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STOCKHOLDERS’ EQUITY | 6 Months Ended
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Jun. 30, 2021
Equity [Abstract] |
STOCKHOLDERS’ EQUITY | NOTE 10 — STOCKHOLDERS’ EQUITY As of June 30, 2021 and December 31, 2020, the Company had two classes of capital stock: common stock and Series Alpha convertible preferred stock. Common Stock Holders of common stock generally vote as a class with the holders of the preferred stock and are entitled to one vote for each share held. Subject to the rights of the holders of the preferred stock to receive preferential dividends, the holders of common stock are entitled to receive dividends when and if declared by the Board of Directors. Following payment of the liquidation preference of the preferred stock, as of June 30, 2021 any remaining assets would be distributed ratably among the holders of the common stock and, on an as-if-converted basis, the holders of Series Alpha convertible preferred stock upon liquidation, dissolution or winding up of the affairs of the Company. The holders of common stock have no preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions. At June 30, 2021, the Company has reserved 13,917,461 shares of authorized but unissued common stock for possible future issuance. At June 30, 2021, shares were reserved in connection with the following: SCHEDULE OF RESERVED SHARES
Exercise of outstanding stock options |  |  | 4,133,856 |
Exercise of outstanding stock warrants |  |  | 9,540,187 |
Conversion of outstanding Series Alpha preferred stock |  |  | 243,418 |
Total |  |  | 13,917,461 |
Series Alpha Preferred Stock In the six-month period ended June 30, 2021, no shares of Series Alpha convertible preferred stock were converted into shares of the Company’s common stock, and there were 180 shares of Series Alpha preferred stock outstanding at June 30, 2021 and December 31, 2020. Alpha Securities Purchase Agreements On July 10, 2020, the Company closed a Securities Purchase Agreement (dated July 8, 2020) with a single institutional investor for the purchase and sale for $8.0 million for (i) 1,140,570 shares of Company common stock, (ii) 780,198 pre-funded warrants (i.e., warrants to purchase shares of Company common stock, for which the exercise price is almost entirely prepaid) and (iii) 1,920,768 two-year warrants to purchase shares of Company common stock for an exercise price of $5.25 per share. Both sets of warrants included a 9.99% beneficial-ownership blocker provision. The 780,198 pre-funded warrants were then exercised on July 21 and 22, 2020. On August 4, 2020, the Company closed a Securities Purchase Agreement (dated August 2, 2020) with a single institutional investor for the purchase and sale for $10.0 million for (i) 1,717,106 shares of Company common stock, and (ii) 1,287,829 two-year warrants to purchase shares of Company common stock for an exercise price of $6.00 per share. The warrants included a 9.99% beneficial-ownership blocker provision. On December 18, 2020, the Company closed a Securities Purchase Agreement (dated December 16, 2020) with a single institutional investor for the purchase and sale for $12,000,000 of (i) 2,370,786 shares of Company common stock, (ii) 1,000,000 pre-funded warrants (i.e., warrants to purchase shares of Company common stock, for which the exercise price is almost entirely prepaid) (iii) 1,348,314 two-year warrants to purchase shares of Company common stock for an exercise price of $4.07 per share, and (iv) 842,696 warrants (first exercisable 6 months after issuance, and with an expiration date 30 months after issuance) to purchase shares of Company common stock for an exercise price of $4.07 per share. The warrants included a 9.99% beneficial-ownership blocker provision. The 1,000,000 pre-funded warrants were exercised on February 4, 2021. Stock Options and Warrants The Company recognizes all compensatory share-based payments as compensation expense over the service period, which is generally the vesting period. In April 2020, the Company adopted the 2020 Stock Incentive Plan (the “2020 Plan”) which provides for the granting of incentive or nonstatutory common stock options to qualified employees, officers, directors, consultants and other service providers. At June 30, 2021 and December 31, 2020 there were 4,040,000 and 3,917,500 outstanding options respectively under the 2020 Plan and on those dates there were 17,157 and 139,657 unused 2020 Plan shares available, respectively, for future grant. The following represents a summary of the options granted (under the 2020 Plan and otherwise) to employees and non-employee service providers that are outstanding at June 30, 2021, and changes during the six-month period then ended: SCHEDULE OF STOCK OPTION ACTIVITY
|  | Shares |  |  | Weighted– Average Exercise Price |  |  | Range of Exercise Price |  |  | Weighted– Average Remaining Life (Years) |
Total outstanding – December 31, 2020 |  |  | 4,011,356 |  |  | $ | 7.05 |  |  | $ | 3.52—1,465.75 |  |  |  | 9.29 |
Granted |  |  | 127,000 |  |  |  | 2.12 |  |  |  | 1.80—3.29 |  |  |  | 9.83 |
Expired |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Forfeited |  |  | (4,500 | ) |  |  | 3.68 |  |  |  | 3.52 — 4.97 |  |  |  | — |
Total outstanding – June 30, 2021 |  |  | 4,133,856 |  |  | $ | 6.90 |  |  | $ | 1.80 — 1,465.75 |  |  |  | 8.82 |
Exercisable (vested) |  |  | 1,296,860 |  |  | $ | 11.50 |  |  | $ | 4.97 — 1,465.75 |  |  |  | 8.36 |
Non-Exercisable (non-vested) |  |  | 2,836,996 |  |  | $ | 4.80 |  |  | $ | 1.80 — 5.13 |  |  |  | 9.04 |
