# FF EAI Robotics Ecosystem Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [FF EAI Robotics Ecosystem Inc.](/companies/ffr.md) (CIK 1460702)
- Form: 10-Q
- Filed: 2023-11-14
- Accepted by EDGAR: Nov 14, 2023, 16:54 ET
- Period: 2023-09-30
- Accession: 0001493152-23-041230
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1460702/000149315223041230/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1460702/000149315223041230/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $1.4m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $3.9m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$2.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$9.0m | us-gaap:OperatingIncomeLoss |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 5,052,463 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 5,021,691 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$4.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2023-09-30 | $2.1m | us-gaap:Cash |
| Current assets | at 2023-09-30 | $3.4m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $4.3m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $6.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $6.0m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | −$1.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 50,173 characters.

*The following discussion and analysis should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and the audited financial statements and notes thereto as of and for the twelve months ended December 31, 2022, which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 2, 2023, as amended by Amendment No. 1 filed with the SEC on July 7, 2023 ( the “2022 Annual Report.) As used in this Quarterly Report, unless the context suggests otherwise, “we,” “us,” “our,” or “Qualigen” refer to Qualigen Therapeutics, Inc. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.*

### Cautionary Note Regarding Forward Looking Statements

This Quarterly Report contains forward-looking statements by the Company that involve risks and uncertainties and reflect the Company’s judgment as of the date of this Report. These statements generally relate to future events or the Company’s future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” or “continue” or the negative of these words or other similar terms or expressions that concern the Company’s expectations, strategy, plans or intentions. Such forward-looking statements may relate to, among other things, potential future development, testing and launch of products and product candidates. Actual events or results may differ from our expectations.

Some of the factors that we believe could cause actual results to differ from those anticipated or predicted include:

- there can be no assurance that we will successfully develop any drugs or therapeutic devices;
- there can be no assurance that preclinical or clinical development of our candidate drugs or therapeutic devices will be successful;
- there can be no assurance that clinical trials will be approved to begin by or will actually begin by or will proceed as contemplated by any projected timeline;
- there can be no assurance that clinical trials will complete enrollment as contemplated by any projected timeline;
- there can be no assurance that future clinical trial data will be favorable or that such trials will confirm any improvements over other products or lack negative impacts;
- there can be no assurance that any of our candidate drugs or therapeutic devices will receive the required regulatory approvals or that they will be commercially successful;
- there can be no assurance that we will be able to procure or earn sufficient working capital to complete the development, testing and launch of our prospective candidate drugs therapeutic products;
- there can be no assurance that patents will issue on our owned and in-licensed patent applications; and
- there can be no assurance that such patents, if any, and our current owned and in-licensed patents would prevent competition.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics, and healthcare, regulatory and scientific developments and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate, are consistent in some future periods with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in other future periods.

Future filings with the SEC, future press releases and future oral or written statements made by us or with our approval, which are not statements of historical fact, may also contain forward-looking statements. Because such statements include risks and uncertainties, many of which are beyond our control, actual results may differ materially from those expressed or implied by such forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.

### Overview

We are a clinical stage therapeutics company focused on developing treatments for adult and pediatric cancers of high unmet medical need with potential for Orphan Drug designation.

Our cancer therapeutics pipeline includes QN-302, our Pan-RAS Inhibitor platform (formerly RAS-F) and QN-247.

Our lead oncology therapeutics program, QN-302, is a high potency small molecule selective transcription inhibitor with strong binding affinity to G-Quadruplexes (G4s) prevalent in cancer cells. By binding to, and stabilizing G4s against “unwinding,” QN-302 could potentially help inhibit cancer cell proliferation and induce cancer cell death. QN-302 has received Investigational New Drug (IND) clearance from the U.S. Food and Drug Administration (FDA) to proceed with its Phase 1 clinical trial. Earlier this year, QN-302 also received Orphan Drug Designation (ODD) from FDA for the indication of pancreatic cancer.

Our Pan-RAS portfolio consists of a family of Pan-RAS inhibitor small molecules believed to inhibit or block mutated RAS genes’ proteins from binding to their effector proteins. Preventing this binding could potentially stop tumor growth, especially in RAS-driven tumors such as pancreatic, colorectal and lung cancers.

Our investigational oligonucleotide-based drug candidate QN-247 binds nucleolin, a key multi-functional regulatory phosphoprotein that is overexpressed in cancer cells. Such binding could potentially inhibit the cancer cells’ proliferation in nucleolin-expressing malignancies. We have de-prioritized deploying our internal resources to our QN-247 program and are seeking a partner to further its development.

On November 23, 2022, we effected a 1-for-10, reverse stock split of our outstanding shares of common stock (the “Reverse Stock Split”). The Reverse Stock Split reduced our shares of outstanding common stock, stock options, and warrants to purchase shares of our common stock. Fractional shares of common stock that would have otherwise resulted from the Reverse Stock Split were rounded down to the nearest whole share and cash in lieu of fractional shares was paid to stockholders. All share and per share data for all periods presented in this Quarterly Report on Form 10-Q have been adjusted retrospectively to reflect the Reverse Stock Split. The number of authorized shares of common stock and the par value per share remains unchanged.

We do not expect to be profitable before products from our therapeutics pipeline are commercialized. To experience losses while therapeutic products are still under development is, of course, typical for biotechnology companies.

