Cellect(US:QNRX)2025-08-07 20:58markdown [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND SUMMARY OF RISK FACTORS](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section provides a cautionary note on forward-looking statements and summarizes key risk factors that could materially impact future results [Forward-Looking Statements Overview](index=3&type=section&id=Forward-Looking%20Statements%20Overview) This section defines forward-looking statements and outlines key risks and uncertainties that could cause actual results to differ materially from projections - Forward-looking statements are characterized by **terms like 'may,' 'will,' 'expect,' 'anticipate,'** and relate to objectives, plans, strategies, financial condition projections, capital needs, and product development[7](index=7&type=chunk)[8](index=8&type=chunk) - Important factors that could cause actual results to differ include limited operating history, history of losses, need for additional capital, lack of revenue, uncertainties of cash flows, ability to obtain regulatory approvals, and ability to generate favorable clinical trial results[10](index=10&type=chunk) - Other risks include obtaining orphan drug designation, manufacturing process validation, difficulties in patient enrollment for clinical trials, requirements of being a publicly traded company, potential adverse effects from internal control failures, and Nasdaq listing compliance[13](index=13&type=chunk) [PART I – FINANCIAL INFORMATION](index=6&type=section&id=PART%20I-FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements.](index=6&type=section&id=Item%201.%20Financial%20Statements.) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, statements of shareholders' equity, and statements of cash flows, along with detailed notes explaining the company's organization, liquidity risks, significant accounting policies, and specific financial line items [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's unaudited condensed consolidated balance sheets as of **June 30, 2025**, and **December 31, 2024** | ASSETS (in $) | June 30, 2025 (unaudited) | December 31, 2024 | | :------------------------ | :------------------------ | :------------------ | | Cash and cash equivalents | 1,668,492 | 3,623,343 | | Investments | 6,121,830 | 10,433,535 | | Total current assets | 8,479,255 | 14,926,004 | | Total assets | 8,912,589 | 15,709,338 | | LIABILITIES AND EQUITY (in $) | June 30, 2025 (unaudited) | December 31, 2024 | | :------------------------ | :------------------------ | :------------------ | | Total current liabilities | 4,337,499 | 4,180,932 | | Total liabilities | 6,361,232 | 6,504,665 | | Total shareholders' equity| 2,551,357 | 9,204,673 | | Total liabilities and shareholders' equity | 8,912,589 | 15,709,338 | [Condensed Consolidated Statements of Operations (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) This section details the unaudited condensed consolidated statements of operations for the three and six months ended **June 30, 2025** and **2024** | Operating Expenses (in $) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative| 1,742,594 | 1,549,615 | 3,325,632 | 3,122,601 | | Research and development | 2,050,585 | 587,503 | 4,424,724 | 1,472,801 | | Total operating expenses | 3,793,179 | 2,137,118 | 7,750,356 | 4,595,402 | | Net loss | (3,695,938) | (1,974,033) | (7,508,117) | (4,301,313) | | Loss per ADS (Basic) | (6.28) | (13.68) | (12.79) | (42.09) | - Net loss for the three months ended **June 30, 2025**, increased to **$(3,695,938)** from **$(1,974,033)** in the prior year, primarily driven by a significant increase in research and development expenses[17](index=17&type=chunk) - Net loss for the six months ended **June 30, 2025**, increased to **$(7,508,117)** from **$(4,301,313)** in the prior year, reflecting higher operating expenses[17](index=17&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20(Unaudited)) This section presents the unaudited condensed consolidated statements of shareholders' equity for the six months ended **June 30, 2025** | Shareholders' Equity (in $) | Balance at January 1, 2025 | Net loss | Exercise of pre-funded warrants and warrants, net | Stock based compensation | Balance at June 30, 2025 | | :-------------------------- | :------------------------- | :------- | :------------------------------------------------ | :----------------------- | :----------------------- | | Total | 9,204,673 | (7,508,117) | 172,958 | 681,843 | 2,551,357 | - Total shareholders' equity decreased from **$9,204,673** at **January 1, 2025**, to **$2,551,357** at **June 30, 2025**, primarily due to