UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
Or
For the transition period from _____________ to _____________
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
n/a
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| The
|
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. ☒
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). ☒
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,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant 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 ☒
As of November 11, 2022, there were shares of the registrant’s common stock, par value $0.001 per share, outstanding.
TABLE OF CONTENTS
2
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUALIGEN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Restricted cash | ||||||||
| Right-of-use assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| R&D grant liability | ||||||||
| Deferred revenue, current portion | ||||||||
| Operating lease liability, current portion | ||||||||
| Short term debt-related party | ||||||||
| Warrant liabilities | ||||||||
| Total current liabilities | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Deferred revenue, net of current portion | ||||||||
| Deferred tax liability | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity | ||||||||
| Qualigen Therapeutics, Inc. stockholders’ equity: | ||||||||
| Common stock, $par value; shares authorized; and shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Qualigen Therapeutics, Inc. stockholders’ equity | ||||||||
| Noncontrolling interest | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities & Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
QUALIGEN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| REVENUES | ||||||||||||||||
| Net product sales | $ | $ | $ | $ | ||||||||||||
| License revenue | ||||||||||||||||
| Total revenues | ||||||||||||||||
| EXPENSES | ||||||||||||||||
| Cost of product sales | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Total expenses | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME, NET | ||||||||||||||||
| Gain on change in fair value of warrant liabilities | ||||||||||||||||
| Interest income, net | ||||||||||||||||
| Other income, net | ||||||||||||||||
| Total other income, net | ||||||||||||||||
| LOSS BEFORE PROVISION FOR INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| PROVISION FOR INCOME TAXES | ||||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to noncontrolling interest | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to Qualigen Therapeutics, Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted—average number of shares outstanding, basic and diluted | ||||||||||||||||
| Other comprehensive loss, net of tax | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Foreign currency translation adjustment | ||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive loss attributable to noncontrolling interest | ( | ) | ( | ) | ||||||||||||
| Comprehensive loss attributable to Qualigen Therapeutics, Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
QUALIGEN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
| Qualigen | ||||||||||||||||||||||||||||||||
| Common Stock | Additional | Accumulated Other | Therapeutics, Inc. | Total | ||||||||||||||||||||||||||||
| Shares | Amount $ | Paid-In Capital | Comprehensive Income | Accumulated Deficit | Stockholders’ Equity | Noncontrolling Interest | Stockholders’ Equity | |||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Stock issued upon exercise of warrants | ||||||||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Common stock issued for business acquisition | $ | |||||||||||||||||||||||||||||||
| Prefunded warrants issued for business acquisition | — | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||||||
| Fair value of noncontrolling interest related to business acquisition | — | |||||||||||||||||||||||||||||||
| Fair value of warrant modification for business acquisition | — | |||||||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Stock issued upon exercise of warrants | $ | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 1,409,504 | — | — | 1,409,504 | — | 1,409,504 | ||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Series Alpha Convertible | Total Qualigen | |||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional | Accumulated Other | Therapeutics, Inc. | Total | ||||||||||||||||||||||||||||||||||
| Shares | Amount $ | Shares | Amount $ | Paid-In Capital | Comprehensive Income | Accumulated Deficit | Stockholders’ Equity | Noncontrolling Interest | Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||
| Stock issued upon cash exercise of warrants | — | |||||||||||||||||||||||||||||||||||||||
| Stock issued upon net-exercise of warrants | — | ( | ) | |||||||||||||||||||||||||||||||||||||
| Stock issued for professional services | — | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||||
| Stock issued upon cash exercise of warrants | — | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||||
| Stock issued upon cash exercise of warrants | — | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
QUALIGEN THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30 | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right-of-use assets | ||||||||
