Qualigen Therapeutics(QLGN) - 2020 Q2 - Quarterly Report

Revenue Performance - Total revenues for the three months ended June 30, 2020, were $904,067, a decrease of $606,768 or 40% compared to $1,510,835 in the same period in 2019[150]. - Net product sales during the three months ended June 30, 2020, were approximately $484,000, down $76,000 or 14% from $561,000 in the same period in 2019[152]. - The decrease in revenues was primarily due to a reduction in sales to Sekisui of about $500,000 and a $100,000 decrease in sales to Low T Center, Inc., both attributed to the COVID-19 pandemic[151]. - Net product sales to related party Sekisui decreased by approximately $531,000, or 56%, to approximately $420,000 for the three months ended June 30, 2020, compared to $950,000 for the same period in 2019[153]. Expense Overview - Total expenses for the three months ended June 30, 2020, were $3,473,725, an increase of $1,437,468 or 71% compared to $2,036,257 in the same period in 2019[150]. - Cost of product sales increased from $317,000, or 56% of product sales, in Q2 2019 to $355,000, or 73% of product sales, in Q2 2020, due to higher overhead costs and lower sales volume[154]. - General and administrative expenses rose significantly from $0.3 million in Q2 2019 to $2.0 million in Q2 2020, primarily due to stock-based compensation and increased professional fees[156]. - Research and development costs increased from approximately $148,000 in Q2 2019 to approximately $597,000 in Q2 2020, with a focus shift towards therapeutics[158]. - Other expenses surged to approximately $16.0 million in Q2 2020 from approximately $0.1 million in Q2 2019, mainly due to the recognition of $16.2 million in warrant liabilities[162]. Financial Losses - The loss from operations for the three months ended June 30, 2020, was $(2,569,658), compared to $(525,422) in the same period in 2019, representing an increase in loss of $2,044,236[150]. - The net loss for the three months ended June 30, 2020, was $(18,578,905), compared to $(594,565) in the same period in 2019, an increase in loss of $17,984,340[150]. - The company expects to continue experiencing net losses and negative cash flow from operations as it focuses on being a development-stage therapeutics biotechnology company[167]. Cash Flow and Capital - As of June 30, 2020, the company had a net working capital deficit of approximately $15.6 million, compared to $3.7 million at March 31, 2020[164]. - Cash position improved to approximately $2.3 million at June 30, 2020, up from approximately $0.2 million at March 31, 2020, primarily due to a $4.0 million equity capital raise[165]. - Net cash used in operating activities was $2.2 million for Q2 2020, resulting from a net loss of $18.6 million[169]. - Net cash provided by financing activities was $4.8 million in Q2 2020, compared to $0.2 million in Q2 2019, in anticipation of the reverse-recapitalization transaction[173]. Product and Distribution Strategy - The FastPack System has generated over $100 million in sales since inception, utilizing a "razor and blades" pricing strategy to increase sales volumes of higher-margin test kits[137]. - The distribution agreement with Sekisui Diagnostics, LLC, is effective until May 2022, and the company is required to rely on Sekisui for most FastPack distribution worldwide[144]. Future Profitability Outlook - The company does not expect to be profitable before products from its therapeutics pipeline are commercialized, as R&D expenses are anticipated to exceed profits from diagnostics products[138].