net losses[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows (unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) This section provides the unaudited condensed consolidated statements of cash flows for the six months ended **June 30, 2025** and **2024** | Cash Flows (in $) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :----------------------------- | :----------------------------- | | Operating activities | (6,280,510) | (3,441,495) | | Investing activities | 4,452,701 | (1,310,774) | | Financing activities | (127,042) | 5,196,197 | | Net change in cash and cash equivalents | (1,954,851) | 443,928 | | Cash and cash equivalents - end of period | 1,668,492 | 2,845,126 | - Net cash used in operating activities significantly increased to **$(6,280,510)** for the six months ended **June 30, 2025**, compared to **$(3,441,495)** in the prior year[20](index=20&type=chunk) - Investing activities provided **$4,452,701** in cash in **H1 2025**, a reversal from using **$1,310,774** in **H1 2024**, primarily due to net sales and redemptions of US Treasury Bills and Notes[20](index=20&type=chunk) [NOTE 1 – ORGANIZATION AND BUSINESS](index=10&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20BUSINESS) This note describes the company's organization as a late-stage clinical pharmaceutical company and its lead product development - The company, Quoin Pharmaceuticals Ltd., is a late-stage clinical specialty pharmaceutical company focused on rare and orphan diseases[22](index=22&type=chunk) - Its lead product, QRX003, is in clinical development for Netherton Syndrome (NS) and Peeling Skin Syndrome, with trials expanding internationally[22](index=22&type=chunk) - Effective **April 9, 2025**, the company executed a **1-for-35 reverse split** of its ADSs to regain Nasdaq compliance[21](index=21&type=chunk) [NOTE 2 - LIQUIDITY RISKS AND OTHER UNCERTAINTIES](index=10&type=section&id=NOTE%202%20-%20LIQUIDITY%20RISKS%20AND%20OTHER%20UNCERTAINTIES) This note discusses the company's accumulated deficit, net losses, and the substantial doubt about its ability to continue as a going concern - The company has an accumulated deficit of approximately **$62.7 million** at **June 30, 2025**, and incurred net losses of **$7.5 million** and negative cash flows from operations of **$6.3 million** for the six months ended **June 30, 2025**[23](index=23&type=chunk) - Management has concluded there is substantial doubt about the company's ability to continue as a going concern for at least one year, necessitating additional debt or equity capital[24](index=24&type=chunk)[25](index=25&type=chunk) - The company regained Nasdaq compliance on **April 29, 2025**, following a **1-for-35 reverse split** of its ADSs, but there is no assurance of maintaining compliance[32](index=32&type=chunk)[33](index=33&type=chunk) [NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=NOTE%203%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the significant accounting policies used in preparing the interim financial statements, including R&D costs and segment reporting - Financial statements are prepared in accordance with U.S. GAAP for interim financial information, with management making estimates and assumptions affecting reported amounts[34](index=34&type=chunk)[36](index=36&type=chunk) - Research and development costs are expensed as incurred, including personnel costs and third-party contractor expenses for clinical trials and drug supplies[44](index=44&type=chunk) - The company operates in one business segment focused on research and development of therapeutic products for rare and orphan diseases[42](index=42&type=chunk) [NOTE 4 – ACCRUED INTEREST AND FINANCING EXPENSE](index=17&type=section&id=NOTE%204%20%E2%80%93%20ACCRUED%20INTEREST%20AND%20FINANCING%20EXPENSE) This note details the estimated liability for 2020 Notes and the absence of interest expense recognized during the reporting periods - An estimated liability of **$1,146,000** for 2020 Notes was outstanding as of **June 30, 2025**, and **December 31, 2024**, with **$339,000** due to related parties[51](index=51&type=chunk) - No interest expense was recognized for the three and six months ended **June 30, 2025**, and **2024**[52](index=52&type=chunk) [NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS](index=17&type=section&id=NOTE%205%20-%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) This note explains the company's application of fair value accounting and classification of financial assets and liabilities - The company applies fair value accounting, classifying financial assets and liabilities based on a three-level