| Accounts receivable reserves and allowances | ||||||||
| Inventory reserves | ||||||||
| Common stock issued for professional services | ||||||||
| Stock-based compensation | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory and equipment held for lease | ( | ) | ( | ) | ||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| R&D grant liability | ( | ) | ||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Payments for patents and licenses | ( | ) | ||||||
| Net cash acquired in business combination | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Net proceeds from warrant exercises | ||||||||
| Principal payments on notes payable | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash and restricted cash | ( | ) | ( | ) | ||||
| Effect of exchange rate changes on cash and restricted cash | ||||||||
| Cash and restricted cash - beginning of period | ||||||||
| Cash and restricted cash - end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Taxes | $ | $ | ||||||
| NONCASH FINANCING AND INVESTING ACTIVITIES: | ||||||||
| Net transfers from equipment held for lease to inventory | $ | $ | ||||||
| Fair value of shares issued for cashless warrant exercises | $ | $ | ||||||
| Fair value of warrant liabilities on date of exercise | $ | $ | ||||||
| ACQUISITION: | ||||||||
| Fair value of assets acquired | $ | ( | ) | |||||
| Fair value of liabilities assumed, net of goodwill | ||||||||
| Fair value of Alpha Capital/Qualigen warrants repriced due to acquisition | ||||||||
| Fair value of Qualigen prefunded warrant issued in exchange for NanoSynex stock | ||||||||
| Fair value of Qualigen common stock issued in exchange for NanoSynex stock | ||||||||
| Net cash acquired in business combination (Note 3) | $ | $ | ||||||
| Cash and restricted cash included in the accompanying balance sheet was as follows: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash and restricted cash | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
QUALIGEN THERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
Organization
Qualigen, Inc., now a subsidiary of Qualigen Therapeutics, Inc., was incorporated in Minnesota in 1996 to design, develop, manufacture and sell Physician Office Laboratory (“POL”) market quantitative immunoassay diagnostic products for use in physician offices and other point-of-care settings worldwide, and was reincorporated in Delaware in 1999. In May 2020, Qualigen, Inc. completed a reverse recapitalization transaction with Ritter Pharmaceuticals, Inc. (“Ritter”) and Ritter was renamed Qualigen Therapeutics, Inc. All shares of Qualigen, Inc.’s capital stock were exchanged for Qualigen Therapeutics, Inc.’s capital stock in the merger. Ritter/Qualigen Therapeutics common stock, which was previously traded on the Nasdaq Capital Market under the ticker symbol “RTTR,” commenced trading on the Nasdaq Capital Market, on a post-reverse-stock-split adjusted basis, under the trading symbol “QLGN” on May 26, 2020. Qualigen Therapeutics, Inc. (the “Company”) operates in one business segment.
.
On
May 26, 2022, the Company acquired shares of Series A-1 Preferred Stock of NanoSynex, Ltd. (“NanoSynex”) from Alpha
Capital Anstalt (“Alpha Capital”) in exchange for shares of the Company’s common stock and a prefunded warrant
to purchase
Basis of Presentation
The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) applicable to interim reports of companies filing as a smaller reporting company. These financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities Exchange Commission on March 31, 2022, as amended on April 29, 2022 (the “2021 Annual Report”). In the opinion of management, the accompanying condensed consolidated interim financial statements include all adjustments necessary in order to make the financial statements not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or any other future period. Certain notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Company’s 2021 Annual Report have been omitted. The accompanying condensed consolidated balance sheet at December 31, 2021 has been derived from the audited balance sheet at December 31, 2021 contained in the 2021 Annual Report.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP. The Company views its operations and manages its business in one operating segment. In general, the functional currency of the Company and its subsidiaries is the U.S. dollar, however for NanoSynex, the functional currency is the local currency, New Israeli Shekels (NIS). As such, assets and liabilities for NanoSynex are translated into U.S. dollars and the effects of foreign currency translation adjustments are reflected as a component of accumulated other comprehensive income within the Company’s consolidated statements of changes in stockholders’ equity.
Accounting Estimates
Management uses estimates and assumptions in preparing its unaudited condensed 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 the estimated fair value of in-process research and development, goodwill, warrant liabilities, stock-based compensation, amortization and depreciation, inventory reserves, allowances for doubtful accounts and returns, and warranty costs. Actual results could vary from the estimates that were used.
