UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31,quarterly period ended June 30, 2020

OROr

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Periodtransition period from _____________ to _____________

Commission File Number: 001-37428

RITTER PHARMACEUTICALS, INC.Qualigen Therapeutics, Inc.

(Exact name of Registrantregistrant as specified in its Charter)charter)

1880 Century Park East, Suite 1000

Los Angeles, CA 900672042 Corte Del Nogal, Carlsbad, California 92011

(Address and zip code of principal executive offices) (Zip Code)

(760) 918-9165

(Registrant’s Telephone Number, Including Area Code:(310) 203-1000telephone number, including area code)

n/a

(Former name or former address, if changed since last report)

Securities Registered Pursuantregistered pursuant to Section 12(b) of the Exchange Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] NoYes [  ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] NoYes [  ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the Registrantregistrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] Yes [X] No [X]

As of April 27,August 7, 2020, there were 46,152,95921,028,837 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

QUALIGEN THERAPEUTICS, INC.

RITTER PHARMACEUTICALS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED BALANCE SHEETS

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

QUALIGEN THERAPEUTICS, INC.

RITTER PHARMACEUTICALS, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(Unaudited

(Unaudited))

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

RITTER PHARMACEUTICALS,QUALIGEN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYDEFICIT

(Unaudited)

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

RITTER PHARMACEUTICALS,QUALIGEN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

QUALIGEN THERAPEUTICS, INC.

RITTER PHARMACEUTICALS, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS(Unaudited)

NOTE 1 -— ORGANIZATION AND PRINCIPAL ACTIVITIESSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Qualigen, Inc., the predecessor of and now a subsidiary of Qualigen Therapeutics, Inc., was incorporated in Minnesota in 1996 to design, develop, manufacture and sell point-of-care quantitative immunoassay diagnostic products for use in physician offices and other point-of-care settings worldwide. Qualigen, Inc. was reincorporated in Delaware in 1999. Qualigen Therapeutics, Inc. (the “Company”) operates in one business segment. In May 2020, Qualigen, Inc. completed a reverse recapitalization transaction with Ritter Pharmaceuticals, Inc. (“Ritter” or the “Company”) is a Delaware corporation headquartered in Los Angeles, California. The Companyand Ritter was formedrenamed Qualigen Therapeutics, Inc., recognized as a Nevada limited liability companyreverse recapitalization. All shares of Qualigen, Inc.’s capital stock were exchanged for Qualigen Therapeutics’ capital stocks in March 2004,the merger. Ritter/Qualigen Therapeutics common stock, which was previously traded on the Nasdaq Capital Market under the name Ritter Natural Sciences, LLC, and converted intoticker symbol “RTTR,” commenced trading on the Nasdaq Capital Market, on a Delaware corporation in September 2008.post-reverse stock split adjusted basis, under the ticker symbol “QLGN” on May 26, 2020.

Since its inception, Ritter has focused on the development of therapeutic products that modulate the gut microbiome to treat gastrointestinal diseases. The Company’s only product candidate, RP-G28, is an orally administered, high purity galacto-oligosaccharide (“GOS”), for the treatment of lactose intolerance (“LI”), a condition that affects millions of people worldwide. RP-G28 is designed to selectively stimulate the growth of lactose-metabolizing bacteria in the colon, thereby effectively adapting the gut microbiome to assist in digesting lactose (the sugar found in milk) that reaches the large intestine.

On October 7, 2019, after previously announcing that its Phase 3 clinical trial of RP-G28 for LI failed to demonstrate statistical significance in its pre-specified primary and secondary endpoints, the Company announced publicly that it had engaged Alliance Global Partners/A.G.P (“AGP”) as a financial advisor to explore and evaluate potential strategic alternatives, as it continued to analyze the results of the trial to better understand the data and clinical outcome to assess a path forward for RP-G28. All further development efforts for RP-G28 have been suspended, until such time as the Company determines a path forward. The Company is continuing to explore monetization opportunities for RP-G28 for the treatment of lactose intolerance, including exploring a variety of commercial routes.

On January 15, 2020, Ritter entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Qualigen, Inc. (“Qualigen”), pursuantwas determined to whichbe the accounting acquirer in a wholly-owned subsidiary of the Company will merge with and into Qualigen, with Qualigen surviving as a wholly-owned subsidiary of Ritter Pharmaceuticals, Inc.

If the merger is consummated, the combined company does not intend to continue the clinical development of RP-G28. Pursuant toreverse recapitalization based upon the terms of the Merger Agreement, at the Effective Time (as definedmerger and other factors. All references to financial figures of “the Company” presented in the Merger Agreement), the Company and John Beck, the Company’s Chief Financial Officer, acting as the initial contingent value right (“CVR”) holders’ representativeaccompanying condensed consolidated financial statements and in his capacity as a consultant to Ritter, will enter into a Contingent Value Rights Agreement (the “CVR Agreement”), pursuant to which, each stockholder of recordthese Notes as of immediately priorMarch 31, 2020 and for the three-months period ended June 30, 2019 are those of Qualigen, Inc.