hierarchy[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) | US Treasury Bills and Notes (in $) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Level 1 | 6,121,830 | 10,433,535 | | Total | 6,121,830 | 10,433,535 | [NOTE 6 – STOCK BASED COMPENSATION](index=19&type=section&id=NOTE%206%20%E2%80%93%20STOCK%20BASED%20COMPENSATION) This note provides details on stock option activity, stock-based compensation expense, and Black-Scholes valuation assumptions | Stock Option Activity | Outstanding at Dec 31, 2024 | Granted | Outstanding at Jun 30, 2025 | | :-------------------- | :-------------------------- | :------ | :-------------------------- | | ADSs Underlying Options | 55,541 | 124,514 | 180,055 | | Weighted Average Exercise Price | $150.47 | $9.07 | $52.69 | - Stock-based compensation expense was approximately **$321,000** for **Q2 2025** and **$682,000** for **H1 2025**, with **$3.1 million** in unrecognized compensation expense remaining[62](index=62&type=chunk)[64](index=64&type=chunk) | Black-Scholes Assumptions (June 30, 2025) | Value | | :---------------------------------------- | :---- | | Expected volatility | 108.4%| | Risk-free interest rate | 4.4% | | Expected dividend yield | 0.0% | | Expected life of options in years | 6.4 | | Estimate fair value of option | $7.73 | [NOTE 7 – PREPAID EXPENSES](index=20&type=section&id=NOTE%207%20%E2%80%93%20PREPAID%20EXPENSES) This note presents a breakdown of prepaid expenses, including R&D costs, insurance, and other prepaid items | Prepaid Expenses (in $) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Prepaid R&D costs | 499,905 | 772,083 | | Prepaid insurance | 135,434 | 309,889 | | Prepaid expense | 53,594 | 87,154 | | Total | 688,933 | 1,169,126 | [NOTE 8 - ACCRUED EXPENSES](index=20&type=section&id=NOTE%208%20-%20ACCRUED%20EXPENSES) This note details the company's accrued expenses, including research contract expenses, payroll, and professional fees | Accrued Expenses (in $) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Research contract expenses | 667,310 | 183,094 | | Payroll | 736,656 | 940,539 | | Payroll taxes | 62,264 | 77,726 | | Professional fees | 100,843 | 323,497 | | Other expenses | 150,491 | 4,121 | | Total | 1,717,564 | 1,528,977 | [NOTE 9 – IN-LICENSED TECHNOLOGY](index=21&type=section&id=NOTE%209%20%E2%80%93%20IN-LICENSED%20TECHNOLOGY) This note describes the exclusive royalty-bearing license agreement for QRX003 and QRX004, including license fees and future royalties - The company holds an exclusive royalty-bearing license from Skinvisible Pharmaceuticals for QRX003 and QRX004, involving a **$1 million** license fee and future **single-digit royalties** on net sales[67](index=67&type=chunk) - A one-time **$5 million** payment is due to Skinvisible upon the first drug product approval in the U.S. or EU[67](index=67&type=chunk) [NOTE 10 - INTANGIBLE ASSETS](index=21&type=section&id=NOTE%2010%20-%20INTANGIBLE%20ASSETS) This note presents the intangible assets, specifically the technology license from Skinvisible, and related accumulated amortization | Intangible Assets (in $) | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Technology license – Skinvisible | 1,000,000 | 1,000,000 | | Accumulated amortization | (566,666) | (516,666) | | Net book value | 433,334 | 483,334 | - Amortization expense was **$25,000** for both **Q2 2025** and **Q2 2024**, and **$50,000** for both **H1 2025** and **H1 2024**[68](index=68&type=chunk) [NOTE 11 - RELATED PARTY TRANSACTIONS](index=21&type=section&id=NOTE%2011%20-%20RELATED%20PARTY%20TRANSACTIONS) This note details transactions with related parties, including repayments to officers and amounts due for salaries and compensation - The company repaid **$150,000** to Dr. Myers and **$150,000** to Ms. Carter in **H1 2025** for accrued indebtedness[69](index=69&type=chunk) | Amounts Due to Officers (in $) | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Salaries and other compensation | 2,623,733 | 2,923,733 | | Less: Short-term portion | (600,000) | (600,000) | | Long-term portion | 2,023,733 | 2,323,733 | [NOTE 12 – RESEARCH, CONSULTING AGREEMENTS AND COMMITMENTS](index=22&type=section&id=NOTE%2012%20%E2%80%93%20RESEARCH,%20CONSULTING%20AGREEMENTS%20AND%20COMMITMENTS) This note outlines research and consulting agreements, including R&D expenses for clinical studies and other research programs - The company incurred R&D expenses of approximately **$348,000** (**Q2 2025**) and **$759,000** (**H1 2025**) under a Master Service Agreement for QRX003 clinical studies, with an estimated remaining cost of **$3.6 million**[73](index=73&type=chunk) - The