### Recent Developments

### FDA IND Clearance to Initiate Phase 1 Clinical Trial of QN-302

On August 1, 2023, we announced that the FDA has cleared our IND application for QN-302. Based on this clearance, we chose TD2 to serve as our contract research organization (“CRO”) to conduct a Phase 1 clinical trial in patients with advanced or metastatic solid tumors. The Phase 1 trial (NCT06086522) is a multicenter, open-label, dose escalation, safety, pharmacokinetic, and pharmacodynamic study with dose expansion to evaluate safety, tolerability, and antitumor activity of QN-302 in patients with advanced solid tumors that have not responded to or that have recurred following treatment with available therapies. On November 7, 2023, we announced that the first patient had been enrolled and dosed in the dose escalation (Phase 1a) portion of the study. Subject to available funding, we anticipate that Phase 1a of the trial can be completed by the end of 2024, funded in part by proceeds received by the divestiture of the Company’s diagnostics business in July 2023 as described immediately below. The exact number of patients to be enrolled in the trial will depend on the observed safety profile, which will determine the number of patients per dose level, as well as the number of dose escalations required to meet the Maximum Tolerated Dose (“MTD”). Once the MTD has been established in dose escalation, dose expansion will begin.

### Sale of Diagnostics Business

On July 20, 2023, we sold all of the issued and outstanding shares of common stock of Qualigen, Inc., a wholly-owned subsidiary and the legal entity operating our FastPack™ diagnostic business, to Chembio Diagnostics, Inc. (“Chembio”), a subsidiary of Biosynex, S.A. As consideration for the shares of Qualigen, Inc., we received a cash payment of approximately $4.7 million, which payment is subject to post-closing adjustments. An additional $450,000 was delivered by Chembio to an escrow account to satisfy our indemnification obligations. Any amounts remaining in the escrow account that have not been offset or reserved for claims will be released to us within five business days following the date that is 18 months after the closing of the transaction. A post-closing adjustment resulting in a receivable from the Transaction of approximately $235,000 is reflected in prepaid expenses and other current assets on the Company’s condensed consolidated balance sheet as of September 30, 2023. Following the consummation of the transaction, Qualigen, Inc. became a wholly-owned subsidiary of Chembio.

### Amendment and Settlement Agreement with NanoSynex Ltd.

On July 20, 2023, the Company entered into the NanoSynex Amendment, which amended the NanoSynex Funding Agreement with NanoSynex (the “NanoSynex Funding Agreement”), pursuant to which the Company agreed to, among other things, forfeit 281,000 Series B Preferred Shares of NanoSynex held by the Company, resulting in the Company’s ownership in NanoSynex being reduced from approximately 52.8% to approximately 49.7% of the voting equity of NanoSynex. In addition, the Company agreed to cancel approximately $3.0 million of promissory notes issued to the Company under the NanoSynex Funding Agreement, relieving NanoSynex of any repayment obligations to the Company with respect to such notes. The surrender of shares reducing the Company’s interest in NanoSynex from approximately 52.8% to approximately 49.97% occurred on July 20, 2023.

The NanoSynex Amendment supersedes any payment obligations contemplated by the original NanoSynex Funding Agreement and amended the Company’s obligations to provide funding to NanoSynex, except that Company agreed to provide future funding as follows: (i) $560,000 on or before November 30, 2023, and (ii) $670,000 on or before March 31, 2024, in each case issued in the form of a promissory note to the Company with a face value in the amount of such funding. However, in lieu of fulfilling such obligations, the Company may, and intends to, instead forfeit shares of Series A-1 Preferred Stock of NanoSynex in a number that will be equal to a fraction, the numerator of which is the amount of the default (*i.e*., the amount that the Company should have, but failed, to advance to NanoSynex pursuant to the terms of the NanoSynex Amendment), and the denominator of which shall be the price per share that the Company originally paid in consideration for its Preferred A-1 shares of NanoSynex to the previous holder thereof, being $1.5716 per share.

### Critical Accounting Policies and Estimates

Our condensed consolidated financial statements historically have not separated our diagnostics-related activities from our therapeutics-related activities. All of our historically reported revenue was diagnostics-related. Prior to the current quarter, our reported expenses represented the total of our diagnostics-related and therapeutics-related expenses. Beginning in the current quarter, all diagnostics-related revenues and expenses have been reclassified to discontinued operations (See Note 5 - Discontinued Operations).

This discussion and analysis is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to impairment of goodwill and other intangible assets, fair value of warrant liabilities, and stock-based compensation. We base our estimates on historical experience, known trends and events and various other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 1 - Organization And Summary Of Significant Accounting Policies And Estimates to our condensed consolidated financial statements appearing in “Item 1. Condensed Consolidated Financial Statements (Unaudited),” we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations:

- Convertible debt
- Research and development
- Discontinued operations
- Impairment of long-lived assets
- Business combination
- Derivative financial instruments and warrant liabilities
- Stock-based compensation
- Income taxes

