SCHEDULE
OF USEFUL LIVES OF PROPERTY AND EQUIPMENT
|
Machinery
and equipment
|
5
years
|
|
Computer
equipment
|
3
years
|
|
Molds
and tooling
|
5
years
|
|
Office
furniture and equipment
|
5
years
|
Leasehold
improvements are amortized on a straight-line basis over the shorter of the lease term or their estimated useful lives. The Company occasionally
designs and builds its own machinery. The costs of these projects, which includes the cost of construction and other direct costs attributable
to the construction, are capitalized as construction in progress. No provision for depreciation is made on construction in progress until
the relevant assets are completed and placed in service.
The
Company’s policy is to evaluate the remaining lives and recoverability of long-term assets on at least an annual basis or when
conditions are present that indicate impairment.
Intangible
Assets, Net
Intangibles
consist of patent-related costs and costs for in-license agreements. Management reviews the carrying value of intangible assets that
are being amortized on an annual basis or sooner when there is evidence that events or changes in circumstances may indicate that impairment
exists. The Company considers relevant cash flow and profitability information, including estimated future operating results, trends
and other available information, in assessing whether the carrying value of intangible assets being amortized can be recovered.
If
the Company determines that the carrying value of intangible assets will not be recovered from the undiscounted future cash flows expected
to result from the use and eventual disposition of the underlying assets, the Company considers the carrying value of such intangible
assets as impaired and reduces them by a charge to operations in the amount of the impairment.
Costs
related to acquiring patents and licenses are capitalized and amortized over their estimated useful lives, which is generally 5 to 17
years, using the straight-line method. Amortization of patents and licenses commences once final approval of the patent has been obtained.
Patent and licenses costs are charged to operations if it is determined that the patent will not be obtained.
The
carrying value of the patents of approximately $168,000
and $169,000
at June 30, 2021 and December 31, 2020, respectively,
are stated net of accumulated amortization of approximately $311,000
and $303,000,
respectively. Amortization of patents charged to operations for the three months ended June 30, 2021 and 2020 was approximately $3,000
for each period, and for the six months ended
June 30, 2021 and 2020 was approximately $6,000
for each period. Total future estimated amortization
of patent costs for the five succeeding years is approximately $8,000
for the remaining six months in the year
ending December 31, 2021, approximately $15,000
for each of the years ending December 31, 2022
through 2023, approximately $11,000
for year 2024, approximately $11,000
for year 2025 and approximately $108,000
thereafter.
The
carrying value of the in-licenses of approximately $16,000 and $19,000 at June 30, 2021 and December 31, 2020 are stated net of accumulated
amortization of approximately $403,000 and $400,000, respectively. Amortization of licenses charged to operations for the three months
ended June 30, 2021 and 2020 was approximately $2,000, and for the six months ended June 30, 2021 and 2020 was approximately $4,000 and
$3,000, respectively. Total future estimated amortization of license costs is approximately $4,000 for the remaining six months in the
year ending December 31, 2021, approximately $7,000 for the year ending December 31, 2022 and approximately $5,000 for the year ending
December 31, 2023.
Derivative
Financial Instruments and Warrant Liabilities
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported
in the condensed consolidated statements of operations. Depending on the features of the derivative financial instrument, the Company
uses either the Black-Scholes option-pricing model or a Monte Carlo simulation to value the derivative instruments at inception and subsequent
valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or
as equity, is re-assessed at the end of each reporting period (see Note 7).
Fair
Value Measurements
The
Company determines the fair value measurements of applicable assets and liabilities based on a three-tier fair value hierarchy established
by accounting guidance and prioritizes the inputs used in measuring fair value. The Company discloses and recognizes the fair value of
its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy
gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level
1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements).
The guidance establishes three levels of the fair value hierarchy as follows:
|
|
●
|
Level
1 - Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability
to access at the measurement date;
|
|
|
●
|
Level
2 - Inputs other than quoted prices that are observable for the assets or liability either directly or indirectly, including inputs
in markets that are not considered to be active; and
|
|
|
●
|
Level
3 - Inputs that are unobservable.
|
Fair
Value of Financial Instruments
Cash
and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and debt are carried at cost, which management believes
approximates fair value due to the short-term nature of these instruments.
Stock-Based
Compensation
Stock-based
compensation cost for equity awards granted to employees and non-employees is measured at the grant date based on the calculated fair
value of the award using the Black-Scholes option-pricing model, and is recognized as an expense, under the straight-line method, over
the requisite service period (generally the vesting period of the equity grant). If the Company determines that other methods are more
reasonable, or other methods for calculating these assumptions are prescribed by regulators, the fair value calculated for the Company-issued
stock options could change significantly. Higher volatility and longer expected lives would result in an increase to stock-based compensation
expense to employees and non-employees determined at the date of grant.
