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STOCKHOLDERS’ EQUITY
 12 Months Ended
Dec. 31, 2023
Equity [Abstract]  
STOCKHOLDERS’ EQUITY

NOTE 12 — STOCKHOLDERS’ EQUITY

 

As of December 31, 2023, and 2022 the Company had two classes of capital stock: common stock and 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, any remaining assets will be distributed ratably among the holders of the common stock and, on an as-if-converted basis, the holders of any 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 December 31, 2023, the Company has reserved 5,781,161 shares of authorized but unissued common stock for possible future issuance as follows:

 

      
Exercise of issued and future grants of stock options   755,715 
Conversion of convertible debt   1,943,729 
Exercise of stock warrants   3,081,717 
Total   5,781,161 

 

 

Preferred Stock

 

At December 31, 2023 and December 31, 2022, there were no shares of preferred stock outstanding.

 

Stock Options and Equity Classified Warrants

 

Stock Options

 

The Company recognizes all compensatory stock-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 grant of incentive or non-statutory common stock options, restricted stock, stock bonus awards, stock appreciation rights, restricted stock units and performance awards to qualified employees, officers, directors, consultants and other service providers. At December 31, 2023 and December 31, 2022 there were 398,924 and 608,012 outstanding stock options, respectively, under the 2020 Plan and there were 356,778 and 147,690 Plan shares available, respectively, for future grant.

 

The following represents a summary of the options granted to employees and non-employee service providers that were outstanding at December 31, 2023, and changes during the twelve months then ended:

 

   Shares  

Weighted–Average

Exercise

Price

  

Range of

Exercise

Price

  

Weighted–Average

Remaining

Life (Years)

 
Total outstanding – December 31, 2022   608,012   $35.02    $5.14 - $51.30    8.09 
Granted   —    —    —    — 
Expired   —    —    —    — 
Forfeited   (209,088)   34.71    5.14 - 51.30    — 
Total outstanding – December 31, 2023   398,924   $35.21    $5.14 — $51.30    7.06 
Exercisable (vested)   320,918   $41.97    $5.14 — $51.30    6.77 
Non-Exercisable (non-vested)   78,006   $7.36    $5.14 - $32.90    8.36 

 

The following represents a summary of the options granted (under the 2020 Plan and otherwise) to employees and non-employee service providers that were outstanding at December 31, 2022, and changes during the twelve months then ended:

 

   Shares  

Weighted–Average

Exercise

Price

  

Range of

Exercise

Price

  

Weighted–Average

Remaining

Life (Years)

 
Total outstanding – December 31, 2021   484,186   $60.70    $12.40 — $14,657.50    8.52 
Granted   134,469    5.24    5.14 — 10.50    5.99 
Expired   (9,379)   932.75    57.50 - 14,657.50    — 
Forfeited   (1,264)   22.64    5.14 - 49.70    — 
Total outstanding – December 31, 2022   608,012   $35.02    $5.14 — $51.30    8.09 
Exercisable (vested)   288,704   $46.32    $12.40 — $51.30    7.59 
Non-Exercisable (non-vested)   319,308   $24.80    $5.14 — $10.50    8.59 

 

There was approximately $1.1 million and $5.4 million of compensation costs related to outstanding options for the year ended December 31, 2023 and December 31, 2022, respectively. This cost is expected to be recognized over a weighted average period of 1.09 years.

 

No stock options were granted or exercised during the year ended December 31, 2023 or 2022.

 

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 10-year period.

 

 

There were no options granted during the year ended December 31, 2023. The weighted average grant date fair value per share of the shares underlying options granted during the year ended December 31, 2022 was $3.96.

 

Fair Value of Equity Awards

 

The Company utilizes the Black-Scholes option pricing model to value awards under the 2020 Plan, and for equity classified compensatory warrants. 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 SEC. 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:

 

  

For the Years Ended December 31,

   2023   2022
Expected dividend yield   n/a   0.00%
Expected stock-price volatility   n/a   103%
Risk-free interest rate   n/a   1.58% — 3.77%
Expected average term of options (in years)   n/a   5.99
Stock price   n/a   5.14 - 10.50

 

The Company recorded stock-based compensation expense and classified it in the Consolidated Statements of Operations as follows:

 

   2023   2022 
   For the Years Ended December 31, 
   2023   2022 
General and administrative  $939,228   $4,649,649 
Research and development   159,305    834,395 
Total  $1,098,533   $5,484,044 

 

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 81,143 reverse split adjusted shares of the Company’s common stock at a reverse split adjusted exercise price of $11.10 per share. The issuance cost of these warrants was charged to additional paid-in capital, and did not result in expense in the Company’s consolidated statements of operations and comprehensive loss.

