AIxCrypto Holdings, Inc. 10-K

Item 1A. Risk Factors An investment in our common stock involves risks. You should carefully consider the risks described below, together with all of the other information included in this Annual Report, as well as in our other filings with the SEC, in evaluating our business. If any of the following risks actually occur, our business, financial condition, operating results and future prospects could be materially and adversely affected. In that case, the trading price of our common stock may decline and you might lose all or part of your investment. The risks described below, which are the risks we judge (rightly or wrongly) to be the most significant to investors, are not the only ones we face. Additional risks that we currently do not judge to be among the “most significant” may also impair our business, financial condition, operating results and prospects. Certain statements below are forward-looking statements. For additional information, see the section of this Annual Report under the caption “Cautionary Note Regarding Forward-Looking Statements.” Risks Related to Our Business Generally Our business strategy is high-risk We are focusing our resources and efforts primarily on development of therapeutic product candidates, which requires extensive cash needs for research and development activities. This is a high-risk strategy because there is no assurance that our products will ever become commercially viable, that we will prevent other companies from depriving us of market share and profit margins by selling products based on our inventions and developments, that we will successfully manage a company in a new area of business and on a different scale than we have operated in the past, that our product candidates will be able to achieve the desired therapeutic results, or that our cash resources will be adequate to develop our product candidates until we become profitable, if ever. This may make our stock an unsuitable investment for many investors. We do not currently have enough working capital to fully execute our strategic plan . We have suffered recurring losses from operations, and we will need capital to support our intended development of our therapeutics business. We believe that future financings will be necessary in order for us to properly execute our strategic plan. However, there can be no assurance that such future financings will be available to us (or, if they are, that they can be consummated on desirable terms). We may, in the short and long-term, seek to raise capital through the issuance of equity securities or through other financing sources. To the extent that we seek to raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may include financial and other covenants that could restrict our use of the proceeds from such financing or impose other business and financial restrictions on us. In addition, we may consider alternative approaches such as licensing, joint venture, or partnership arrangements to provide long term capital. Additional funding may not be available to us on acceptable terms, or at all. In addition, any future financing (depending on the terms and conditions) may be subject to the approval of Alpha Capital Anstalt (“Alpha”), a related party and the holder of our 8% Senior Convertible Debenture (the “Debenture”), and/or trigger certain adjustments to the Debenture or warrants held by Alpha. See Part II, Item 7 “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” for additional details regarding the Debenture. Servicing our debt will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay this debt. Our ability to make payments to Alpha of principal or interest on our indebtedness or to make any potential prepayments for the Debenture, to the extent applicable, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. If the assumptions underlying our cash flow guidance are incorrect, our business may not continue to generate cash flow from operations in the future sufficient to service our indebtedness and make necessary capital expenditures. 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 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 include a condition that we have obtained stockholder approval for such share issuances. 13 The Debenture accrues interest at the rate of 8% per annum, which begins accruing on December 1, 2023, and will be payable on a quarterly basis. Interest may be paid in cash or shares of common stock or a combination thereof at our option; provided that interest may only be paid in shares if the Equity Conditions have been satisfied, including the stockholder approval condition as described above. If we are unable to obtain stockholder approval for the issuance of shares of common stock under the Debenture, we will required to make any required payments to Alpha in cash. If we are unable to generate cash flow sufficient to service our indebtedness and make necessary capital expenditures, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or issuing additional equity, equity-linked or debt instruments on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. If we are unable to engage in any of these activities or engage in these activities on desirable terms, we may be unable to meet our debt obligations, which would materially and adversely impact our business, financial condition and operating results. Risks Related to Our Therapeutics and Diagnostics Pipeline Our product candidates are still in the early stages of development. We have not begun clinical trials or obtained regulatory approval for any drug candidate. We may never obtain approval for any of our drug candidates. We are still early in our development efforts and have not yet begun enrollment in any clinical trials evaluating QN-302, RAS, or QN-247. There can be no assurance that QN-302, RAS, and/or QN-247 will achieve success in their clinical trials or obtain regulatory approval. Our ability to generate revenues from QN-302, RAS, and/or QN-247 will depend on the successful development and eventual commercialization of such drug candidates. The success of these products will depend on several factors, including the following: ● successful completion of preclinical studies and clinical trials; ● acceptance of an IND application by the FDA or other clinical trial or similar applications from foreign regulatory authorities for our future clinical trials for our pipeline; ● timely and successful enrollment of patients in, and completion of, clinical trials with favorable results; ● demonstration of safety, efficacy and acceptable risk-benefit profiles of our products to the satisfaction of the FDA and foreign regulatory agencies; ● receipt and related terms of marketing approvals from applicable regulatory authorities, including the completion of any required post-marketing studies or trials; ● obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory exclusivity for our products; ● developing and implementing marketing and reimbursement strategies; ● establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others; ● acceptance of our drugs, if and when approved, by patients, the medical community and third-party payors; ● effectively competing with other therapies; ● obtaining and maintaining third-party payor coverage and adequate reimbursement; and ● maintaining a continued acceptable safety profile of the products following approval. Many of these factors are beyond our control, and it is possible that none of our drug candidates will ever obtain regulatory approval even if we expend substantial time and resources seeking such approval. If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our drug candidates. For example, our business could be harmed if results of the clinical trials of QN-302, RAS, QN-247, any other drug candidates vary adversely from our expectations. 14 Drug development involves a lengthy and expensive process. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of QN-302, RAS, and/or QN-247. Most drug candidates fail, and taking a drug candidate from concept through clinical trials and regulatory approval is not easy or guaranteed. We are unable to predict when or if our drug candidates, will prove effective or safe in humans or will obtain marketing approval. Before obtaining marketing approval from regulatory authorities for the sale of these products, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of these products for humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to the outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim or preliminary results of a clinical trial do not necessarily predict final results. We may experience numerous unforeseen events that could delay or prevent our ability to obtain marketing approval or commercialize our drug candidates, including: ● regulators or IRBs or ECs may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; ● we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites; ● clinical trials for our drug candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials, delay clinical trials or abandon product development programs; ● the number of patients required for clinical trials for our drug candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate or the duration of these clinical trials may be longer than we anticipate; ● competition for clinical trial participants from investigational and approved therapies may make it more difficult to enroll patients in our clinical trials; ● our third-party contractors may fail to meet their contractual obligations to us in a timely manner, or at all, or may fail to comply with regulatory requirements; ● we may have to suspend or terminate clinical trials for our drug candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks; ● our drug candidates may have undesirable or unexpected side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs/ECs to suspend or terminate the trials; ● the cost of clinical trials for our drug candidates may be greater than we anticipate; and ● the supply or quality of our drug candidates, or other materials necessary to conduct clinical trials may be insufficient or inadequate and result in delays or suspension of our clinical trials. Our product development costs will increase if we experience delays in preclinical studies or clinical trials or in obtaining marketing approvals. We do not know whether any of our planned preclinical studies or clinical trials will begin on a timely basis or at all, will need to be restructured or will be completed on schedule, or at all. For example, the FDA may place a partial or full clinical hold on any of our clinical trials for a variety of reasons. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our drug candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our drug candidates. Any delays in the commencement or completion, or termination or suspension, of our future clinical trials, if any, could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects. Before we can initiate clinical trials of a drug candidate, we must submit the results of preclinical studies to the FDA along with other information as part of an IND or IDE application or similar regulatory filing, and the FDA (or corresponding foreign regulatory body) must approve the application. We have not yet submitted our IND application for QN-302 for pancreatic cancer. While we expect to submit the IND application during the first half of 2023, we cannot guarantee the timing for submitting the IND application for QN-302, and we do not know when this IND application (or any other IND application) would be approved, if ever. 15 Before obtaining marketing approval from the FDA for the sale of QN-302, RAS, QN-247, or any other future drug candidate, we must conduct extensive clinical studies to demonstrate safety and efficacy. Clinical testing is expensive, time consuming and uncertain as to outcome. The FDA may require us to conduct additional preclinical studies for any drug candidate before it allows us to initiate clinical trials under any IND application, which may lead to additional delays and increase the costs of our preclinical development programs. Any delays in the commencement or completion of our ongoing, planned or future clinical trials could significantly increase our costs, slow down our development and approval process and jeopardize our ability to commence product sales and generate revenues. We do not know whether our planned trials will begin on time or at all, or be completed on schedule, if at all. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to: ● the FDA disagreeing as to the design or implementation of our clinical trials or with our recommended dose for any of our pipeline programs; ● obtaining FDA authorization to commence a trial or reaching a consensus with the FDA on trial design; ● obtaining approval from one or more IRBs/ECs; ● IRBs/ECs refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the trial; ● changes to clinical trial protocol; ● clinical sites deviating from trial protocol or dropping out of a trial; ● failing to manufacture or obtain sufficient quantities of drug candidate, or, if applicable, combination therapies for use in clinical trials; ● patients failing to enroll or remain in our trial at the rate we expect, or failing to return for post-treatment follow-up; ● patients choosing an alternative treatment, or participating in competing clinical trials; ● lack of adequate funding to continue the clinical trial; ● patients experiencing severe or unexpected drug-related adverse effects; ● occurrence of serious adverse events in trials of the same class of agents conducted by other companies; ● selecting or being required to use clinical end points that require prolonged periods of clinical observation or analysis of the resulting data; ● a facility manufacturing our drug candidates, or any of their components, including without limitation, our own facilities being ordered by the FDA to temporarily or permanently shut down due to violations of cGMP, regulations or other applicable requirements, or infections or cross-contaminations in the manufacturing process; ● lack of stability of our clinical trial material or any quality issues that arise with the clinical trial material; ● any changes to our manufacturing process that may be necessary or desired; ● Our, or our third-party contractors, not performing data collection or analysis in a timely or accurate manner or improperly disclosing data prematurely or otherwise in violation of a clinical trial protocol; or ● any third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications. 16 We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs/ECs of the institutions in which such trials are being conducted, by a Data Safety Monitoring Board for such trial or by the FDA. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using the product under investigation, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs/ECs for reexamination, which may impact the costs, timing or successful completion of a clinical trial. If we experience delays or difficulties enrolling patients in our ongoing or planned clinical trials, our receipt of necessary regulatory approval could be delayed or prevented. We may not be able to initiate or continue our ongoing or planned clinical trials for our products if we are unable to identify and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA. In addition, some of our competitors may have ongoing clinical trials for products that would treat the same patients as QN-302, RAS or QN-247, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ products. In addition, introduction of new drugs or devices to the marketplace may have an effect on the number of patients available or timing of the availability of the patients. Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Adverse side effects or other safety risks associated with QN-302, RAS, and/or QN-247 product candidates could delay or preclude approval, cause us to suspend or discontinue any clinical trials or abandon further development, limit the commercial profile of an approved label, or result in significant negative consequences following regulatory approval, if any. Results of our planned clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Undesirable side effects caused by our products could result in the delay, suspension or termination of clinical trials by us or the FDA for a number of reasons. Moreover, if our products are associated with undesirable side effects in clinical trials or have characteristics that are unexpected, we may elect to abandon or limit their development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective, which may limit the commercial expectations for our products, if approved. We may also be required to modify our study plans based on findings in our clinical trials. Many drug candidates that initially showed promise in early stage testing have later been found to cause side effects that prevented further development. In addition, regulatory authorities may draw different conclusions or require additional testing to confirm these determinations. It is possible that as we test our drug candidates in larger, longer and more extensive clinical trials, including with different dosing regimens, or as the use of our drug candidates becomes more widespread following any regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by patients. The development and commercialization of pharmaceutical and device products are subject to extensive regulation, and we may not obtain regulatory approvals for QN-302, RAS, QN-247 or any other product candidates, on a timely basis or at all. The clinical development, manufacturing, labeling, packaging, storage, recordkeeping, advertising, promotion, export, import, marketing, distribution, adverse event reporting, including the submission of safety and other post-marketing information and reports, and other possible activities relating to QN-302, RAS and QN-247, as well as any other product candidate that we may develop in the future, are subject to extensive regulation. Regulatory approval of drugs in the United States requires the submission of an NDA to the FDA and we are not permitted to market any pharmaceutical product candidate in the United States until we obtain approval from the FDA of the NDA for that product. An NDA must be supported by extensive clinical and preclinical data, as well as extensive information regarding pharmacology, chemistry, manufacturing and controls. 17 FDA approval of an NDA or PMA is not guaranteed, and the review and approval process is an expensive and uncertain process that may take several years. The FDA also has substantial discretion in the approval process. The number and types of preclinical studies and clinical trials that will be required for NDA or PMA approval varies depending on the product candidate, the disease or the condition that the product candidate is designed to treat and the regulations applicable to any particular product candidate. Despite the time and expense associated with preclinical studies and clinical trials, failure can occur at any stage. The results of preclinical and any clinical trials of QN-302, RAS or QN-247 or any other future product candidate may not be predictive of the results of our later-stage clinical trials. Clinical trial failure may result from a multitude of factors including flaws in trial design, dose selection, placebo effect, patient enrollment criteria and failure to demonstrate favorable safety or efficacy traits, and failure in clinical trials can occur at any stage. Companies in the pharmaceutical and device industry frequently suffer setbacks in the advancement of clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Based upon negative or inconclusive results, we may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies. In addition, data obtained from clinical trials are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may further delay, limit or prevent regulatory approval. Even if we are able to commercialize any drug candidates, the products may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business. The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our drug candidate to other available therapies. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a drug candidate in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues, if any, we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more drug candidates, even if such drug candidates obtain regulatory approval. Our ability to commercialize any drug candidates successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from third-party payors, including government healthcare programs, private health insurers and other organizations. Third-party payors decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere has been cost containment. Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage and reimbursement may not be available for any product that we commercialize and, even if these are available, the level of reimbursement may not be satisfactory. Reimbursement may affect the demand for, or the price of, any drug candidate for which we obtain regulatory approval. Obtaining and maintaining coverage and adequate reimbursement for our products may be difficult. We may be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies. If coverage and adequate reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize any drug candidate for which we obtain regulatory approval. There may also be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory authorities outside of the United States. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, intellectual property, manufacture, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies, but also have their own methods and approval process apart from Medicare determinations. We expect that the Affordable Care Act, as well as other healthcare reform measures that may be adopted in the future, may continue to result in more rigorous coverage criteria and in additional downward pressure on the price that providers receive for any approved therapeutics products of ours. This would adversely affect the prices we receive and could also adversely affect providers’ willingness to prescribe our therapeutics products, if any. 18 We may not be able to obtain or maintain orphan drug designation or exclusivity for our drug candidates. Regulatory authorities in some jurisdictions, including the United States, may designate drugs for relatively small patient populations as “orphan drugs.” Under the Orphan Drug Act of 1983, as amended, the FDA may designate a drug candidate as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States, or if the disease or condition affects more than 200,000 individuals in the United States and there is no reasonable expectation that the cost of developing and making a drug product available in the United States for the type of disease or condition will be recovered from sales of the product. Orphan drug designation entitles a party to financial incentives, such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. Additionally, if a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity. This means that the FDA may not approve any other applications to market the same drug or biological product for the same indication for seven years, except in certain circumstances, including proving clinical superiority ( i.e ., another product is safer, more effective or makes a major contribution to patient care) to the product with orphan exclusivity. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity, or obtain approval for the same product but for a different indication than that for which the orphan product has exclusivity. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective. We have received orphan drug designation in the United States for QN-302 for the indication of pancreatic cancer. Following having data that supports other rare cancer indications, we intend to seek orphan drug designation in the United States for QN-302 for additional indications, and will also seek orphan drug designations for RAS for one or more indications. Orphan drug status does not ensure that we will receive marketing exclusivity in a particular market, and there is no assurance that any application for orphan drug designation will be granted. Orphan drug designation neither shortens the development time or regulatory review time of a drug, nor gives the drug any advantage in the regulatory review or approval process. We rely, and intend to continue to rely, on third parties to conduct our preclinical studies and clinical trials and perform some of our research and preclinical studies. If these third parties do not satisfactorily carry out their contractual duties, fail to comply with applicable regulatory requirements or do not meet expected deadlines, our development programs may be delayed or subject to increased costs or we may be unable to obtain regulatory approval. We are dependent on third parties to conduct our planned preclinical studies and clinical trials of QN-302, RAS and QN-247. The timing of the initiation and completion of these trials will therefore be partially controlled by such third parties and may result in delays to our development programs. We have relied heavily, and expect to continue to rely, on UofL for preclinical studies related to RAS, and we expect to rely heavily on CROs and sponsored academic researchers for preclinical studies related to QN-302. As to any clinical trials, we expect to rely on CROs, sponsored academic researchers, clinical investigators and consultants to play a significant role in the conduct of these trials and the subsequent collection and analysis of data. However, we will not be able to control all aspects of their activities. Nevertheless, we are responsible for ensuring that each clinical trial is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, including GCP, requirements, and our reliance on the CROs and other third parties does not relieve us of our regulatory responsibilities. There is no guarantee that any such CROs, clinical trial investigators or other third parties on which we rely will devote adequate time and resources to our development activities or perform as contractually required. If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, otherwise perform in a substandard manner, or terminate their engagements with us, the timelines for our development programs may be extended or delayed or our development activities may be suspended or terminated. If one of our clinical trial site terminates for any reason, we may experience the loss of follow-up information on subjects enrolled in such clinical trial unless we are able to transfer those subjects to another qualified clinical trial site, which may be difficult or impossible. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, regulatory approvals for QN-302, RAS and/or QN-247 and will not be able to, or may be delayed in our efforts to, successfully commercialize our products. 19 Manufacturing pharmaceutical products is complex and subject to product loss for a variety of reasons. We contract with third parties for the manufacture of our product candidates for preclinical testing and clinical trials and expect to continue to do so for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts. We rely, and expect to continue to rely, on third parties for the manufacture of our products for preclinical and any clinical testing, as well as for commercial manufacture if any of our product candidates obtain regulatory approval. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts. We may be unable to establish any agreements with third-party manufacturers or to do so on favorable terms. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including: ● reliance on the third-party for regulatory, compliance and quality assurance; ● operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier or the issuance of an FDA Form 483 notice or warning letter; ● the possible breach of the manufacturing agreement by the third-party; and ● the possible termination or nonrenewal of the agreement by the third-party at a time that is costly or inconvenient for us. We do not have manufacturing agreements in place for any of our current drug candidates. We acquire many key materials on a purchase order basis. As a result, we do not have long-term committed arrangements with respect to our product candidates and other materials. If we obtain regulatory approval for any of our product candidates, we will need to establish an agreement for commercial manufacture with a third-party. Any performance failure on the part of our existing or future manufacturers could delay clinical development or regulatory approval. We do not currently have arrangements in place for redundant supply or a second source for bulk drug substance for QN-302, RAS or QN-247. We may enter into collaborations with third parties for the development and commercialization of our products. If those collaborations are not successful, we may not be able to capitalize on the market potential of these products. Even if they are successful, they may result in a limitation of our upside potential. We may in the future seek third-party collaborators for the development and commercialization of some of our products on a selected basis. For example, we expect that we will require partners to continue the development of QN-247 which is in early-stage development. Our likely collaborators for any collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. We face significant competition in seeking appropriate collaborators. Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. If we do enter into any such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that such collaborators dedicate to the development or commercialization of our products. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements. Any collaboration will necessarily result in a sharing of economics with the collaborator, which might otherwise have been captured by us directly. 20 Even if any of our product candidates receives regulatory approval, we may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success. If any of our product candidates receives regulatory approval, we may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. For example, current cancer treatments, such as existing targeted therapies, chemotherapy, and radiation therapy, are well established in the medical community, and doctors may continue to rely on these treatments. If our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including: ● the efficacy and potential advantages compared to alternative treatments; ● the prevalence and severity of any side effects, in particular compared to alternative treatments; ● limitations or warnings contained in the labeling approved for our product candidates by the FDA; ● the size of the target patient population; ● the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; ● our ability to offer our products for sale at competitive prices; ● the convenience and ease of administration compared to alternative treatments; ● the strength of marketing and distribution support; ● publicity for our product candidates and competing products and treatments; ● the existence of distribution and/or use restrictions, such as through a Risk Evaluation and Mitigation Strategy; ● the availability of third-party payor coverage and adequate reimbursement and the willingness of patients to pay for our products in the absence of such coverage and adequate reimbursement; ● the timing of any marketing approval in relation to other product approvals; ● support from patient advocacy groups; and ● any restrictions on the use of our products together with other medications. We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do. The development and commercialization of pharmaceutical products is highly competitive. We face competition from major pharmaceutical companies, specialty pharmaceutical and and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of the disease indications for which we are developing our product candidates that may be effective in developing therapeutics. Some of these competitive products, therapies are based on scientific approaches that are similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. We expect that our oncology drug product candidates will face competition from traditional small or large molecule drugs that target specific cancers that are FDA-approved and marketed for the indications that we are pursuing, in addition to off-label use of current therapeutics and therapeutics in development; and from other drugs using targeted approaches to direct payloads to cancerous tumors, as well as newer approaches, such as immuno-oncology, which attempts to harness the patient’s own immune system to fight cancer itself. 