Basis of Presentation

The Company’s unaudited interim condensed consolidated financial statements included herein have been prepared in accordance with the instructions to the Effective Time (after giving effect to the exerciseForm 10-Q and Article 8 of any outstanding stock options or warrantsRegulation S-X and the conversionrules and regulations of any outstanding preferred stock, but not to be adjusted for any reverse stock split to be effected in connection with the merger) will receive one CVR for each share of common stock held by such stockholder, entitling the holder to receive the net proceeds, if any, from any sale, license, transfer, spin-off or other monetizing event of all or any part of the Company’s RP-G28 intellectual property or technology (a “Legacy Monetization”) that is entered into during the period beginning on the date the Merger Agreement was signed and ending on the third anniversary of the closing date of the merger. Under the CVR Agreement, the combined company agreed to commit up to $350,000 (subject to reduction pursuant to the terms of the Merger Agreement) for certain expenses to be incurred by the Company in pursuing and closing any Legacy Monetization. The CVRs will not be transferable by the holders of CVRs (“CVR Holders”), except in certain limited circumstances, will not be certificated or evidenced by any instrument, will not accrue interest and will not be registered with the Securities and Exchange Commission (the “SEC”) or listed for trading on any exchange. The CVRs will terminate on the tenth anniversary of the Effective Time (the “CVR Termination Date”(“SEC”). No payments with respect to the CVRs will be payableCertain information and footnote disclosures normally included in respect of any Legacy Monetization proceeds actually received after the CVR Termination Date by the Company. From and after the CVR Termination Date, any further proceeds received by the Company arising from any Legacy Monetization will be retained by Ritter and will not be distributed to the CVR Holders.

The Company may not be successful in completing the merger. If the merger is not completed, Ritter may seek to pursue the development and commercialization of RP-G28 as either a prescription drug, OTC product or dietary supplement for the consumer healthcare industry, which would, in any case, require significant additional funding. If Ritter is unable to obtain funding for the development of RP-G28, whether through potential collaborative, partnering or other strategic arrangements or otherwise, it will likely be required to cease operations

The Company currently operates in one business segment focusing on the potential future development and commercialization of RP-G28. The Company is not organized by market and is managed and operated as one business. A single management team reports to the chief operating decision maker, the Chief Executive Officer. The Company does not currently operate any separate lines of business or separate business entities.

NOTE 2 - BASIS OF PRESENTATION

The accompanying interim period unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicablehave been condensed or omitted pursuant to such rules and regulations ofregulations. In management’s opinion, the SEC regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. However, in the opinion of management, allaccompanying statements reflect adjustments consisting of normal recurring adjustments considered necessary for a fair presentation ofto present fairly the financial position, and results of operations, have been included and management believes the disclosures that are made arecash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading.

Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the footnotes. The condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended March 31, 2020 included on Form 8-K/A, as filed with the SEC on June 29, 2020. The accompanying condensed balance sheet at DecemberMarch 31, 20192020 has been derived from the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC onbalance sheet at March 31, 2020 and amended on April 24, 2020 (as amended,contained in the “2019 Annual Report”), but does not include allabove referenced Form 8-K/A. Results of the information and footnotes required by GAAPoperations for complete financial statements.

The results for the three months ended March 31, 2020interim periods are not necessarily indicative of the results expectedof operations for thea full fiscal year or any other period. The accompanying interim period unaudited condensed financial statements and related financial information included in this Quarterly Report on Form 10-Q (“Quarterly Report”) should be read in conjunction with the audited financial statements and notes thereto included in the Company’s 2019 Annual Report.

All common share amounts and per share amounts have been adjusted to reflect a 1-for-10 reverse stock split of the Company’s common stock effected on March 23, 2018.year.

Going ConcernAccounting Estimates

Management uses estimates and Liquidityassumptions in preparing its condensed consolidated financial statements in accordance with U.S. GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The most significant estimates relate to amortization and depreciation, deferred revenue, inventory reserves, allowances for doubtful accounts and returns, and warranty costs. Actual results could vary from the estimates that were used.

Cash and Cash Equivalents

The accompanying condensed interim period unaudited financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realizationconsiders all highly liquid investments purchased with an initial maturity of assets90 days or less and satisfaction of liabilities in the normal course of business.money market funds to be cash equivalents.

The Company maintains its cash and cash equivalents in bank deposits which at times may exceed federally insured limits. The Company has not generatedexperienced any product revenuelosses in such accounts and hasbelieves it is not achieved profitable operations. Forexposed to any significant credit risks on cash and cash equivalents.

Restricted Cash

Restricted cash includes funds that are held in a bank account that are restricted as to withdrawal until certain conditions are met pursuant to Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Company’s condensed consolidated statements of cash flows for the three months ended June 30, 2020 and 2019:

Inventory, Net

Inventory is recorded at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. The Company reviews the components of its inventory on a periodic basis for excess or obsolete inventory, and records specific reserves for identified items.

Long-Lived Assets

The Company assesses potential impairments to its long-lived assets when there is evidence that events or changes in circumstances indicate that assets may not be recoverable. An impairment loss would be recognized when the sum of the expected future undiscounted cash flows is less than the carrying amount of the assets. The amount of impairment loss, if any, will generally be measured as the difference between the net book value of the assets and their estimated fair values. During the three months ended June 30, 2020 and year ended March 31, 2020, the Company had a net loss of approximately $1.7 million and had net cash used in operating activities of approximately $1.2 million. At March 31, 2020, the Company had net working capital of approximately $4.5 million, an accumulated deficit of approximately $82.0 million, and cash and cash equivalents of approximately $6.0 million. There is no assurance that profitable operations will ever be achieved, and, if achieved, could be sustained on a continuing basis. In addition, potential future development activities, clinical and pre-clinical testing, and commercialization of the Company’s products will require significant financing. If the merger is not consummated, the Company may be forced to cease operations if the Company cannot raise the cash to continue operations. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern.such impairment losses have been recorded.