There was approximately $1.3 million and $0.4 million of compensation cost related to outstanding options for the three months ended June 30, 2021 and 2020, respectively, and approximately $2.5 million and $0.4 million of compensation cost related to outstanding options for the six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021, there was approximately $10.3 million of total unrecognized compensation cost related to unvested stock-based compensation arrangements. This cost is expected to be recognized over a weighted average period of 1.98 years. No stock options were exercised during the six months ended June 30, 2021. The exercise price for an option issued under the 2020 Plan is determined by the Board of Directors, but will be (i) in the case of an incentive stock option (A) granted to an employee who, at the time of grant of such option, is a 10% stockholder, no less than 110% of the fair market value per share on the date of grant; or (B) granted to any other employee, no less than 100% of the fair market value per share on the date of grant; and (ii) in the case of a non-statutory stock option, no less than 100% of the fair market value per share on the date of grant. The options awarded under the 2020 Plan will vest as determined by the Board of Directors but will not exceed a ten-year period. The weighted average grant date fair value per share of options granted during the six months ended June 30, 2021 was $1.68. Fair Value of Equity Awards The Company utilizes the Black-Scholes option pricing model to value awards under its Plans. Key valuation assumptions include:
● | Expected dividend yield. The expected dividend is assumed to be zero, as the Company has never paid dividends and has no current plans to pay any dividends on the Company’s common stock.
● | Expected stock-price volatility. The Company’s expected volatility is derived from the average historical volatilities of publicly traded companies within the Company’s industry that the Company considers to be comparable to the Company’s business over a period approximately equal to the expected term.
● | Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected term.
● | Expected term. The expected term represents the period that the stock-based awards are expected to be outstanding. The Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate an expected term because of a lack of sufficient data. Therefore, the Company estimates the expected term by using the simplified method provided by the Securities and Exchange Commission. The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the options.
The material factors incorporated in the Black-Scholes model in estimating the fair value of the options granted for the periods presented were as follows: SCHEDULE OF ASSUMPTIONS USED IN BLACK-SCHOLES OPTION-PRICING METHOD
|  | For the six months ended June 30, 2021 |
Expected dividend yield |  |  | 0.00 | %
Expected stock-price volatility |  |  | 102 | %
Risk-free interest rate |  |  | 0.84% — 1.18 | %
Expected average term of options |  |  | 6.0 |
Stock price |  | $ | 2.12 |
The Company recorded share-based compensation expense and classified it in the condensed consolidated statements of operations as follows: SCHEDULE OF SHARE-BASED COMPENSATION EXPENSE
|  | For the six months ended June 30, |
|  | 2021 |  |  | 2020 |
General and administrative |  | $ | 2,201,499 |  |  | $ | 277,807 |
Research and development |  |  | 347,550 |  |  |  | 88,684 |
Total |  | $ | 2,549,049 |  |  | $ | 366,491 |
Equity Classified Compensatory Warrants In connection with the $4.0 million equity capital raise as part of the May 2020 reverse recapitalization transaction, the Company issued common stock warrants to an advisor and its designees for the purchase of 811,431 shares of the Company’s common stock at an exercise price of $1.11 per share. The issuance cost of these warrants was charged to additional paid-in capital, and did not result in expense on the Company’s statements of operations. In addition, various service providers hold equity classified compensatory warrants issued in 2017 and earlier (originally exercisable to purchase Series C convertible preferred stock, and now instead exercisable to purchase common stock) for the purchase of 668,024 shares of Company common stock at a weighted average exercise price of $2.34 per share. These are to be differentiated from the Series C Warrants described in Note 7. No compensatory warrants were issued during the six months ended June 30, 2021. The following table summarizes the activity in the common stock equity classified compensatory warrants received in exchange for the Series C convertible preferred stock equity classified compensatory warrants for the six months ended June 30, 2021: SCHEDULE OF WARRANT ACTIVITY
|  | Common Stock |
|  | Shares |  |  | Weighted– Average Exercise Price |  |  | Range of Exercise Price |  |  | Weighted– Average Remaining Life (Years) |
Total outstanding – December 31, 2020 |  |  | 1,294,217 |  |  | $ | 1.66 |  |  |  |  |  |  |  |  |
Common stock warrants received in exchange for Series C preferred stock warrants upon reverse recapitalization |  |  | - |  |  |  | - |  |  |  |  |  |  |  |  |
Legacy Ritter warrants |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Granted |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Exercised |  |  | (38,390 | ) |  |  | 2.09 |  |  |  |  |  |  |  |  |
Expired |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Forfeited |  |  | (65,179 | ) |  |  | 2.07 |  |  |  |  |  |  |  |  |
Total outstanding – June 30, 2021 |  |  | 1,190,648 |  |  | $ | 1.62 |  |  |  |  |  |  |  |  |
Exercisable |  |  | 1,187,052 |  |  | $ | 1.62 |  |  | $ | 1.11 — 2.54 |  |  |  | 3.75 |
Non-Exercisable |  |  | 3,596 |  |  | $ | 2.54 |  |  | $ | 2.54 |  |  |  | 5.23 |
Of the 38,390 shares issued upon the exercise of equity classified compensatory warrants during the six months ended June 30, 2021, 35,512 shares were issued upon net-exercises rather than upon exercises for cash. The following table summarizes the activity in the common stock equity classified compensatory warrants received in exchange for the Series C convertible preferred stock equity classified compensatory warrants for the six months ended June 30, 2020:
SCHEDULE OF WARRANT ACTIVITY |  | Common Stock |
|  | Shares |  |  | Weighted– Average Exercise Price |  |  | Range of Exercise Price |  |  | Weighted– Average Remaining Life (Years) |
Total outstanding – December 31, 2019 |  |  | — |  |  | $ | 1.99 |  |  |  |  |  |  |  |  |
Common stock warrants received in exchange for Series C preferred stock warrants upon reverse recapitalization |  |  | 668,024 |  |  |  | 2.34 |  |  |  |  |  |  |  |  |
Legacy Ritter warrants |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Granted |  |  | 811,431 |  |  |  | 1.11 |  |  |  |  |  |  |  |  |
Expired |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Forfeited |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Total outstanding – June 30, 2020 |  |  | 1,479,455 |  |  | $ | 1.67 |  |  |  |  |  |  |  |  |
Exercisable |  |  | 660,832 |  |  | $ | 2.34 |  |  | $ | 2.07 — 2.54 |  |  |  | 3.82 |
Non-Exercisable |  |  | 818,623 |  |  | $ | 1.12 |  |  | $ | 1.11 — 2.54 |  |  |  | 4.91 |
There were no compensation cost related to outstanding equity classified compensatory warrants for the six months ended June 30, 2021 and approximately $8,000 for the six months ended June 30, 2020. As of June 30, 2021 and 2020, there was no unrecognized compensation cost related to nonvested equity classified compensatory warrants. Noncompensatory Equity Classified Warrants In May 2020, as a commitment fee, the Company issued noncompensatory equity classified warrants to an investor for the purchase of 270,478 shares of Company common stock at an exercise price of $1.11 per share (of which warrants for 200,000 shares were subsequently exercised in December 2020). In July 2020 the Company issued noncompensatory equity classified warrants to such investor for the purchase of 780,198 shares of Company common stock at an exercise price of $0.001 per share (which were subsequently exercised in July 2020), and 1,920,678 shares of Company common stock at an exercise price of $5.25 per share. In August 2020 the Company issued noncompensatory equity classified warrants to such investor for the purchase of 1,287,829 shares of Company common stock at an exercise price of $6.00 per share. Lastly, in December 2020, the Company issued noncompensatory equity classified warrants to such investor for the purchase of 1,000,000 shares of Company common stock at an exercise price of $0.01 per share (which were exercised in February 2021) and 2,191,010 shares of Company common stock at an exercise price of $4.07 per share. No noncompensatory equity classified warrants were issued during the six months ended June 30, 2021. The following table summarizes the noncompensatory equity classified warrant activity for the six months ended June 30, 2021: SCHEDULE OF WARRANT ACTIVITY
|  | Common Stock |
|  | Shares |  |  | Weighted– Average Exercise Price |  |  | Range of Exercise Price |  |  | Weighted– Average Remaining Life (Years) |
Total outstanding – December 31, 2020 |  |  | 6,549,777 |  |  | $ | 4.37 |  |  |  |  |  |  |  |  |
Exercised |  |  | (1,000,000 | ) |  |  | 0.01 |  |  |  |  |  |  |  |  |
Granted |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Expired |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Forfeited |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Total outstanding – June 30, 2021 |  |  | 5,549,777 |  |  | $ | 5.15 |  |  |  |  |  |  |  |  |
Exercisable |  |  | 5,549,777 |  |  | $ | 5.15 |  |  | $ | 1.11 — 2,325.00 |  |  |  | 1.33 |
Non-Exercisable |  |  | — |  |  | $ | — |  |  |  | — |  |  |  | — |

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 13 -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 14 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496171-112644 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 14 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496171-112644 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.3-04) -URI http://asc.fasb.org/extlink&oid=120397183&loc=d3e187085-122770 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 18 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496189-112644 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (g) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644 Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 18 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496189-112644 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (h) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 14 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496171-112644 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 18 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496189-112644 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 16 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496180-112644 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (i) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644 Reference 15: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(e)(1)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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