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

Note 12 — Stockholders’ Equity

 

On July 11, 2022, the Company increased its authorized number of shares of Common Stock to 103,000,000, consisting of: 100,000,000 shares of Common Stock, and 3,000,000 shares of Preferred Stock. On January 9, 2020, the Company designated 100,000 shares of the 3,000,000 authorized shares of Preferred Stock, as Series A Convertible Preferred Stock (“Series A Preferred Stock”).

 

Series A Convertible Preferred Stock

 

Beginning in the first quarter of 2020, the Company issued an aggregate of 60,000 shares of Series A Preferred Stock, for an aggregate purchase price of $6.0 million. In May 2020, the Company completed an offering of Series A Preferred Stock with the issuance of an additional 40,000 shares of Series A Preferred Stock for an aggregate purchase price of $4.0 million.

 

Amendment of Conversion Formulas

 

On January 11, 2021, the Company’s Board of Directors approved the amendment to the conversion formula of the Series A Preferred Stock and Convertible Notes. After the amendment:

 

  ●

the Series A Preferred Stock is convertible, at any time after the issuance or immediately prior to the closing of a public transaction, into Common Stock in an amount of shares equal to (i) the product of the Series A Preferred Stock original price plus accrued but unpaid dividends on the shares being converted, multiplied by the number of shares of Series A Preferred Stock being converted, divided by (ii) a conversion price of $77.20 per share (after the reverse split taking effect); and

 

  ● immediately prior to the consummation of a public transaction, the outstanding principal amount of the Convertible Notes together with all accrued and unpaid interest shall convert into a number of fully paid and non-assessable shares of Common Stock equal to the quotient of (i) the outstanding principal amount of the Convertible Notes together with all accrued and unpaid interest thereunder immediately prior to such public transaction divided by (ii) a conversion price of $77.20 per share (after the reverse split taking effect).

 

On January 11, 2021, the Company’s shareholders approved the amendment to the Series A Preferred Stock.

 

Initial Public Offering

 

On February 1, 2021, the Company completed an IPO for the sale of 540,000 shares of Common Stock at a price of $100.00 per share. The Company also granted the underwriters: (a) a 45-day option to purchase up to 81,000 additional shares of Common Stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the IPO, and (b) warrants to purchase 16,200 shares of Common Stock (equal to 3% of the aggregate number of shares of Common Stock issued in the IPO) at an exercise price of $125.00 per share (which is equal to 125% of the IPO price). Subsequently, the underwriters exercised the over-allotment option, and on February 4, 2021, the Company closed on the sale of an additional 81,000 shares of Common Stock for a price of $100.00 per share and granted to the underwriters warrants to purchase 2,430 additional shares of Common Stock (equal to 3% of the amount of shares issued as part of the exercised of the over-allotment option) at an exercise price of $125.00 per share. The exercise of the over-allotment option brought the total number of shares of Common Stock sold by the Company in connection with the IPO to 621,000 shares and the total net proceeds received in connection with the IPO to approximately $57.0 million, after deducting underwriting discounts and estimated offering expenses.

 

Immediately prior to the closing of the Company’s IPO, all outstanding shares of Series A Preferred Stock and Convertible Notes were converted into 137,304 shares of Common Stock and 169,707 shares of Common Stock, respectively, at a conversion price of $77.72 per share.

  

Subsequent Public Offering

 

On February 19, 2021, the Company consummated a secondary public offering (the “February Offering”) for the sale of 555,556 shares of Common Stock for a price of $135.00 per share. The Company also granted the underwriters: (a) a 45-day option to purchase up to 83,333 additional shares of Common Stock on the same terms and conditions for the purpose of covering any over-allotments in connection with the February Offering, and (b) warrants to purchase 16,667 shares of Common Stock (equal to 3% of the aggregate number of shares of Common Stock issued in the February Offering) at an exercise price of $168.75 per share (which is equal to 125% of the February Offering). Subsequently, the underwriters exercised the over-allotment option, and on March 22, 2021, the Company closed on the sale of an additional 83,333 shares of Common Stock for a price of $135.00 per share and granted to the underwriters warrants to purchase 2,500 additional shares of Common Stock (equal to 3% of the amount of shares issued as part of the exercised of the over-allotment option) at an exercise price of $168.75 per share. The exercise of the over-allotment option brought the total number of shares of Common Stock sold by the Company in connection with the February Offering to 638,889 shares and the total net proceeds received in connection with the February Offering to approximately $80.0 million, after deducting underwriting discounts and estimated offering expenses.

 

Underwriter Termination

 

On September 14, 2021, the Company entered into a letter agreement and waiver (the “Letter Agreement”), to amend the terms of its underwriting agreement with the representative of the underwriters in the IPO. Pursuant to the Letter Agreement, the representative agreed to waive the right of first refusal included in the underwriting agreement in consideration of a cash payment to the representative of $2.4 million and the right to participate as a co-manager with 10% of the economics with respect to the Company’s next public offering of securities, payable in cash upon the closing of such offering.

 

Private Placement

 

On January 25, 2022, the Company entered into a Securities Purchase Agreement (the “Securities Agreement”) with an institutional investor and other accredited investors for the sale by the Company of 245,035 shares (the “SA Shares”) of Common Stock, pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to an aggregate of 157,064 shares of Common Stock and warrants to purchase up to an aggregate of 301,575 shares of Common Stock (the “Common Warrants” and, collectively with the Pre-Funded Warrants, the “SA Warrants”), in a private placement offering. The combined purchase price for one share of Common Stock (or one Pre-Funded Warrant) and the accompanying fraction of a Common Warrant was $68.00 per share.

 

Subject to certain ownership limitations, the SA Warrants are exercisable six months from issuance. Each Pre-Funded Warrant was exercisable into one share of Common Stock at a price per share of $0.001 (as adjusted from time to time in accordance with the terms thereof). Each Common Warrant is exercisable into one share of Common Stock at a price per share of $74.80 (as adjusted from time to time in accordance with the terms thereof) and will expire on the fifth anniversary of the initial exercise date. The institutional investor that received the Pre-Funded Warrants fully exercised such warrants in March 2022.

 

Raymond Chang, Chairman and Chief Executive Officer of the Company, and Stuart Wilcox, who is currently the Chief Operating Officer, and at the time was a member of the Company’s Board of Directors, participated in the private placement on essentially the same terms as other investors, except for having a combined purchase price of $69.00 per share.

 

The gross proceeds to the Company from the private placement were approximately $27.3 million, before deducting the placement agent’s fees and other offering expenses, and excluding the proceeds, if any, from the exercise of the SA Warrants.

 

Issuance of Common Stock in Connection with Acquisitions 

 

On October 1, 2021, the Company issued an aggregate of 66,640 shares of its Common Stock to the Precision and Cascade shareholders in connection with the Company’s acquisition of Precision and Cascade. On August 17, 2022, the Company issued an additional 8,704 shares of its Common Stock to the Precision and Cascade shareholders in connection with the finalization of the net working capital settlement. Refer to Note 8 – Business Combinations, included elsewhere in the notes to the consolidated financial statements.

 

On December 31, 2021, the Company issued an aggregate of 24,030 shares of its Common Stock to the PurePressure shareholders in connection with the Company’s acquisition of PurePressure. Refer to Note 8 – Business Combinations, included elsewhere in the notes to the consolidated financial statements.

 

On February 1, 2022, the Company issued an aggregate of 29,793 shares of its Common Stock to the Lab Society shareholders in connection with the Company’s acquisition of Lab Society. Refer to Note 8 – Business Combinations, included elsewhere in the notes to the consolidated financial statements.