Since inception, the operationsAccounts Receivable, Net

The Company grants credit to domestic physicians, clinics, and distributors. The Company performs ongoing credit evaluations of the Company have been fundedits customers and generally requires no collateral. Customers can purchase certain products through the sale of common shares, preferred shares, warrants, warrant exercise proceeds and convertible debt. Management cannot be certain that additional funding will be available on acceptable terms, or at all. To the extenta financing agreement that the Company raises additional fundshas with an outside leasing company. Under the agreement, the leasing company evaluates the credit worthiness of the customer. Upon acceptance of the product by issuing equity securities, the Company’s stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that could impactcustomer, the Company’s abilityleasing company remits payment to conduct business. If the Company at a discount. This financing arrangement is not ablewithout recourse to raise additional capital when requiredthe Company.

The Company provides an allowance for doubtful accounts and returns equal to the estimated uncollectible amounts or expected returns. The Company’s estimates are based on acceptable terms,historical collections and returns and a review of the current status of trade accounts receivable.

Accounts receivable is comprised of the following at:

Research and Development

The Company may needexpenses research and development costs as incurred.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expense was approximately $9,000 and $1,000, respectively, for the three months ended June 30, 2020 and 2019.

Shipping and Handling Costs

The Company includes shipping and handling fees billed to (i) significantly delay, scale back or discontinuecustomers in net sales. Shipping and handling costs associated with inbound and outbound freight are generally recorded in cost of sales which totaled approximately $26,000 and $27,000, respectively, for the three months ended June 30, 2020 and 2019. Other shipping and handling costs included in general and administrative, research and development, and/or commercialization of one or more product candidates; (ii) seek collaboratorsand sales and marketing expenses totaled approximately $4,000 and $1,000 for product candidates at an earlier stage than otherwise would be desirablethe three months ended June 30, 2020 and on terms that are less favorable than might otherwise be available; or (iii) relinquish or otherwise dispose of rights to technologies, product candidates or products that the Company would otherwise seek to develop or commercialize.2019, respectively.

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Risks Related to COVID-19 PandemicRevenue from Contracts with Customers

The recent outbreak of COVID-19 originated in Wuhan, China, in December 2019 and has since spread to multiple countries, including the United States and several European countries. On March 11,Effective April 1, 2020, the World Health Organization declaredCompany adopted Accounting Standard Codification (“ASC”) Topic 606 (“ASC 606”), Revenue from Contracts with Customers, using the outbreak a pandemic.modified retrospective approach. The COVID-19 pandemic is affecting the United States and global economies and may affect the Company’s operations and thoseadoption of third parties on which the Company relies. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce the Company’s ability to access capital, which could negatively impact the Company’s short-term and long-term liquidity and the Company’s and Qualigen’s ability to complete the Plan of Merger on a timely basis or at all. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. The Company doesASC 606 did not yet know the full extent of potential delays or impacts on its business, financing or other activities or on healthcare systems or the global economy as a whole. However, these effects could have a material impact on the Company’s liquidity, capital resources, operationsmeasurement or on the recognition of revenue of contracts for which all revenue had not been recognized as of April 1, 2020. Therefore, no cumulative adjustment has been made to the opening balance of accumulated deficit at April 1, 2020. The comparative information has not been restated and business and thosecontinues to be reported under the accounting standards in effect for the periods presented.

The core principle of the third partiesnew revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

Step 1: Identify the contract with the customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when the company satisfies a performance obligation

The Company places its medical diagnostic equipment, FastPack System analyzers and accessories, at customer sites under loan agreements as well as generating revenue from direct sales to customers and sells disposable products for use with the equipment. In instances where the equipment is loaned to the customer, the customer is required to make minimum purchases of disposable products. The Company generates revenue from selling disposable products used with the FastPack System. Disposable products include reagent packs which are diagnostic tests for Total PSA, testosterone, thyroid disorders, pregnancy, and Vitamin D.

The Company provides the disposable products and equipment in exchange for consideration, which occurs when a customer submits a purchase order and the Company provides disposable products and equipment at the agreed upon prices in the invoice. Generally, customers purchase disposable products using separate purchase orders after the equipment has been provided to the customer. The delivery of the equipment represents a separate performance obligation and is completed upon receipt of the equipment by the customer. The delivery of each individual reagent pack represents a separate performance obligation because the reagent packs are standardized, are not interrelated in any way, and the customer can benefit from each reagent pack without any other product. The Company’s contracts for equipment and disposable products only include fixed consideration. There are no discounts, rebates, returns or other forms of variable consideration. Customers are generally required to pay within 30 days.

The delivery of the equipment and the delivery of disposable products are performance obligations satisfied at a point in time. The performance obligation arising from the delivery of the equipment is satisfied upon the delivery of the equipment to the customer. The disposable products are shipped Free on which we rely.Board (“FOB”) shipping point. For disposable products that are shipped FOB shipping point, the customer has the significant risks and rewards of ownership and legal title to the assets when the disposable products leave the Company’s shipping facilities, thus the customer obtains control and revenue is recognized at that point in time.