7
Cash, cash equivalents and restricted cash
The Company considers all highly liquid investments purchased with an initial maturity of 90 days or less and money market funds to be cash equivalents. Restricted cash includes cash that is restricted due to Israeli banking regulations.
The Company maintains its cash in bank deposits which exceed federally insured limits and could potentially be subject to significant concentrations of credit risk on cash. The Company reviews the financial stability of its depository institutions on a regular basis, and has not experienced any losses in such accounts.
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 reserves for inventory components identified as excess or obsolete.
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 and nine months ended September 30, 2022 and
2021,
Accounts Receivable, Net
The Company grants credit to domestic physicians, clinics, and distributors. The Company performs ongoing credit evaluations of its customers and generally requires no collateral. Customers can purchase certain products through a financing agreement that the Company has with an outside leasing company. Under the agreement, the leasing company evaluates the credit worthiness of the customer. Upon acceptance of the product by the customer, the leasing company remits payment to the Company at a discount. This financing arrangement is without recourse to the Company.
The Company records an allowance for doubtful accounts and returns equal to the estimated uncollectible amounts or expected returns. The Company’s estimates are based on historical collections and returns and a review of the current status of trade accounts receivable.
Accounts receivable, net is comprised of the following at:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Accounts Receivable | $ | $ | ||||||
| Less Allowances | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Research and Development
Except for acquired in process research and development (IPR&D), the Company expenses research and development costs as incurred including therapeutics license costs.
R&D Grants
NanoSynex has received R&D grants from Israel Innovation Authority (IIA) and from the European Commission. These grants may provide cash funding to NanoSynex from time to time in advance of the applicable costs being incurred. When such cash funding is received from these grants in advance, the proceeds are recorded as a current or non-current R&D grant liability based on the time from the condensed consolidated balance sheets date to the expected future date of recognition as a reduction to research and development expenses.
Shipping and Handling Costs
The
Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with inbound and
outbound freight are generally recorded in cost of sales which totaled approximately $
Revenue from Contracts with Customers
We apply the following five-step model in accordance with ASC 606, Revenue from Contracts with Customers, in order to determine revenue: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
8
Product Sales
The Company generates revenue from selling FastPack System analyzers, accessories and disposable products used with the FastPack System. Disposable products include reagent packs which are diagnostic tests for prostate-specific antigen (“PSA”), testosterone, thyroid disorders, pregnancy, and Vitamin D.
The Company provides 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 (“analyzer”) has been provided to the customer. The initial delivery of the equipment and reagent packs represents a single performance obligation and is completed upon receipt by the customer. The delivery of each subsequent 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. There are no significant discounts, rebates, returns or other forms of variable consideration. Customers are generally required to pay within 30 days.
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 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.
License Revenue
The Company enters into out-license agreements with counterparties to develop and/or commercialize its products in exchange for nonrefundable upfront license fees and/or sales-based royalties.
If
the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified
in the arrangement, the Company recognizes revenue from nonrefundable upfront fees allocated to the license when the license is transferred
to the customer and the customer can benefit from the license. For licenses that are bundled with other performance obligations, management
uses judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is
satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing
revenue from nonrefundable upfront fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts
the measure of progress and related revenue recognition. During the three months ended September 30, 2022 and 2021, the Company recognized
no license revenue, and during the nine months ended September 30, 2022 and 2021, the Company recognized license revenue of $ and
approximately $
Contract Asset and Liability 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 performance of the related services, the Company records deferred revenue until the performance obligations are satisfied.
Multiple performance obligations include contracts that combine both the Company’s analyzer and a customer’s future reagent purchases under a single contract. In some sales contracts, the Company provides analyzers at no charge to customers. Title to the analyzer is maintained by the Company and the analyzer is returned by the customer to the Company at the end of the purchase agreement.
9
During
the three months ended September 30, 2022 and 2021, product sales are stated net of an allowance for estimated returns of approximately
$
Deferred Revenue
Payments received in advance from customers pursuant to certain collaborative research license agreements, deposits against future product sales, multiple element arrangements and extended warranties are recorded as a current or non-current deferred revenue liability based on the time from the condensed consolidated balance sheets date to the future date of revenue recognition.
