees, directors, and certain advisors of the Company under the LTIP Plan during the nine months ended September 30, 2023. The fair value of these awards was $4,287,777 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 $857,526 and $683,202 was recognized in “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Operations during the three months ended September 30, 2023 and 2022, respectively, and $2,582,163 and $1,971,537 was recognized during the nine months ended September 30, 2023 and 2022, respectively.

 

At September 30, 2023, there was $3,980,624 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 1.0 years.

 

Below is a summary of restricted stock activity for the nine months ended September 30, 2023:

 

   For the Nine Months Ended
September 30, 2023		 
   Shares   Weighted Average
Grant Date Fair Value		 
Nonvested at beginning of period   181,102   $22.89 
Granted   118,912    39.14 
Vested   (129,342)   22.84 
Forfeited   (11,115)   32.96 
Nonvested at September 30, 2023   159,557   $34.27 

 

Stock Options

 

A summary of the status of outstanding stock options at September 30, 2023 and changes during the nine months then ended is presented below:

 

   For the Nine Months Ended
September 30, 2023		 
       Weighted Average   Weighted Average  
       Exercise   Remaining 
   Options   Price   Contract Life 
Outstanding at beginning of period   146,191   $10.65      
Granted or assumed   -    -      
Exercised   (50,318)   11.58      
Forfeited   -    -      
Expired   -    -      
Outstanding at September 30, 2023   95,873   $10.16    7.1 
                
Exercisable at September 30, 2023   95,873   $10.16    7.1 

 

 

Warrants

 

A summary of the status of outstanding warrants to purchase common stock at September 30, 2023 and changes during the nine months then ended is presented below:

   

  

For the Nine Months Ended

September 30, 2023

 
       Weighted Average   Weighted Average 
       Exercise   Remaining 
   Warrants   Price   Contract Life 
Outstanding at beginning of period   16,725   $10.80      
Granted or assumed   -    -      
Exercised   -    -      
Forfeited   -    -      
Expired   -    -      
Outstanding at September 30, 2023   16,725   $10.80    7.0 
                
Exercisable at September 30, 2023   16,725   $10.80    7.0