### Warrant Liabilities

In 2004, Qualigen, Inc. issued Series C preferred stock warrants to investors and brokers in connection with a private placement. These warrants were subsequently extended and survived the May 2020 Ritter reverse recapitalization transaction and are now exercisable for Qualigen Therapeutics common stock. These warrants contain a provision that if we issue shares (except in certain defined scenarios) at a price below the warrants’ exercise price, the exercise price will be re-set to such new price and the number of shares underlying the warrants will be increased in the same proportion as the exercise price decrease. For accounting purposes, such warrants give rise to warrant liabilities. The operation of the “double-ratchet” provisions in these warrants in connection with the NanoSynex Acquisition and the convertible debenture financing transaction in December 2022 now allow the holders to exercise for a significantly higher number of shares than before. Accounting principles generally accepted in the United States of America (“U.S. GAAP”) require us to recognize the fair value of these warrants as warrant liabilities on our condensed consolidated balance sheets and to reflect period-to-period changes in the fair value of the warrant liabilities on our condensed consolidated Statements of Operations. The estimated fair value of these warrant liabilities was $0.1 million and $0.8 million at September 30, 2023 and December 31, 2022, respectively. There were 1,349,571 of these warrants outstanding at September 30, 2023 and December 31, 2022.

On December 22, 2022, as part of the convertible debenture financing, the Company issued to Alpha Capital a common stock warrant for 2,500,000 shares of common stock of the Company (the “Alpha Warrant”). The exercise price of the Alpha Warrant is $1.65. The Alpha Warrant may be exercised by Alpha Capital, in whole or in part, at any time before June 22, 2028. U.S. GAAP requires us to recognize the fair value of this warrant as a warrant liability on our condensed consolidated balance sheets and to reflect period-to-period changes in the fair value of the warrant liability on our condensed consolidated statements of operations. The estimated fair value of this warrant liability was approximately $2.2 million and $2.8 million at September 30, 2023 and December 31, 2022, respectively.

Because the fair value of the above liability classified warrants will be determined each quarter on a “mark-to-market” basis, it could result in significant variability in our future quarterly and annual consolidated statement of operations and consolidated balance sheets based on changes in our public market common stock price. Pursuant to U.S. GAAP, a quarter-to-quarter increase in our stock price would result in an increase (possibly quite large) in the fair value of the warrant liabilities and a quarter-to-quarter decrease in our stock price would result in a decrease (possibly quite large) in the fair value of the warrant liabilities.

### Results of Operations

### Comparison of the Three Months Ended September 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended September 30, 2023 and 2022:

| EXPENSES | For the Three Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| General and administrative | $1,336,765 | $2,539,389 |
| Research and development | 1,441,598 | 930,536 |
| Total expenses | 2,778,363 | 3,469,925 |
| **LOSS FROM OPERATIONS** | (2,778,363) | (3,469,925) |
| **OTHER EXPENSE (INCOME), NET** |  |  |
| Loss (gain) on change in fair value of warrant liabilities | 101,112 | (321,300) |
| Interest (income) expense, net | 367,257 | (4,631) |
| Loss on fixed asset disposal | 21,747 | — |
| Other income (expense), net | (33,454) | — |
| Total other expense (income), net | 456,662 | (325,931) |
| **LOSS BEFORE (BENEFIT) PROVISION FOR INCOME TAXES** | (3,235,025) | (3,143,994) |
| **(BENEFIT) PROVISION FOR INCOME TAXES** | — | — |
| **NET LOSS FROM CONTINUING OPERATIONS** | (3,235,025) | (3,143,994) |
| **DISCONTINUED OPERATIONS** |  |  |
| Income (loss) from discontinued operations before income taxes | 159,507 | (911,882) |
| Loss on disposal of discontinued operations | (619,545) | — |
| **LOSS FROM DISCONTINUED OPERATIONS** | (460,038) | (911,882) |
| **NET LOSS** | (3,695,063) | (4,055,876) |
| Net loss attributable to non-controlling interest from discontinued operations | (38,526) | (230,767) |
| **Net loss attributable to Qualigen Therapeutics, Inc.** | $(3,656,537) | $(3,825,109) |
| **Net loss per common share, basic and diluted - continuing operations** | $(0.64) | $(0.80) |
| **Net loss per common share, basic and diluted - discontinued operations** | $(0.08) | $(0.17) |
| Weighted—average number of shares outstanding, basic and diluted | 5,052,463 | 3,944,406 |
| **Other comprehensive loss, net of tax** |  |  |
| Net loss | $(3,695,063) | $(4,055,876) |
| Foreign currency translation adjustment from discontinued operations | — | 88,523 |
| Other comprehensive loss | (3,695,063) | (3,967,353) |
| Comprehensive loss attributable to noncontrolling interest from discontinued operations | (38,526) | (230,767) |
| **Comprehensive loss attributable to Qualigen Therapeutics, Inc.** | $(3,656,537) | $(3,736,586) |

31

### Expenses

#### General and Administrative Expenses

General and administrative expenses decreased by 47% from $2.5 million, during the three months ended September 30, 2022, to $1.3 million during the three months ended September 30, 2023, primarily due to a decrease in stock-based compensation of approximately $1.1 million, as well as a decrease in professional fees of approximately $0.1 million. The decrease in stock-based compensation was due to the January 2023 reduction in force as well as certain option grants from prior years becoming fully vested.

#### Research and Development Costs

Research and development costs increased from $0.9 million for the three months ended September 30, 2022 to approximately $1.4 million for the three months ended September 30, 2023. This increase in research and development costs during the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was primarily due to a $0.5 million increase in preclinical research costs for QN-302.