Operating Leases
Effective April 1, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2018-11, Leases (Topic 842) Targeted Improvements (“Topic 842”). In accordance with the guidance in Topic 842, the Company recognizes lease liabilities and corresponding right-of-use-assets for all leases with terms of greater than 12 months. Leases with a term of 12 months or less will be accounted for in a manner similar to the guidance for operating leases prior to the adoption of Topic 842. (See Note 12- Commitments and Contingencies for more information).
Property and Equipment, Net
Property and equipment are stated at cost and are presented net of accumulated depreciation. Depreciation is provided for on a straight-line basis over the estimated useful lives of the related assets as follows:
| Machinery and equipment | ||||
| Computer equipment | ||||
| Molds and tooling | ||||
| Furniture and fixtures |
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 include 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.
Business Combinations
The Company accounts for business combinations using the acquisition method pursuant to FASB ASC Topic 805. This method requires, among other things, that results of operations of acquired companies are included in Qualigen’s financial results beginning on the respective acquisition dates, and that assets acquired and liabilities assumed are recognized at fair value as of the acquisition date. Intangible assets acquired in a business combination are recorded at fair value using a discounted cash flow model. The discounted cash flow model requires assumptions about the timing and amount of future net cash flows, the cost of capital and terminal values from the perspective of a market participant. Each of these factors can significantly affect the value of the intangible asset. Any excess of the fair value of consideration transferred (the “Purchase Price”) over the fair values of the net assets acquired is recognized as goodwill. The fair value of assets acquired and liabilities assumed in certain cases may be subject to revision based on the final determination of fair value during a period of time not to exceed 12 months from the acquisition date. Legal costs, due diligence costs, business valuation costs and all other acquisition-related costs are expensed when incurred.
Goodwill
Goodwill represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets acquired, when accounted for using the purchase method of accounting. Goodwill has an indefinite useful life and is not amortized but is reviewed for impairment annually and whenever events or changes in circumstances indicate that the carrying value of the goodwill may not be recoverable.
In testing for impairment, the fair value of the reporting unit is compared to the carrying value. If the net assets assigned to the reporting unit exceed the fair value of the reporting unit, an impairment loss equal to the difference is recorded.
10
Intangible Assets
In Process R&D
Acquired in process R&D (IPR&D) represents the fair value assigned to the research and development assets that have not reached technological feasibility. The value assigned to IPR&D is determined by estimating the costs to develop the acquired technology into commercially viable products, estimating the resulting revenue from the projects, and discounting the net cash flow to present value. The revenue and cost projections used to value acquired IPR&D are, as applicable, reduced based on the probability of success of developing the new product. Additionally, projections consider relevant market sizes and growth factors, expected trends in technology and the nature and expected timing of new product introductions. The rates utilized to discount the net cash flow to its present value are commensurate with the stage of development of the project and uncertainties in the economic estimates used in the projections. Upon the acquisition of acquired IPR&D, an assessment is completed as to whether the acquisition constitutes an acquisition of a single asset or a group of assets. Multiple factors are considered in this assessment, including the nature of the technology acquired, the presence or absence of separate cash flows, the development process and stage of completion, quantitative significance, and the Company’s rationale for entering into the transaction.
If a business is acquired, as defined under the applicable accounting standards, then the acquired IPR&D is capitalized as an intangible asset. If an asset or group of assets is acquired that do not meet the definition under the applicable accounting standards, then the acquired IPR&D is expensed on its acquisition date. Future costs to develop these assets are recorded to research and development expense in the Company’s condensed consolidated statements of operations and other comprehensive (loss) as they are incurred.
IPR&D is evaluated for impairment annually using the same methodology as described above for calculating fair value. If the carrying value of the acquired IPR&D exceeds the fair value, then the intangible asset is written down to its fair value, with the resulting adjustment recorded as a charge to operations. Changes in estimates and assumptions used in determining the fair value of acquired IPR&D could result in an impairment.