The Company has elected the practical expedient and accounting policy election to account for the shipping and handling as activities to fulfill the promise to transfer the disposable products and not as a separate performance obligation.

The Company’s contracts with customers generally have an expected duration of one year or less, and therefore the Company has elected the practical expedient in ASC 606 to not disclose information about its remaining performance obligations. Any incremental costs to obtain contracts are recorded as selling, general and administrative expense as incurred due to the short duration of the Company’s contracts.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESContract balances

The timing of the Company’s revenue recognition may differ from the timing of payment by the Company’s customers. The Company records a receivable when revenue is recognized prior to payment and there is an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied.

Prior to the adoption of ASC 606, the Company accounted for its revenue arrangements under ASC 605, Revenue Recognition (“ASC 605”). Revenue arrangements with multiple deliverables were evaluated for proper accounting treatment. In these arrangements, the Company recorded revenue as separate units of accounting if the delivered items have value to the customer on a stand-alone basis, if the arrangement includes a general right of return relative to the delivered items, and if delivery or performance of the undelivered items is considered probable and substantially within the Company’s control.

There have been no material changes in

Revenues from product sales which included both the Company’s proprietary diagnostic equipment (“analyzer”) and various immunoassay products (“reagents”) were generally recognized upon shipment, as no significant accounting policiescontinuing performance obligations remained post shipment. Cash payments received in advance were classified as deferred revenue and recorded as a liability. The Company was generally not contractually obligated to accept returns, except for defective products. Revenue was recorded net of an allowance for estimated returns.

Multiple element arrangements included contracts that combined both the Company’s analyzer and fora customer’s future reagent purchases under a single contract. In some sales contracts, the Company provided analyzers at no charge to customers. Title to the analyzer was maintained by the Company and the analyzer was returned by the customer to the Company at the end of the purchase agreement.

During the three months ended March 31,June 30, 2020 as compared with the significant accounting policies described in the Company’sand 2019, Annual Report.product sales are stated net of an allowance for estimated returns of approximately $31,000 and $45,000, respectively.

Use of EstimatesDeferred Revenue

The preparation

Prior to the adoption of financial statementsASC 606, payments received in conformity with GAAP requires managementadvance from customers pursuant to make estimatescertain collaborative research license agreements, deposits against future product sales, multiple element arrangements and assumptions that affectextended warranties are recorded as a current or non-current deferred revenue liability based on the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as oftime from the balance sheet date to the future date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.revenue recognition.

CashResearch and Cash EquivalentsLicenses

Cash consists of amounts held in financial institutions that are immediately available to the Company. The funds are maintained at stable financial institutions, generally at amounts in excess of federally insured limits. Cash equivalents include money market funds and held-to-maturity securities with a maturity date of 90 days or less. As of March 31, 2020, cash and cash equivalents consisted of bank deposits, cash and investments in money market funds.

InvestmentsPrior to the adoption of ASC 606, the Company recognized research revenue over the term of various agreements, as negotiated contracted amounts are earned or reimbursable costs are incurred related to those agreements. Negotiated contracted amounts are earned in Marketable Securitiesrelative proportion to the performance required under the applicable contracts. Nonrefundable license fees are recognized over the related performance period or at the time that the Company has satisfied all performance obligations. Any amounts received prior to satisfying these revenue recognition criteria are recorded as deferred revenue.

During the three months ended June 30, 2020 and managed by2019, the Company’s capital advisors based on the Company’s investment guidelines. All of the Company’s investments in marketable securities are classified as available-for-sale debt securities and are carried at fair value. Interest on these securities, as well as the amortization of discounts and premiums, is included in interest income in the statements of operations and comprehensive loss. The unrealized gains and losses on these securities are excluded from earnings and reported in other comprehensive income until realized, except when it considers declines in value to be other than temporary. Other than temporary impairment losses related to credit losses are considered to be realized losses. When available-for-sale debt securities are sold, the cost of the securities is specifically identified and is used to determine the realized gain or loss. Securities classified as current assets have maturity dates of less than or equal to one year from the balance sheet date.Company did not recognize any collaborative research revenue.

Operating Leases

Effective April 1, 2020, the Company adopted ASU No. 2018-11, Leases (Topic 842) (“Topic 842”) Targeted Improvements. The Company determines if a contract contains a lease at inception. The Company’s material operating lease relates toconsists of a single officeoffice/manufacturing/warehouse/laboratory space. Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent the Company’s right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, the Company estimatesused the incremental secured borrowing ratesrate for an existing secured loan corresponding to the maturities of the leases. As the Company has no outstanding debt or committed credit facilities, secured or otherwise, the Company estimates this rate based on prevailing financial market conditions, comparable company and credit analysis, and management judgment.

The Company’s leases typically contain rent escalations over the lease term. The Company recognizerecognizes expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce the Company’s right-of-use (“ROU”) asset related to the lease. These are amortized through the ROU asset as reductions of expense over the lease term. The Company’s office/manufacturing/warehouse/laboratory lease agreement does not contain any material residual value guarantees or material restrictive covenants. The Company has no lease agreements with lease and non-lease components.