Netherton Syndrome research program with QUT has been discontinued, and the Scleroderma research program with QUT is under review[74](index=74&type=chunk) - A research agreement with UCC for novel topical rapamycin formulations involves funding up to **€567,000 ($668,000)** over **2.5 years**, with **$60,000** (**Q2 2025**) and **$120,000** (**H1 2025**) incurred[75](index=75&type=chunk) [NOTE 13 – SHAREHOLDERS' EQUITY](index=23&type=section&id=NOTE%2013%20%E2%80%93%20SHAREHOLDERS'%20EQUITY) This note details changes in shareholders' equity, including warrant exercises and their impact on net proceeds - In **January** and **February 2025**, warrant exercises generated approximately **$173,000** in net proceeds[77](index=77&type=chunk) | Warrant Activity | Outstanding and exercisable at Dec 31, 2024 | Exercised Pre-Funded and Common Warrants | Outstanding and exercisable at Jun 30, 2025 | | :--------------- | :------------------------------------------ | :--------------------------------------- | :------------------------------------------ | | ADSs Underlying Warrants | 1,440,664 | (332,505) | 1,108,159 | | Average Exercise Price Per ADS | $16.80 | $0.58 | $21.92 | [NOTE 14 – CONTINGENCIES](index=23&type=section&id=NOTE%2014%20%E2%80%93%20CONTINGENCIES) This note states that management is unaware of any material legal matters requiring accrual in the financial statements - Management is unaware of any material legal matters requiring accrual in the financial statements[79](index=79&type=chunk) [NOTE 15 – LICENSE AGREEMENTS](index=23&type=section&id=NOTE%2015%20%E2%80%93%20LICENSE%20AGREEMENTS) This note describes the company's commercial license and supply agreements from which future royalties are expected - The company has nine commercial license and supply agreements from which it expects future royalties, but no royalty revenues have been received through **June 30, 2025**[80](index=80&type=chunk) [NOTE 16 – SUBSEQUENT EVENTS](index=23&type=section&id=NOTE%2016%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note reports on subsequent events, including the signing of the One Big Beautiful Bill Act and its potential impact - The One Big Beautiful Bill Act (OBBBA) was signed into law on **July 4, 2025**, and the company is currently assessing its impact on consolidated financial statements[81](index=81&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, including an overview of its business, recent developments, detailed analysis of operating expenses, and a discussion of liquidity and capital resources, emphasizing the ongoing need for financing [Overview](index=24&type=section&id=Overview) This section provides an overview of the company's business as a late-stage clinical pharmaceutical company focused on rare diseases - The company is a late-stage clinical specialty pharmaceutical company focused on rare and orphan diseases, with QRX003 as its lead product for Netherton Syndrome[83](index=83&type=chunk) - Strategic plans include completing QRX003 clinical testing, preparing for commercialization with a U.S. sales infrastructure and international partnerships, and pursuing business development opportunities[85](index=85&type=chunk) - No products have been commercialized, and no revenue has been generated; additional capital is required for development and commercialization[84](index=84&type=chunk) [Recent Developments](index=25&type=section&id=Recent%20Developments) This section highlights recent developments, including regaining Nasdaq compliance after an ADS reverse split - The company regained Nasdaq compliance on **April 29, 2025**, after effecting a **1-for-35 reverse split** of its ADSs on **April 9, 2025**, to meet the Minimum Bid Price Requirement[86](index=86&type=chunk) - There is no assurance of maintaining Nasdaq compliance, and delisting would negatively impact liquidity and future capital raising ability[88](index=88&type=chunk) [Components of Our Results of Operations](index=25&type=section&id=Components%20of%20Our%20Results%20of%20Operations) This section explains the components of operating expenses, primarily research and development and general and administrative costs - Operating expenses consist of research and development (R&D) and general and administrative (G&A) expenses[89](index=89&type=chunk) - R&D costs are expensed as incurred and are expected to be significant due to late-stage clinical studies and regulatory preparations for QRX003[90](index=90&type=chunk)[92](index=92&type=chunk) - G&A expenses are expected to increase to support R&D activities, including compensation, personnel, travel, and professional fees[93](index=93&type=chunk) [Results