Qualigen Therapeutics(QLGN) - 2022 Q3 - Quarterly Report

Part I. Financial Information Item 1. Condensed Consolidated Financial Statements (Unaudited) The company's financial statements reflect a reduced cash position, stable total assets due to an acquisition, and a narrowed net loss driven by lower R&D expenses Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights | Balance Sheet Item | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash | $6,618,141 | $17,538,272 | | Total current assets | $10,395,428 | $20,796,397 | | Intangible assets, net | $5,852,074 | $171,190 | | Goodwill | $4,896,223 | $0 | | Total Assets | $22,958,832 | $22,835,705 | | Liabilities & Equity | | | | Total current liabilities | $4,881,243 | $4,635,479 | | Total liabilities | $7,043,223 | $6,270,971 | | Total Stockholders' Equity | $15,915,609 | $16,564,734 | | Total Liabilities & Stockholders' Equity | $22,958,832 | $22,835,705 | - The acquisition of NanoSynex in May 2022 significantly impacted the balance sheet, adding $4.9 million in Goodwill and increasing Intangible Assets to $5.9 million[8] Condensed Consolidated Statements of Operations Statement of Operations Summary (Three Months Ended Sep 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total revenues | $1,441,065 | $1,155,065 | | Total expenses | $5,824,011 | $5,962,975 | | Loss from operations | ($4,382,946) | ($4,807,910) | | Net loss attributable to Qualigen | ($3,825,109) | ($3,037,482) | | Net loss per share | ($0.10) | ($0.10) | Statement of Operations Summary (Nine Months Ended Sep 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total revenues | $3,593,628 | $4,172,496 | | Research and development | $5,059,067 | $10,091,155 | | Total expenses | $17,126,538 | $22,188,087 | | Loss from operations | ($13,532,910) | ($18,015,591) | | Net loss attributable to Qualigen | ($12,268,300) | ($13,678,278) | | Net loss per share | ($0.33) | ($0.48) | - Research and development expenses for the nine months ended Sep 30, 2022, were nearly halved to $5.1 million from $10.1 million in the prior-year period, significantly reducing the operating loss[10] Condensed Consolidated Statements of Cash Flows Cash Flow Summary (Nine Months Ended Sep 30) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($11,009,814) | ($11,817,410) | | Net cash provided by (used in) investing activities | $60,611 | ($124,356) | | Net cash provided by financing activities | $7,173 | $285,005 | | Net change in cash and restricted cash | ($10,942,030) | ($11,656,761) | - Cash and restricted cash decreased by $10.9 million during the first nine months of 2022, ending the period at $6.6 million[14][15] Notes to Condensed Consolidated Financial Statements Notes detail the NanoSynex acquisition, raise substantial doubt about the company's ability to continue as a going concern, and outline funding commitments - On May 26, 2022, the Company acquired a 52.8% controlling interest in NanoSynex, Ltd, a micro-biologics diagnostics company based in Israel[19] - The company's cash of approximately $6.6 million and accumulated deficit of $97.0 million as of September 30, 2022, raise substantial doubt about its ability to continue as a going concern[77] - The company is committed to providing NanoSynex with up to $10.4 million in future funding, contingent on NanoSynex achieving certain development milestones[80][86] - The fair value of warrant liabilities decreased from $1.69 million at the end of 2021 to $0.67 million as of September 30, 2022, resulting in a non-cash gain of $1.02 million[99] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses increased product sales, reduced R&D expenses, and reiterates substantial doubt about the company's ability to continue as a going concern Results of Operations Q3 net product sales rose 25% while nine-month R&D expenses fell significantly, leading to an improved net loss for the period - Q3 2022 net product sales increased by 25% to $1.4 million from $1.2 million in Q3 2021, mainly because the company now recognizes 100% of revenue from direct sales after the Sekisui distribution agreement expired on March 31, 2022[181] - For the nine months ended Sep 30, 2022, R&D costs decreased significantly to $5.1 million from $10.1 million in the prior year, primarily due to a $6.5 million decrease in pre-clinical research costs for the deprioritized QN-165 COVID-19 program[202][203] - The gain on change in fair value of warrant liabilities was $1.0 million for the nine months ended Sep 30, 2022, compared to a $4.3 million gain in the same period of 2021, with the change primarily driven by declines in the company's stock price[207] Liquidity and Capital Resources The company's cash of $6.6 million is only sufficient to fund operations into Q3 2023, necessitating significant additional financing - The company's cash balance of $6.6 million as of September 30, 2022, is expected to fund operations only into the third quarter of 2023, raising substantial doubt about its ability to continue as a going concern[213] - Significant additional financing is required for planned R&D, clinical trials for QN-302, and to fund NanoSynex operations, which includes a commitment of up to $10.4 million based on milestones[214][216] - Net cash used in operating activities was $11.0 million for the first nine months of 2022, a slight improvement from $11.8 million in the same period of 2021[230][231] Quantitative and Qualitative Disclosures About Market Risk The company is not required to provide market risk disclosures as it is a "smaller reporting company" - The company is not required to provide information on market risk as it qualifies as a "smaller reporting company"[242] Controls and Procedures Management concluded disclosure controls were effective but is remediating a previously identified material weakness in internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of September 30, 2022[244] - The company is working to remediate a material weakness in internal control over financial reporting identified as of December 31, 2021, which was related to a lack of accounting department resources and procedures[246] Part II. Other Information Legal Proceedings A lawsuit with Mediant Communications Inc was settled and paid for $96,558 in April 2022 - A lawsuit with Mediant Communications Inc was settled on April 5, 2022, for an amount of $96,558, which has been paid[109] Risk Factors No material changes to risk factors are reported, except for new risks associated with the acquisition of NanoSynex, Ltd - New risks have been introduced related to the acquisition of NanoSynex, Ltd[252][253] - Risks include potential failure to achieve intended benefits from the acquisition, difficulties in assimilating employees, diversion of management attention, and assumption of unforeseen liabilities[253][256] - The company is obligated to fund NanoSynex up to approximately $10.4 million over three years, subject to milestones, which will reduce liquidity and may not be achievable if the company cannot raise sufficient capital[254][255] - A significant portion of NanoSynex's assets are recorded as goodwill ($4.9 million) and other intangibles ($5.7 million), which are subject to impairment tests and potential write-offs that could adversely affect financial results[258] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales or purchases of equity securities were reported during the period - None reported for the period[259] Exhibits This section lists all exhibits filed with the report, including required officer certifications