Related to the adoption of Topic 842, the Company’s policy elections were as follows:

Equity-linked Financial Instruments

The Company classifies outstanding common stock warrants with down-round features as equity, if the instrument would otherwise be classified in equity absent the down-round feature. The Company will recognize the value of a down-round feature when it is triggered and the warrant’s strike price has been adjusted downward, as a deemed dividend and reduction of income available to common stockholders in computing basic earnings per share.

Net Loss Per Share

The Company determines basic loss per share and diluted loss per share in accordance with the provisions of Accounting Standards Codification (“ASC”) 260, “Earnings per Share.” Basic net loss per share was calculated by dividing net loss by the weighted-average common shares outstanding during the period. Diluted net loss per share was calculated by dividing net loss by the weighted-average common shares outstanding during the period using the treasury stock method or the two-class method, whichever is more dilutive. The potentially dilutive stock options issued under the 2015 Plan (described in Note 8), Series A, B and C Convertible Preferred Stock (described in Note 6) and warrants to purchase the Company’s common stock (described in Notes 6 and 7) were not considered in the computation of diluted net loss per share because they would be anti-dilutive.

Comprehensive Income (Loss)Property and Equipment, Net

Comprehensive income (loss)Property and equipment are stated at cost and are presented net of accumulated depreciation. Depreciation is definedprovided for on a straight-line basis over the estimated useful lives of the related assets as follows:

Leasehold improvements are amortized on a straight-line basis over the change in equity during a period from transactionsshorter 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 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 andor changes in circumstances from non-owner sources.may indicate that impairment exists. The Company is requiredconsiders 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 record all componentsresult from the use and eventual disposition of comprehensive income (loss)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 financial statements inamount of the period inimpairment.

Costs related to acquiring patents are capitalized and amortized over their estimated useful lives, which theyis generally 5 to 17 years, using the straight-line method. Amortization of patents commences once final approval of the patent has been obtained. Patent costs are recognized. Net income (loss)charged to operations if it is determined that the patent will not be obtained. The cost of the patents of approximately $739,000 and other comprehensive income (loss), including foreign currency translation adjustments$715,000 at June 30, 2020 and unrealized gains and losses on investmentsMarch 31, 2020, respectively, are reported,stated net of their related tax effect,accumulated amortization of approximately $297,000 and $293,000, respectively. Amortization of patents charged to arrive at comprehensive income (loss). There were no investments in available-for-sale debt securities and held-to-maturity debt securitiesoperations for the three months ended June 30, 2020 and 2019 were approximately $3,000 for each period. Total future estimated amortization of patent costs for the five succeeding years is approximately $10,000 for the year ending March 31, 2020. For2021, approximately $14,000 for each of the three months endedyears ending March 31, 2019, comprehensive income consisted of unrealized gains on investments in available-for-sale debt securities.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting2022 through 2023, approximately $13,000 for Income Taxes,” which is intended to simplify various aspects related to accountingyear 2024, approximately $9,000 for income taxes. The ASU 2019-12 removes certain exceptions to the general principles in Topic 740year 2025 and also clarifies and amends existing guidance to improve consistent application. The ASU 2019-12 is effective for the Company beginning after December 15, 2021. The Company is evaluating the impact of the adoption of ASU 2019-12 on its financial statements, but does not expect such adoption to have a material impact.

Other accounting standard updates effective after March 31, 2020 are not expected to have a material impact on the Company’s financial statements.approximately $382,000 thereafter.

The cost of the licenses of approximately $810,000 and $544,000 at June 30, 2020 and March 31, 2020 are stated net of accumulated amortization of approximately $396,000 and $395,000, respectively. Amortization of licenses charged to operations for each of the three month periods ended June 30, 2020 and 2019 was approximately $2,000. Total future estimated amortization of license costs is approximately $5,000 for the year ending March 31, 2021, approximately $7,000 for each of the years ending March 31, 2022 through 2023 and approximately $3,000 for year 2024, $0 for year 2025 and approximately $390,000 thereafter.

Recently Adopted Accounting PronouncementsDerivative Financial Instruments and Warrant Liabilities

In June 2016,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 Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13,Financial Instruments – Credit Losses (Topic 326): Measurementderivative 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 Credit LossesOperations. Depending on Financial Instruments, an amendment that modifies the measurement recognitionfeatures of credit losses for mostthe derivative financial assetsinstrument, the Company uses either the Black-Scholes option-pricing model or a Monte Carlo simulation to value the derivative instruments at inception and certain other instruments.subsequent valuation dates. The amendment updates the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the “incurred loss” model with an “expected loss” model. Accordingly, these financial assets will be presented at the net amount expected to be collected. The amendment also requires that credit losses related to available-for-sale debt securitiesclassification of derivative instruments, including whether such instruments should be recorded as an allowance through net income rather than reducingliabilities or as equity, is re-assessed at the carrying amount under the current, other-than-temporary-impairment model. The FASB also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, and ASU 2019-05 (collectively, “Topic 326”). Topic 326 requires measurement and recognitionend of expected credit losses for financial assets held. The effective date and transition methodology for the amendments in Topic 326 are the same as in ASU 2016-13. The guidance is effective for public business entities that are SEC filers. The amendments in ASU No. 2016-13 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2016-13 on January 1, 2020 and the adoption of this guidance did not have a material impact on its financial statements.each reporting period (See Note 7).