of Operations – Three months ended June 30, 2025 compared to the three months ended June 30, 2024](index=28&type=section&id=Results%20of%20Operations%20%E2%80%93%20Three%20months%20ended%20June%2030,%202025%20compared%20to%20the%20three%20months%20ended%20June%2030,%202024) This section analyzes the company's operating results for the three months ended **June 30, 2025**, compared to the prior year | Operating Expenses (in $) | 2025 | 2024 | Change | | :------------------------ | :------------ | :------------ | :------------ | | General and administrative| 1,742,594 | 1,549,615 | 192,979 | | Research and development | 2,050,585 | 587,503 | 1,463,082 | | Total operating expenses | 3,793,179 | 2,137,118 | 1,656,061 | | Net loss | (3,695,938) | (1,974,033) | (1,721,905) | - General and administrative expenses increased by **$192,979** (**12.5%**) due to higher consulting, marketing, legal fees, and corporate taxes, partially offset by decreases in payroll, travel, and insurance[97](index=97&type=chunk) - Research and development expenses surged by **$1,463,082** (**248.8%**) due to increased external expenditures on QRX003 clinical studies and the University College Cork research collaboration[98](index=98&type=chunk) [Results of Operations – Six months ended June 30, 2025 compared to the six months ended June 30, 2024](index=29&type=section&id=Results%20of%20Operations%20%E2%80%93%20Six%20months%20ended%20June%2030,%202025%20compared%20to%20the%20six%20months%20ended%20June%2030,%202024) This section analyzes the company's operating results for the six months ended **June 30, 2025**, compared to the prior year | Operating Expenses (in $) | 2025 | 2024 | Change | | :------------------------ | :------------ | :------------ | :------------ | | General and administrative| 3,325,632 | 3,122,601 | 203,031 | | Research and development | 4,424,724 | 1,472,801 | 2,951,923 | | Total operating expenses | 7,750,356 | 4,595,402 | 3,154,954 | | Net loss | (7,508,117) | (4,301,313) | (3,206,804) | - General and administrative expenses increased by **$203,031** (**6.5%**) due to higher consulting, legal, public company costs, and marketing expenses, partially offset by lower payroll and insurance costs[102](index=102&type=chunk) - Research and development expenses increased by **$2,951,923** (**200.4%**) due to increased external expenditures on QRX003 clinical studies and the University College Cork research collaboration[103](index=103&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity position, capital resources, accumulated deficit, and ongoing need for additional financing - The company has an accumulated deficit of **$62.7 million** and incurred a net loss of **$7.5 million** with negative cash flows from operations of **$6.3 million** for **H1 2025**[106](index=106&type=chunk) - As of **June 30, 2025**, cash and cash equivalents totaled **$1.7 million** and investments were **$6.1 million**[106](index=106&type=chunk) - Management has concluded there is substantial doubt about the company's ability to continue as a going concern for at least one year, necessitating additional financing[107](index=107&type=chunk) [Future Funding Requirements](index=31&type=section&id=Future%20Funding%20Requirements) This section outlines the company's future funding needs and the potential consequences of failing to secure adequate additional capital - Future funding requirements depend on factors such as the scope and timing of drug development, clinical trials, regulatory review, commercialization, intellectual property, and operational infrastructure[109](index=109&type=chunk)[110](index=110&type=chunk) - Failure to secure adequate additional funding could lead to significant delays, scaling back, or termination of development programs or even cessation of operations[109](index=109&type=chunk)[112](index=112&type=chunk) - Raising capital through equity or convertible debt securities will dilute existing equity holders, and debt financing may impose restrictive covenants[111](index=111&type=chunk) [Summary Statement of Cash Flows](index=33&type=section&id=Summary%20Statement%20of%20Cash%20Flows) This section provides a summary of the company's cash flows from operating, investing, and financing activities | Cash Flows (in $) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | (6,280,510) | (3,441,495) | | Net cash provided (used) in investing activities | 4,452,701 | (1,310,774) | | Net cash (used) provided in financing activities | (127,042) | 5,196,197 | | Net change in cash and cash equivalents | (1,954,851) | 443,928 | [Operating Activities](index=33&type=section&id=Operating%20Activities) This