### Other Income (Expense), Net

#### Change in Fair Value of Warrant Liabilities

During the three months ended September 30, 2023 and 2022, we experienced a loss of approximately $0.1 million and a gain of approximately $0.3 million, respectively, on change in fair value of warrant liabilities, primarily due to changes in our stock price and reduction in the remaining terms of the warrants. Typically, a decline in our stock price would result in a decline in the fair value of our warrant liabilities, generating a gain, while an increase in our stock price would result in an increase in the fair value of our warrant liabilities, generating a loss.

Because the fair value of warrant liabilities will be determined each quarter on a “mark-to-market” basis, this item is likely to continue to result in significant variability in our future quarterly and annual consolidated statements of operations based on unpredictable changes in our public market common stock price and the number of warrants outstanding at the end of each quarter.

#### Interest Expense (Income), Net

Interest expense, net during the three months ended September 30, 2023 was approximately $367,000 due to accrued interest on the convertible debt, compared to interest income, net of approximately $5,000 during the three months ended September 30, 2022.

#### Loss On Fixed Asset Disposal

Loss on fixed asset disposal during the three months ended September 30, 2023 was approximately $22,000 due to a write off of equipment, compared to $0 during the three months ended September 30, 2022.

#### Other Income, Net

Other income was $33,000 during the three months ended September 30, 2023 compared to $0 during the three months ended September 30, 2022 due to dividend income on cash invested in money market funds during the current period.

### Discontinued Operations

Income from discontinued operations during the three months ended September 30, 2023 was approximately $160,000 compared to loss from discontinued operations of approximately $912,000 during the three months ended September 30, 2022. Of the $160,000 income from discontinued operations during the three months ended September 30, 2023, approximately $91,000 was due to net income from our former Qualigen, Inc. subsidiary, and $69,000 in income from NanoSynex, inclusive of a $150,000 benefit in provision for income taxes. The $912,000 loss from discontinued operations during the three months ended September 30, 2022 consisted of approximately $422,000 from our former Qualigen, Inc. subsidiary and approximately $489,000 from NanoSynex.

In addition, the Company recorded a loss of approximately $0.6 million on disposal of discontinued operations during the three months ended September 30, 2023, and $0 during the three months ended September 30, 2022. The loss during the three months ended September 30, 2023 consisted of approximately $4.5 million from deconsolidation of NanoSynex, offset by a gain of approximately $3.9 million from the sale of the Company’s former Qualigen, Inc. subsidiary.

### Comparison of the Nine Months Ended September 30, 2023 and 2022

The following table summarizes our results of operations for the nine months ended September 30, 2023 and 2022:

| EXPENSES | For the Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| General and administrative | $5,132,834 | $7,705,823 |
| Research and development | 3,898,061 | 3,618,428 |
| Total expenses | 9,030,895 | 11,324,251 |
| **LOSS FROM OPERATIONS** | (9,030,895) | (11,324,251) |
| **OTHER EXPENSE (INCOME), NET** |  |  |
| (Gain) loss on change in fair value of warrant liabilities | (1,377,855) | (1,019,342) |
| Interest expense (income), net | 1,288,908 | (15,763) |
| Loss on voluntary conversion of convertible debt | 1,077,287 | — |
| Loss on fixed asset disposal | 21,747 | — |
| Other income, net | (33,534) | — |
| Total other expense (income), net | 976,553 | (1,035,105) |
| **LOSS BEFORE (BENEFIT) PROVISION FOR INCOME TAXES** | (10,007,448) | (10,289,146) |
| **(BENEFIT) PROVISION FOR INCOME TAXES** | — | 6,173 |
| **NET LOSS FROM CONTINUING OPERATIONS** | (10,007,448) | (10,295,319) |
| **DISCONTINUED OPERATIONS** |  |  |
| Loss from discontinued operations before income taxes | (683,008) | (2,207,864) |
| Loss on disposal of discontinued operations | (619,545) | — |
| **LOSS FROM DISCONTINUED OPERATIONS** | (1,302,553) | (2,207,864) |
| **NET LOSS** | (11,310,001) | (12,503,183) |
| Net loss attributable to non-controlling interest from discontinued operations | (343,038) | (234,883) |
| **Net loss attributable to Qualigen Therapeutics, Inc.** | $(10,966,963) | $(12,268,300) |
| **Net loss per common share, basic and diluted - continuing operations** | $(1.99) | $(2.77) |
| **Net loss per common share, basic and diluted - discontinued operations** | $(0.19) | $(0.53) |
| Weighted—average number of shares outstanding, basic and diluted | 5,021,691 | 3,715,462 |
| **Other comprehensive loss, net of tax** |  |  |
| Net loss | $(11,310,001) | $(12,503,183) |
| Foreign currency translation adjustment from discontinued operations | (50,721) | 154,063 |
| Other comprehensive loss | (11,360,722) | (12,349,120) |
| Comprehensive loss attributable to noncontrolling interest from discontinued operations | (343,038) | (234,883) |
| **Comprehensive loss attributable to Qualigen Therapeutics, Inc.** | $(11,017,684) | $(12,114,237) |

33

### Expenses

#### General and Administrative Expenses

General and administrative expenses decreased 33% from $7.7 million, during the nine months ended September 30, 2022 to approximately $5.1 million during the nine months ended September 30, 2023, This $2.6 million decrease was primarily due to a $2.6 million decrease in stock-based compensation expense due to the January 2023 reduction in force as well as certain option grants from prior years becoming fully vested.

