6. SHAREHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2020

Shareholders' equity (deficit)

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. After proportionally adjusting to reflect a subsequent 1 for 100 reverse stock split of the Common Stock, each share of Series F Convertible Preferred Stock was 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 was 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 Preferred shares could then be converted. The Series F Convertible Preferred Stock ranked 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 were entitled to a liquidation preference of $5 per share.

On February 7, 2020, Catalyst Group converted its entire holdings of Sanara MedTech Inc.’s 30-month $1,500,000 convertible promissory note and Series F Convertible Preferred Stock into shares of Sanara Common Stock. The Company issued an aggregate of 2,452,731 shares of Common Stock in the conversions. After the conversions, Catalyst controls the voting of a total of 3,416,587 shares of Common Stock, which represents 55.1% of the 6,203,832 shares of Common Stock currently outstanding. As of March 31, 2020, there were no shares of the Series F Preferred stock issued and 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 a majority of shareholders 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 offering 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 Form S-8 registration statement which registered an aggregate of 2,000,000 shares of common stock, par value $0.001 per share (the “Common Stock”), that may be issued under the Sanara MedTech Inc. 2014 Omnibus Long-Term Incentive Plan. Pursuant to Rule 416 of the Securities Act of 1933, as amended, this registration statement 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.

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.

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 $304,897 was recognized in selling, general and administrative expenses during the three months ended March 31, 2020. No share-based expense was recognized during the three months ended March 31, 2019.

Below is a summary of restricted stock activity for the three months ended March 31, 2020:

	For the Three Months Ended
	March 31, 2020
				Weighted Average
	Shares			Grant Date Fair Value
Non-vested at beginning of period		-			-
Granted		180,100		$	11.50
Vested		(15,497	)		11.15
Forfeited		-			-
Non-vested at March 31, 2020		164,603		$	11.54

At March 31, 2020 there was $1,677,875 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 2.6 years.

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Stock Options

On December 31, 2017, the Company granted a total of 11,500 options to five employees. The aggregate fair value of the awards was determined to be $61,322 and was to be expensed over a three-year vesting period. On April 13, 2018, the Company granted a total of 2,000 options to one employee and one contractor. The aggregate fair value of the awards was determined to be $8,943 and was to be expensed over a three-year vesting period. The aggregate fair value of the awards was determined to be $16,405 and was to be expensed over a three-year vesting period.

The Company’s stock option agreements include a provision whereby all outstanding options vest immediately if the Company consummates a transaction resulting in a change in control of the Company, as defined in the stock option agreements. The Cellerate Acquisition on March 15, 2019 (see Note 1 for more information) represented a change in control of the Company for purposes of the stock option agreements. Accordingly, all outstanding stock options fully vested on March 15, 2019.

A summary of the status of the stock options at March 31, 2020 and changes during the three-month period then ended is presented below: 

	For the Three Months Ended March 31, 2020
	Options		Weighted Average Exercise Price		Weighted Average Remaining Contract Life
Outstanding at beginning of period		11,500	$	6.00
Granted		-		-
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at March 31, 2020		11,500	$	6.00		2.8
Exercisable at March 31, 2020		11,500	$	6.00		2.8