Other Intangible Assets, Net
Other intangible assets consist of patent-related costs and costs for license agreements. Management reviews the carrying value of other 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 other 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
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 and other comprehensive (loss). 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 10- Warrant Liabilities).
11
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, accounts receivable, prepaids, accounts payable, and accrued liabilities 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’s stock options could change significantly. Higher volatility, lower risk-free interest rates, 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.
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 condensed consolidated 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 $
Foreign Currency Translation
The functional currency for the Company is the U.S. dollar. The functional currency for NanoSynex, the Company’s newly acquired majority owned subsidiary, is the New Israeli Shekel (NIS). The financial statements of NanoSynex are translated into U.S. dollars using exchange rates in effect at each period end for assets and liabilities; using exchange rates in effect during the period for results of operations; and using historical exchange rates for certain equity accounts. The adjustment resulting from translating the financial statements of NanoSynex is reflected as a separate component of other comprehensive income (loss).
12
Other
comprehensive loss related to the effects of foreign currency translation adjustments attributable to NanoSynex was $
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued 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 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 condensed 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 condensed consolidated financial statements.
Global Economic Conditions
Russia’s Invasion of Ukraine
In February 2022, Russia invaded Ukraine. While the Company has limited exposure in Russia and Ukraine, the Company continues to monitor any broader impact to the global economy, including with respect to inflation, supply chains and fuel prices. The full impact of the conflict on the Company’s business and financial results remains uncertain and will depend on the severity and duration of the conflict and its impact on regional and global economic conditions.
Inflationary Cost Environment
During fiscal 2021 and continuing into the current fiscal year, global commodity and labor markets experienced significant inflationary pressures attributable to ongoing economic recovery and supply chain issues. The Company is subject to inflationary pressures with respect to raw materials, labor and transportation. Accordingly, the Company continues to take actions with its customers and suppliers to mitigate the impact of these inflationary pressures in the future. Actions to mitigate inflationary pressures with suppliers include aggregation of purchase requirements to achieve optimal volume benefits, negotiation of cost-reductions and identification of more cost competitive suppliers. While these actions are designed to offset the impact of inflationary pressures, the Company cannot provide assurance that it will be successful in fully offsetting increased costs resulting from inflationary pressure.
Ongoing COVID-19 Pandemic
The COVID-19 pandemic has had a dramatic impact on businesses globally and our business as well. Our sales of diagnostic products fell significantly during 2020 and our net loss increased significantly, as deferral of patients’ non-emergency visits to physician offices, clinics and small hospitals sharply reduced demand for FastPack tests. Since then we have experienced some recovery in demand. To mitigate risks, we continue to evaluate the extent to which COVID-19 may impact our business and operations and adjust risk mitigation planning and business continuity activities as needed.
13
Other accounting standard updates are either not applicable to the Company or are not expected to have a material impact on the Company’s unaudited condensed financial statements.
NOTE 2 — LIQUIDITY AND GOING CONCERN
As of September 30, 2022, the Company had approximately $
As a pre-clinical development-stage therapeutics biotechnology company, we expect to continue to have net losses and negative cash flow from operations, which over time will challenge our liquidity. There is no assurance that profitable operations will ever be achieved, or, if achieved, could be sustained on a continuing basis. In order to fully execute our business plan, we will require significant additional financing for planned research and development activities, capital expenditures, clinical and pre-clinical testing for QN-302 clinical trials, to continue preclinical development of RAS and QN-247, and to continue funding the NanoSynex operations (See Note 3-Acquisition), as well as commercialization activities.
Historically,
the Company’s principal sources of cash have included proceeds from the issuance of common and preferred equity and proceeds
from the issuance of debt. In December 2021, the Company raised $
As
a condition to the NanoSynex closing, the Company agreed to provide NanoSynex with up to $
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, commercialization, marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The financial statements do not include any adjustments that would be necessary should the Company be unable to continue as a going concern, and therefore, be required to liquidate its assets and discharge its liabilities in other than the normal course of business and at amounts that may differ from those reflected in the accompanying financial statements.