#### Research and Development Costs

Research and development costs increased from $3.6 million for the nine months ended September 30, 2022 to $3.9 million for the nine months ended September 30, 2023. The $0.3 million increase in therapeutics research and development costs during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily due to an increase of $1.5 million in preclinical research costs for QN-302, offset by a $0.9 million decrease in QN-247 preclinical research costs, a $0.1 million decrease in RAS preclinical research costs, a $0.1 million decrease in QN-165 preclinical research costs, and a $0.1 million decrease in payroll expenses.

### Other Income (Expense), Net

#### Change in Fair Value of Warrant Liabilities

During the nine months ended September 30, 2023 and 2022, we experienced gains of $1.4 million and $1.0 million, respectively, on change in fair value of warrant liabilities, primarily due to declines in our stock price, and reductions in the remaining terms of the warrants during both periods. Typically, a decline in our stock price would result in a decline in the fair value of our warrant liabilities, generating a gain, while an increase in our stock price would result in an increase in the fair value of our warrant liabilities, generating a loss.

Because the fair value of warrant liabilities will be determined each quarter on a “mark-to-market” basis, this item is likely to continue to result in significant variability in our future quarterly and annual statements of operations based on unpredictable changes in our public market common stock price and the number of liability classified warrants outstanding at the end of each quarter.

#### Interest Expense (Income), Net

Interest expense, net during the nine months ended September 30, 2023 was approximately $1.3 million due to accrued interest on the convertible debt, compared to interest income, net of approximately $16,000 during the nine months ended September 30, 2022.

#### Loss on Voluntary Conversion of Convertible Debt

During the nine months ended September 30, 2023, we recognized a $1.1 million loss due to a voluntary conversion by Alpha Capital of approximately $1.1 million of convertible debt into 841,726 shares of common stock (see Note 8 - Convertible Debt - Related Party to our condensed consolidated financial statements). We did not have any outstanding convertible debt for the nine months ended September 30, 2022.

#### Loss on Fixed Asset Disposal

Loss on fixed asset disposal during the nine months ended September 30, 2023 was approximately $22,000 due to a write off of equipment, compared to $0 during the nine months ended September 30, 2022.

#### Other Income, Net

Other income was $33,000 during the nine months ended September 30, 2023, compared to $0 during the nine months ended September 30, 2022, due to dividend income on cash invested in money market funds during the current period.

### Discontinued Operations

Loss from discontinued operations for the nine months ended September 30, 2023 was approximately $0.7 million compared to loss from discontinued operations of approximately $2.2 million during the nine months ended September 30 2022. The $0.7 million loss from discontinued operations during the nine months ended September 30, 2023 consisted of approximately $0.2 million from our former Qualigen, Inc. subsidiary and approximately $0.5 million from NanoSynex. The $2.2 million loss from discontinued operations during the nine months ended September 30, 2022 consisted of approximately $1.7 million from our former Qualigen, Inc. subsidiary and approximately $0.5 million from NanoSynex.

In addition, the Company recorded a loss of approximately $0.6 million on disposal of discontinued operations during the nine months ended September 30, 2023, and $0 during the nine months ended September 30, 2022. This loss consisted of approximately $4.5 million from deconsolidation of NanoSynex, offset by a gain of approximately $3.9 million from the sale of our former Qualigen, Inc. subsidiary.

### Liquidity and Capital Resources

As of September 30, 2023, we had approximately $2.1 million in cash and an accumulated deficit of $114.4 million. For the nine months ended September 30, 2023 and 2022, we used cash of approximately $4.6 million and $11.0 million, respectively, in operations.

On July 20, 2023, we entered into the NanoSynex Amendment with NanoSynex, which amended the NanoSynex Funding Agreement. See “Contractual Obligations and Commitments” below.

On July 25, 2023, we received a cash payment of approximately $4.7 million from Chembio for all of the outstanding shares of common stock of Qualigen, Inc., which payment is subject to post-closing adjustments, upward or downward, as applicable, for: (i) cash held by the Subsidiary as of the closing of the Transaction; (ii) net working capital of the Subsidiary as of the closing of the Transaction, (iii) certain indebtedness of the Subsidiary as of the closing of the Transaction, and (iv) certain Transaction expenses as of the closing of the Transaction. At September 30, 2023 an additional $235,000 relating to a post-closing true-up adjustment is reflected in other current assets on the Company’s condensed consolidated balance sheet, and an additional $450,000 reflected in other assets on the Company’s condensed consolidated balance sheet is being held in an escrow account to satisfy certain indemnification obligations. Any amounts remaining in the Indemnity Escrow that have not been offset or reserved for claims will be released to us within five business days following the date that is 18 months after the closing of the Transaction.

The Company’s cash balances as of the date that the accompanying financial statements were issued along with the proceeds from the above sale of Qualigen, Inc. to Chembio, without additional financing, are expected to fund operations into the first quarter of 2024. The Company expects to continue to have net losses and negative cash flow from operations, which over time will challenge its liquidity. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the one-year period following the date that these financial statements were issued.