section details the net cash used in operating activities and its primary drivers for the reporting periods - Net cash used in operating activities increased to approximately **$6.3 million** in **H1 2025** from **$3.4 million** in **H1 2024**, primarily due to an increase in net loss[114](index=114&type=chunk) [Investing Activities](index=33&type=section&id=Investing%20Activities) This section describes the net cash provided by or used in investing activities, primarily related to investments - Investing activities provided **$4.5 million** in net cash in **H1 2025**, primarily from net sales and redemptions of US Treasury Bills and Notes, contrasting with **$1.3 million** used in **H1 2024** for net purchases[115](index=115&type=chunk) [Financing Activities](index=33&type=section&id=Financing%20Activities) This section explains the net cash provided by or used in financing activities, including warrant exercises and officer repayments - Net cash used in financing activities was **$127,042** in **H1 2025**, resulting from **$172,958** from warrant exercises offset by **$300,000** in repayments to officers[116](index=116&type=chunk) - In **H1 2024**, financing activities provided **$5.2 million**, mainly from a public offering, partially offset by officer repayments[116](index=116&type=chunk) [Research and Development Commitments](index=33&type=section&id=Research%20and%20Development%20Commitments) This section outlines the company's commitments related to research and development, including licensing and clinical study agreements - The company has an exclusive licensing agreement with Skinvisible Pharmaceuticals for QRX003 and QRX004, requiring a **$5 million** payment upon the first U.S. or EU approval[117](index=117&type=chunk)[118](index=118&type=chunk) - A Master Service Agreement for QRX003 clinical studies has an estimated total remaining cost of approximately **$3.6 million**[119](index=119&type=chunk) - The Netherton Syndrome research program with QUT has been discontinued, while a research agreement with UCC for rapamycin formulations involves funding up to **€567,000 ($668,000)**[120](index=120&type=chunk)[121](index=121&type=chunk) [Critical Accounting Estimates](index=35&type=section&id=Critical%20Accounting%20Estimates) This section confirms no material changes to the company's critical accounting estimates from the prior annual report - There have been no material changes to the company's critical accounting estimates from those reported in its Annual Report on Form 10-K for the year ended **December 31, 2024**[122](index=122&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) As a smaller reporting company, Quoin Pharmaceuticals Ltd. is exempt from providing quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide information under this item[123](index=123&type=chunk) [Item 4. Controls and Procedures.](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures.) This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=36&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on management's conclusion regarding the effectiveness of disclosure controls and procedures - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of **June 30, 2025**[124](index=124&type=chunk) [Changes in Internal Control over Financial Reporting](index=36&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section confirms that there were no material changes in internal control over financial reporting during the quarter - There were no material changes in internal control over financial reporting during the quarter ended **June 30, 2025**[125](index=125&type=chunk) [PART II – OTHER INFORMATION](index=37&type=section&id=PART%20II%E2%80%93OTHER%20INFORMATION) This section covers legal proceedings, updated risk factors, equity sales, defaults, mine safety disclosures, other information, and exhibits [Item 1. Legal Proceedings.](index=37&type=section&id=Item%201.%20Legal%20Proceedings.) The company is not currently involved in any material legal or administrative proceedings - The company is not a party to any material legal or administrative proceedings, nor is it aware of any pending or threatened material proceedings[127](index=127&type=chunk) [Item 1A. Risk Factors.](index=37&type=section&id=Item%201A.