Income
Taxes
Deferred
income taxes are recognized for temporary differences in the basis of assets and liabilities for financial statement and income tax reporting
that arise due to net operating loss carry forwards, research and development credit carry forwards and from using different methods
and periods to calculate depreciation and amortization, allowance for doubtful accounts, accrued vacation, research and development expenses,
and state taxes. A provision has been made for income taxes due on taxable income and for the deferred taxes on the temporary differences.
The components of the deferred tax asset and liability are individually classified as current and noncurrent based on their characteristics.
Deferred
tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment. Realization of the deferred income tax asset is dependent on generating sufficient taxable income
in future years.
Sales
and Excise Taxes
Sales
and other taxes collected from customers and subsequently remitted to government authorities are recorded as accounts receivable with
corresponding tax payable. These balances are removed from the balance sheet as cash is collected from customers and remitted to the
tax authority.
Warranty
Costs
The
Company’s warranty policy generally provides for one year of coverage against defects and nonperformance within published specifications
for sold analyzers and for the term of the contract for equipment held for lease. The Company accrues for estimated warranty costs in
the period in which the revenue is recognized based on historical data and the Company’s best estimates of analyzer failure rates
and costs to repair.
Accrued
warranty liabilities were approximately $48,000 and $25,000, respectively, for the periods ended June 30, 2021 and December 31, 2020
and are included in accrued expenses and other current liabilities on the balance sheets. Warranty costs were approximately $20,000 and
$31,000 for the three months ended June 30, 2021 and 2020, respectively, and approximately $41,000 and $58,000 for the six months ended
June 30, 2021 and 2020, respectively, and are included in cost of product sales in the statements of operations.
Net Loss Per Share
Basic net loss per share is calculated by dividing
the net loss by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents.
Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and common stock equivalents
outstanding for the period determined using the treasury stock method. For purposes of this calculation, stock options, employee stock
purchase plan rights, restricted stock units, and warrants, and convertible preferred stock are considered to be common stock equivalents
but are not included in the calculations of diluted net loss per share for the periods presented as their effect would be anti-dilutive.
The Company incurred net losses for all periods presented and there were no reconciling items for potentially dilutive securities. More
specifically, at June 30, 2021 and 2020, stock options, warrants, and convertible preferred stock exercisable
or convertible for approximately 13.9
million shares and 16.5
million shares, respectively, were excluded from the calculation of diluted net loss per share as their effect would have been
anti-dilutive. Comprehensive loss is the same as net loss for all periods presented.
Recent
Accounting Pronouncements
In
June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13,
Measurement of Credit Losses on Financial Instruments, which supersedes current guidance by requiring recognition of credit losses when
it is probable that a loss has been incurred. The new standard requires the establishment of an allowance for estimated credit losses
on financial assets including trade and other receivables at each reporting date. The new standard will result in earlier recognition
of allowances for losses on trade and other receivables and other contractual rights to receive cash. In November 2019, the FASB issued
ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842),
which extends the effective date of Topic 326 for certain companies until fiscal years beginning after December 15, 2022. The new standard
will be effective for the Company in the first quarter of the fiscal year beginning January 1, 2023, and early adoption is permitted.
The Company has not completed its review of the impact of this standard on its consolidated financial statements. However, based on the
Company’s history of immaterial credit losses from trade receivables, management does not expect that the adoption of this standard
will have a material effect on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, “Fair
Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement,”
an amendment to the accounting guidance on fair value measurements. The guidance modifies the disclosure requirements on fair value measurements,
including the removal of disclosures of the amount of and reasons for transfers between Level 1 of the fair value hierarchy, the policy
for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. The guidance also adds certain
disclosure requirements related to Level 3 fair value measurements. The guidance is effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2019. The Company adopted ASU No. 2018-13 on April 1, 2020 and the adoption of this guidance
did not have a material impact on its financial statements.
In
August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major
separation models required under prior U.S. GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts
to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU
2020-06 is effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within those fiscal
years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020 and adoption must be as of the
beginning of the Company’s annual fiscal year. The Company is currently evaluating the impact of this standard on its consolidated
financial statements and related disclosures.
Other
accounting standard updates are either not applicable to the Company or are not expected to have a material impact on the Company’s
condensed consolidated financial statements.