NOTE 3 — ACQUISITION
Business Combination
The
Company acquired a
14
The acquisition of the majority interest of NanoSynex was accounted for as a business combination using the acquisition method, in accordance with FASB ASC Topic 805. A summary of the consideration transferred and provisional fair value of assets acquired and liabilities assumed in the NanoSynex acquisition is as follows:
| Consideration transferred, net of cash acquired | ||||
| Cash paid for NanoSynex preferred stock: | $ | |||
| Purchase of NanoSynex preferred stock: | ||||
| Price per share of Qualigen Stock on May 26, 2022 | $ | |||
| FMV of shares of Qualigen stock issued to Alpha Capital Anstalt | $ | |||
| FMV of shares of Qualigen stock related to prefunded warrant issued to Alpha Capital Anstalt | $ | |||
| Total consideration paid for NanoSynex preferred stock | $ | |||
| FMV of consideration related to related to repricing of shares of Alpha Capital/Qualigen warrants * | $ | |||
| NanoSynex cash acquired | ( | ) | ||
| Total consideration transferred, net of cash acquired | $ | |||
| * |
| Purchase Price Allocation | ||||
| Accounts receivable | $ | |||
| Property and equipment | ||||
| In process R&D | ||||
| Accounts payable | ( | ) | ||
| Accrued expenses and other payables | ( | ) | ||
| R&D grant liability | ( | ) | ||
| Short term debt | ( | ) | ||
| Deferred tax liability | ( | ) | ||
| Noncontrolling interest assumed | ( | ) | ||
| Identifiable net assets acquired | ( | ) | ||
| Goodwill | ||||
| Total consideration transferred, net of cash acquired | $ | |||
The purchase accounting adjustments are preliminary and subject to revision within the measurement period provided by ASC Topic 805. Qualigen transaction costs, which were immaterial, have been expensed as incurred and charged to the Company’s consolidated statements of operations and other comprehensive loss. There was no provision for reimbursement of transaction costs from Qualigen to NanoSynex.
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired as of the acquisition date. Goodwill represents the value of the future technology to be developed in excess of the identifiable assets as well as the operational synergies of the combined companies to be recognized. Goodwill has an indefinite useful life and is not amortized.
As
a condition to the closing, the Company agreed to provide NanoSynex with up to $
The
Company’s condensed consolidated statement of operations and other comprehensive loss for three and nine months ended
September 30, 2022 include $
15
The following pro forma information has been prepared as if the NanoSynex acquisition occurred on January 1, 2021. The following unaudited supplemental pro forma consolidated results do not purport to reflect what the combined Company’s results of operations would have been, nor do they project the future results of operations of the combined Company. The unaudited supplemental pro forma consolidated results reflect the historical financial information of Qualigen and NanoSynex, adjusted to give effect to the NanoSynex acquisition as if it had occurred on January 1, 2021, as well as to record NanoSynex stock compensation expense and to record the net loss related to the noncontrolling interest, in accordance with generally accepted accounting principles:
| Consolidated Pro Forma Financial | ||||||||
| Results for the Nine Months Ending | ||||||||
| September 30, | September 30, | |||||||
| 2022 | 2021 | |||||||
| Net revenue | $ | $ | ||||||
| Net loss attributable to Qualigen Therapeutics, Inc. | $ | ( | ) | $ | ( | ) | ||
NOTE 4 — INVENTORY, NET
Inventory, net consisted of the following at September 30, 2022 and December 31, 2021:
September 30, 2022 | December 31, 2021 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| $ | $ | |||||||
NOTE 5 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following at September 30, 2022 and December 31, 2021:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Prepaid insurance | $ | $ | ||||||
| Prepaid manufacturing expenses | ||||||||
| Other prepaid expenses | ||||||||
| $ | $ | |||||||
NOTE 6 — PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following at September 30, 2022 and December 31, 2021:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Machinery and equipment | $ | $ | ||||||
| Computer equipment | ||||||||
| Leasehold improvements | ||||||||
| Molds and tooling | ||||||||