21 Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing and selling approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific, management and sales and marketing personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are approved for broader indications or patient populations, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other marketing approval for their products more rapidly than any approval we may obtain, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products. The key competitive factors affecting the success of QN-302, RAS, QN-247 are likely to be efficacy, safety, scope and limitations of marketing approval, and availability of reimbursement. We maintain our cash at financial institutions, often in balances that exceed federally insured limits. We maintain our cash at financial institutions, often in balances that exceed federally insured limits.We maintain the majority of our cash and cash equivalents in accounts at banking institutions in the United States that we believe are of high quality. Cash held in these accounts often exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. If such banking institutions were to fail, we could lose all or a portion of amounts held in excess of such insurance limitations. The FDIC recently took control of two such banking institutions, Silicon Valley Bank (“SVB”) on March 10, 2023 and Signature Bank (“Signature Bank”) on March 12, 2023. While we did not have an account at either of these two banks, in the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position. Risks Related to Our Diagnostics Business We may face challenges distributing our FastPack System. Our distribution agreement with Sekisui for our FastPack System expired on March 31, 2022. We have and will continue to incur costs re-establishing and maintaining a direct sales force, and we may also face logistical issues and relationship issues with customers during the transition period. In addition, there is the risk that the direct sales force assembled and used by us will not be as efficient and effective as Sekisui’s distribution efforts. We may provide inadequate training to our sales force and/or fail to increase our sales and marketing capabilities. We rely on our direct sales force to sell our FastPack System in targeted geographic regions, territories and distribution channels, and any failure to maintain our direct sales force could harm our business. The members of our direct sales force are specifically trained to market and sell our FastPack System and they possess technical expertise, which we believe is critical in driving the awareness and adoption of our product. The members of our sales force are at-will employees. The loss of these personnel to competitors, or otherwise, could materially harm our business. If we are unable to retain our direct sales force personnel or replace them with individuals of comparable expertise and qualifications, or if we are unable to successfully instill such expertise in replacement personnel, our product sales, revenues and results of operations could be materially harmed. Identifying and recruiting qualified sales and marketing professionals and training them on our FastPack System, on applicable federal and state laws and regulations and on our internal policies and procedures requires significant time, expense and attention. It can take several months or more before a sales representative is fully trained and productive. Our sales force may subject us to higher fixed costs than those of companies with competing products that can utilize independent third parties, placing us at a competitive disadvantage. Our business may be harmed if our efforts to expand and train our sales force do not generate a corresponding increase in product sales and revenue, and our higher fixed costs may slow our ability to reduce costs in the face of a sudden decline in demand for our products. Any failure to hire, develop and retain talented sales personnel, to achieve desired productivity levels in a reasonable period of time or timely reduce fixed costs, could have material adverse effect on our business, financial condition and results of operations. Our diagnostic products face heavy competition. Our FastPack System is a mature technology and faces heavy competition from manufacturers of more complex immunoassay systems designed primarily for central laboratory use, but that also are sold to physician offices. Many of our competitors have substantially greater financial, technical, research and other resources and capabilities. We also face competition from companies that have developed or are developing newer blood testing systems for use in physician offices. The FastPack system may not continue to be competitive in light of future technological developments by others. 22 Our diagnostic products are disadvantaged by reduced Medicare reimbursement and third-party payer pricing. As noted above, a primary trend in the U.S. healthcare industry and elsewhere is cost containment. Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medical devices, especially mature ones such as ours. Decreases in Medicare and private-insurer reimbursement for diagnostic tests such as ours in recent years are a negative factor in our attempts to maintain and grow our diagnostics business. This factor constrains the price that we can charge to providers for our diagnostic products. Moreover, if adequate reimbursement is not available or reimbursement is available only to limited levels, some physician offices, clinics and small hospitals may choose not to offer (or to discontinue offering) some or all of our diagnostic products. Yi Xin may not meet expectations in its China/overseas FastPack business. Yi Xin is a new and untested company and there is no assurance that its financial and other capabilities will enable it to succeed in commercializing FastPack-based diagnostic products. We will receive royalties from Yi Xin if and only if Yi Xin achieves sales of FastPack-based diagnostic products. Risks Related to our Intellectual Property If we are unable to obtain and maintain sufficient patent protection for our therapeutic product candidates and diagnostic technologies, or if the scope of the patent protection is not sufficiently broad, third parties, including our competitors, could develop and commercialize products similar or identical to ours, and our ability to commercialize our product candidates successfully may be adversely affected. Our commercial success depends significantly on our ability to protect our proprietary (and exclusively in-licensed) product candidates or technologies that we believe are important to our business, including pursuing, obtaining and maintaining patent protection in the United States and other countries intended to cover the composition of matter of our product candidates, the methods of use, related technologies, and other inventions that are important to our business. In addition to patent protection, we also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. If we do not adequately pursue, obtain, maintain, protect or enforce our intellectual property, third parties, including our competitors and/or collaborators, may be able to erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability. To protect our proprietary position, we file patent applications in the United States and abroad related to our product candidates and technologies, their methods of manufacture and use. The patent application and approval process is expensive, time-consuming and complex. We may not be able to prepare, file, prosecute and maintain all necessary or desirable patent applications at a reasonable cost or in a timely manner or in all jurisdictions. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, depending on the terms of any future license agreements to which we may become a party, we may not have the right to control the preparation, filing, and prosecution of patent applications, or to maintain or defend the patents, covering technology licensed from third parties. Therefore, these patents and patent applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patents, whether any issued patents will be found invalid and unenforceable or will be threatened by third parties or whether any issued patents will effectively prevent others from commercializing competing technologies and product candidates. We have not filed patent applications in every jurisdiction, and some filings are only pending in the United States. Because patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we were the first to file or invent (before March 16, 2013) the invention disclosed in any patent application related to our product candidates or technology. Moreover, because the issuance of a patent, although presumptive, is not conclusive as to its inventorship, scope, validity or enforceability, our patents or pending patent applications may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or in our patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical products and technologies or limit the duration of the patent protection of our products and technologies. Such challenges also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. 23 Our and our licensors’ pending and future patent applications may not result in patents being issued that protect our product candidates and technologies, in whole or in part, or that effectively prevent others from commercializing competitive products and technologies. Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us or otherwise provide us with any competitive advantage. Our competitors and other third parties may be able to circumvent our patents by developing similar or alternative products or technologies in a non-infringing manner. Our competitors and other third parties may also seek approval to market their own products and technologies similar to or otherwise competitive with our products and technologies. Alternatively, our competitors or other third parties may seek to market generic versions of any approved products by submitting abbreviated NDAs to the FDA during which process they may claim that patents owned by us are invalid, unenforceable or not infringed. In these circumstances, we may need to defend or assert our patents, or both, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid or unenforceable, or that our competitors are competing in a non-infringing manner. Thus, even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives. The term of our patents may be inadequate to protect our competitive position on our products. Given the amount of time required for the development, testing and regulatory review of drug candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. In such an event (and if we are unable to obtain patent term extension or the term of any such extension is less than we request), our competitors and other third parties may be able to obtain approval of competing products following patent expiration and take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case. Generic competition usually results in serious price erosion for the original drug brand. Risks Related to Employee Matters, Managing Growth, Potential Dilution, Stock Price Variability and Other Risks Related to Our Business Our future success depends on our ability to retain key employees and to attract, retain and motivate qualified personnel. We are highly dependent on Michael Poirier, our Chief Executive Officer and Chairman, as well as other members of our management, scientific, operations and corporate development teams. As previously disclosed, in January 2023, as part of certain cost-cutting measures, we approved a temporary 20% reduction to the base salaries of all executive officers of the Company, effective immediately. As part of these cost-cutting measures, we terminated the employment of certain employees, including our former Chief Operating Officer and former Vice President and Chief Scientific Officer. These cost-cutting measures could make us vulnerable to attrition among our current senior management team and other key employees, and may make it difficult for us to hire additional senior managers and other key employees. Our ability to compete depends upon our ability to attract, retain and motivate highly skilled and experienced personnel with scientific, clinical, regulatory, manufacturing and management skills and experience. We may not be able to attract or retain qualified personnel in the future. Many of the companies against which we compete have greater financial and other resources, different risk profiles and a longer history in the industry than we do. Our competitors may provide higher compensation, more diverse opportunities and/or better opportunities for career advancement. Any or all of these competing factors may limit our ability to continue to attract and retain high quality personnel, which could negatively affect our ability to successfully develop and commercialize our product candidates and to grow our business and operations as currently contemplated. We expect that we will need to expand our development and regulatory capabilities as our product candidates progress through the clinic, or additional product candidates are developed; if any products are approved, we would have to implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties in managing growth, which could disrupt our operations. As of March 31, 2023, we had 38 employees, 31 of whom were full-time employees. Although we outsource many drug development functions and may choose to continue to do so in the future, we expect to experience growth in the number of employees and the scope of our operations, particularly in the areas of clinical development, clinical operations, manufacturing, and regulatory affairs as we progress QN-302, RAS and QN-247 through the clinic and develop additional product candidates. If any of our therapeutics product candidates receives regulatory approval, we may need to expand into sales, marketing and distribution. To manage anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. We may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert management and business development resources. 24 We currently rely, and for the foreseeable future will continue to rely, in substantial part, on certain third-party contract research organizations, sponsored academic researchers, advisors and consultants to provide certain services, including assuming substantial responsibilities for the conduct of our clinical trials and the manufacture of QN-302, RAS and QN-247 or any future product candidates. We cannot assure that the services of such third-party contract research organizations, sponsored academic researchers, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by our vendors or consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval of QN-302, RAS and/or QN-247 or any of future product candidates or otherwise advance our business. We cannot assure that we will be able to properly manage our existing vendors or consultants or find other competent outside vendors and consultants on economically reasonable terms, or at all. We may engage in strategic transactions that could impact liquidity, increase expenses and present significant distractions to management. From time to time, we may consider strategic transactions, such as acquisitions of companies, businesses or assets and out-licensing or in-licensing of products, drug candidates or technologies. Potential transactions that we may consider include a variety of different business arrangements, including spin-offs, in-licensing, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Any such transaction may require us to incur non-recurring or other charges, may increase near term or long-term expenditures and may pose significant integration challenges or disrupt management or business, which could adversely affect our operations and financial results. For example, as a result of annual goodwill impairment testing, we recognized a $4.2 million non-cash goodwill impairment charge in the valuation of our business acquisition of Nanosynex for the year ended December 31, 2022. These trans actions may entail numerous operational and financial risks, including: ● exposure to unknown liabilities; ● disruption of business and diversion of management’s time and attention in order to develop acquired products, drug candidates or technologies; ● incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions; ● higher than expected acquisition and integration costs; ● write-downs of assets or impairment charges; ● increased amortization expenses; ● difficulty and cost in combining the operations, systems and personnel of any acquired businesses with our operations, systems and personnel; ● impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and ● inability to retain key employees of any acquired businesses. Our investment in NanoSynex, our majority owned indirect subsidiary, has a number of risks associated with it. Our investment in NanoSynex, our majority owned indirect subsidiary domiciled in Israel, has a number of risks associated with it, including, among others, the following: ● a history of operating losses, with no assurance of future revenues or operating profits; ● risks associated with the development of medical devices and NanoSynex’s ability to obtain the necessary regulatory approvals for the development and commercialization of its antimicrobial susceptibility test platform; ● very limited manufacturing, marketing, distribution and sales capabilities; ● competition from both public and private companies and academic collaborators, many of which have significantly greater experience and financial resources; ● acceptance by life sciences research and diagnostic communities is not assured; ● commercial development of its antimicrobial susceptibility test platform is not assured; ● an inability to manufacture, market or sell its proposed products if it is unsuccessful in entering into strategic alliances or joint ventures with third parties; and ● risks related to the political, economic and military conditions in Israel. 25 In addition, as a condition to our acquisition of NanoSynex, we agreed to provide NanoSynex with up to $10.4 million of future funding in the form of promissory notes to us based on NanoSynex’s achievement of certain future development milestones and subject to other terms and conditions described in the funding agreement. See Part II, Item 7 “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” for additional details. If we are unable to make these payments, if and when required, and if NanoSynex is unable to find alternative sources of funding, NanoSynex’s operations may be negatively impacted, which would ultimately have a negative impact on us. Our reported financial condition and results of operations may fluctuate significantly from quarter to quarter and year to year, which makes them difficult to predict or understand. We expect our financial condition and results of operations to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. In particular, the warrant liabilities (and change in the fair value of warrant liabilities, over a reporting period) may result in distortions and sharp variability in reported periodic results. Accordingly, you should not blindly rely upon the results of any quarterly or annual periods as indications of future operating performance. Other investors may, however, attach undue significance to reported results which are heavily influenced by such distortions and variability, which in turn could cause our stock price to rise or fall despite there being no corresponding change in our prospects or position as a practical matter. We have a substantial amount of derivative securities outstanding. As of December 31, 2022 there were 608,012 stock options outstanding under our equity incentive plans. and 4,575,617 outstanding warrants. In addition, the Debenture issued to Alpha in December 2022 is convertible, at any time, and from time to time, at Alpha’s option, into shares of our common stock, subject to our receipt of the necessary stockholder approvals and other terms and conditions described in the Debenture. Furthermore, subject to our receipt of the necessary stockholder approvals and other terms and conditions described in the Debenture, we may elect to pay all or a portion of the Monthly Redemption Amount and/or interest required by the Debenture in shares of our common stock. The issuance of shares upon the exercise or conversion of outstanding stock options, warrants and the Debenture (or our election to pay amounts owed under the Debenture in shares of our common stock) could result in significant dilution to the holders of our existing outstanding common stock. We rely significantly upon information technology, and any failure, inadequacy, interruption or security lapse of that technology, including any cyber security incidents, could harm our ability to operate our business effectively and result in a material disruption of our product development programs. We utilize complex IT systems to transmit and store information, including sensitive personal information and proprietary or confidential information, and otherwise to support our business and process. In the future, our systems may prove inadequate to our business needs and necessary upgrades may not operate as designed, which could result in excessive costs or disruptions in portions of our business. In particular, any disruptions, delays or deficiencies from our enterprise resource planning systems could adversely affect our ability to, among other matters, process orders, procure supplies, manufacture and ship products, track inventory, provide services and customer support, send invoices and track payments, fulfill contractual obligations or otherwise operate our business. We could also be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information maintained in the information systems and networks of our company. Outside parties may attempt to penetrate our systems or those of our partners or fraudulently induce our employees or employees of our partners to disclose sensitive information to gain access to our data. Like other companies, we may experience threats to our data and systems, including malicious codes and computer viruses, cyber-attacks or other system failures. Furthermore, a security breach could be facilitated by ineffective protection measures, employee errors or omissions, and malfeasance. Despite our efforts to protect against cyber-attacks and security breaches, hackers and other cyber criminals are using increasingly sophisticated and constantly evolving techniques, and we may need to expend substantial additional resources to continue to protect against potential security breaches or to remediate problems caused by such attacks or any breach of our safeguards. Any system failure, accident or security breach that causes interruptions in our operations, for us or our partners, could result in a material disruption of our product development programs and business operations, in addition to possibly requiring substantial expenditures of resources to remedy. For example, the loss of clinical trial data from completed clinical trials could result in delays in our regulatory approval efforts and we could incur significant increases in costs to recover or reproduce the data. The risk of cyber incidents could also be increased by cyberwarfare in connection with the ongoing war in Ukraine, including potential proliferation of malware from the conflict into systems unrelated to the conflict. To the extent that any disruption or security breach results in a loss of, or damage to, our data or applications, or inappropriate public disclosure of confidential or proprietary information, we may incur liabilities and the further development of our product candidates may be delayed. 26 The number and complexity of these security threats continue to increase over time. The costs of maintaining adequate protection against such threats are significant and are expected to continue to increase in the future and may be material to our financial statements. If a breach of our security systems or that of our partners occurs, the market perception of the effectiveness of our security measures could be harmed, we could lose business and our reputation and credibility could be damaged. We could be required to expend significant amounts of money and other resources to repair or replace information systems or networks. We may also be required to comply with disparate state and foreign breach notification laws and otherwise subject to liability under laws that protect personal data, resulting in increased costs or loss of revenue. In addition, a data security breach or ransomware attack could distract management or other key personnel from performing their primary operational duties. Although we develop and maintain systems and controls designed to prevent these events from occurring, and we have a process to identify and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely. Our business, financial condition, results of operations and growth have been adversely impacted by the effects of the COVID-19 pandemic and may be adversely impacted by COVID-19 or another pandemic, epidemic or infectious disease outbreak in the future. The COVID-19 pandemic and related governmental and business responses had and may again have an adverse effect on the markets we derive project opportunities from, our customers, and our operations. The extent to which the COVID-19 pandemic could again impact us will depend on numerous evolving factors and future developments that are uncertain and that we are not able 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. Although the COVID-19 pandemic has subsided, we could again experience adverse impacts to our business as a result of any related economic recession that occurred or may occur in the future from COVID-19 or other similar global pandemics. Adverse global conditions, including economic uncertainty, may negatively impact our financial results. Global conditions, disruptions in the financial markets, or inflation could adversely impact our business. In addition, the global macroeconomic environment has been and may continue to be negatively affected by, among other things, instability in global economic markets, increased U.S. trade tariffs and trade disputes with other countries, instability in the global credit markets, supply chain weaknesses, instability in the geopolitical environment as a result of the war in Ukraine, the withdrawal of the United Kingdom from the European Union, and other political tensions, and foreign governmental debt concerns. Such challenges have caused, and may continue to cause, uncertainty and instability in local economies and in global financial markets, which may adversely affect our business. We or the third parties upon whom we depend may be adversely affected by natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster. We are located in southern California, and are subject to risks posed by natural disasters, including wildfires, earthquakes and severe weather that may interfere with our operations. Extreme weather events and other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented Qualigen from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for Qualigen to continue our business for a substantial period of time. Any disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. Any failure to develop or maintain effective internal controls over financial reporting or difficulties encountered in implementing or improving our internal controls over financial reporting could harm our operating results and prevent us from meeting our reporting obligations. Moreover, effective internal controls, particularly those related to financial reporting, are necessary for us to produce reliable financial reports. If we cannot provide reliable financial reports, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly. In addition, investors relying upon this misinformation could make an uninformed investment decision, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities or to stockholder class action securities litigation. In addition, discovery and disclosure of a material weakness, by definition, could have a material adverse impact on our financial statements. As previously described in our annual report on Form 10-K for the year ended December 31, 2021, in connection with the audit of our financial statements as of and for the year ended December 31, 2021 (the “2021 audit”), our management identified 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 U.S. GAAP. This material weakness resulted in adjustments to our warrant valuations in connection with the 2021 audit. In response to the material weakness, we took a number of remediation steps to enhance our internal controls, 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. However, in connection with the audit of our financial statements as of and for the year ended December 31, 2022 (the “2022 audit”), our management determined that that the material weakness identified in connection with the 2021 audit has not been fully remediated and has resulted in adjustments to the accounting treatment related to convertible debt, the business combination and goodwill impairment during the 2022 audit, which resulted in the late filing of this Annual Report (see Item 9A. Controls and Procedures). If we are unable to remediate the material weakness and achieve and maintain effective internal control over financial reporting and effective disclosure controls, our business could be adversely affected. Certain customers and/or suppliers may choose not to do business with us and the price of our common stock could be adversely impacted. This could, in turn, negatively affect our ability to access equity capital markets. Our failure to be current in our filings with the SEC could pose significant risks to our business, which could materially and adversely affect our financial condition and results of operations. We are required, as a public reporting company, to provide investors on a regular basis with periodic reports that contain important financial and business information, including annual reports on Form 10-K and other periodic reports. Periodic reports help investors to make informed investment decisions about the purchase or sale of a reporting company’s securities. Our inability to timely file periodic reports with the SEC could have an adverse impact on our ability to, among other things, (i) raise funds in the public markets and (ii) attract and retain key employees, which could materially and adversely affect our financial condition and results of operations. In addition, the late filing of our Annual Report has also adversely affected our eligibility to use our Form S-3 registration statement. Use of that Form requires, among other things, that the issuer be current in its reports under the Exchange Act for at least 12 months. As a result of our being unable to use Form S-3, we will have to meet more demanding requirements to register our securities, so it will be more difficult for us to effect public offering transactions, and our range of available financing alternatives could be narrowed. Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock. If we fail to satisfy the continued listing requirements of Nasdaq, Nasdaq may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. On April 20, 2023, we received a notification letter from the Listing Qualifications Department of Nasdaq indicating that, as a result of our delay in filing this Annual Report, we were not in compliance with the timely filing requirements for continued listing under Nasdaq Listing Rule 5250(c)(1). The notification letter has no immediate effect on the listing or trading of our common stock on the Nasdaq Capital Market. The notification letter states that, under Nasdaq rules, we have 60 calendar days, or until June 20, 2023, to submit a plan to regain compliance with Nasdaq’s continued listing requirements. Alternatively, we may also regain compliance with Nasdaq’s continued listing requirements at any time before June 20, 2023, by filing this Annual Report with the SEC, as well as any subsequent periodic financial reports that may become due, and continuing to comply with Nasdaq’s other continued listing requirements. We expect that the filing of this Annual Report will be sufficient to avoid the delisting of our common stock. We have in the past been in noncompliance with other Nasdaq continued listing rules. For example, on November 23, 2022, we effected a 1-for-10 reverse stock split of our outstanding common stock to cure our noncompliance, for a period of more than 30 consecutive business days, with Nasdaq Listing Rule 5550(a)(2), which requires listed securities to maintain a minimum bid price of $1.00 per share. If we are unable to maintain compliance with Nasdaq’s continued listing requirements. In the event of a delisting, we would take action to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s other listing requirements. Item 1B. Unresolved Staff Comments. Not applicable. Item 2. Properties. Our wholly-owned subsidiary Qualigen, Inc. currently leases an all-purpose facility in Carlsbad, California. Our partially owned subsidiary NanoSynex currently leases an R&D facility in Ness Ziona, Israel. Item 3. Legal Proceedings. None. Item 4. Mine Safety Disclosures. Not applicable. 27 PART II