Qualigen Therapeutics(QLGN) - 2021 Q2 - Quarterly Report

Sales and Revenue - Qualigen Therapeutics has reported that sales of its FastPack products have exceeded $100 million since inception [148]. - Net product sales for the three months ended June 30, 2021, were approximately $1.1 million, representing a 24% increase from $0.9 million in the same period of 2020 [168]. - Total revenues for the six months ended June 30, 2021, were $3.0 million, an increase of $0.6 million compared to $2.4 million in the same period of 2020 [184]. - License revenue for the six months ended June 30, 2021, was $479,000, attributed to a Technology Transfer Agreement, with no counterpart in the prior year [186]. Technology and Agreements - The company has entered into a Technology Transfer Agreement with Yi Xin Zhen Duan Jishu (Suzhou) Ltd., granting exclusive rights for the development and commercialization of FastPack products in China [160]. - Qualigen expects to improve the profitability of its diagnostics business upon regaining FastPack distribution rights from Sekisui, which are set to expire on March 31, 2022 [159]. Research and Development - Qualigen's therapeutics pipeline includes QN-247, RAS-F, and STARS, with ongoing development efforts in cancer and infectious disease treatments [146]. - The company has deprioritized the QN-165 program after the FDA required additional preclinical studies before clinical trials could commence [147]. - Research and development costs surged to $4.5 million for the three months ended June 30, 2021, compared to $0.6 million in the same period of 2020, with 93% allocated to therapeutics [174]. - Research and development costs increased from $0.8 million for the six months ended June 30, 2020, to $8.0 million for the six months ended June 30, 2021, with therapeutics accounting for 91% of the latter [190]. - The increase in therapeutics R&D costs included $5.9 million related to the potential application of QN-165 for COVID-19 treatment, with $4.2 million in drug compound manufacturing costs [191]. - The company anticipates that therapeutic R&D costs will continue to increase significantly compared to diagnostic R&D costs in the future [192]. Financial Performance - The net loss for the three months ended June 30, 2021, was $5.3 million, a significant reduction from a net loss of $18.6 million in the same period of 2020 [167]. - The company reported a net cash used in operating activities of $8.8 million for the six months ended June 30, 2021, compared to $1.8 million for the same period in 2020 [203]. - As of June 30, 2021, the company had $15.2 million in cash and cash equivalents, but expects to continue incurring net losses and negative cash flow from operations [198]. - Net cash provided by financing activities was approximately $155,580 for the six months ended June 30, 2021, compared to $4.5 million for the same period in 2020 [207]. Expenses - General and administrative expenses increased sharply to $3.0 million for the three months ended June 30, 2021, from $2.0 million in the same period of 2020, primarily due to stock-based compensation [173]. - Sales and marketing expenses increased to approximately $136,000 for the three months ended June 30, 2021, compared to approximately $89,000 in the same period of 2020 [177]. - Sales and marketing expenses rose to approximately $272,000 for the six months ended June 30, 2021, compared to $181,000 for the same period in 2020, primarily due to increased payroll and recruiting expenses [193]. - The cost of product sales for the three months ended June 30, 2021, was $916,624, representing 82% of net product sales, compared to 89% in the same period of 2020 [172]. Market Challenges - Qualigen has faced challenges in maintaining market demand for its diagnostic products due to COVID-19-related deferrals of physician visits [142]. Financial Liabilities - Approximately 41% of the "exploding warrants" were exercised or forfeited through June 30, 2021, reducing the potential variability in warrant liabilities [167]. - The fair value of warrant liabilities at June 30, 2021, was $4.1 million, significantly distorting the balance sheet and results of operations [167]. - The fair value of warrant liabilities decreased to $4.1 million as of June 30, 2021, down from $8.3 million at December 31, 2020, resulting in $4.2 million in other income [194]. - The company’s balance sheet included $4.1 million of warrant liabilities and $0.8 million of accounts payable as of June 30, 2021 [200]. Future Financing - The company expects to require additional financing to fully execute its business plan, including clinical trials for therapeutic drug candidates [199]. Internal Controls - The management believes that the condensed consolidated financial statements fairly represent the financial condition and results of operations in accordance with U.S. GAAP [214]. - There is an identified material weakness in the internal control system, which may affect the assurance of meeting control objectives [214]. - The company acknowledges that no internal control system can provide absolute assurance against fraud detection [214].