%20Risk%20Factors.) This section updates and reiterates key risk factors, particularly focusing on the company's ability to maintain Nasdaq listing compliance and its ongoing need for additional capital to continue operations given its history of losses [Our failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a delisting of our ADSs.](index=37&type=section&id=Our%20failure%20to%20meet%20the%20continued%20listing%20requirements%20of%20The%20Nasdaq%20Capital%20Market%20could%20result%20in%20a%20delisting%20of%20our%20ADSs.) This section discusses the risk of delisting from Nasdaq due to failure to meet continued listing requirements, despite recent compliance efforts - The company regained Nasdaq compliance on **April 29, 2025**, after a **1-for-35 ADS reverse split** on **April 9, 2025**, to meet the minimum bid price requirement[130](index=130&type=chunk) - If the company falls out of compliance before **April 9, 2026**, it would not be eligible for an automatic grace period and would face immediate delisting[131](index=131&type=chunk) - Delisting would negatively impact liquidity, the ability to raise future capital, and could lead to lower stock prices and increased trading difficulties[132](index=132&type=chunk)[133](index=133&type=chunk)[136](index=136&type=chunk) [We must raise additional capital to fund our operations in order to continue as a going concern.](index=39&type=section&id=We%20must%20raise%20additional%20capital%20to%20fund%20our%20operations%20in%20order%20to%20continue%20as%20a%20going%20concern.) This section highlights the critical need for additional capital to fund operations and address substantial doubt about the company's going concern ability - As of **June 30, 2025**, the company had an accumulated deficit of **$62.7 million** and cash/investments of **$7.8 million**, leading to substantial doubt about its ability to continue as a going concern[137](index=137&type=chunk) - Additional capital is required through equity, debt, strategic relationships, or grants, and failure to secure it could force the company to curtail or cease operations[137](index=137&type=chunk) [We have incurred significant losses since our inception and have limited cash available for our operations.](index=39&type=section&id=We%20have%20incurred%20significant%20losses%20since%20our%20inception%20and%20have%20limited%20cash%20available%20for%20our%20operations.) This section details the company's history of significant losses and limited cash, emphasizing the need for substantial future funding - The company has incurred net losses every year since inception, with an accumulated deficit of approximately **$62.7 million** at **June 30, 2025**[138](index=138&type=chunk) - Current cash and cash equivalents, along with investments, total **$7.8 million**, which is deemed insufficient for operating the business for the next twelve months[138](index=138&type=chunk) - Expenses are expected to increase substantially with continued clinical development, regulatory approvals, commercialization efforts, and expansion of intellectual property and infrastructure[139](index=139&type=chunk)[140](index=140&type=chunk)[147](index=147&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) The company reported no unregistered sales of equity securities or use of proceeds during the period - None[143](index=143&type=chunk) [Item 3. Defaults Upon Senior Securities.](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) The company reported no defaults upon senior securities during the period - None[144](index=144&type=chunk) [Item 4. Mine Safety Disclosures.](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to the company - Not applicable[145](index=145&type=chunk) [Item 5. Other Information.](index=41&type=section&id=Item%205.%20Other%20Information.) No Rule 10b5-1 trading arrangements were adopted or terminated by directors or executive officers during the second quarter of 2025 - None of the directors or executive officers adopted or terminated any 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the second quarter of **2025**[146](index=146&type=chunk) [Item 6. Exhibits.](index=42&type=section&id=Item%206.%20Exhibits.) This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, certifications, and financial data in XBRL format - Exhibits include Amended and Restated Articles of Association, CEO and CFO certifications (pursuant to Rules 13a-14(a) or 15d-14(a) and 18 U.S.C. Section 1350), and financial information formatted in Inline XBRL[148](index=148&type=chunk) [SIGNATURES](index=43&type=section&id=SIGNATURES) This section contains the official signatures for the Form 10-Q report [Report Signatures](index=43&type=section&id=Report%20Signatures) The Form 10-Q report was duly signed on behalf of Quoin Pharmaceuticals Ltd. by its Chief Financial Officer - The report was signed by Gordon Dunn, Chief Financial Officer of Quoin Pharmaceuticals Ltd., on **August 7, 2025**[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)