| Furniture and fixtures | ||||||||
| Equipment held for lease, net | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation
expense relating to property and equipment was approximately $
16
NOTE 7 — GOODWILL, IPR&D AND OTHER INTANGIBLES
| September 30, | December 31, | |||||||||
| 2022 | 2021 | |||||||||
| Estimated Useful Lives | Gross carrying amounts | Gross carrying amounts | ||||||||
| Goodwill | $ | $ | ||||||||
| Finite-lived intangible assets: | ||||||||||
| Developed-product-technology rights | ||||||||||
| Licensing rights | ||||||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||||
| Total finite-lived intangible assets, net | ||||||||||
| Indefinite-lived intangible assets: | ||||||||||
| In-process research and development | ||||||||||
| Total other intangible assets, net | $ | $ | ||||||||
The
carrying value of the patents of approximately $
The
carrying value of the in-licenses of approximately $
NOTE 8 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following at September 30, 2022 and December 31, 2021:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Board compensation | $ | $ | ||||||
| Franchise, sales and use taxes | ||||||||
| Income taxes | ||||||||
| Payroll | ||||||||
| Professional fees | ||||||||
| Research and development | ||||||||
| Royalties | ||||||||
| Vacation | ||||||||
| Warranty liability | ||||||||
| Other | ||||||||
| $ | $ | |||||||
17
NOTE 9 – SHORT TERM DEBT-RELATED PARTY
NanoSynex
has four separate Notes Payable (the “Notes”) outstanding to Alpha Capital, dated between March 26, 2020 and September 2,
2021, aggregating to a total principal outstanding balance of $
NOTE 10 – 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.
In
exchange for the Series C Warrants, upon closing of the merger with Ritter, the holders received warrants to purchase an aggregate of
The following table summarizes the activity in the Common Stock Warrants (received in exchange for the Series C Warrants) for the nine months ended September 30, 2022:
| 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, 2021 | $ | |||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Expired | ||||||||||||||||
| Granted | ||||||||||||||||
| Total outstanding – September 30, 2022 | $ | |||||||||||||||
| Exercisable | $ | $ | ||||||||||||||
18
The following table summarizes the activity in the Common Stock Warrants (received in exchange for the Series C Warrants) activity for the nine months ended September 30, 2021:
| 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 | $ | | ||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Expired | ||||||||||||||||
| Granted | ||||||||||||||||
| Total outstanding – September 30, 2021 | $ | |||||||||||||||
| Exercisable | $ | $ | ||||||||||||||
The following table presents the Company’s fair value hierarchy for its warrant liabilities and exercises (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 September 30, 2022:
| Quoted | ||||||||||||||||
| Market | Significant | |||||||||||||||
| Prices for | Other | Significant | ||||||||||||||
| Identical | Observable | Unobservable | ||||||||||||||
| Assets | Inputs | Inputs | ||||||||||||||
| Common Stock Warrant liabilities | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | $ | ||||||||||||
| Exercises | ( | ) | ( | ) | ||||||||||||
| Gain on change in fair value of warrant liabilities | ( | ) | ( | ) | ||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | $ | ||||||||||||
There were no transfers of financial assets or liabilities between category levels for the three and nine months ended September 30, 2022.
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.
19
The following table shows the range of assumptions used in estimating the fair value of warrant liabilities as of September 30, 2022 and 2021:
September 30, 2022 | September 30, 2021 | |||||||||||||||
| Range | Weighted Average | Range | Weighted Average | |||||||||||||
| Risk-free interest rate | % | % | ||||||||||||||
| Expected volatility (peer group) | % | % | ||||||||||||||
| Term of warrants (in years) | ||||||||||||||||
| Expected dividend yield | % | % | % | % | ||||||||||||
Basic loss per share (“EPS”) is computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted EPS is computed based on the sum of the weighted-average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of shares issuable from stock options and warrants.
