BUSINESS COMBINATION

9 Months Ended

Sep. 30, 2022

BUSINESS COMBINATION

BUSINESS COMBINATION

NOTE 19 – BUSINESS COMBINATION

Sera Labs Acquisition

In October 2020, the Company acquired all of the issued and outstanding stock of Sera Labs in exchange for consideration of, subject to customary adjustments, an aggregate of approximately (i) $1.0 million in cash and (ii) up to 6,909,091 shares of the Company’s common stock. Pursuant to the Sera Labs Merger Agreement, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the “Clawback Shares”) based on the achievement of certain sales and gross margin milestones. On August 11, 2022, the Board agreed to extend the period in which the Clawback Shares may be earned to December 31, 2024.

The acquisition was accounted for in accordance with ASC 805. The equity consideration to be provided is subject to a variety of earn-out and milestone provisions thus of the 12,897,115 total potential shares to be issued, 5,988,024 shares are considered contingent shares based on the achievement of certain sales and gross margin milestones (“Contingent Shares”). Under ASC 480-10-25, based on the variable number of shares to be issued as part of the acquisition, the fair value of the Contingent Shares of $3.2 million was initially recorded as a liability as contingent stock consideration as of October 2, 2020.

The following table presents the change in fair value of contingent stock consideration (in thousands):

(Dollars in thousands)	Fair Value of Contingent Stock Consideration
Fair value at December 31, 2021	$	1,430
Fair value at September 30, 2022		917
Net change in fair value for the nine months ended September 30, 2022	$	(513	)