In August 2018,Fair value measurements The Company determines 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 includingof applicable assets and liabilities based on a three-tier fair value hierarchy established by accounting guidance and prioritizes the removalinputs used in measuring fair value. The Company discloses and recognizes the fair value of disclosures ofits assets and liabilities using a hierarchy that prioritizes the amount ofinputs 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 reasons for transfers between Level 1the 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 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 2016-13 on January 1, 2020 and the adoption of this guidance did not have a material impact on its financial statements.as follows:

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

Depreciation expense of approximately $1,500 and $1,400 was recognized for the three months ended March 31, 2020 and 2019, respectively, and classified in general and administrative expense in the accompanying unaudited condensed statements of operations and comprehensive loss.

NOTE 5 - COMMITMENTS AND CONTINGENCIES

Master Services AgreementFair Value of Financial Instruments

In May 2018, Ritter entered into an AmendedFinancial instruments, which include cash and Restated Master Services Agreement (“Service Agreement”) with a clinical research organization (“CRO”), pursuant tocash equivalents, accounts receivable, accounts payable, accrued liabilities, and debt are carried at cost, which the CRO agreed to perform certain services relatedmanagement believes approximates fair value due to the management and executionshort-term nature of certain clinical trials involving RP-G28. The Services Agreement supersedes the Master Service Agreement, dated August 30, 2016, that Ritter entered into with the CRO. The precise services to be performed by the CRO under the Services Agreement will be mutually agreed upon by the parties in writing and set forth in one or more task orders. Ritter is not obligated to purchase any minimum or specific volume or dollar amount of services under the Services Agreement.these instruments.

The termStock-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 Services Agreementaward using the Black-Scholes option-pricing model, and is four years fromrecognized as an expense, under the effectivestraight-line method, over the requisite service period (generally the vesting period of the equity grant). If we determine that other methods are more reasonable, or other methods for calculating these assumptions are prescribed by regulators, the fair value calculated for our 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 the Service Agreement unless earlier terminated. Ritter may terminate the Services Agreement or any task without cause immediately upon giving the CRO notice of such termination. The CRO may, with advance notice to Ritter, terminate a task order if Ritter has materially defaulted on its obligations under the Services Agreement or any task order and has not cured such material default, as described in the Services Agreement. As of March 31, 2020, there were no in process task orders with the CRO under the Service Agreement.grant.

Clinical Supply and Cooperation Agreement with Ricerche Sperimentali Montale SpA (“RSM”)Income Taxes

UnderDeferred income taxes are recognized for temporary differences in the termsbasis 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 Supply Agreement with RSMdeferred tax asset and liability are individually classified as current and noncurrent based on July 22, 2015, Rittertheir characteristics.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is required to pay RSM $400,000 within 10 days following FDA approvalmore likely than not that some portion or all of an NDAthe deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the first product owned or controlled by Ritter using Improved GOS as its active pharmaceutical ingredient.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.

Offer Letter AmendmentsSales and Excise Taxes

On October 15, 2019, Ritter entered into amendmentsSales 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 respective employment offer letterstax authority.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, enacted in March 2010, required medical device manufacturers to pay an excise tax of Andrew J. Ritter, its Chief Executive Officer, John W. Beck, its Chief Financial Officer, and Ira E. Ritter, its Chief Strategic Officer (the “Offer Letter Amendments”). Pursuant2.3% on the sales price of medical devices sold in the United States beginning in January 2013.

The Further Consolidated Appropriations Act, 2020 H.R. 1865 (Pub.L.116-94), signed into law on December 20, 2019, has repealed the medical device excise tax previously imposed by Internal Revenue Code section 4191. Prior to the termsrepeal, the tax was on a 4-year moratorium. As a result of the Offer Letter Amendments, eachrepeal and the prior moratorium, sales of Ritter’s executive officers agreed to defer a portion of his annual base salary (the “Deferred Amounts”), as set forth below, until such time as the board of directors, in its sole discretion, decides to pay the Deferred Amounts (or any portion of the Deferred Amounts)taxable medical devices after December 31, 2015, are not subject to the executive officers, if ever.tax. Accordingly, for the three months ended June 30, 2020 and 2019, the Company did not incur any medical device excise tax expenses.

Lease AgreementWarranty Costs

On July 9, 2015, the Company entered into a lease with a California limited partnership, pursuant to which the Company leased approximately 2,780 square feet of office space in Los Angeles, California for its headquarters. The leaseCompany’s warranty policy generally provides for a termone year of 61 months, commencing on October 1, 2015. The Company paid no rentcoverage against defects and nonperformance within published specifications for the first month of the termsold analyzers and paid base rent of $9,174 per month for months 2 through 13 of the term, with increasing base rent for each twelve-month period thereafter under the term of the lease to a maximum of $10,325 per monthcontract for months 50 through 61.equipment held for lease. The base rent payments do not includeCompany accrues for estimated warranty costs in the period in which the revenue is recognized based on historical data and the Company’s proportionate sharebest estimates of any operating expenses, including real estate taxes. The Company has the optionanalyzer failure rates and costs to extend the term of the lease for one five-year term, provided that the rent would be subject to market adjustment at the beginning of the renewal term.repair.