| For the Three Months Ended September 30, | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net loss used for basic earnings per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic weighted-average common shares outstanding | ||||||||||||||||
| Dilutive potential shares issuable from stock options and warrants | ||||||||||||||||
| Diluted weighted-average common shares outstanding | ||||||||||||||||
As of September 30, | As of September 30, | |||||||
| 2022 | 2021 | |||||||
| Shares of common stock subject to outstanding options | ||||||||
| Shares of common stock subject to outstanding warrants | ||||||||
| Shares of common stock subject to conversion of Series Alpha Convertible Preferred Stock | ||||||||
| Total common stock equivalents | ||||||||
NOTE 12 — COMMITMENTS AND CONTINGENCIES
Leases
The
Company leases its facilities under a long-term operating lease agreement. On December 15, 2021, our wholly-owned subsidiary Qualigen,
Inc. entered into a Second Amendment to Lease with Bond Ranch LP. This Amendment extended the Company’s triple-net leasehold on
the Company’s existing
20
The tables below show the operating lease right-of-use assets and operating lease liabilities as of September 30, 2022, including the changes during the periods:
| Operating lease right-of-use assets | ||||
| Net right-of-use assets at December 31, 2021 | $ | |||
| Less amortization of operating lease right-of-use assets | ( | ) | ||
| Operating lease right-of-use assets at September 30, 2022 | $ |
Operating lease liabilities | ||||
| Lease liabilities at December 31, 2021 | $ | |||
| Less principal payments on operating lease liabilities | ( | ) | ||
| Lease liabilities at September 30, 2022 | ||||
| Less non-current portion | ( | ) | ||
| Current portion at September 30, 2022 | $ |
As
of September 30, 2022, the Company’s operating leases have a weighted-average remaining lease term of
As of September 30, 2022, future minimum payments during the next five fiscal years and thereafter are as follows:
| Year Ending December 31, | Amount | |||
| 2022 (three months) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total | ||||
| Less present value discount | ( | ) | ||
| Operating lease liabilities | $ | |||
Total
lease expense was approximately $
Termination of Sekisui Distribution Agreement
In March 2018, the Company extended a strategic partnership entered into in May 2016 with Sekisui Diagnostics, LLC (“Sekisui”). The Company appointed Sekisui as its diagnostics commercial partner and exclusive worldwide distributor with the exception of certain customer accounts retained by Qualigen; Sekisui’s distribution arrangement expired on March 31, 2022. Subsequent to the expiration of the agreement, the Company has a a commitment to purchase leased FastPack rental systems back from Sekisui at Sekisui’s net book value, the amount of which has not yet been determined.
NanoSynex Funding Commitment
As
a condition to the closing, the Company agreed to provide NanoSynex with up to $
21
Litigation and Other Legal Proceedings
On
November 9, 2021, the Company was named as a defendant in an action brought by Mediant Communications Inc. (“Mediant”) in
the U.S. District Court for the Southern District of New York. The complaint alleged that Qualigen entered into an implied contract with
Mediant, whereby Qualigen retained Mediant to distribute proxy materials and subsequently conduct shareholder vote tabulations. The Company
filed a Motion to Dismiss with the District Court and on March 14, 2022 a hearing was held during which the presiding judge ruled in
favor of the Motion to Dismiss. The Company and Mediant settled the litigation on April 5, 2022 in the amount of $
NOTE 13 — RESEARCH AND LICENSE AGREEMENTS
The University of Louisville Research Foundation
In
March 2019, the Company entered into a sponsored research agreement and an option for a license agreement with University of Louisville Research Foundation (“ULRF”) for development of
several small-molecule RAS interaction inhibitor drug candidates. Under the terms of this agreement, the Company agreed to reimburse
ULRF for sponsored research expenses of up to $
22
Sponsored
research expenses related to this agreement for the three months ended September 30, 2022 and 2021 were approximately $
Between June 2018 and April 2022, the Company entered into license and
sponsored research agreements with 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 $
Sponsored research expenses related to this agreement
for the three months ended September 30, 2022 and 2021 were $
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 took 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 $
The license agreement with ULRF for its intellectual property in the use of QN-165 as a treatment for COVID-19 was terminated effective October 31, 2022.
Sponsored
research expenses related to this agreement for the three months ended September 30, 2022 and 2021 were $