There is no assurance that profitable operations will ever be achieved, or, if achieved, could be sustained on a continuing basis. In order to fully execute our business plan, we will require significant additional funding for planned research and development activities, capital expenditures, clinical testing for our QN-302 clinical trials, preclinical development of RAS and QN-247, as well as commercialization activities.

Historically, our principal sources of cash have included proceeds from the issuance of common and preferred equity and proceeds from the issuance of debt. In December 2022 we raised $3.0 million from the sale of a convertible debt instrument (see Note 8 - Convertible Debt - Related Party to our condensed consolidated financial statements). There can be no assurance that further financing will be obtained on favorable terms, or at all. If we are unable to obtain funding, we could be required to delay, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect our business prospects.

The accompanying financial statements have been prepared assuming that we will continue as a going concern. The financial statements do not include any adjustments that would be necessary should we be unable to continue as a going concern, and therefore, be required to liquidate our assets and discharge our liabilities in other than the normal course of business and at amounts that may differ from those reflected in the accompanying financial statements.

Our condensed consolidated balance sheet at September 30, 2023 includes $2.2 million of warrant liabilities. We do not consider the warrant liabilities to constrain our liquidity, as a practical matter. Our current liabilities at September 30, 2023 include $1.6 million of accounts payable, $1.1 million of accrued expenses and other current liabilities, $0.2 million of accrued vacation, $0.8 million convertible debt to a related party.

### Contractual Obligations and Commitments

We have no material contractual obligations that are not fully recorded on our condensed consolidated balance sheets or fully disclosed in the notes to the condensed consolidated financial statements.

#### License and Sponsored Research Agreements

We have obligations under various license and sponsored research agreements to make future payments to third parties that become due and payable on the achievement of certain development, regulatory and commercial milestones (such as the start of a clinical trial, filing for product approval with the FDA or other regulatory agencies, product approval by the FDA or other regulatory agencies, product launch or product sales) or on the sublicense of our rights to another party. We have not included these commitments on our balance sheet because the achievement and timing of these events is not determinable. Certain milestones are in advance of receipt of revenue from the sale of products and, therefore, we may require additional debt or equity capital to make such payments.

We have multiple license and sponsored research agreements with ULRF. Under these agreements, we have taken over development, regulatory approval and commercialization of various drug compounds from ULRF and are responsible for maintenance of the related intellectual property portfolio. For example, we agreed to reimburse ULRF for sponsored research expenses of up to $2.9 million and prior patent costs of up to $112,000 for RAS. As of September 30, 2023, there was approximately $181,000 remaining due to ULRF under this sponsored research agreement for RAS. We also agreed to reimburse ULRF for sponsored research expenses of up to $830,000 and prior patent costs of up to $200,000 for QN-247. As of September 30, 2023, there were no remaining un-expensed amounts due to ULRF under this sponsored research agreement for QN-247 and the agreement was terminated effective August 31, 2022. Under the terms of these agreements, we are required to make patent maintenance payments and payments based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property. The maximum aggregate milestone payments we may be obligated to make per product are $5 million. We will also be required to pay a royalty on net sales of products covered by the in-licensed intellectual property in the low single digits. The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits. We have the right to sublicense our rights under these agreements, and we will be required to pay a percentage of any sublicense income.

On January 13, 2022, we entered into a License Agreement with UCL Business Limited to obtain an exclusive worldwide in-license of a genomic quadruplex (G4)-selective transcription inhibitor drug development program which had been developed at University College London, including lead and back-up compounds, preclinical data and a patent estate. (UCL Business Limited is the commercialization company for University College London.) The program’s lead compound is being developed by us under the name QN-302 as a candidate for treatment of pancreatic ductal adenocarcinoma (PDAC), which represents the vast majority of pancreatic cancers. The Agreement requires (if and when applicable) tiered royalty payments in the low to mid-single digits, clinical/regulatory/sales milestone payments, and a percentage of any non-royalty sublicensing consideration paid to the Company. On November 7, 2023 the Company announced that first patient dosing occurred for the Company’s QN-302 clinical trial which triggered a $100,000 milestone payment obligation under this exclusive license agreement.

### Alpha Convertible Debt

On December 22, 2022, we issued an 8% Senior Convertible Debenture in the aggregate principal amount of $3,300,000 (the “Debenture”) to Alpha Capital for a purchase price of $3,000,000 pursuant to the terms of a Securities Purchase Agreement, dated December 21, 2022. The Debenture has a maturity date of December 22, 2025 and is convertible, at any time, and from time to time, until the Debenture is no longer outstanding, at Alpha Capital’s option, into shares of our common stock, at a price equal to $1.32 per share, subject to adjustment and other terms and conditions described in the Debenture, including the Company’s receipt of the necessary stockholder approvals, which were obtained at our 2023 annual meeting of stockholders on July 13, 2023.

In January 2023 Alpha Capital converted $1,111,078 of the Debenture principal into 841,726 shares of common stock at a conversion price of $1.32 per share.