 

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 66,802 reverse split adjusted shares of Company common stock at a weighted average exercise price of $23.40 per share. These are to be differentiated from the Series C Warrants described in Note 7- Warrant Liabilities.

 

 

On April 25, 2022, 60,000 warrants were repriced from $13.20 per share exercise price to a reverse split adjusted exercise price of $6.00 per share exercise price and extended from June 3, 2023 to September 14, 2023. The increase in fair value of $67,370 for the modification of these warrants was charged to general and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss. These warrants expired on September 14, 2023. On April 25, 2022 and May 26, 2022 an additional 67,620 reverse split adjusted warrants were repriced from reverse split adjusted $11.10 per share exercise price to $5.136 per share exercise price. The increase in fair value of $31,010 for the modification of these warrants was charged to additional paid-in capital and did not result in expense on the Company’s consolidated statements of operations and comprehensive loss. On December 22, 2022 67,620 warrants were repriced from $5.136 per share exercise price to $1.32 per share exercise price. The increase in fair value of $8,548 for the modification of these warrants was charged to additional paid-in capital and did not result in expense on the Company’s consolidated statements of operations and comprehensive loss. On December 5, 2023, 67,620 warrants were repriced from $1.32 per share exercise price to $0.73 per share exercise price. The increase in fair value of $7,945 for the modification of these warrants was charged to general and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss.

 

No new compensatory warrants were issued during the year ended December 31, 2023 or 2022.

 

The following table summarizes the equity classified compensatory warrant activity for the year ended December 31, 2023:

 

   Common Stock 
   Shares  

Weighted– Average

Exercise

Price

  

Range of

Exercise Price

  

Weighted–Average

Remaining

Life (Years)

 
Total outstanding – December 31, 2022   179,046   $9.12    $1.32 — $25.40    1.73 
Granted to advisor and its designees   —    —           
Exercised   —    —           
Expired   (60,000)   6.00    6.00      
Forfeited   —    —           
Total outstanding – December 31, 2023   119,046   $10.69    $0.73 — $25.40    1.25 
Exercisable   119,046   $10.69    $0.73 — $25.40    1.25 
Non-Exercisable   —   $—   $—    — 

 

The following table summarizes the equity classified compensatory warrant activity for the year ended December 31, 2022:

 

   Common Stock 
   Shares  

Weighted– Average

Exercise

Price

  

Range of

Exercise Price

  

Weighted–Average Remaining

Life (Years)

 
Total outstanding – December 31, 2021   179,046   $15.20    $11.10 — $25.40    2.64 
Granted to advisor and its designees   —    —           
Exercised   —    —           
Expired   —    —           
Forfeited   —    —           
Total outstanding – December 31, 2022   179,046   $9.12    $1.32 — $25.40    1.73 
Exercisable   179,046   $9.12    $1.32- $25.40    1.73 
Non-Exercisable   —   $—   $—    — 

 

There was $7,945 in compensation costs related to outstanding warrants for the year ended December 31, 2023 and $67,370 for the year ended December 31, 2022. As of December 31, 2023 and December 31, 2022, there was no unrecognized compensation cost related to nonvested warrants.

 

 

Noncompensatory Equity Classified Warrants

 

In May 2020, as a commitment fee, the Company issued noncompensatory equity classified warrants to Alpha (a related party) for the purchase of 27,048 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $11.10 per share (of which warrants for 20,000 shares were subsequently exercised in December 2020). In July 2020 the Company issued noncompensatory equity classified warrants to Alpha for the purchase of 78,019 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $0.01 per share (which were subsequently exercised in July 2020), and 192,068 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $52.50 per share. In August 2020, the Company issued noncompensatory equity classified warrants to Alpha for the purchase of 128,783 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $60.00 per share. In December 2020, the Company issued noncompensatory equity classified warrants to Alpha for the purchase of 100,000 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $0.10 per share (which were exercised in February 2021) and 219,101 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $40.70 per share. In May 2022, the Company issued noncompensatory equity classified warrants to Alpha for the purchase of 331,464 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $0.01 per share.