Other information related to leases was as follows:Accrued warranty liabilities were approximately $29,000 and $35,000, respectively, at June 30, 2020 and March 31, 2020 and are included in accrued expenses and other current liabilities on the balance sheets. Warranty costs were approximately $31,000 and $28,000 for the three months ended June 30, 2020 and 2019, respectively, and are included in cost of product sales in the statements of operations.

Future payments under non-cancelable extended operating leases having initial or remaining terms of one year or more are as follows for the remaining fiscal year and thereafter:

Rent expense, which is recognized on a straight-line basis over the lease term, was approximately $29,000 for the three months ended March 31, 2020 and 2019 and is recorded in general and administrative expenses in the accompanying unaudited condensed statements of operations and comprehensive loss.

LegalRecent Accounting Pronouncements

From time

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 current U.S. GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to time,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 mayfor 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 partyas 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.

In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842) Targeted Improvements, which provides for an alternative transition method by allowing companies to legal claims and proceedings that arisecontinue to use the legacy guidance in Topic 840, Leases, including its disclosure requirements, in the ordinary coursecomparative periods presented in the year of business, which may relateadoption of the new leases standard and recognize a cumulative-effect adjustment to our operations or assets. These may include disputesthe opening balance of retained earnings in the period of adoption rather than the earliest period presented. The most significant impact was the recognition of a ROU asset and lawsuits related to intellectual property, licensing, contract law and employee relations matters. Periodically, the Company reviews the status of significant matters, if any exist, and assesses its potential financial exposure. If the potential loss from any claim or legal claim is considered probable and the amount can be estimated, the Company accrues alease liability for the estimated loss. Legal proceedings are subjectCompany’s sole operating lease—the Company had no finance leases. Adoption of the standard did not require the Company to uncertainties,restate previously reported results as it elected to apply a modified retrospective approach at the beginning of the period of adoption rather than at the beginning of the earliest comparative period presented.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”). The guidance in Topic 606 provides that an entity should recognize revenue to depict the transfer of goods or services provided and establishes the outcomes are difficultfollowing steps to predict. Because of such uncertainties, accruals arebe applied by an entity: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies the performance obligation. Topic 606 will be effective for fiscal years beginning after December 15, 2019 for the Company, based on the best information available atissuance of ASU 2020-05, which provided deferral of the time. Aseffective date for an additional information becomes available,one year in response to the coronavirus (COVID-19) pandemic. The Company reassessesadopted the potential liability related to pending claims and litigation. We donew revenue standard as of April 1, 2020 using the modified retrospective approach. The adoption of ASU 2014-09 did not believe that any individual legal claim or proceeding that is currently pending ishave a material impact on the Company’s condensed consolidated financial statements.

Other accounting standard updates are either not applicable to the Company or that these claims and proceedings inare not expected to have a material impact on the aggregate are material to the Company.

NOTE 6 - STOCKHOLDERS’ EQUITY

Authorized Shares

In September 2017, the Company amended its Amended and Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to authorize the issuance of up to 225,000,000 shares of common stock, $0.001 par value per share, and 15,000,000 shares of preferred stock, $0.001 par value per share, consisting of (i) 9,500 shares that have been designated Series A convertible preferred stock, (ii) 6,000 shares that have been designated as Series B convertible preferred stock, and (iii) 1,880 shares that have been designated as Series C convertible preferred stock. Pursuant to the terms of the Certificate of Incorporation, the board of directors has the authority to issue preferred stock in one or more classes or series and to fix the designations, powers, preferences and rights, and the qualifications, limitations or restrictions thereof, including dividend rights, conversion right, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any class or series, without further vote or action by the stockholders.

All common share amounts and per share amounts were retroactively restated to reflect a 1-for-10 reverse stock split that was effective March 23, 2018.Company’s condensed consolidated financial statements.

As of March 31,NOTE 2 — LIQUIDITY

The Company has suffered recurring losses from operations and has a net working capital deficit and an accumulated deficit at June 30, 2020, the Company had 45,713,862 shares of common stock and 240 shares of Series C convertible preferred stock issued and outstanding. Each share of the Company’s common stock is entitled to one vote, and all shares rank equally as to voting and other matters. Each share of Series C preferred stock is convertible by the holder at $1.64 per share; subject to customary adjustment in the event of future stock dividends and stock splits. Holders are entitled to receive, and the Company shall pay, dividends on outstanding shares of Series C preferred stock, on an as-if-converted-to-common-stock basis, equalcontinued to and in the same form as dividends actually paid on outstanding common shares when, as and if such dividends are paid on outstanding common shares. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of Series C preferred stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company the same amount that a holder of common stock would receive if the Series C preferred stock were fully converted to common stock, which amounts shall be paid pari passu with all common stockholders. Holders of Series C preferred stock have no voting rights. However, as long as any shares of Series C preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of Series C preferred stock, (a) alter or change adversely the powers, preferences or rights givenincur losses subsequent to the Series C preferred stock or alter or amend the applicable Certificatebalance sheet date. The Company’s reverse recapitalization transaction with Ritter Pharmaceuticals, Inc. (“Ritter”) closed in May 2020 together with an associated new equity capital raise of Designation, (b) amend the Company’s certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series C preferred stock, (c) increase the number of authorized shares of Series C preferred stock, or (d) enter into any agreement with respect to any of the foregoing.