NOTE
2 — LIQUIDITY
The
Company has incurred recurring losses from operations and has an accumulated deficit at June 30, 2021, and the Company expects to continue
to incur losses subsequent to the balance sheet date of June 30, 2021. The Company’s reverse recapitalization transaction with
Ritter closed in May 2020 together with an associated new equity capital raise of approximately $4.0 million, and approximately $1.9
million in convertible notes payable were converted into shares of the Company’s capital stock. In July, August and December 2020,
the Company raised an additional $30.0 million through three Securities Purchase Agreements with a single institutional investor (see
Note 10). Based on the Company’s current cash position, currently planned expenditures and level of operations, the Company
believes it has sufficient capital to fund operations for the 12-month period subsequent to the issuance of the interim financial information.
However, there is no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis.
Also, beyond such 12-month period, planned research and development activities, capital expenditures, clinical and pre-clinical testing,
and commercialization activities of the Company’s products are expected to require significant additional financing. Additional
financing may not be available on acceptable terms or at all.
NOTE
3 — INVENTORY, NET
Inventory,
net consisted of the following at June 30, 2021 and December 31, 2020:
SCHEDULE
OF INVENTORY
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Raw materials
|
|
$
|
779,936
|
|
|
$
|
579,765
|
|
|
Work in process
|
|
|
241,677
|
|
|
|
309,826
|
|
|
Finished goods
|
|
|
51,722
|
|
|
|
63,867
|
|
|
Inventory net
|
|
$
|
1,073,335
|
|
|
$
|
953,458
|
|
As of June 30, 2021 and December 31, 2020, total inventory is recorded
net of inventory reserves of $149,000 and $108,000, respectively.
NOTE
4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid
expenses and other current assets consisted of the following at June 30, 2021 and December 31, 2020:
SCHEDULE
OF PREPAID EXPENSES AND OTHER CURRENT ASSETS
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Prepaid insurance
|
|
$
|
1,916,387
|
|
|
$
|
1,307,864
|
|
|
Prepaid manufacturing expenses
|
|
|
49,617
|
|
|
|
1,181,029
|
|
|
Prepaid investor relations expenses
|
|
|
49,127
|
|
|
|
150,000
|
|
|
Other prepaid expenses
|
|
|
18,726
|
|
|
|
40,001
|
|
|
Prepaid expenses and other current assets
|
|
$
|
2,033,857
|
|
|
$
|
2,678,894
|
|
NOTE
5 — PROPERTY AND EQUIPMENT, NET
Property
and equipment, net consisted of the following at June 30, 2021 and December 31, 2020:
SCHEDULE
OF PROPERTY AND EQUIPMENT
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Machinery and equipment
|
|
$
|
2,409,946
|
|
|
$
|
2,401,470
|
|
|
Construction in progress–equipment
|
|
|
94,717
|
|
|
|
104,400
|
|
|
Computer equipment
|
|
|
472,094
|
|
|
|
443,865
|
|
|
Leasehold improvements
|
|
|
327,894
|
|
|
|
321,033
|
|
|
Molds and tooling
|
|
|
260,002
|
|
|
|
260,002
|
|
|
Office furniture and equipment
|
|
|
143,013
|
|
|
|
138,699
|
|
|
Property and equipment, gross
|
|
|
3,707,666
|
|
|
|
3,669,469
|
|
|
Less Accumulated depreciation
|
|
|
(3,454,405
|
)
|
|
|
(3,422,146
|
)
|
|
Property and equipment, net
|
|
$
|
253,261
|
|
|
$
|
247,323
|
|
Depreciation
expense relating to property and equipment was approximately $17,000 and $9,000 for the three months ended June 30, 2021 and 2020, respectively,
and $32,000 and $18,000 for the six months ended June 30, 2021 and 2020, respectively.
NOTE
6 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued
expenses and other current liabilities consisted of the following at June 30, 2021 and December 31, 2020:
SCHEDULE
OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Board compensation
|
|
$
|
50,776
|
|
|
$
|
15,091
|
|
|
Vacation
|
|
|
290,587
|
|
|
|
230,457
|
|
|
Royalties
|
|
|
1,078
|
|
|
|
491
|
|
|
Research and development
|
|
|
744,640
|
|
|
|
237,504
|
|
|
Professional fees
|
|
|
271,377
|
|
|
|
58,261
|
|
|
Warranty costs
|
|
|
47,854
|
|
|
|
24,871
|
|
|
Payroll
|
|
|
176,275
|
|
|
|
4,566
|
|
|
Patent and license fees
|
|
|
—
|
|
|
|
7,204
|
|
|
Franchise, sales and use taxes
|
|
|
21,130
|
|
|
|
30,353
|
|
|
Income taxes
|
|
|
2,261
|
|
|
|
3,326
|
|
|
Other
|
|
|
317,730
|
|
|
|
134,614
|
|
|
Accrued expenses and
other current liabilities
|
|
$
|
1,923,708
|
|
|
$
|
746,738
|
|
NOTE
7 – WARRANT LIABILITIES
In
2004, the Company issued warrants to various investors and brokers for the purchase of Series C preferred stock in connection with a
private placement (the “Series C Warrants”). The Series C Warrants were subsequently extended and, upon closing of the reverse
recapitalization transaction with Ritter, exchanged for warrants to purchase common stock of the Company, pursuant to the Series C Warrant
terms as adjusted. The Series C Warrants were classified as liabilities, but had minimal fair value prior to the merger with Ritter.