Commencing June 1, 2023 and continuing on the first day of each month thereafter until the earlier of (i) December 22, 2025 and (ii) the full redemption of the Debenture (each such date, a “Monthly Redemption Date”), we must redeem $110,000 plus accrued but unpaid interest, liquidated damages and any amounts then owing under the Debenture (the “Monthly Redemption Amount”). The Monthly Redemption Amount must be paid in cash; provided that after the first two monthly redemptions, we may elect to pay all or a portion of a Monthly Redemption Amount in shares of common stock, based on a conversion price equal to the lesser of (i) the then applicable conversion price of the Debenture and (ii) 85% of the average of the VWAPs (as defined in the Debenture) for the five consecutive trading days ending on the trading day that is immediately prior to the applicable Monthly Redemption Date. We may also redeem some or all of the then outstanding principal amount of the Debenture at any time for cash in an amount equal to 105% of the then outstanding principal amount of the Debenture being redeemed plus accrued but unpaid interest, liquidated damages and any amounts then owing under the Debenture. Our election to pay monthly redemptions in shares of common stock or to effect an optional redemption is subject to the satisfaction of the Equity Conditions (as defined in the Debenture), including our receipt of the necessary stockholder approvals, which we obtained at our 2023 annual meeting of stockholders on July 13, 2023.

The Debenture accrues interest at the rate of 8% per annum, which does not begin accruing until December 1, 2023, and will be payable on a quarterly basis. Interest may be paid in cash or shares of common stock of the Company or a combination thereof at the option of the Company; provided that interest may only be paid in shares if the Equity Conditions have been satisfied, including our receipt of the necessary stockholder approvals, which we obtained at our 2023 annual meeting of stockholders.

During the three and nine months ended September 30, 2023, we recognized an extinguishment loss on voluntary conversion of convertible debt of $0 and approximately $1.1 million, respectively, and recorded accrued interest of approximately $368,000 and $1.3 million, respectively (of which approximately $350,000 and $1.2 million was a reduction to the discount, respectively) in other expenses in the condensed consolidated statements of operations. During the three and nine months ended September 2023 we paid Monthly Redemption Amounts of $330,000 and $440,000, respectively in cash, and as of September 30, 2023 the remaining Debenture principal balance was approximately $1.7 million, the remaining discount was approximately $0.9 million, the fair value of the Alpha Warrant was approximately $2.2 million, and the fair value of the suite of bifurcated embedded derivative features was $0.

### NanoSynex Funding Agreement

As a condition to the NanoSynex Acquisition, we entered into the NanoSynex Funding Agreement with NanoSynex, pursuant to which we agreed to fund NanoSynex up to an aggregate of approximately $10.4 million over a three-year period, subject to NanoSynex’s achievement of certain performance milestones specified in the NanoSynex Funding Agreement and the satisfaction of other terms and conditions described in the NanoSynex Funding Agreement.

These funding commitments were to be made in the form of convertible promissory notes to be issued to us with a face value equal to the amount paid by us to NanoSynex upon satisfaction of the applicable performance milestone, bearing interest at the rate of 9% per annum on the principal balance from time to time outstanding under the particular promissory note, convertible at our option into additional shares of NanoSynex in order for us to maintain at least a 50.1% controlling ownership interest in NanoSynex, should NanoSynex issue additional shares. During the year ended December 31, 2022, a total of approximately $2.4 million was funded to NanoSynex, and for the nine months ended September 30, 2023 an additional $0.5 million was funded to NanoSynex under the NanoSynex Funding Agreement.

On July 20, 2023, the Company entered into the NanoSynex Amendment, which amended the NanoSynex Funding Agreement with NanoSynex (the “NanoSynex Funding Agreement”), pursuant to which the Company agreed to, among other things, forfeit 281,000 Series B Preferred Shares of NanoSynex held by the Company, resulting in the Company’s ownership in NanoSynex being reduced from approximately 52.8% to approximately 49.7% of the voting equity of NanoSynex. In addition, the Company agreed to cancel approximately $3.0 million of promissory notes issued to the Company under the NanoSynex Funding Agreement, relieving NanoSynex of any repayment obligations to the Company with respect to such notes. The surrender of shares reducing the Company’s interest in NanoSynex from approximately 52.8% to approximately 49.97% occurred on July 20, 2023.

The NanoSynex Amendment supersedes any payment obligations contemplated by the original NanoSynex Funding Agreement and amended the Company’s obligations to provide funding to NanoSynex, except that Company agreed to provide future funding as follows: (i) $560,000 on or before November 30, 2023, and (ii) $670,000 on or before March 31, 2024, in each case issued in the form of a promissory note to the Company with a face value in the amount of such funding. However, in lieu of fulfilling such obligations, the Company may, and intends to, instead forfeit shares of Series A-1 Preferred Stock of NanoSynex in a number that will be equal to a fraction, the numerator of which is the amount of the default (*i.e*., the amount that the Company should have, but failed, to advance to NanoSynex pursuant to the terms of the NanoSynex Amendment), and the denominator of which shall be the price per share that the Company originally paid in consideration for its Preferred A-1 shares of NanoSynex to the previous holder thereof, being $1.5716 per share.

The NanoSynex Amendment supersedes any payments contemplated by the NanoSynex Funding Agreement, such that except as described in the NanoSynex Amendment, we will have no further payment obligations to NanoSynex under the NanoSynex Funding Agreement or otherwise (including by way of equity investment, loan financing or credit lines), and NanoSynex will have no further payment obligations to us for advances previously received under the NanoSynex Funding Agreement.