Aspire Capital Common Stock Purchase Agreement

On May 4, 2017, the Company entered into a common stock purchase agreement with Aspire Capital Fund, LLC (“Aspire Capital”), which the Companyapproximately $4.0 million, and Aspire Capital amended and restated on March 29, 2019 and on July 23, 2019 (as amended and restated, the “Aspire Purchase Agreement”). The Aspire Purchase Agreement was amended and restated to adjust certain provisions to improve the Company’s access to funding under the agreement. The Company was not required to pay a commitment fee to Aspire Capital to affect the amendment to the Aspire Purchase Agreement. The Aspire Purchase Agreement was entered into to provide access to the Company of up to an aggregate of $6.5approximately $1.9 million in proceeds through the sale of shares of its common stock through March 31, 2021.

Under the Aspire Purchase Agreement, as amended, on any trading day the Company selected, it has the right, in its sole discretion, to present Aspire Capital with a purchase notice (each, a “Purchase Notice”), directing Aspire Capital (as principal) to purchase up to 100,000 shares of its common stock per trading day (which may be increased by as much as an additional 2,000,000 shares per trading day by mutual agreement), up to an aggregate of $6,500,000 of its common stock, at a per share price (the “Purchase Price”) equal to the lesser of: (i) the lowest sale price of the Company’s common stock on the sale date, or (ii) the arithmetic average of the three lowest closing sale prices for the Company’s common stock during the 10 consecutive trading days ending on the trading day immediately preceding the sale date. The aggregate purchase priceconvertible notes payable by Aspire Capital on any one purchase date may not exceed $500,000, unless otherwise mutually agreed. In addition, on any date on which the Company submits a Purchase Notice to Aspire Capital in an amount of at least 100,000 shares and its stock price is not less than $0.25 per share, the Company may also, in its sole discretion, present Aspire Capital with a volume-weighted average price purchase notice (each, a “VWAP Purchase Notice”) directing Aspire Capital to purchase an amount of its common stock equal to up to 30% of the aggregatewere converted into shares of the Company’s common stock traded on its principal market oncapital stock. In July and August 2020, the next trading day (the “VWAPCompany raised an additional $18.0 million through two Securities Purchase Date”), as determined by the Company. Under the terms of the Aspire Purchase Agreement, the number of shares that may be sold pursuant to the Aspire Purchase Agreement is limited to 1,807,562 (the “Exchange Cap”), which represented 19.99%Agreements with a single institutional investor (see Note 13). Planned future research and development activities, capital expenditures, clinical and pre-clinical testing, and commercialization activities of the Company’s outstanding shares of common stock as of March 29, 2019, the date the agreement was first amended and restated, unless stockholder approvalproducts will require significant additional financing. Additional financing may not be available on acceptable terms or an exception pursuant to the rules of the Nasdaq Capital Marketat all. There is obtained to issue more than 19.99%. This limitationno assurance that profitable operations will not applyever be achieved, or if at any time the Exchange Cap is reached and at all times thereafter, the average price paid for all shares issued under the Aspire Purchase Agreement is equal to or greater than $0.86 (the “Minimum Price”), which was the closing price of the Company’s common stock immediately preceding the signing of the agreement. For the three-month period ending March 31, 2020, the Company sold approximately 1.8 million shares of common stock under this agreement resulting in proceeds to the Company of approximately $0.5 million.achieved, could be sustained on a continuing basis.

At-the-Market Offering AgreementNOTE 3 — INVENTORY, NET

On November 6, 2019, the Company entered into an at the market sales agreement (“ATM Agreement”) with A.G.P./Alliance Global Partners (“AGP”), pursuant to which it may offer and sell, from time to time through AGP, shares of its common stock (the “Placement Shares”) having an aggregate offering price of up to $3,673,159 (which was subsequently increased to $8,030,917), subject to the terms and conditionsInventory, net consisted of the ATM Agreement. Unless earlier terminated pursuant to the termsfollowing at June 30, 2020 and March 31, 2020:

NOTE 4 — PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the ATM Agreement, the ATM Agreement will automatically terminate upon the earlier to occur of (i) issuancefollowing at June 30, 2020 and sale of all of the Placement Shares to or through AGP and (ii) August 1, 2022. For the three-month period ending March 31, 2020:

Depreciation expense relating to property and equipment was approximately $9,000 and $17,000 for the three months ended June 30, 2020 the Company sold approximately 16.8 million shares of common stock under the ATM Agreement resulting net proceeds to the Company of approximately $4.3 million after commissions and expenses of approximately $157,000.2019, respectively.

NOTE 7 - WARRANTS5 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following at June 30, 2020 and March 31, 2020:

NOTE 6 — NOTES PAYABLE

Notes payable consisted of the following at June 30, 2020 and March 31, 2020:

Future maturities of notes payable are as follows as of June 30, 2020:

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 2,363,3044,713,490 shares of the Company’s common stock were outstanding at March 31, 2020. These$0.72 per share, subject to adjustment. As of June 30, 2020, the warrants are all vested and exercisable, have exercise pricesremaining terms ranging from $0.153.1 to $93.00 per share, with5.3 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 weighted average exercise priceleveraged ratchet provision for subsequent dilutive issuances.

The following table summarizes the warrant activity for the year ended June 30, 2020:

The following table summarizes the warrant activity for the year ended June 30, 2019:

The following table presents the Company’s fair value hierarchy for its warrant liabilities measured at fair value on a recurring basis as of $2.04,June 30, 2020: