What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-05-02 compared with 2022-03-31 · 460 added, 395 removed, 66 unchanged (93% of the section changed)

8 unchanged sentences

See “Cautionary Note Regarding Forward-Looking Statements” for additional information.

are a diversified life sciences company focused on developing treatments for adult and pediatric cancers with potential for

Orphan Drug designation, while also commercializing diagnostics.

Our cancer therapeutics pipeline includes QN-302, QN-247

Our investigational QN-302 compound is a small molecule G4 selective transcription inhibitor

with strong binding affinity to G4s prevalent in cancer cells.

Such binding could, by stabilizing the G4s against “unwinding,”

help inhibit cancer cell proliferation.

QN-247 is a DNA coated gold nanoparticle cancer drug candidate that has the potential to target

various types of cancer;

the nanoparticle conjugate technology is similar to the core nanoparticle coating technology used in our blood-testing

diagnostic products.

The foundational aptamer of QN-247, QN-165 (formerly referred to as AS1411), which the Company has deprioritized

as a drug candidate for treating COVID-19 and other viral-based infectious diseases.

RAS-F is a family of RAS oncogene protein-protein

interaction inhibitor small molecules for preventing mutated RAS genes’ proteins from binding to their effector proteins;

this binding could stop tumor growth, especially in RAS-driven tumors such as pancreatic, colorectal and lung cancers.

We are also identifying

strategic partnering opportunities for STARS, a DNA/RNA-based therapeutic device product concept for removing precisely targeted tumor-produced

and viral compounds from circulating blood.

our therapeutic candidates are still in the pre-clinical development stage, our only products that are currently commercially available

are the FastPack System diagnostic instruments and test kits.

Our FastPack System diagnostic instruments and test kits are sold commercially

primarily in the United States, as well as certain European countries.

The FastPack System menu includes rapid point-of-care diagnostic

tests for cancer, men’s health, hormone function, and vitamin D status.

We have always utilized a “razor and blades”

pricing strategy, providing analyzers to our customers (physician offices, clinics and small hospitals) at low cost in order to increase

sales volumes of higher-margin test kits.

We currently rely on our diagnostics distribution partner Sekisui for most FastPack distribution

worldwide pursuant to a distribution agreement, but maintain direct distribution for certain house accounts, including selling our total

testosterone test kits to Low T, the largest men’s health group in the United States, with 40 locations.

The distribution agreement

with Sekisui will expire on March 31, 2022, at which time the services currently provided by Sekisui will revert to us and we will recognize

100% of the revenue from the sales of our FastPack diagnostic instruments and test kits.

We have licensed and technology-transferred our

FastPack System technology to Yi Xin Zhen Duan Jishu (Suzhou) Ltd.

Unless otherwise indicated, all information in this Annual Report on Form 10-K gives effect to a 1-for-10 reverse stock split of our

common stock that became effective on November 23, 2022, and all references to shares of common stock outstanding and per share amounts

give effect to the reverse stock split.

are a diversified life sciences company focused on developing treatments for adult and pediatric cancers with potential for Orphan Drug

designation, while also commercializing diagnostics.

cancer therapeutics pipeline includes QN-302, RAS and QN-247.

lead oncology therapeutics program, QN-302, is an investigational small molecule G4-selective transcription inhibitor with strong binding

affinity to G4s prevalent in cancer cells.

Such binding could, by stabilizing the G4s against DNA “unwinding,” help inhibit

cancer cell proliferation.

QN-302 is currently undergoing Good Laboratory Practice (GLP) toxicology studies.

RAS portfolio consists of a family of RAS oncogene protein-protein interaction inhibitor small molecules believed to inhibit or block

mutated RAS genes’ proteins from binding to their effector proteins.

Preventing this binding could stop tumor growth, especially

in RAS-driven tumors such as pancreatic, colorectal and lung cancers.

investigational QN-247 compound binds nucleolin, a key multi-functional regulatory phosphoprotein that is overexpressed in cancer cells.

Such binding could inhibit the cancer cells’ proliferation.

The foundational aptamer of QN-247 is QN-165 (formerly referred to

as AS1411), which the Company has deprioritized as a drug candidate for treating COVID-19 and other viral-based infectious diseases.

May 26, 2022, we acquired 2,232,861 shares of Series A-1 Preferred Stock of NanoSynex from Alpha in exchange for 3,500,000 shares of

our common stock and a prefunded warrant to purchase 3,314,641 shares of our common stock at an exercise price of $0.001 per share.

These warrants were subsequently exercised on September 13, 2022 and the shares of our common stock were subsequently subject to a 1 for 10 reverse split on November 23, 2022.

Concurrently with this

transaction, we also purchased 381,786 shares of Series B preferred stock from NanoSynex for a total purchase price of $600,000.

transactions resulted in our acquiring a 52.8% interest in NanoSynex.

NanoSynex is a micro-biologics diagnostics company domiciled

our therapeutic candidates are all still in the pre-clinical development stage, our only products that are currently commercially available

are the for sale FastPack System diagnostic instruments and test kits.

Our FastPack System diagnostic instruments and test kits are sold

commercially primarily in the United States, as well as certain European countries.

The FastPack System menu includes a rapid, highly

accurate immunoassay diagnostic testing system for cancer, men’s health, hormone function, and vitamin D status.

We provide analyzers

to our customers (physician offices, clinics and small hospitals) at low cost in order to increase sales volumes of higher-margin test

have always utilized a “razor and blades” pricing strategy, providing analyzers to our customers (physician offices, clinics

and small hospitals) at low cost in order to increase sales volumes of higher-margin test kits.

Through the first quarter of 2022, we

relied on our diagnostics distribution partner, Sekisui, for most FastPack distribution worldwide pursuant to a distribution agreement.

We maintained direct distribution for certain house accounts, including selling our total testosterone test kits to Low T, the largest

men’s health group in the United States, with 40 locations.

The Distribution Agreement with Sekisui expired on March 31, 2022,

and after that date the activities previously provided by Sekisui have reverted back to us and we have recognized 100% of the revenue

from the sales of our FastPack diagnostic instruments and test kits.

We have licensed and technology-transferred our FastPack System

technology to Yi Xin Zhen Duan Jishu (Suzhou) Ltd.

for the China diagnostics market.

do not expect to be profitable before products from our therapeutics pipeline are commercialized, because we foresee that research and

development expenses on the therapeutics programs will significantly exceed the profits, if any, that we might have from our diagnostics

development expenses on the therapeutics programs will significantly exceed the profits, if any, that we will generate from our diagnostics

To experience losses while therapeutic products are still under development is, of course, typical for biotechnology companies.

financial statements do not separate out our diagnostics-related activities and our therapeutics-related activities.

Although to date

all our reported revenue is diagnostics-related, our reported expenses represent the total of our diagnostics-related and therapeutics-related

of Reverse Recapitalization Transaction with Ritter

May 22, 2020, we completed a “reverse recapitalization” transaction with Qualigen, Inc.

(not to be confused with the Company);

our merger subsidiary merged with and into Qualigen, Inc.

with Qualigen, Inc.

surviving as a wholly owned subsidiary of the Company.

The Company, which had previously been known as Ritter Pharmaceuticals, Inc., was renamed Qualigen Therapeutics, Inc., and the former

stockholders of Qualigen, Inc.

acquired, via the recapitalization, a substantial majority of the shares of the Company.

Ritter/Qualigen

Therapeutics common stock, which was previously traded on the Nasdaq Capital Market under the ticker symbol “RTTR,” commenced

trading on Nasdaq, on a post-reverse-stock-split adjusted basis, under the ticker symbol “QLGN” on May 26, 2020.

Qualigen, Inc.

was the accounting acquirer in the reverse recapitalization transaction, all references to financial figures of “the

Company” presented in the accompanying financial statements and Notes are those of Qualigen, Inc.;

the corresponding figures of

Ritter Pharmaceuticals, Inc.

have been disregarded.

Moreover, references in this Annual Report to “our” pre-May 22, 2020-merger

history, securities and agreements are references to the pre-May 22, 2020 merger history, securities and agreements of Qualigen, Inc.,

except where otherwise expressly specified.

are no longer pursuing the gastrointestinal disease treatment business on which Ritter Pharmaceuticals, Inc.

had focused before the reverse

recapitalization transaction.

and Development Agreement with Sekisui

May 2016, through our wholly-owned diagnostics subsidiary Qualigen, Inc., we entered into a Distribution and Development Agreement (the

“Distribution Agreement”) with Sekisui.

Under the Distribution Agreement, Sekisui currently serves as the exclusive worldwide

distributor for FastPack products (although we retain certain specific accounts for direct transactions).

Sekisui’s exclusive distribution

arrangements are effective until March 31, 2022.

the Distribution Agreement, we began development of a proposed “FastPack 2.0” product line, which if successfully introduced

by us would have been distributed by Sekisui.

Between May 2016 and January 2018, Sekisui paid us a total of approximately $5.5 million

upon the achievement of specified development milestones.

this program, we developed a FastPack 2.0 diagnostic test for a new whole blood vitamin D assay, and we then conducted a clinical trial

of it in March 2019.

We determined in May 2019 that it was uncertain whether the results of the trial would enable the test to receive

FDA approval, and our FastPack 2.0 project with Sekisui was discontinued.

Currently no further FastPack 2.0 analyzer or test development

is ongoing, and we have licensed and transferred our FastPack 2.0 technology to Yi Xin Zhen Duan Jishu (Suzhou) Ltd.

for them to further

develop and commercialize.

became obligated to pay Sekisui $0.9 million for $0.5 million in research and development costs advanced by Sekisui to us and for the

reimbursement of $0.4 million in certain out-of-pocket development and preclinical study expenses incurred by Sekisui.

We satisfied these

amounts (plus interest) by payment in full on July 21, 2020.

Distribution Agreement with Sekisui is scheduled to expire on March 31, 2022, at which time the services currently provided by Sekisui

will revert to us and we will recognize 100% of the revenue from the sales of our FastPack diagnostic instruments and test kits.

Transfer Agreement with Yi Xin

Through our wholly-owned diagnostics

subsidiary Qualigen, Inc., we entered into a Technology Transfer Agreement dated as of October 7, 2020 with Yi Xin, of Suzhou, China,

which authorizes Yi Xin to develop, manufacture and sell new generations of diagnostic test systems based on our core FastPack

In addition, the Technology Transfer Agreement authorizes Yi Xin to manufacture and sell our current generations of

FastPack System diagnostic products (1.0, IP and PRO) in China.

the Technology Transfer Agreement, we have received total net cash payments of approximately $670,000, of which approximately $632,000

is classified as license revenue, and approximately $38,000 is classified as product sales on the statement of operations for the fiscal

year ended December 31, 2021.

We will receive low- to mid-single-digit royalties on any future new-generations and current-generations

product sales by Yi Xin.

have provided technology transfer and patent/know-how license rights to facilitate Yi Xin’s development and commercialization.

We have provided Yi Xin

the exclusive rights for China – which is a market we have not otherwise entered – both for Yi Xin’s new generations

of FastPack-based products and for Yi Xin-manufactured versions of our existing FastPack product lines.

Yi Xin will also have the right

to sell its new generations of FastPack-based diagnostic test systems throughout the world (but not to or toward current customers of

our existing generations of FastPack products);

any such non-China sales would, until March 31, 2022, need to be through Sekisui.

March 31, 2022, Yi Xin will have the right to sell Yi Xin-manufactured versions of existing FastPack 1.0, IP and PRO product lines

worldwide (other than in the United States and other than to or toward current non-US customers of those products).

Yi Xin will also

have the right, after March 31, 2022, to buy Qualigen-manufactured FastPack 1.0, IP and PRO products from us at distributor

prices for resale in and for the United States (but not to or toward current U.S.

customers of those products).

not license Yi Xin to sell in the United States market any Yi Xin-manufactured versions of those legacy FastPack product lines, even

after March 31, 2022.

agreed in the Technology Transfer Agreement that we would not, after March 31, 2022, seek new FastPack customers outside the United

Xin is a newly-formed company and is subject to many risks.

There can be no assurance that Yi Xin will successfully commercialize any

products or that we will receive any royalties from Yi Xin.

consolidated financial statements do not separate our diagnostics-related activities from our therapeutics-related activities.

to date all of our reported revenue is diagnostics-related, our reported expenses represent the total of our diagnostics-related and

therapeutics-related expenses

November 23, 2022, we effected a 1-for-10, as determined by our board of directors, 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 payments were made to stockholders.

All share and per share

data for all periods presented in this section and the accompanying financial statements and related disclosures 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.

of COVID-19 Pandemic

COVID-19 pandemic had, and it or similar pandemics, epidemics or infectious disease outbreaks may, in the future, have, adverse impacts

and world economy, health care systems, personnel availability, supply chains, social and political assumptions, and capital

The impacts from the pandemic were particularly serious for smaller companies such as ours.

Sales of our diagnostic products

fell significantly during 2020 as deferral of patients’ non-emergency visits to physician offices, clinics and small hospitals

sharply reduced demand for our FastPack tests.

While our FastPack sales began to rebound in 2021, the extent to which the COVID-19 pandemic,

or similar pandemics, epidemic or infectious disease outbreak, could impact us in the future will depend on numerous evolving factors

and future developments that we are unable to predict at this time, including:

the timing, extent, trajectory and duration of the pandemic;

the emergence of new variants;

the development, availability, distribution and effectiveness of vaccines and treatments;

the imposition

of protective public safety measures;

and the impact of the pandemic on the global economy and demand for our products and services.

We could again experience adverse impacts to our business as a result of any related economic recession that may occur in the future

from COVID-19 or other similar global pandemic, epidemic or infectious disease outbreak.

Accounting Policies and Estimates

discussion and analysis is based on our consolidated financial statements, which have been prepared in accordance with U.S.

preparation of these 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 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, stock-based

compensation, amortization and depreciation, inventory reserves, allowances for doubtful accounts and returns, and warranty costs.

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.

our significant accounting policies are more fully described in Note 1 to our consolidated financial statements appearing in “Item

Financial Statements and Supplementary Data,” 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

and development

for doubtful accounts and returns

● Impairment of long-lived

● Derivative financial instruments and warrant

● Stock-based compensation

2004, Qualigen, Inc.

2 unchanged sentences

Qualigen Therapeutics common stock.

These warrants were so-called “exploding warrants” – as they contained a provision

that if Qualigen, Inc.

issued shares (except in certain defined scenarios) at a price below the warrants’ exercise price, the exercise

price would be re-set to such new price and the number of shares underlying the warrants would be increased in the same proportion as

the exercise price decrease.

For accounting purposes, such “exploding warrants” give rise to “warrant liabilities”.

Although the fair value of the warrants was immaterial at March 31, 2020, the operation of the “double-ratchet” provisions

in these “exploding warrants” in connection with the reverse-recapitalization transaction now allow the holders to exercise

for a significantly higher number of shares than before and at a significantly lower price than the current market price of our shares.

These warrants contain a provision that if Qualigen, Inc.

issues 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 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 Consolidated Balance Sheets and to reflect period-to-period changes in the fair value

of the warrant liabilities on our Consolidated Statements of Operations.

The size of these warrant liabilities was quite large ($1.7

million and $8.3 million at December 31, 2021 and 2020 respectively) and caused a significant distortion of our Consolidated Balance

Sheets and our results of operations for these periods.

Because this fair value will be determined each quarter on a “mark-to-market”

basis, this item 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.

require us to recognize the fair value of these warrants as warrant liabilities on our Consolidated Balance Sheets and to reflect period-to-period

changes in the fair value of the warrant liabilities on our Consolidated Statements of Operations.

The estimated fair value of these

warrant liabilities was $0.8 million and $1.7 million at December 31, 2022 and 2021, respectively.

There were 1,349,571 of these

warrants outstanding at December 31, 2022 and 248,162 of these warrants outstanding at December 31, 2021.

On December 22, 2022, as part of the convertible debenture financing, the Company issued to

Alpha a common stock warrant to purchase a number of shares of the common stock of the Company equal to the number of Conversion Shares

issuable upon conversion of the Debenture as of the closing date.

The exercise price of the warrant is $1.65 (equal to 125% of the Conversion

Price of the Debenture on the closing date).

The warrant entitles Alpha to purchase up to 2,500,000 shares of common stock of the Company

and may be exercised by Alpha, in whole or in part, at any time on or after June 22, 2023 and before June 22, 2028.

GAAP requires

us to recognize the fair value of these warrants as warrant liabilities on our Consolidated Balance Sheets and to reflect period-to-period

changes in the fair value of the warrant liabilities on our Consolidated Statements of Operations.

The estimated fair value of this warrant

liability was $2.8 million and $0 at December 31, 2022 and 2021, respectively.

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.

Approximately 53% of these “exploding warrants” have been exercised as of December 31, 2021, which reduced the amplitude

of this variability.

(There were 2,481,614 of these “exploding warrants” outstanding at December 31, 2021 and 3,378,596

of these “exploding warrants” outstanding at December 31, 2020.) We will continue to encourage the holders of these

warrants to exercise them, and if the number of outstanding “exploding warrants” is further reduced the potential amplitude

of the changes in the warrant liabilities will correspondingly be further reduced.

Impact of COVID-19 Pandemic

has had, and will continue to have, adverse impacts on the U.S.

and world economy, health care systems, personnel availability, supply

chains, social and political assumptions, and capital markets.

Those impacts are expected to be especially serious for smaller companies

such as ours.

Our sales of diagnostic products fell significantly in the nine months ended December 31, 2020 (and net loss increased

significantly), as deferral of patients’ non-emergency visits to physician offices, clinics and small hospitals sharply reduced

demand for FastPack tests.

A resurgence of the COVID-19 pandemic, or the emergence of new vaccine resistant variants of COVID-19 or some

other infectious disease could have a similar impact on our future operations, although the degree of impact will probably depend on

the extent of any lockdowns and similar actions taken in response to the pandemic as well as any personal and societal behavior changes

arising from psychological factors.

Accounting Policies and Estimates

discussion and analysis is based on our financial statements, which have been prepared in accordance with U.S.

The preparation

of these 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 financial statements.

On an ongoing basis, we evaluate our

estimates and judgments, including those related to fair value of warrant liabilities, stock-based compensation, amortization and depreciation,

inventory reserves, allowances for doubtful accounts and returns, and warranty costs.

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.

results may differ from these estimates under different assumptions or conditions.

our significant accounting policies are more fully described in Note 1 to our consolidated financial statements appearing in “Item

Financial Statements and Supplementary Data,” 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:

for doubtful accounts and returns

and development

liabilities and stock-based compensation

On January 1, 2021, t he

Company early adopted ASU No.

2021-04 Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock

Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40 ) and ASU No.

2020-06, “ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in

Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ”6,

(Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

the nine months ended December

31, 2020 , the Company adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers , and Accounting

Standards Codification Topic 842, Leases .

The application of other existing accounting policies was not changed as of and for

the year ended December 31, 2021.

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.

of Operations

of the Twelve-Month Year Ended December 31, 2021 (“Fiscal 2021”) and Nine Months Ended December 31, 2020 (the “Transition

following table summarizes our results of operations for Fiscal 2021 and the Transition Period:

For the Year Ended

For the Nine Months Ended

of the Years Ended December 31, 2022 and 2021

For the Years Ended

Net product sales

5 unchanged sentences

Sales and marketing

Impairment loss on construction in progress

Goodwill and fixed asset impairment

Total expenses

4 unchanged sentences

(Gain) loss on change in fair value of warrant liabilities

Gain on loan extinguishment

Interest (income) expense, net

1 unchanged sentence

Total other expense (income), net

LOSS BEFORE PROVISION FOR INCOME TAXES

LOSS BEFORE (BENEFIT) PROVISION FOR INCOME TAXES

(21,299,717 )

(17,891,710 )

PROVISION FOR INCOME TAXES

(BENEFIT) PROVISION FOR INCOME TAXES

(21,034,643 )

(17,897,137 )

operating revenues are primarily generated from sales of diagnostic tests.

Revenues for Fiscal 2021 were $5.6 million compared to $2.8

million for the Transition Period, an increase of $2.8 million, or

This increase was primarily due to $2.2 million in increased diagnostic product sales, as

well the recognition of approximately $0.6 million in license revenue from Yi Xin under the Technology Transfer Agreement, compared with

no license revenue in the Transition Period.

Net loss attributable to noncontrolling interest

Net loss attributable to Qualigen Therapeutics, Inc.

$ (18,640,543 )

$ (17,897,137 )

Other comprehensive loss, net of tax

$ (21,034,643 )

$ (17,897,137 )

Foreign currency translation adjustment

Other comprehensive loss

(20,983,923 )

(17,897,137 )

Comprehensive loss attributable to noncontrolling interest

Comprehensive loss attributable to Qualigen Therapeutics, Inc.

$ (18,589,823 )

$ (17,897,137 )

operating revenues are primarily generated from sales of our FastPack diagnostic tests.

Revenues for the year ended December 31,

2022 were approximately $5.0 million compared to approximately $5.7 million for the year ended December 31, 2021, a decrease of $0.7

This decrease was primarily due to the recognition of approximately $0.6 million in license revenue from Yi Xin under the

Technology Transfer Agreement for the year ended December 31, 2021, compared with no license revenue for the year ended December 31,

product sales

product sales are primarily generated from sales of diagnostic tests.

Net product sales for Fiscal 2021 and the Transition Period were

approximately $5.0 million and $2.8 million, respectively, representing an increase of approximately $2.2 million, or 76%.

This improvement

was due to a recovery from the effects of COVID-19 pandemic during the prior year as well as the fact that the Transition Period had

only nine months versus a full twelve months in Fiscal 2021.

revenue for Fiscal 2021 was $0.6 million, due to the recognition of revenue from Yi Xin under the Technology Transfer Agreement.

was no license revenue for the Transition Period.

product sales are primarily generated from sales of our diagnostic tests.

Net product sales for the year ended December 31, 2022 were

$5.0 million, which remained largely consistent with $5.0 million for the year ended December 31, 2021.

revenue for the year ended December 31, 2021 was $0.6 million, due to the recognition of revenue from Yi Xin under the Technology Transfer

There was no license revenue for the year ended December 31, 2022.

of Product Sales

of product sales increased to $4.3 million for Fiscal 2021, or 86% of net product sales, compared to $2.6 million for the Transition

Period, or 93% of net product sales.

The increase in dollars (even after recognizing and adjusting for the fact that the Transition Period

had only nine months and Fiscal 2021 had twelve months) and decrease in percentage of net product sales were primarily due to increased

unit sales of product, which resulted in economies of scale.

of product sales for the year ended December 31, 2022 were $4.3 million, which remained largely consistent with $4.3 million for the

year ended December 31, 2021.

and Administrative Expenses

and administrative expenses increased sharply from $7.1 million for the Transition Period to $11.

for Fiscal 2021.

This increase was primarily due to $2.1 million in employee/director stock-based compensation expense, a $ 0.7

million increase in professional fees (including $0.

in stock-based compensation), a $0.6 million increase in insurance expenses, and a $1.2 million increase in payroll expenses, primarily

due to the addition of a new President and Chief Strategy Officer position, higher strategic consulting and proxy distribution costs,

as well as the fact that the Transition Period had only nine months versus a full twelve months in Fiscal 2021.

and administrative expenses decreased from $11.7 million for the year ended December 31, 2021 to $10.8 million the year ended December

This decrease was due to a $0.3 million decrease in professional fees, a $0.3 million decrease in payroll-related expenses,

a $0.3 million decrease in insurance expenses, and a $0.3 million decrease in investor relations expenses, offset by increases of $0.2

million in legal expenses and $0.1 million in rent.

and Development Costs

and development costs include therapeutic and diagnostic research and product development costs.

Research and development costs increased

sharply from $3.3 million for the Transition Period to $11.7 million for Fiscal 2021.

Of the $3.3 million of research and development

costs for the Transition Period (nine months), $2.5 million (75%) was attributable to therapeutics and $0.8 million (25%) was attributable

to diagnostics.

Of the $11.7 million of research and development costs for Fiscal 2021 (twelve months), $10.4 million (88%) was

attributable to therapeutics and $1.3 million (12%) was attributable to diagnostics.

increase in diagnostic research and development costs was primarily due to $0.3 million in increased stock-based compensation expense,

and $0.2 million resulting from the fact that the Transition Period had only nine months and Fiscal 2021 had twelve months.

in therapeutics research and development costs was primarily

due to an increase of $5.6 million in expenses related to the potential application of QN-165 for the treatment of COVID-19 ($4.3 million

in drug compound manufacturing costs, and a $1.3 million increase in other pre-clinical research costs), as well as pre-clinical research

and development cost increases of approximately $0.7 million for QN-247, $0.5 million for RAS, and an increase o f

approximately $0.8 million in payroll-related expenses primarily due to the addition of a new Chief Medical Officer position, and $0.3

million in increased patent costs for Fiscal 2021 (twelve months), all as compared to the Transition Period (nine months).

11, 2021, the FDA informed us that additional pre-clinical studies would be required in order for the FDA to clear the IND application

that we filed on July 13, 2021 for clinical studies of QN-165 for the treatment of COVID-19 in hospitalized patients.

We have since decided

to deprioritize this QN-165 progra m.

and development costs include therapeutics and diagnostics research and product development costs.

Research and development costs decreased

from $11.7 million for the year ended December 31, 2021 to $6.8 million for the year ended December 31, 2022.

Of the $6.8 million of

research and development costs for year ended December 31, 2022, $4.5 million (66%) was attributable to therapeutics and $2.3 million

(34%) was attributable to diagnostics.

Of the $11.7 million of research and development costs for the year ended December 31, 2021, $10.3

million (88%) was attributable to therapeutics and $1.4 million (12%) was attributable to diagnostics.

increase in diagnostic research and development costs was primarily due to $0.9 million in R&D expenses assumed in connection with

the acquisition of NanoSynex.

The decrease in therapeutics research and development costs was primarily due to a decrease of $6.4 million

in expenses related to the potential application of QN-165 for the treatment of COVID-19 ($4.6 million in drug compound manufacturing

costs, and $1.8 million in other pre-clinical research costs), as well as pre-clinical research and development cost decreases

of $0.2 million for QN-247, a decrease in legal expenses of $0.3 million, a decrease of $0.3 million in payroll-related expenses, offset

by an increase in QN-302 spending of $1.1 million and an increase in RAS expenses of $0.3 million.

the future, we expect our therapeutic research and development costs to continue to significantly outweigh our diagnostic research and

2 unchanged sentences

and Marketing Expenses

and marketing expenses for Fiscal 2021 increased to approximately $0.5 million as compared to $0.3 million for the Transition Period,

primarily due to an increase in payroll-related expenses, and the

fact that the Transition Period had only nine months and Fiscal 2021 had twelve months .

the Transition Period, we evaluated the ongoing value of construction in progress related to new FastPack manufacturing equipment.

on this evaluation, we determined the asset was impaired and wrote it down by $1.4 million to its estimated fair value of $0.

no impairment loss for Fiscal 2021.

and marketing expenses for the year ended December 31, 2022 increased to $1.0 million as compared to $0.5 million for the year ended

December 31, 2021, primarily due to an increase in payroll-related expenses as a result of the termination of the Sekisui distribution

and Fixed Asset Impairment

a result of annual goodwill impairment testing, we recognized a $4.2 million non-cash goodwill and fixed asset impairment charge in the valuation of

our business acquisition of NanoSynex for the year ended December 31, 2022.

For more information, refer to Note 1 - Organization and

Summary of Significant Accounting Policies and Estimates and Note 7 - Goodwill, IPR&D and other Intangibles of the consolidated financial

Expense (Income)

in Fair Value of Warrant Liabilities

Fiscal 2021 we experienced (primarily due to a decrease in our stock price during the period) a $4.7 million gain in other income

because of the change in fair value of the warrant liabilities arising from our “exploding warrants” series (containing a

“double-ratchet” provision) issued by Qualigen, Inc.

many years ago to brokers and investors in connection with a 2004 private

The estimated fair value of these warrants

decreased to $1.7 million as of December 31, 2021 from $8.3 million as of December 30, 2020.

the Transition Period, the loss on change in fair value of warrant liabilities was $8.3 million due to an associated increase in the

market price of our common stock.

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.

the year ended December 31, 2022 we experienced (primarily due to a decrease in our stock price during the period) a $0.9 million gain

in other income because of the change in fair value of the warrant liabilities arising from our liability classified warrants described

The estimated fair value of these warrants increased to $3.6 million as of December 31, 2022 from $1.7 million as of December

31, 2021 primarily due to the issuance of a new warrant as part of the convertible debt-related party financing transaction, offset by a reduction

in fair value of the other liability classified warrants.

For the year ended December 31, 2021, the gain on change in fair value of warrant

liabilities was $4.7 million due to an associated decrease in the market price of our common stock.

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.

the fair value of the warrant liabilities will be determined each quarter on a “mark-to-market” basis, this item is likely

1 unchanged sentence

changes in our public market common stock price and the number of warrants outstanding at the end of each quarter.

on Loan Extinguishment

recognized a $0.5 million gain on loan extinguishment in the Transition Period when the federal government forgave our CARES Act loan.

There was no similar item in Fiscal 2021.

(Income) Expense, Net

was $43,000 in net interest income during Fiscal 2021 versus net interest expense of $48,000 during the Transition Period.

Transition Period, interest on $1.7 million principal amount of convertible notes payable ceased to accrue when they automatically converted

in May 2020 upon the closing of the reverse recapitalization transaction.

In addition, between April 1, 2020 and December 31, 2020 we

paid off our revolving factoring line of credit facility and repaid approximately $0.9 million to Sekisui.

During the second quarter

of Fiscal 2021 we paid off our Equipment Financing Agreements, which eliminated all of our notes payable.

Interest income was generated

during both periods from cash in interest bearing bank depository accounts.

(Income) Expense, Net

was $5,000 of other income during Fiscal 2021, and approximately $256,000 in other income during the Transition

period , of which $250,000 resulted from a license option fee for our FastPack 2.0 technology.

and Capital Resources

of December 31, 2021, we had $17.5 million of cash .

However, we have suffered recurring losses from operations and expect to continue to do so.

Based on our current cash position, and assuming

currently planned expenditures and level of operations, we believe we have sufficient capital to fund operations for the twelve-month

period subsequent to the date of this Annual Report.

a pre-clinical development-stage therapeutics biotechnology company, we expect to continue to have net losses and negative cash flow

from operations, which over time will challenge our liquidity.

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, including full clinical trials

of therapeutic drug candidates, we will require significant additional financing.

There can be no assurance that further financing can

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

Consolidated Balance Sheet as of December 31, 2021 included $1.7 million of warrant liabilities.

We do not consider that the warrant

liabilities constrain our liquidity, as a practical matter.

Our current liabilities as of December 31, 2021 included $0.9 million

of accounts payable and $1.8 million of accrued expenses and

other current liabilities.

Contractual Obligations and

On December 15, 2021, our wholly-owned

subsidiary Qualigen, Inc.

was $27,000 in net interest expense during the year ended December 31, 2022 compared to net interest income of $43,000 during the year

ended December 31, 2021.

During the year ended December 31, 2022, we issued convertible debt which resulted in an increase of $47,000

in interest expense offset by a reduction of $20,000 in interest income compared to the year ended December 31, 2021, primarily due to

lower interest bearing cash balances.

Other Income, Net

Other income was immaterial during the years ended December 31, 2022 and 2021.

and Going Concern

of December 31, 2022, we had approximately $7.0 million in cash.

We have incurred recurring losses from operations and have an accumulated

deficit of $103.4 million at December 31, 2022.

We expect to continue to incur losses subsequent to the consolidated balance sheet date

of December 31, 2022.

For the years ended December 31, 2022 and 2021, we used cash of $13.2 million and $14.7 million, respectively,

in operations.

We currently expect our cash balances to fund operations into the third quarter of 2023.

As a pre-clinical development-stage

therapeutics biotechnology company, we expect to continue to have net losses and negative cash flow from operations, which over time

will challenge our liquidity.

These factors raise substantial doubt regarding our 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 we

will ever achieve profitable operations, or, if achieved, could be sustained on a continuing basis.

In order to fully execute our business

plan, we will require significant additional financing for planned research and development activities, capital expenditures, clinical

and pre-clinical testing for QN-302 clinical trials, to continue preclinical development of RAS, and to continue funding the NanoSynex

operations (See Note 3-Acquisition), as well as commercialization activities.

Historically, our principal sources

of cash have, in addition to revenue from FastPack product sales and license revenues, included proceeds from the issuance of common and

preferred equity and proceeds from the issuance of debt.

In December 2021, we raised $8.8 million from the issuance of common stock to

several institutional investors, and in December 2022 we raised approximately $3.0 million from the sale of a convertible debenture to Alpha.

There can be no assurance that further financing can 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 extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our

common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect

the rights of our common stockholders.

Debt financing, if available, may involve agreements that include covenants limiting or restricting

our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

additional funds through government or other third-party funding, commercialization, marketing and distribution arrangements or other

collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies,

future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

any future financing (depending on the terms and conditions) may be subject to the approval of Alpha under the terms of the Debenture

and/or trigger certain adjustments to the Debenture or warrants held by Alpha.

As a condition to the

NanoSynex closing, the Company agreed to provide NanoSynex with up to $10.4 million of future funding based on NanoSynex’s

achievement of certain future development milestones and subject to other terms and conditions described in the Master Agreement for

the Operational and Technological Funding of NanoSynex (the “Funding Agreement”) entered into with NanoSynex.

funding commitments are in the form of convertible promissory notes to be issued to the Company with a face value equal to the

amount paid by the Company 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 the option

of the Company into additional shares of NanoSynex in order for the Company to maintain at least a 50.1% controlling ownership

interest in NanoSynex, should NanoSynex issue additional shares.

The principal of the convertible notes are due and payable upon the

sooner to occur of:

i) five years from the date of issuance of the particular promissory note;

ii) the acquisition by any person or

entity of all or substantially all of the share capital of NanoSynex, through share purchase, issuance or shares or merger of

NanoSynex, or the purchase of all or substantially all of the assets of NanoSynex;

or iii) the initial public offering of NanoSynex.

The Company provided funding to NanoSynex of $2.4 million during 2022 and an additional $0.5 million in February 2023 pursuant to

this agreement.

The Company may terminate the Funding Agreement upon 120 days’ notice, but would still be liable for any

payments due for milestones achieved prior to termination.

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

The financial statements

do not include any adjustments that would be necessary should the Company be unable to continue as a going concern, and therefore, be

required to liquidate its assets and discharge its liabilities in other than the normal course of business and at amounts that may differ

from those reflected in the accompanying financial statements.

consolidated balance sheet at December 31, 2022 includes $3.6 million of current warrant liabilities.

We do not consider the warrant

liabilities to constrain our liquidity, as a practical matter.

Our current liabilities at December 31, 2022 also include $0.9

million of accounts payable, $0.5 million of accrued vacation pay, $1.5 million of accrued expenses and other current liabilities, a $0.8 million R&D grant

liability, $0.2 million in operating lease liabilities, $0.1 million of notes payable (convertible debt to a related party), and $1.0 million in short term debt to a related party.

Obligations and Commitments

have no material contractual obligations that are not fully recorded on our consolidated balance sheets or fully disclosed in the notes

to the financial statements.

Agreement with Bond Ranch LP

December 15, 2021, our wholly-owned subsidiary Qualigen, Inc.

entered into a Second Amendment to Lease with Bond Ranch LP.

This Amendment extended the C ompany’s

triple-net leasehold on its existing 22,624-square-foot headquarters/manufacturing facility at 2042 Corte del Nogal, Carlsbad, California

for the 61-month period of November 1, 2022 to November 30, 2027.

Over the 61 months, the base rent payable will total $1,950,710;

the base rent for the first 12 months of the 61-month period will be only $335,966.

Additionally, Qualigen, Inc.

is entitled to a

$339,360 tenant improvement allowance.

See Note 9 of the consolidated financial statements for additional details.

We have no material contractual obligations not

fully recorded on our Consolidated Balance Sheet or fully disclosed in the notes to the financial statements.

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 F DA 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 fixed and 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.

These commitments include

multiple license and sponsored research agreements with UofL Research Foundation (“ULRF”).

Under these agreements, we will

take over development, regulatory approval and commercialization of various drug compounds from ULRF and are responsible for maintenance

This Amendment

extended the Company’s triple-net leasehold on its existing 22,624-square-foot headquarters/manufacturing facility at 2042 Corte

del Nogal, Carlsbad, California for the 61-month period of November 1, 2022 to November 30, 2027.

Over the 61 months, the base rent payable

will total $1,950,710;

however, the base rent for the first 12 months of the 61-month period will be only $335,966.

Additionally, Qualigen,

was entitled to a $339,360 tenant improvement allowance.

See Note 13-Commitments and Contingencies of the consolidated financial

statements for additional details.

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.

have multiple license and sponsored research agreements with UofL Research Foundation (“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.

We agreed to reimburse ULRF for sponsored research expenses of up to $805,000 and prior

patent costs of up to $200,000 for QN-247.

We agreed to reimburse ULRF for sponsored research expenses of up to $2.7 million and

prior patent costs of up to $112,000 for RAS.

As of December 31, 2022 we had up to $748,000 remaining due under this sponsored research

agreement for QN-247.

We also agreed to reimburse ULRF for sponsored research expenses of up

to $1.8 million and prior patent costs of up to $112,000 for RAS.

As of December 31, 2021 we had

up to $0.7 million remaining due under this sponsored research agreement for RAS.

This sponsored research agreement for RAS was

subsequently amended in March 2022 (see Note 15).

We agreed to reimburse ULRF for sponsored research expenses of up to $430,000 and prior

patent costs of up to $24,000 for QN-165.

As of December 31, 2021 we had no remaining amounts due under this sponsored research agreement

For 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.

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.

following table sets forth the significant sources

and uses of cash and cash equivalents for the periods set forth below:

For the Year Ended

For the Nine Months Ended

Net cash provided by (used in):

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 December 31, 2022, there were no remaining un-expensed amounts under this sponsored research agreement for

QN-247 and the agreement was terminated effective August 31, 2022.

We also agreed to reimburse ULRF for sponsored research expenses of

up to $430,000 and prior patent costs of up to $24,000 for QN-165.

As of December 31, 2022 we had no remaining un-expensed amounts under

this sponsored research agreement for QN-165, and the agreement was terminated effective November 30, 2021.

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.

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 will be further developed at Qualigen 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 Qualigen.

of Sekisui Distribution Agreement

the expiration of the Sekisui Distribution Agreement on March 31, 2022, the Company has a commitment to purchase leased FastPack rental

systems back from Sekisui at its net book value, in the amount of $154,000 which is included in equipment held for lease and accrued

expenses and other current liabilities on the consolidated balance sheet.

Transfer Agreement with Yi Xin

our wholly-owned diagnostics subsidiary Qualigen, Inc., we entered into a Technology Transfer Agreement dated as of October 7, 2020,

with Yi Xin, of Suzhou, China, which authorizes Yi Xin to develop, manufacture and sell new generations of diagnostic test systems based

on our core FastPack technology.

In addition, the Technology Transfer Agreement authorizes Yi Xin to manufacture and sell our current

generations of FastPack System diagnostic products (1.0, IP and PRO) in China.

We have provided technology transfer and patent/know-how

license rights to facilitate Yi Xin’s development and commercialization.

the terms of the Technology Transfer Agreement, we have provided Yi Xin the exclusive rights for China – which is a market we have

not otherwise entered – both for Yi Xin’s new generations of FastPack-based products and for Yi Xin-manufactured versions

of our existing FastPack product lines.

Yi Xin has the right to sell its new generations of FastPack-based diagnostic test systems throughout

the world (but not to or toward current customers of our existing generations of FastPack products);

provided that any non-China sales

would, until March 31, 2022, need to be through Sekisui.

As of April 1, 2022, Yi Xin has right to sell Yi Xin-manufactured versions of

existing FastPack 1.0, IP and PRO product lines worldwide (other than in the United States and other than to or toward current non-US

customers of those products).

Yi Xin also has the right, as of April 1, 2022, to buy Qualigen-manufactured FastPack 1.0, IP and PRO products

from us at distributor prices for resale in and for the United States (but not to or toward current U.S.

customers of those products).

We did not license Yi Xin to sell in the United States market any Yi Xin-manufactured versions of those legacy FastPack product lines,

even after March 31, 2022.

We agreed in the Technology Transfer Agreement that we would not, after March 31, 2022, seek new FastPack

customers outside the United States.

the Technology Transfer Agreement, we have received total net cash payments of approximately $670,000, of which approximately $632,000

was classified as license revenue, and approximately $38,000 is classified as product sales on the statement of operations for the fiscal

year ended December 31, 2021.

There were no revenues under this agreement for the fiscal year ended December 31, 2022.

We will receive

low- to mid-single-digit royalties on any future new-generations and current-generations product sales by Yi Xin.

Xin is a newly-formed company and is subject to many risks.

There can be no assurance that Yi Xin will successfully commercialize any

products or that we will receive any royalties from Yi Xin.

Convertible Debt

December 22, 2022, we issued an 8% Senior Convertible Debenture in the aggregate principal amount of $3,300,000 to Alpha for a purchase

price of $3,000,000 pursuant to the terms of a Securities Purchase Agreement, dated December 21, 2022 (the “Alpha Purchase Agreement”).

The Debenture is convertible, at any time, and from time to time, at Alpha’s option, into shares of our common stock (the “Conversion

Shares”), at a price equal to $1.32 per share, subject to adjustment as described in the Debenture (the “Conversion Price”)

and other terms and conditions described in the Debenture, including the Company’s receipt of the requisite stockholder approvals.

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, we must redeem $110,000 plus accrued but unpaid interest, liquidated damages and any amounts then owing under the Debenture.

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 our 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.

These monthly redemption and optional redemptions are subject to the satisfaction of the Equity Conditions (as defined

in the Debenture), which includes a condition that we have obtained stockholder approval for such share issuances.

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

provided that interest may only be paid in shares if the Equity Conditions have been satisfied, including the stockholder approval

condition as described above.

Funding Agreement

a condition to the NanoSynex acquisition, we entered into a Master Agreement for the Operational and Technological Funding of NanoSynex

(the “Funding Agreement”), on May 26, 2022, pursuant to which we have agreed to fund NanoSynex up to an aggregate of approximately

$10.4 million over the next three years, subject to NanoSynex’s achievement of certain performance milestones specified in the

Funding Agreement and the satisfaction of other terms and conditions described in the Funding Agreement.

will receive in exchange for any payment made to NanoSynex under the Funding Agreement one or more promissory notes (which may contain

convertible features) with a face value equal to the amount paid by the Company to NanoSynex upon satisfaction of the applicable performance

Any promissory notes issued to us by NanoSynex under the Funding Agreement will bear interest at a rate of 9.00% per annum

on the principal balance from time to time outstanding under the promissory note.

The principal and interest under any promissory note

issued to us under the Funding Agreement will be due and payable upon the sooner to occur of:

(i) five years from the date of the particular

promissory note;

(ii) the acquisition by any person or entity of all or substantially all of the share capital of NanoSynex, through

share purchase, issuance of shares or merger of NanoSynex or the purchase of all or substantially all of the assets of NanoSynex;

(iii) the initial public offering of NanoSynex.

If at any time, our ownership of the share capital of NanoSynex on an issued and outstanding

basis falls or is reasonably expected to fall below 50.1%, solely as a result of the exercise of existing or future options (or an equivalent

instrument) or as a result of issuance of restricted, shares, restricted stock units (or an equivalent instruments), we, in our sole

discretion, may elect to convert all or any portion of the outstanding principal amount of any promissory note into shares of NanoSynex’s

most senior class of preferred shares existing immediately prior to such conversion, subject to the terms and conditions described in

the promissory notes so that, following such conversion, we will regain 50.1% ownership of NanoSynex’s issued and outstanding share

During the year ended December 31, 2022 a total of approximately $2.4 million was funded and in February 2023 and additional $0.5 million was funded to NanoSynex under the Funding Agreement.

Service Agreements

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.

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

For the Years Ended

Net cash (used in) provided by:

Operating activities

3 unchanged sentences

Financing activities

Net increase (decrease) in cash and cash equivalents

Effect of exchange rate on cash

Net decrease in cash and restricted cash

$ (10,498,149 )

$ (6,438,298 )

Cash Used in Operating Activities

the year ended December 31, 2021, operating activities used $14.7 million of cash, primarily resulting from a net loss of $17.9

Cash flows from operating activities (as opposed to net loss) for the twelve months ended December 31, 2021 were impacted by

a $5.6 million increase in stock-based compensation expense, a $1.3 million decrease in prepaid expenses and other assets, a $1.0

million increase in accrued expenses and other current liabilities and a $0.4 million increase in accounts payable, due to higher costs

related to therapeutics research and development.

The decrease in prepaid expenses reflected in the statements of cash flows from operating

activities was primarily due to the expensing during the period of $1.2 million of previous prepayments to STA Pharmaceutical Co., Ltd.,

a subsidiary of WuXi AppTec, which was our manufacturer of QN-165 drug compounds.

Cash flows from operating activities (as opposed to

net loss) for the twelve months ended December 31, 2021 were negatively impacted by a $4.7 million gain on change in fair

the year ended December 31, 2022, operating activities used $13.2 million of cash, primarily resulting from a net loss of $21.0 million.

Cash flows from operating activities (as opposed to net loss) for the year ended December 31, 2022 were positively impacted by adjustments

for $5.4 million in non cash stock-based compensation expense, a $4.2 million non cash goodwill impairment charge related to the acquisition

of Nanosynex, $0.1 million in depreciation and amortization, as well as $0.4 million decrease in accounts receivable.

Cash flows from

operating activities (as opposed to net loss) for the year ended December 31, 2022 were negatively impacted by a $1.0 million gain on

change in fair value of warrant liabilities (as described above), a $0.6 million increase in inventory and equipment held for lease,

a $0.5 million decrease in R&D grant liability which was offset against NanoSynex R&D expenses, a $0.3 million decrease in deferred

tax liability, a $0.1 million increase in prepaid expenses and other assets, and a $0.1 million decrease in accounts payable and accrued

the year ended December 31, 2021, operating activities used $14.7 million of cash, primarily resulting from a net loss of $17.9 million.

Cash flows from operating activities (as opposed to net loss) for the twelve months ended December 31, 2021 were positively impacted

by adjustments for $5.6 million in non cash stock-based compensation expenses, a $1.3 million decrease in prepaid expenses and other

assets, a $1.0 million increase in accrued expenses and other current liabilities and a $0.4 million increase in accounts payable, due

to higher costs related to therapeutics research and development.

The decrease in prepaid expenses reflected in the statements of cash

flows from operating activities was primarily due to the expensing during the period of $1.2 million of previous prepayments to STA Pharmaceutical

Co., Ltd., a subsidiary of WuXi AppTec, which was our manufacturer of QN-165 drug compounds.

Cash flows from operating activities (as

opposed to net loss) for the twelve months ended December 31, 2021 were negatively impacted by a $4.7 million gain on change in fair

value of warrant liabilities (as described above), and a $0.4 million decrease in deferred revenue primarily resulting from recognition

of Yi Xin license revenue.

the Transition Period, operating activities used $10.2 million of cash, resulting from a net loss of $19.5 million, largely offset by

the $8.3 million loss on change in fair value of warrant liabilities.

Cash flows from operating activities (as opposed to net loss) for

the Transition Period were impacted by the $8.3 million loss on change in fair value of warrant liabilities (as described above), $2.8

million in employee/director stock-based compensation expense, a $1.4 million impairment loss on construction in progress and a $0.4

million write-off of patents and licenses.

Cash flows from operating activities (as opposed to net loss) for the Transition Period were

negatively impacted by a $1.5 million increase in prepaid expenses, payment of $0.9 million owed to Sekisui, a $0.5 million gain on CARES

Act loan extinguishment and a $0.4 million decrease in accounts payable.

The increase in prepaid expenses reflected in the statements

of cash flows from operating activities was primarily due to $1.2 million of upfront deposits paid to STA Pharmaceutical Co., Ltd., a

subsidiary of WuXi AppTec, which was our manufacturer of QN-165 drug compounds.

Cash Used in Investing Activities

Fiscal 2021, net cash used in investing activities was approximately $0.1 million, primarily related to the purchase of property and

the Transition Period, net cash used in investing activities was $0.1 million, primarily related to purchase of property and equipment,

offset by cash and cash equivalents acquired in the May 2020 reverse recapitalization.

the year ended December 31, 2022, net cash used in investing activities was approximately $0.2 million, due to capital expenditures offset

by cash acquired in the NanoSynex acquisition.

the year ended December 31, 2021, net cash used in investing activities was approximately $0.1 million, primarily related to the purchase

of property and equipment.

Cash Provided by Financing Activities

cash provided by financing activities for Fiscal 2021 was approximately $8.4 million, due to $8.8 million of proceeds from sales of equity

securities in a registered-direct offering to several institutional investors, and $0.5 million of net proceeds from warrant exercises,

offset by $0.7 million in payments for offering costs related to the registered-direct offering and $0.1 million of principal payments

on notes payable.

cash provided by financing activities for the Transition Period was $34.1 million, due to $34.0 million of proceeds from a reverse-recapitalization-time

equity capital raise and later sales of equity securities in three registered-direct offerings to an institutional investor, $1.4 million

in proceeds from the issuance of notes payable (including a $0.5 million CARES Act loan that ultimately was forgiven) and $1.3 million

of net proceeds from warrant exercises, offset by $1.4 million in payments for offering costs related to the three registered-direct

offerings and $1.3 million of principal payment of notes payable.

cash provided by financing activities for the year ended December 31, 2022, was approximately $2.9 million, due to the issuance of convertible

debt to Alpha.

cash provided by financing activities for the year ended December 31, 2021 was approximately $8.4 million, due to $8.8 million of proceeds

from sales of equity securities in a registered-direct offering to several institutional investors, and $0.5 million of net proceeds

from warrant exercises, offset by $0.7 million in payments for offering costs related to the registered-direct offering and $0.1 million

of principal payments on notes payable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis