Qualigen Therapeutics(QLGN) - 2024 Q2 - Quarterly Report

PART I. Financial Information Item 1. Condensed Consolidated Financial Statements (Unaudited) Unaudited Q2 2024 financials show decreased assets, increased liabilities, reduced net loss, and significant going concern doubts Condensed Consolidated Balance Sheets Total assets declined to $0.53 million, liabilities rose to $4.81 million, worsening the stockholders' deficit Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | June 30, 2024 (USD) | December 31, 2023 (USD) | | :--- | :--- | :--- | | Assets | | | | Cash | $118,685 | $401,803 | | Total Current Assets | $534,410 | $1,166,767 | | Total Assets | $534,410 | $2,033,248 | | Liabilities & Stockholders' Deficit | | | | Total Current Liabilities | $4,812,273 | $4,136,805 | | Total Stockholders' Deficit | $(4,277,863) | $(2,103,557) | | Total Liabilities & Stockholders' Deficit | $534,410 | $2,033,248 | Condensed Consolidated Statements of Operations Net loss from continuing operations improved for both three and six-month periods due to reduced operating expenses Statement of Operations Summary - Three Months Ended June 30 | Metric | 2024 (USD) | 2023 (USD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Expenses | $1,740,771 | $3,601,712 | -51.7% | | Loss from Operations | $(1,740,771) | $(3,601,712) | +51.7% | | Net Loss from Continuing Operations | $(1,476,558) | $(3,537,361) | +58.3% | | Net Loss Attributable to Qualigen | $(1,576,558) | $(3,464,205) | +54.5% | | Net Loss Per Share (basic and diluted) | $(0.21) | $(0.69) | +69.6% | Statement of Operations Summary - Six Months Ended June 30 | Metric | 2024 (USD) | 2023 (USD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Expenses | $3,166,091 | $6,252,531 | -49.4% | | Loss from Operations | $(3,166,091) | $(6,252,531) | +49.4% | | Net Loss from Continuing Operations | $(3,509,309) | $(6,772,423) | +48.2% | | Net Loss Attributable to Qualigen | $(3,669,326) | $(7,310,426) | +49.8% | | Net Loss Per Share (basic and diluted) | $(0.54) | $(1.46) | +63.0% | Condensed Consolidated Statements of Cash Flows Operating cash outflow reduced, with $1.63 million from financing, leading to a $(0.28) million net cash decrease Cash Flow Summary - Six Months Ended June 30 | Cash Flow Activity | 2024 (USD) | 2023 (USD) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(2,258,118) | $(5,562,416) | | Net Cash Provided by (Used in) Investing Activities | $350,000 | $(246,418) | | Net Cash Provided by Financing Activities | $1,625,000 | $0 | | Net Change in Cash | $(283,118) | $(5,808,834) | Notes to Condensed Consolidated Financial Statements Notes detail discontinued operations, substantial going concern doubt, and subsequent financing and Nasdaq compliance updates - The company has substantial doubt about its ability to continue as a going concern. Cash on hand as of June 30, 2024, was approximately $119,000, which is expected to fund operations only into the fourth quarter of 2024[28] - The sale of Qualigen, Inc. and the deconsolidation of NanoSynex in July 2023 are classified as discontinued operations. In Q2 2024, the company recognized a $100,000 loss on disposal related to an early settlement of an escrow account from the Qualigen, Inc. sale[11][31][32] - Subsequent to the quarter's end, the company raised $2.0 million through an 18% senior note, saw the full conversion of its 2022 convertible debenture, and received an extension from a Nasdaq Hearings Panel until October 31, 2024, to regain compliance with listing requirements[75][76][78] - In April 2024, the company entered into a Co-Development Agreement with Marizyme, paying a $200,000 Exclusivity Fee and a $500,000 Funding Payment to support the commercialization of DuraGraft™, in return for a 33% royalty-like payment on net sales, capped at double the funding provided[56] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strategic shift to therapeutics, reduced expenses, critical liquidity, and efforts to address going concern doubts Overview and Recent Developments The company transitioned to an early-clinical-stage therapeutics focus, with lead program QN-302 in Phase 1a, and divested diagnostics - The company is now an early-clinical-stage therapeutics company focused on developing treatments for adult and pediatric cancer[82] - The lead program, QN-302, is in a Phase 1a clinical trial after receiving FDA clearance for its IND application in August 2023. The first patient was dosed in November 2023[82][83] - The diagnostics business (Qualigen, Inc.) was sold to Chembio Diagnostics, Inc. in July 2023, with a final escrow settlement in June 2024[84] Results of Operations Operating expenses significantly decreased for both periods, with G&A down 46% and R&D down 54% due to restructuring Operating Expense Comparison - Six Months Ended June 30 | Expense Category | 2024 (Millions USD) | 2023 (Millions USD) | Change (%) | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | General and Administrative | $2.0M | $3.8M | -46% | Decreases in stock-based compensation, professional fees, and payroll | | Research and Development | $1.1M | $2.5M | -54% | Decreased QN-302 and RAS program costs, partially offset by new Marizyme agreement expenses | - Other income/expense was significantly impacted by non-cash gains on the change in fair value of warrant and derivative liabilities, totaling approximately $0.6 million for the first six months of 2024[99] Liquidity and Capital Resources Severe liquidity crisis with $119,000 cash, raising going concern doubts, partially mitigated by recent and subsequent financing - The company's cash balance of ~$119,000 as of June 30, 2024, is expected to fund operations only into Q4 2024, raising substantial doubt about its ability to continue as a going concern[102] - In H1 2024, the company raised ~$1.5 million through the issuance of convertible debentures to Alpha Capital Anstalt and Yi Hua Chen[102] - Subsequent to the quarter, the company secured $2.0 million in funding through an 18% senior note issued to an institutional investor in July 2024[102] - A Nasdaq Hearings Panel granted the company an extension until October 31, 2024, to regain compliance with the minimum bid price and stockholders' equity listing requirements[78][102] Item 4. Controls and Procedures Disclosure controls and procedures were ineffective as of June 30, 2024, due to unremediated material weaknesses - Management concluded that disclosure controls and procedures were not effective as of June 30, 2024[114] - The ineffectiveness is due to unremediated material weaknesses, including a lack of sufficient accounting personnel for segregation of duties and inadequate IT General Controls[115] PART II. Other Information Item 1. Legal Proceedings No material legal proceedings are currently pending or threatened against the company as of June 30, 2024 - As of June 30, 2024, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the company's operations[52][117] Item 1A. Risk Factors No material changes to the company's risk factors have occurred since the 2023 Annual Report - There have been no material changes to the company's risk factors since the 2023 Annual Report[118] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued 1,604,612 unregistered common shares for $440,000 in convertible debt redemption - In the six months ended June 30, 2024, the company issued 1,604,612 unregistered common shares to Alpha Capital Anstalt for the redemption of convertible debt[119]