 

On November 29, 2021, with the exception of the warrants to purchase 27,048 reverse split adjusted shares of the Company’s common stock at a reverse split adjusted exercise price of $11.10 per share, the exercise prices of all outstanding warrants to purchase a total of 539,951 reverse split adjusted shares of the Company’s common stock were modified to a reverse split adjusted exercise price of $20.00 per share and each of their remaining terms extended by six months. The fair value of the modification cost of these warrant modifications of approximately $2.3 million was charged to additional paid-in capital and did not result in expense on the Company’s consolidated statements of operations and comprehensive loss. In May 2022, pre-funded warrants to purchase 331,464 reverse split adjusted shares of the Company’s common stock at a reverse split adjusted exercise price of $0.01 per share with no expiration date were issued to Alpha. These warrants were subsequently exercised in 2022.

 

In conjunction with the NanoSynex Acquisition, on April 25, 2022 the exercise price of 7,048 reverse split adjusted outstanding warrants at $11.10 was modified to a reverse split adjusted exercise price of $6.00. The increase in fair value of $2,533, using a Monte Carlo pricing model for the modification of these warrants, was charged to additional paid-in capital and did not result in expense on the Company’s consolidated statements of operations and comprehensive loss. On May 26, 2022, the reverse split adjusted exercise price of these warrants was modified again to $5.136, and the increase in fair value of $696, using a Monte Carlo pricing model for the modification of these warrants, was included in consideration transferred in the NanoSynex Acquisition. On December 22, 2022 the exercise price of these warrants was modified again to $1.32. The increase in fair value of $891, using a Monte Carlo pricing model for the modification of those warrants, was charged to additional paid-in capital and did not result in expense on the Company’s consolidated statements of operations and comprehensive loss.

 

On December 5, 2023, the Company entered into an Amendment No. 1 with regard to Securities Purchase Agreement, with Alpha. This Amendment amended two instruments which the Company issued under the Securities Purchase Agreement dated December 21, 2022: (a) the 8% Senior Convertible Debenture dated December 22, 2022 in favor of Alpha, and (b) the Common Stock Purchase Warrant dated December 22, 2022 in favor of Alpha. The Amendment reduced the Conversion Price of the Debenture from $1.32 per share to $0.73 per share (subject to possible future adjustment pursuant to the terms of the Debenture) and reduced the Exercise Price of the Alpha Warrant from $1.65 per share to $0.73 per share (subject to possible future adjustment pursuant to the terms of the Alpha Warrant). The Amendment revised certain provisions of the Warrant which resulted in reclassification of the Warrant from liabilities to equity. For more details see Note 7 - Warrant Liabilities.

 

The following table summarizes the noncompensatory equity classified warrant activity for the year ended December 31, 2023:

 

   Common Stock 
   Shares  

Weighted–Average

Exercise

Price

  

Range of

Exercise Price

  

Weighted– Average Remaining

Life (Years)

 
Total outstanding – December 31, 2022   547,003   $19.76    $1.32 - $20.00    0.33 
Legacy Ritter warrants   —    —           
Reclassification of Alpha Warrant from warrant liabilities to equity   2,500,000    0.73    0.73      
Exercised   —    —           
Expired   (539,953)   20.00    20.00      
Forfeited   —    —           
Total outstanding – December 31, 2023   2,507,050   $0.73           
Exercisable   2,507,050   $0.73    0.73    4.47 
Non-Exercisable   —   $—   $—    — 

 

 

The following table summarizes the noncompensatory equity classified warrant activity for the year ended December 31, 2022:

 

   Common Stock 
   Shares   Weighted– Average Exercise Price  

Range of

Exercise

Price

  

Weighted– Average Remaining

Life (Years)

 
Total outstanding – December 31, 2021   554,914   $20.10    11.10— 37.78    1.32 
Legacy Ritter warrants   —    —           
Granted   331,464    0.01    0.01      
Exercised   (331,464)   0.01    0.01      
Expired   (7,911)   37.78    37.78      
Forfeited   —    —    0      
Total outstanding – December 31, 2022   547,003   $19.76    1.32 - 20.00    0.33 
Exercisable   547,003   $19.76    1.32 - 20.00    0.33 
Non-Exercisable   —   $—   $—    —