In
exchange for the Series C Warrants, upon closing of the merger with Ritter, the holders received warrants to purchase an aggregate of
4,713,490
shares of the Company’s common stock at
$0.72
per share, subject to adjustment. As of June
30, 2021, the warrants received in exchange for the Series C Warrants have remaining terms ranging from 2.4
to 3.0
years. The warrants were determined to be
liability-classified pursuant to the guidance in ASC 480 and ASC 815-40, resulting from inclusion of a leveraged ratchet provision for
subsequent dilutive issuances.
The
following table summarizes the activity in the warrants received in exchange for the Series C Warrants for the six months ended June
30, 2021:
SCHEDULE OF WARRANTS ACTIVITY
|
|
|
Common Stock Warrants (received in exchange for the
Series C Warrants)
|
|
|
|
|
Shares
|
|
|
Weighted–
Average
Exercise
Price
|
|
|
Range of Exercise
Price
|
|
|
Weighted–
Average
Remaining
Life (Years)
|
|
|
Total outstanding – December 31, 2020
|
|
|
3,378,596
|
|
|
$
|
0.72
|
|
|
|
|
|
|
|
|
|
|
Common stock warrants received in exchange for Series C preferred stock warrants upon reverse recapitalization
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(542,737
|
)
|
|
|
0.72
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(36,097
|
)
|
|
|
0.72
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total outstanding – June 30, 2021
|
|
|
2,799,762
|
|
|
$
|
0.72
|
|
|
|
|
|
|
|
|
|
|
Exercisable
|
|
|
2,799,762
|
|
|
$
|
0.72
|
|
|
$
|
0.72
|
|
|
|
2.5
|
|
Of
the 542,737 shares issued upon the exercise of warrants (previously received in exchange for the Series C Warrants) during the six months
ended June 30, 2021, 156,861 shares were issued upon net-exercises rather than upon exercises for cash.
The
following table summarizes the activity in the warrants received in exchange for the Series C Warrants activity for the six months ended
June 30, 2020:
The
following table presents the Company’s fair value hierarchy for its warrant liabilities (all of which arise under the warrants
received in exchange for the Series C Warrants) measured at fair value on a recurring basis using Level 3 inputs as of June 30, 2021:
SCHEDULE OF FAIR VALUE HIERARCHY FOR WARRANT LIABILITIES
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
Prices for
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
|
|
Warrant liabilities
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
|
Balance as of December 31. 2020
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,310,100
|
|
|
$
|
8,310,100
|
|
|
Balance as of June 30, 2021
|
|
|
—
|
|
|
|
—
|
|
|
$
|
4,112,100
|
|
|
$
|
4,112,100
|
|
There
were no transfers of financial assets or liabilities between category levels for the three and six months ended June 30, 2021.
During
the six months ended June 30, 2021 the Company recorded $4.2
million gain
in other income because the fair value of the
warrant liabilities declined to $4.1
million from $8.3
million at December 31, 2020, primarily due to
a reduction in the stock price and to warrant exercises. For the six months ended June 30, 2020, change in fair value of warrant liabilities
was $16.2
million due to the reverse recapitalization transaction.
The
value of the warrant liabilities was based on a valuation received from an independent valuation firm determined using a Monte-Carlo
simulation. For volatility, the Company considers comparable public companies as a basis for its expected volatility to calculate the
fair value of common stock warrants and transitions to its own volatility as the Company develops sufficient appropriate history as a
public company. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected term of the common
stock warrant. The Company uses an expected dividend yield of zero based on the fact that the Company has never paid cash dividends and
does not expect to pay cash dividends in the foreseeable future. Any significant changes in the inputs may result in significantly higher
or lower fair value measurements.
The
following table shows the range of assumptions used in estimating the fair value of warrant liabilities as of June 30, 2021 and December
31, 2020:
SCHEDULE
OF ASSUMPTIONS OF WARRANT LIABILITIES
|
|
|
June
30, 2021
|
|
|
December
31, 2020
|
|
|
|
|
Range
|
|
|
Risk-free
interest rate
|
|
|
0.34%
— 0.46
|
%
|
|
|
0.17%
— 0.22
|
%
|
|
Expected
volatility (peer group)
|
|
|
82.00
— 83.00
|
%
|
|
|
82.00
|
%
|
|
Term
of warrants (in years)
|
|
|
2.41
— 2.99
|
|
|
|
2.90
— 3.49
|
|
|
Expected
dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
NOTE
8 — LEASES
The
Company leases its facilities under a long-term operating lease agreement expiring in October 2022. The tables below show the operating
lease right-of-use assets and operating lease liabilities as of December 31, 2020 and June 30, 2021, including the changes during the
periods:
SCHEDULE
OF OPERATING LEASE RIGHT OF USE ASSETS AND OPERATING LEASE LIABILITIES
|
|
|
Operating lease
right-of-use assets
|
|
|
Net right-of-use assets at December 31, 2020
|
|
|
430,795
|
|
|
Less amortization of operating lease right-of-use assets
|
|
|
(109,719
|
)
|
|
Operating lease right-of-use assets at June 30, 2021
|
|
$
|
321,076
|
|
|
|
|
Operating lease
liabilities
|
|
|
At December 31, 2020
|
|
$
|
491,565
|
|
|
Less principal payments on operating lease liabilities
|
|
|
(122,780
|
)
|
|
Operating lease liabilities at June 30, 2021
|
|
|
368,785
|
|
|
Less non-current portion
|
|
|
(98,145
|
)
|
|
Current portion at June 30, 2021
|
|
$
|
270,640
|
|
As
of June 30, 2021, the Company’s operating leases have a weighted-average remaining lease term of 1.3 years and a weighted-average
discount rate of 8.9%.
As
of June 30, 2021, future minimum payments during the next five fiscal years and thereafter are as follows:
SCHEDULE
OF MATURITIES OF OPERATING LEASE LIABILITIES
|
Year Ending December 31,
|
|
Amount
|
|
|
2021 (six months)
|
|
$
|
145,958
|
|
|
2022
|
|
|
246,650
|
|
|
Total
|
|
|
392,608
|
|
|
Less present value discount
|
|
|
(23,823
|
)
|
|
Operating lease liabilities
|
|
$
|
368,785
|
|
Total
lease expense was approximately $86,000 for each of the three month periods ended June 30, 2021 and 2020, and approximately $172,000
and $171,000, respectively, for the six month periods ended June 30, 2021 and 2020. Lease expense was recorded in cost of product sales,
general and administrative expenses, research and development and sales and marketing expenses.
NOTE
9 — RESEARCH AND LICENSE AGREEMENTS
The
University of Louisville Research Foundation
Between
June 2018 and September 2020, the Company entered into license and sponsored research agreements with the University of Louisville Research
Foundation (“ULRF”) for QN-247, a novel aptamer-based compound that has shown promise as an anticancer drug. Under the agreements,
the Company will take over development, regulatory approval and commercialization of the compound from ULRF and is responsible for maintenance
of the related intellectual property portfolio. In return, ULRF received a $50,000 convertible promissory note in payment of an upfront
license fee, which was subsequently converted into the Company’s common stock, and the Company agreed to reimburse ULRF for sponsored
research expenses of up to $805,000 and prior patent costs of up to $200,000. In addition, the Company agreed to pay ULRF (i) royalties,
on patent-covered net sales associated with the commercialization of anti-nucleolin agent-conjugated nanoparticles, of 4% (on net sales
up to a cumulative $250,000,000) or 5% (on net sales above a cumulative $250,000,000), until expiration of the last to expire of the
licensed patents, (ii) 30% to 50% of any non-royalty sublicensee income received (50% for sublicenses granted in the first two years
of the ULRF license agreement, 40% for sublicenses granted in the third or fourth years of the ULRF license agreement, and 30% for sublicenses
granted in the fifth year of the ULRF license agreement or thereafter), (iii) reimbursements for ongoing costs associated with the preparation,
filing, prosecution and maintenance of licensed patents, incurred prior to June 2018, and (iv) payments ranging from $100,000 to $5,000,000
upon the achievement of certain regulatory and commercial milestones. Milestone payments for the first therapeutic indication would be
$100,000 for first dosing in a Phase 1 clinical trial, $200,000 for first dosing in a Phase 2 clinical trial, $350,000 for first dosing
in a Phase 3 clinical trial, $500,000 for regulatory marketing approval and $5,000,000 upon achieving a cumulative $500,000,000 of Licensed
Product sales; the Company would also pay another $500,000 milestone payment for any additional regulatory marketing approval for each
additional therapeutic (or diagnostic) indication. The Company also must pay ULRF shortfall payments if the total amounts actually paid
with respect to royalties and non-royalty sublicensee income for any year is less than the applicable annual minimum (ranging from $10,000
to $50,000) for such year.
Sponsored
research expenses related to these agreements for the three months ended June 30, 2021 and 2020 were approximately $89,000 and $2,000,
and for the six months ended June 30, 2021 and 2020 were approximately $152,000 and $2,000, respectively, and these amounts are recorded
in research and development expenses in the statements of operations. Minimum annual royalties of $0 for each period related to these
agreements are included in research and development expenses in the statements of operations for the three months ended June 30, 2021
and 2020, respectively, and approximately $0 and $10,000 related to these agreements are included in research and development expenses
in the statements of operations for the six months ended June 30, 2021 and 2020, respectively. License costs were approximately $17,000
and $0 related to these agreements for the three months ended June 30, 2021 and 2020, respectively, and approximately $53,000 and $0
related to these agreements for the six months ended June 30, 2021 and 2020, respectively, and are included in research and development
expenses in the statements of operations.
In
March 2019, the Company entered into a sponsored research agreement and an option for a license agreement with ULRF for development of
several small-molecule RAS interaction inhibitor drug candidates. Under the terms of this agreement, the Company will reimburse ULRF
for sponsored research expenses of up to $693,000 for this program. In February 2021, the Company extended the term of this agreement
for an additional 18 months (expires July 2022) and increased the amount that the Company will reimburse ULRF for sponsored research
expenses from $693,000 to approximately $1.4 million. In July 2020, the Company entered into an exclusive license agreement with ULRF
for RAS interaction inhibitor drug candidates. Under the agreement, the Company will take over development, regulatory approval and commercialization
of the candidates from ULRF and is responsible for maintenance of the related intellectual property portfolio. In return, ULRF received
approximately $112,000 for an upfront license fee and reimbursement of prior patent costs. In addition, the Company has agreed to pay
ULRF (i) royalties, on patent-covered net sales associated with the commercialization, of 4% (on net sales up to a cumulative $250,000,000)
or 5% (on net sales above a cumulative $250,000,000), until expiration of the licensed patent, and 2.5% (on net sales for any sales not
covered by Licensed Patents), (ii) 30% to 50% of any non-royalty sublicensee income received (50% for sublicenses granted in the first
two years of the ULRF license agreement, 40% for sublicenses granted in the third or fourth years of the ULRF license agreement, and
30% for sublicenses granted in the fifth year of the ULRF license agreement or thereafter), (iii) reimbursements for ongoing costs associated
with the preparation, filing, prosecution and maintenance of licensed patents, incurred prior to July 2020, and (iv) payments ranging
from $50,000 to $5,000,000 upon the achievement of certain regulatory and commercial milestones. Milestone payments for the first therapeutic
indication would be $50,000 for first dosing in a Phase 1 clinical trial, $100,000 for first dosing in a Phase 2 clinical trial, $150,000
for first dosing in a Phase 3 clinical trial, $300,000 for regulatory marketing approval and $5,000,000 upon achieving a cumulative $500,000,000
of Licensed Product sales. The Company also must pay ULRF shortfall payments if the total amounts actually paid with respect to royalties
and non-royalty sublicensee income for any year is less than the applicable annual minimum (ranging from $20,000 to $100,000) for such
year.
Sponsored
research expenses related to these agreements for the three months ended June 30, 2021 and 2020 were approximately $99,000 and $139,000,
respectively, and for the six months ended June 30, 2021 and 2020 were approximately $206,000 and $247,000, respectively, and are recorded
in research and development expenses in the statements of operations. License costs related to these agreements for the three months
ended June 30, 2021 and 2020 were approximately $0 and $0, respectively, and for the six months ended June 30, 2021 and 2020 were approximately
$40,000 and $0, respectively, and are included in research and development expenses in the statements of operations.
In
June 2020, the Company entered into an exclusive license agreement with ULRF for its intellectual property in the use of QN-165 as a
treatment for COVID-19. Under the agreement, the Company will take over development, regulatory approval and commercialization of the
compound (for such use) from ULRF and is responsible for maintenance of the related intellectual property portfolio. In return, ULRF
received approximately $24,000 for an upfront license fee and reimbursement of prior patent costs. In addition, the Company was required
to enter into a separate sponsored research agreement with ULRF (for QN-165 as a treatment for COVID-19) for at least $250,000. In November
2020, the Company executed a sponsored research agreement with ULRF (for QN-165 as a treatment for COVID-19) supporting up to approximately
$430,000 in research which satisfied this requirement.
In
addition, the Company has agreed to pay ULRF (i) royalties, on patent-covered net sales associated with the commercialization of QN-165
as a treatment for COVID-19, of 4% (on net sales up to a cumulative $250,000,000) or 5% (on net sales above a cumulative $250,000,000),
until expiration of the licensed patents, and 2.5% (on net sales for any sales not covered by Licensed Patents), (ii) 30% to 50% of any
non-royalty sublicensee income received (50% for sublicenses granted in the first two years of the ULRF license agreement, 40% for sublicenses
granted in the third or fourth years of the ULRF license agreement, and 30% for sublicenses granted in the fifth year of the ULRF license
agreement or thereafter), (iii) reimbursements for ongoing costs associated with the preparation, filing, prosecution and maintenance
of licensed patents, incurred prior to June 2020, and (iv) payments ranging from $50,000 to $5,000,000 upon the achievement of certain
regulatory and commercial milestones. Milestone payments would be $50,000 for first dosing in a Phase 1 clinical trial, $100,000 for
first dosing in a Phase 2 clinical trial, $150,000 for first dosing in a Phase 3 clinical trial, $300,000 for regulatory marketing approval
and $5,000,000 upon achieving a cumulative $500,000,000 of Licensed Product sales. The Company also must pay ULRF shortfall payments
if the total amounts actually paid with respect to royalties and non-royalty sublicensee income for any year is less than the applicable
annual minimum (ranging from $5,000 to $50,000) for such year.
Sponsored
research expenses related to these agreements for the three months ended June 30, 2021 and 2020 were approximately $25,000 and $0, respectively,
and for the six months ended June 30, 2021 and 2020 were approximately $94,000 and $0, respectively, and are recorded in research and
development expenses in the statements of operations. License costs related to these agreements for the three months ended June 30, 2021
and 2020 were approximately $16,000 and $0, respectively, and for the six months ended June 30, 2021 and 2020 were approximately
$16,000 and $0, respectively.
Advanced
Cancer Therapeutics
In
December 2018, the Company entered into a license agreement with Advanced Cancer Therapeutics, LLC (“ACT”), granting the
Company exclusive rights to develop and commercialize QN-165, an aptamer-based drug candidate. In return, ACT received a $25,000 convertible
promissory note in payment of an upfront license fee, which was subsequently converted into the Company’s common stock. In addition,
the Company agreed to pay ACT (i) royalties, on net sales associated with the commercialization of QN-165, of 2% (only if patent-covered
and only on net sales above a cumulative $3,000,000) or 1% (if not patent-covered, but only on net sales above a cumulative $3,000,000),
until the 15th anniversary of the ACT license agreement and (ii) milestone payments of $100,000 for the Company raising a cumulative
total of $2,000,000 in new equity financing after the date of the ACT license agreement, $100,000 upon any first QN-165-based licensed
product receiving the CE Mark or similar FDA status, and $500,000 upon cumulative worldwide QN-165-based licensed product net sales reaching
$3,000,000. For the three months ended June 30, 2021 and 2020, there were no license costs and for the six months ended June 30, 2021
and 2020, there were approximately $2,000 and $0, respectively, in license costs related to this agreement.
Prediction
Biosciences
In
November 2015, the Company entered into a long-term development and supply agreement with Prediction Biosciences SAS to develop and manufacture
diagnostic tests for use in the stroke point-of-care market. The Company recognizes development revenue and product sales over the performance
period of the contract. For the three months ended June 30, 2021 and 2020 there was $0 for each period, and for the six months ended
June 30, 2021 and 2020, there was $0 and $45,000, respectively, in collaborative research revenue related to this agreement.
Sekisui
Diagnostics
During
the year ended March 31, 2018, the Company extended a strategic partnership entered into in May 2016 with Sekisui Diagnostics, LLC (“Sekisui”)
until May 2022. The Company appointed Sekisui as its diagnostics commercial partner and exclusive worldwide distributor with the exception
of certain customer accounts retained by Qualigen. The agreement contains a right of first refusal for Sekisui against any potential
acquisition of the Company until May 2022.
There
were product sales to Sekisui of approximately $701,000 and $420,000 for the three months ended June 30, 2021 and 2020, and product sales
of approximately $1.7 million and $1.4 million related to this agreement, for the six months ended June 30, 2021 and 2020.
Yi
Xin
In
October 2020, the Company entered into a Technology Transfer Agreement with Yi Xin Zhen Duan Jishu (Suzhou) Ltd. (“Yi Xin”),
of Suzhou, China, for Yi Xin to develop, manufacture and sell new generations of diagnostic test systems based on the Company’s
core FastPack technology. In addition, the Technology Transfer Agreement authorized Yi Xin to manufacture and sell the Company’s
current generations of FastPack System diagnostic products (1.0, IP and PRO) in China.
Under
the Technology Transfer Agreement, the Company received net cash payments of $250,000 in the final quarter of the year ended December
31, 2020, classified as deferred revenue on the December 31, 2020 balance sheet, and a cash payment of $420,000 during the first quarter
of 2021. The Company will also receive low- to mid-single-digit royalties on any future new-generations and current-generations product
sales by Yi Xin. Of these amounts, the Company recognized approximately $38,000 in product sales and $479,000 in license revenue included
in the statement of operations for the six months ended June 30, 2021. On the balance sheet at June 30, 2021, the Company had
deferred revenue of approximately $153,000 related to this agreement. The Company provided technology transfer and patent/know-how
license rights to facilitate Yi Xin’s development and commercialization.
The
Company gave Yi Xin the exclusive rights for China – which is a market the Company has not otherwise entered – both for Yi
Xin’s new generations of FastPack-based products and for Yi Xin-manufactured versions of the Company’s existing FastPack
product lines. Yi Xin will also have the right to sell its new generations of FastPack-based diagnostic test systems throughout the world
(but not to or toward current customers of the Company’s existing generations of FastPack products); any such non-China sales would,
until Spring 2022,
need to be through Sekisui. In addition, after Spring 2022, Yi Xin will have the right to sell Yi Xin-manufactured versions of existing
FastPack 1.0, IP and PRO product lines worldwide (other than in the United States and other than to or toward current non-US customers
of those products). Also, after Spring 2022,
Yi Xin will have the right to buy Company-manufactured FastPack 1.0, IP and PRO products from the Company at distributor prices for resale
in and for the United States (but not to or toward current US customers of those products); the Company did not license Yi Xin to sell
in the United States market any Yi Xin-manufactured versions of those legacy FastPack 1.0, IP and PRO product lines, even after Spring
2022. In the Technology Transfer Agreement, the
Company confirmed that it would not, after Spring 2022,
seek new FastPack customers outside the United States.
STA
Pharmaceutical
In
November 2020, the Company entered into a contract with STA Pharmaceutical Co., Ltd., a subsidiary of WuXi AppTec, for GMP production
of QN-165, the Company’s lead drug candidate for the treatment of COVID-19 and other viral diseases, for potential clinical trials
in 2021. In connection with this agreement, the Company paid an upfront deposit of approximately $1.1 million which was classified as
prepaid expenses on the December 31, 2020 balance sheet date, and all of which was included in research and development expenses in the
statement of operations for the six months ended June 30, 2021.
Research
and development expenses related to this agreement for the three months ended June 30, 2021 and 2020 were approximately $1.9 million
and $0, respectively, and for the six months ended June 30, 2021 and 2020 were approximately $3.1 million and $0, respectively, and are
recorded in research and development expenses in the statements of operations.
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:
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
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
NOTE
11 — RELATED PARTY TRANSACTIONS
In
October 2017, Sekisui purchased all outstanding shares of the Company’s Series D and Series D-1 preferred stock from Gen-Probe
Incorporated. As such, Sekisui became a related party as of October 2017. These Series D and Series D-1 preferred stock shares were converted
into 1,980,233 shares of the Company’s common stock in connection with the reverse recapitalization transaction in May 2020. During
the nine-months transition period ended December 31, 2020, Sekisui ceased to be a related party as to the Company. In the attached financial
statements, information for 2020 periods and dates is presented without distinct “related party” treatment for items pertaining
to Sekisui.
NOTE
12 — SUBSEQUENT EVENTS
Management
has evaluated subsequent events pursuant to the requirements of ASC Topic 855, Subsequent Events, from the balance sheet date
through the date the financial statements were available to be issued, and has determined that there are no material subsequent events
that require disclosure in these financial statements, except that effective July 1, 2021, the Company and Sekisui amended the scheduled
termination date of the Sekisui Distribution and Development Agreement (see Note 9) to be March 31, 2022 instead of May 1, 2022, and by virtue
of a 2020 Plan amendment approved by the Company’s stockholders on August 9, 2021, the number of shares of common stock available
for issuance under the 2020 Plan was increased by 3,500,000.