### Other Service Agreements

We enter into contracts in the normal course of business, including with clinical sites, contract research organizations, and other professional service providers for the conduct of clinical trials, contract manufacturers for the production of our product candidates, contract research service providers for preclinical research studies, professional consultants for expert advice and vendors for the sourcing of clinical and laboratory supplies and materials. These contracts generally provide for termination on notice, and therefore are cancelable contracts.

### Cash Flows

The following table sets forth the significant sources and uses of cash for the periods set forth below:

| Net cash (used in) provided by: | For the Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Operating activities | $(4,632,677) | $(11,009,815) |
| Investing activities | 3,980,541 | 60,612 |
| Financing activities | (440,000) | 7,173 |
| Effect of exchange rate on cash | — | 27,523 |
| Net decrease in cash and restricted cash | **$(1,092,136)** | **$(10,914,507)** |

#### Net Cash Used in Operating Activities

During the nine months ended September 30, 2023, operating activities used $4.6 million of cash, primarily resulting from a loss from continuing operations of $10.0 million. Cash flows from operating activities for the nine months ended September 30, 2023 were positively impacted by adjustments for a $1.1 million non cash loss on voluntary conversion of convertible debt, accretion of discount of $1.2 million on convertible debt, $1.0 million in stock-based compensation expense, a $1.0 million increase in accounts payable, a $0.4 million increase in accrued expenses and other current liabilities, and cash provided by discontinued operations of $2.6 million. Cash flows from operating activities for the nine months ended September 30, 2023 were negatively impacted by adjustments for a $1.4 million decrease in fair value of warrant liabilities and a $0.6 million increase in prepaid expenses and other assets.

During the nine months ended September 30, 2022, operating activities used $11.0 million of cash, primarily resulting from a loss from continuing operations of $10.3 million. Cash flows from operating activities for the nine months ended September 30, 2022 were positively impacted by an adjustment for $4.1 million in stock-based compensation expense, Cash flows from operating activities for the nine months ended September 30, 2022 were negatively impacted by cash used in discontinued operations of $2.4 million, a $1.0 million decrease in fair value of warrant liabilities, a $0.7 million decrease in accrued expenses and other current liabilities, a $0.3 million decrease in accounts payable, and a $0.4 million increase in prepaid expenses and other assets.

#### Net Cash Provided by (Used in) Investing Activities

During the nine months ended September 30, 2023, net cash provided by investing activities was approximately $4.0 million from discontinued operations, due to $4.7 million in proceeds received from the sale of Qualigen, Inc., offset by $0.5 million advanced to NanoSynex, and $0.2 million in purchases of property and equipment prior to deconsolidation.

During the nine months ended September 30, 2022, net cash provided by investing activities was approximately $0.1 million from discontinued operations, primarily due to $0.7 million in cash acquired in the NanoSynex transaction, offset by the $0.6 million purchase of NanoSynex stock.

#### Net Cash Provided by Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2023 was approximately $0.4 million, due to monthly redemption payments on convertible notes payable.

Net cash provided by financing activities for the nine months ended September 30, 2022 was approximately $7,000, due to net proceeds from the exercise of warrants.

## Market risk

As filed, 163 characters.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item.

## Controls and procedures

As filed, 3,828 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023, the end of the period covered by this Quarterly Report.

Based on this evaluation, our principal executive officer and principal financial officer have concluded that, due to the material weakness described below, our disclosure controls and procedures as of September 30, 2023 were not effective to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act’), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. We believe that a disclosure controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the disclosure controls system are met, and no evaluation of disclosure controls can provide absolute assurance that all disclosure control issues, if any, within a company have been detected.

### Changes in Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP. As of December 31, 2022, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework, or 2013 Framework. Based on this assessment, our management concluded that, as of December 31, 2022, our internal control over financial reporting was not effective because of a material weakness in our internal control over financial reporting related to the lack of accounting department resources and/or policies and procedures to ensure recording and disclosure of items in compliance with generally accepted accounting principles. We have taken and continue to take steps to remediate the material weakness, including implementing additional procedures and utilizing external consulting resources with experience and expertise in U.S. GAAP and public company accounting and reporting requirements to assist management with its accounting and reporting of complex and/or non-recurring transactions and related disclosures.

Notwithstanding the identified material weakness, our management believes that the condensed consolidated financial statements included in this Quarterly Report fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP. Nonetheless, we also believe that an internal control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the internal control system are met, and no evaluation of internal control can provide absolute assurance that all internal control issues and instances of fraud, if any, within a company are detected.

## Risk factors

As filed, 613 characters.

The Company’s business, reputation, results of operations and financial condition, as well as the price of its stock, can be affected by a number of factors, whether currently known or unknown, including those described in Part I, Item 1A of the Company’s 2022 Annual Report under the heading “Risk Factors.” When any one or more of these risks materialize, the Company’s business, reputation, results of operations and financial condition, as well as the price of its stock, can be materially and adversely affected. There have been no material changes to the Company’s risk factors since the 2022 Annual Report.

Filed Nov 14, 2023.
Source: SEC EDGAR, the filing index for accession 0001493152-23-041230. Last ingested by Listed: Oct 26, 2026, 17:26 ET. No prices; not investment advice.