What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-14 compared with 2023-03-15 · 136 added, 131 removed, 176 unchanged (60% of the section changed)

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Our initial focus is on the development of products, using our proprietary owned and in-licensed drug delivery technologies, that could help address rare skin diseases.

Our first lead product is QRX003, a once daily, topical lotion comprised of a broad-spectrum serine protease inhibitor, formulated with the proprietary in-licensed Invisicare® technology, is under development as a potential treatment fort Netherton Syndrome (“NS”), a rare hereditary genetic disease.

Our first lead product is QRX003, a once daily, topical lotion comprised of a broad-spectrum serine protease inhibitor, formulated with the proprietary in-licensed Invisicare® technology, is under development as a potential treatment for Netherton Syndrome (“NS”), a rare hereditary genetic disease.

QRX003 is currently being tested in two clinical studies in the United States (“U.S.”) under an open Investigational New Drug (“IND”) application with the Food and Drug Administration (“FDA”).

Dosing of patients has commenced for the first study, and we are preparing to commence enrollment into the second clinical study.

We are also developing QRX004 as a potential treatment for Recessive Dystrophic Epidermolysis Bullosa (“RDEB”).

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To achieve these objectives, we plan to:

● seek the necessary regulatory approvals to complete the clinical development of QRX003 and, if successful, file for marketing approval in the United States and other territories;

● complete the late-stage clinical testing of QRX003 and, if successful, file for marketing approval in the United States and other territories;

● prepare to commercialize QRX003 by establishing our own sales infrastructure in the U.S.

and Europe and entering into distribution partnerships in other territories such as those currently established for Canada, Australia/New Zealand, the Middle East, China, Hong Kong, Taiwan, Latin America, Central and Eastern Europe, Turkey;

● pursue business development activities by seeking partnering, licensing, merger and acquisition opportunities or other transactions to further expand our pipeline and drug-development capabilities and which take advantage of our financial resources for the benefit of increasing stockholder value.

Our operations, to date, have not been significantly affected by COVID-19.

However, the extent of any future impact of COVID-19 on our operational and financial performance will depend on the possibility of a resurgence and resulting severity of COVID-19 pandemic as it relates to our access to API and drug product for clinical testing, as well as our ability to safely and efficiently conduct planned clinical trials.

We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain marketing approval for one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty.

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See “Liquidity and Capital Resources”.

ADS Ratio Change and Ordinary Share Reverse Split

Effective August 1, 2022, the ratio of ADSs evidencing ordinary shares changed from 1 ADS representing four hundred (400) ordinary shares to 1 ADS representing five thousand (5,000) ordinary shares, which resulted in a one for 12.5 reverse split of the issued and outstanding ADSs.

Effective July 18, 2023, the ratio of ADSs evidencing ordinary shares changed from 1 ADS representing five thousand (5,000) ordinary shares to 1 ADS representing sixty thousand (60,000) ordinary shares, which resulted in a 1 for 12 reverse

split of the issued and outstanding ADSs.

Effective November 8, 2023, the Company completed a 1 for 60,000 reverse split of the ordinary shares which resulted in the ratio of ADSs evidencing ordinary shares to be changed from 1 ADS representing sixty thousand (60,000) ordinary shares to 1 ADS representing one (1) ordinary share.

Except as specifically provided, all ordinary share, ADS and related option and warrant information presented herein, including our financial statements and accompanying footnotes, has been retroactively adjusted to reflect the number of ordinary shares and ADSs resulting from the aforementioned ordinary share reverse split and ADS ratio changes.

On October 28, 2021, Cellect completed the business combination with Quoin Inc.

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and Merger Sub, which was a wholly-owned subsidiary of Cellect, pursuant to which Merger Sub merged with and into Quoin Inc., with Quoin Inc.

surviving as a wholly-owned subsidiary of Cellect (the “Merger”).

surviving as a wholly-owned subsidiary of Cellect.

Immediately after completion of the Merger, Cellect changed its name to “Quoin Pharmaceuticals, Ltd.”

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We have no interests in EnCellX subsequent to the closing of the Merger.

ADS Ratio Change

Effective August 1, 2022, the ratio of American Depositary Shares (“ADSs”) evidencing ordinary shares changed from 1 ADS representing four hundred (400) ordinary shares to 1 ADS representing five thousand (5,000) ordinary shares, which resulted in a one for 12.5 reverse split of the issued and outstanding ADSs (the “Ratio Change”).

All ADS and related option and warrant information presented herein and our financial statements and accompanying footnotes, has been retroactively adjusted to reflect the reduced number of ADSs resulting from the Ratio Change.

Nasdaq Listing

On June 10, 2022, we received a letter from the Staff notifying us that the closing bid price per ADS was below the required minimum of $1.00 for a period of 30 consecutive business days and that we did not meet the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2).

On August 15, 2022, the Staff determined that the closing bid price of our ADSs was at $1.00 per ADS or greater for the preceding 10 business days, and we regained compliance with the minimum bid price requirement.

There can be no assurance that we will be able to meet the minimum bid price requirement for 30 consecutive business days, and our ADSs could be subject to delisting again.

If our ADSs are delisted from Nasdaq, it will have material negative impacts on the actual and potential liquidity of our securities, as well as material negative impacts on our ability to raise future capital.

Clinical Development

Quoin’s lead asset, QRX003, is currently in clinical development in the U.S.

Quoin’s lead asset, QRX003, is currently in late-stage clinical development in the U.S.

under an open IND application with the FDA.

Five of the projected six clinical sites in the U.S.

have been opened for this study.

Patients are actively being screened and recruited into the study and dosing has commenced.

This study is a randomized, double blinded assessment of two different doses of QRX003 versus a placebo vehicle in NS patients.

Five clinical sites in the U.S.

have been opened for our initial study, patients are actively being screened and recruited into the study and dosing commenced in December 2022.

This study originally was designed as a randomized, double blinded assessment of two different doses of QRX003 versus a placebo vehicle in 18 adult NS patients.

The test materials are applied once daily, over a twelve-week period, to pre-selected areas of the patient’s body.

Based on discussions with the FDA, a number of different clinical endpoints are being assessed in the study, including but not limited to, an Investigators Global Assessment (IGA), Patient’s Global Assessment (PaGA) and Pruritis.

In November 2022, we submitted a protocol for our second clinical study in NS patients to the FDA under our currently open IND.

In November 2022, we submitted a protocol for our second clinical study in NS patients to the FDA under our currently open IND (the “Open Label Study”).

This study was cleared by the FDA to initiate in December 2022.

We are currently enrolling patients into this study.

This study will be conducted in ten NS patients who are currently receiving off-label systemic therapy, primarily systemic biologic therapy.

This will be an open-label study with no placebo control.

Both of our NS clinical studies will run concurrently and utilize the same clinical trial sites and investigators.

This study originally was designed to be conducted in ten adult NS patients who are currently receiving, and will continue to do so throughout the study, off-label systemic therapy, primarily systemic biologic therapy.

This is an open-label study with no placebo control and is being conducted at the same clinical sites as our other ongoing study.

Both of our NS clinical studies are running concurrently and utilize the same clinical trial sites and investigators.

While there is no assurance regarding the final results of the open label study, on October 24, 2023, we released positive initial clinical results obtained from the first six evaluable subjects in our open-label study.

As a result of this positive initial data and the absence of any safety concerns from both studies, on November 8, 2023 we submitted a number of protocol amendments to the FDA, under our open IND, with a view to optimizing both studies and potentially leading to even better clinical outcomes and a more rapid regulatory approval.

These protocol amendments included eliminating the lower dose from the double-blinded study, modifying the dosing frequency from once-daily to twice-daily and increasing the number of subjects from 18 to 30.

For the open-label study, the number of subjects was increased from 10 to 20 and dosing was modified from once-daily to twice-daily.

On December 13, 2023, we announced that we were cleared by the FDA to implement these protocol amendments.

Agreements with Altium Growth Fund, LP and Warrant Exercises

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We issued 28,508 ADSs to the Investor.

We also issued to the Investor, effective as of March 13, 2022, the 136th day following the consummation of the Merger (i) Series A Warrant to purchase 342,100 ADSs (the “Series A Warrant”) (ii) Series B Warrant to purchase 342,100 ADSs (the “Series B Warrant”) and (iii) Series C Warrant to purchase 191,174 ADSs (“Series C Warrant” and, together with the Series A Warrant and Series B Warrant, the “Investor Warrants”).

The exercise price for the Investor Warrants is $49.75 per ADS, with Series A Warrant having a five-year maturity, and Series B Warrant and Series C Warrant having a two-year maturity.

We also issued to the Investor, effective as of March 13, 2022 (i) a Series A Warrant to purchase 28,508 ADSs (the “Series A Warrant”) (ii) a Series B Warrant to purchase 28,508 ADSs (the “Series B Warrant”) and (iii) a Series C Warrant to purchase 15,931 ADSs (the “Series C Warrant” and, together with the Series A Warrant and the Series B Warrant, the “Investor Warrants”).

The exercise price for the Investor Warrants is $597 per ADS, with the Series A Warrant having a five-year maturity, and the Series B Warrant and the Series C Warrant having a two-year maturity.

We had the right to require the mandatory exercise of the Series C Warrant, subject to an effective registration statement being in place for the resale of the shares underlying such warrant and the satisfaction of equity market conditions, as defined in the Series C Warrant.

On April 22, 2022, a registration statement for the resale of the shares underlying Investor Warrants was declared effective by the SEC.

In the period from April 22, 2022 to June 30, 2022, the Investor exercised the Series B Warrant in full pursuant to the alternate cashless exercise rights of such warrant, which gives the Investor the sole option as elected by the Investor to receive 1.0 ADS for each warrant ADS underlying such warrant, resulting in the issuance of a total of 342,100 ADSs to the Investor.

In the period from April 22, 2022 to June 30, 2022, the Investor exercised the Series B Warrant in full pursuant to the alternate cashless exercise rights of such warrant, resulting in the issuance of a total of 28,508 ADSs to the Investor.

The market related conditions to require the mandatory exercise of the Series C Warrant were not met during the period up to July 14, 2022.

On July 14, 2022, we entered into an agreement with Quoin Inc.

and Altium (the “Altium Agreement”), pursuant to which the parties agreed to, among other things, (i) amend certain terms of the Series A Warrant and Investor Exchange Warrants previously issued to Altium to reduce the exercise price to $0.00 per ADS with respect to a total of 399,999 ADSs, (ii) cancel the Series C Warrant and the remaining portion of the Series A Warrant previously issued to Altium, and (iii) terminate the Purchase Agreements, pursuant to which the warrants were previously issued to Altium.

The incremental fair value of the modified warrants was approximately $491,000, which was charged against the gross proceeds of the August Offering (see below).

From July 15, 2022 to August 2, 2022, Altium exercised all of its Series A Warrant to purchase 300,925 ADSs and all of its Investor Exchange Warrants to purchase 99,074 ADSs at $0.00 per ADS exercise price, and we issued a total of 399,999 ADSs.

and Altium (the “Altium Agreement”), pursuant to which the parties agreed to, among other things, (i) amend certain terms of the Series A Warrant and the Investor Exchange Warrants previously issued to Altium to reduce the exercise price to $0.00 per ADS with respect to a total of 33,333 ADSs, (ii) cancel the Series C Warrant and the remaining portion of the Series A Warrant previously issued to Altium, and (iii) terminate the Purchase Agreements, pursuant to which the warrants were previously issued to Altium.

The incremental fair value of the modified warrants was approximately $491,000, which was charged against the gross proceeds of the 2022 Offering (see below) as the modification was done in contemplation of the offering.

As of August 2, 2022, Altium exercised all of its warrants to purchase ADSs at $0.00 per ADS exercise price, and we issued a total of 33,333 ADSs to Altium.

Noteholder Warrant Exercises

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issued promissory notes (the “2020 Notes”) to five noteholders, including our directors, Messrs.

Langer and Culverwell (collectively, “2020 Noteholders”).

The 2020 Notes were issued at a 25% original issue discount with an aggregate face value of $1,213,313 with an interest at a rate of 20% per annum.

Langer and Culverwell (collectively, the “2020 Noteholders”).

The 2020 Notes were issued at a 25% original issue discount with an aggregate face value of $1,213,313 with interest at a rate of 20% per annum.

The 2020 Notes were mandatorily convertible into ADSs based on the valuation negotiated in the Primary Financing.

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Public Offerings

On August 9, 2022 (the “August Closing Date”), we completed an offering (the “August Offering”) of 11,050,000,000 ordinary shares represented by 2,210,000 ADSs at a purchase price of $5.00 per ADS and a pre-funded warrant (the “August Pre-Funded Warrant”) to purchase 5,750,000,000 ordinary shares represented by 1,150,000 ADSs at a per pre-funded warrant price of $4.9999, with each ADS and August Pre-Funded Warrant accompanied by an ordinary warrant (the “August Common Warrant”), for aggregate gross proceeds of $16.8 million, resulting in net proceeds of approximately $14.9 million, after deducting the placement agent’s fees and estimated offering expenses payable by us, and excluding the proceeds, if any, from the subsequent exercise of the August Common Warrants.

Each August Common Warrant had an exercise price of $5.00 per ADS and was to expire on the fifth anniversary of the August Closing Date.

On the August Closing Date, the holder of the August Pre-Funded Warrant exercised its Pre-Funded Warrant in full.

On February 24, 2023 (the “February Closing Date”), we completed an offering (the “February Offering”) of 24,750,000,000 ordinary shares represented by 4,950,000 ADSs at a purchase price of $1.00 per ADS and a pre-funded warrant (the “February Pre-Funded Warrant”) to purchase 10,250,000,000 ordinary shares represented by 2,050,000 ADSs at a per pre-funded warrant price of $0.9999, with each ADS and February Pre-Funded Warrant accompanied by an ordinary warrant (the “February Common Warrant”) for aggregate gross proceeds of $7.0 million, resulting in net proceeds of approximately $6.0 million, after deducting the placement agent’s fees and estimated offering expenses payable by us, and excluding the proceeds, if any, from the subsequent exercise of the February Common Warrants.

Each February Common Warrant has an exercise price of $1.00 per ADS and expires on the fifth anniversary of the February Closing Date.

On the February Closing Date, the holder of the February Pre-Funded Warrant exercised its Pre-Funded Warrant in full.

In connection with the February Offering, we entered into a Securities Purchase Agreement (the “February Purchase Agreement”) with certain institutional investors.

Under the February Purchase Agreement, subject to certain exemptions, we agreed not to:

(i) for a period of ninety (90) days after the closing date of the February Offering, issue, enter into any agreement to issue or announce the issuance or proposed issuance of any ADSs, ordinary shares or ordinary share equivalents or (ii) file any registration statement or amendment or supplement thereto, other than a registration statement on Form S-8 in connection with any employee benefit plan or any post-effective amendment to a registration statement declared effective by the SEC and (ii) for a period of 180 days after the closing date of the February Offering, enter into an agreement to effect a “variable rate transaction” as defined in the February Purchase Agreement.

In connection with the February Offering, we entered into an Amendment No.

1 to Warrant to Purchase Ordinary Shares Represented by American Depositary Shares, dated February 24, 2023 (collectively, the “Warrant Amendments”), with each of the purchasers (the “2022 Purchasers”) who participated in both the August Offering and February Offering.

The Warrant Amendments amended certain terms of the August Common Warrants issued to such 2022 Purchasers in the August Offering.

On August 9, 2022 (the “2022 Closing Date”), we completed an offering (the “2022 Offering”) of 184,167 ordinary shares represented by 184,167 ADSs at a purchase price of $60.00 per ADS and a pre-funded warrant (the “2022 Pre-Funded Warrant”) to purchase 95,833 ordinary shares represented by 95,833 ADSs at a per pre-funded warrant price of $59.9988, with each ADS and 2022 Pre-Funded Warrant accompanied by an ordinary warrant (the “2022 Common Warrant”), for aggregate gross proceeds of $16.8 million, resulting in net proceeds of approximately $14.9 million, after deducting the placement agent’s fees and estimated offering expenses payable by us, and excluding the proceeds, if any, from the subsequent exercise of the 2022 Common Warrants.

Each 2022 Common Warrant had an exercise price of $60.00 per ADS and was to expire on the fifth anniversary of the 2022 Closing Date.

On the 2022 Closing Date, the holder of the 2022 Pre-Funded Warrant exercised its Pre-Funded Warrant in full.

On February 24, 2023 (the “2023 Closing Date”), we completed an offering (the “2023 Offering”) of 412,500 ordinary shares represented by 412,500 ADSs at a purchase price of $12.00 per ADS and a pre-funded warrant (the “2023 Pre-Funded Warrant”) to purchase 170,833 ordinary shares represented by 170,833 ADSs at a per pre-funded warrant price of $11.9988, with each ADS and 2023 Pre-Funded Warrant accompanied by an ordinary warrant (the “2023 Common Warrant”) for aggregate gross proceeds of $7.0 million, resulting in net proceeds of approximately $5.8 million, after deducting the placement agent’s fees and offering expenses paid by us, and excluding the proceeds, if any, from the subsequent exercise of the 2023 Common Warrants.

Each 2023 Common Warrant has an exercise price of $12.00 per ADS and expires on the fifth anniversary of the 2023 Closing Date.

On the 2023 Closing Date, the holder of the 2023 Pre-Funded Warrant exercised its Pre-Funded Warrant in full.

In connection with the 2023 Offering, we entered into an Amendment No.

1 to Warrant to Purchase Ordinary Shares Represented by American Depositary Shares, dated February 24, 2023 (collectively, the “2023 Warrant Amendments”), with each of the purchasers (the “2022 Purchasers”) who participated in both the 2022 Offering and the 2023 Offering.

The 2023 Warrant Amendments amended certain terms of the common warrants issued to such 2022 Purchasers in the 2022 Offering.

Specifically, the 2023 Warrant Amendments reduced the exercise price of such warrants to $13.20 and extended the term during which those warrants could remain exercisable until February 24, 2028.

On March 7, 2024, (the “2024 Closing Date”) we completed an offering (the “2024 Offering”) of the following securities (i) 811,250 ordinary shares represented by ADSs, (ii) 4,062,500 Series D warrants (the “Series D Warrants”) to purchase 4,062,500 ordinary shares represented by ADSs, (iii) 4,062,500 Series E warrants (the “Series E Warrants” and together with the Series D Warrants, the “2024 Warrants”) to purchase 4,062,500 ordinary shares represented by ADSs, and (iv) 3,251,250 pre-funded warrants (the “2024 Pre-Funded Warrants”) to purchase 3,251,250 ordinary shares represented by ADSs for aggregate gross proceeds of approximately $6.5 million, resulting in net proceeds of approximately $5.6 million, after deducting the placement agent’s fees and offering expenses paid by us.

Each ADS (or 2024 Pre-Funded Warrant to purchase one ADS in lieu thereof) was sold together with a Series D Warrant to purchase one ADS and a Series E Warrant to purchase one ADS.

The ADSs and accompanying 2024 Warrants were sold at a combined public offering price of $1.60 and the 2024 Pre-Funded Warrants and accompanying 2024 Warrants were sold at a combined public offering price of $1.5999, which is equal to the combined purchase price per ADS and accompanying 2024 Warrants, minus the exercise price of each 2024 Pre-Funded Warrant of $0.0001.

The Series D Warrants and the Series E Warrants have an exercise price of $1.60 per share, are exercisable immediately following the closing of the 2024 Offering and expire in two years and five years, respectively, from the closing of the 2024 Offering.

In connection with the 2024 Offering, we entered into a Securities Purchase Agreement (the “2024 Purchase Agreement”) dated March 4, 2024, with certain institutional investors signatory thereto, pursuant to which we agreed to issue and sell to such investors, certain of the ADSs, 2024 Pre-Funded Warrants and 2024 Warrants sold in the 2024 Offering.

Pursuant to the terms of the 2024 Purchase Agreement, we agreed, subject to certain exceptions, (i) to not enter into variable rate financings for a period of 180 days following the closing of the 2024 Offering, and (ii) to not enter into any equity financings for 90 days from the closing of the 2024 Offering.

On March 7, 2024, we also entered into privately negotiated agreements with the holders of certain existing outstanding warrants to purchase up to 638,834 ADSs (the “Prior Warrants”) to, among other things, reduce the exercise price of such Prior Warrants to $1.60 and to extend the current expiration date of the Prior Warrants until March 7, 2029.

Alumni Equity Line and Purchase Agreement

On January 25, 2024, we entered into a Purchase Agreement (the “Alumni Purchase Agreement”) with Alumni Capital LP (“Alumni”).

Pursuant to the Alumni Purchase Agreement, we have the right to sell to Alumni up to $8,000,000 (the “Commitment Amount”) of newly issued ordinary shares that are represented by ADS (the “Purchase Notice Securities”), subject to certain conditions and limitations, from time to time during the term of the Alumni Purchase Agreement.

We do not have the right to commence any sales of ordinary shares represented by ADSs to Alumni under the Alumni Purchase Agreement until the date, which we refer to as the Commencement Date, that all of the conditions set forth in the Alumni Purchase Agreement have been satisfied, including that the registration statement we agreed to file with the Securities and Exchange Commission (“SEC”) pursuant to the Alumni Purchase Agreement is declared effective by the SEC, and our shareholders have approved of the issuance of ADSs under the Alumni Purchase Agreement.

If shareholder approval of the issuance of ADSs under the Purchase Agreement is not obtained by April 30, 2024, we may terminate the Alumni Purchase Agreement by written notice to Alumni and neither party shall have any obligation or liability to the other party.

From and after the Commencement Date, we may, from time to time and at our sole discretion for a period of three months, which we at our sole discretion may increase by an additional three months (such period, including any extension, the “Commitment Period”), on any business day that we select, direct Alumni to purchase ordinary shares represented by ADSs.

The purchase price for the ordinary shares represented by ADSs we may sell to Alumni will be based upon formulas set forth in the Alumni Purchase Agreement based on the then current market price of the ADSs as computed under the Alumni Purchase Agreement and will depend on the type of purchase notice we submit to Alumni from time to time.

There is no upper limit on the price per share that Alumni could be obligated to pay for the ADSs under the Alumni Purchase Agreement;

provided, however at no time can the purchase price be below a floor price of $1.00 per share (subject to adjustment).

We agreed to issue purchase notices for an aggregate of at least $4,000,000 of the Commitment Amount prior to the end of the Commitment Period.

As consideration for Alumni’s irrevocable commitment to purchase ADSs under the Alumni Purchase Agreement, we agreed to issue to Alumni, at the times set forth in the Alumni Purchase Agreement beginning with the trading day after the Commencement Date, a number of ADSs with a value at the time of issuance not to exceed $240,000 in the aggregate (the “Commitment Securities”).

The ADSs to be issued will be valued at the average of the closing prices of the ADSs on Nasdaq for the five trading days immediately prior to the date such ADSs are issued.

We may pay cash in lieu of issuing all or any portion of the Commitment Securities.

In connection with the 2024 Offering, we agreed not to sell any ADS to Alumni under the Alumni Purchase agreement for a period of 180 days from the 2024 Closing Date.

Nasdaq Listing

On April 5, 2023, we received a letter from Listing Qualifications staff of The Nasdaq Stock Market, LLC notifying us that the closing bid price per ADS was below the required minimum of $1.00 for a period of 30 consecutive business days and that the we did not meet the minimum bid price requirements set forth in Nasdaq Rule 5550(a)(2).

Pursuant to Nasdaq Rule 5810(c)(3)(A), we had a period of one hundred eighty (180) calendar days, or until October 2, 2023 (the “Compliance Period”), to regain compliance with Nasdaq’s minimum bid price requirement.

On August 1, 2023, we received a letter from Nasdaq stating that the closing bid price per ADS was at $1.00 or greater for the last 10 consecutive business days.

Accordingly, we regained compliance with Listing Rule 5550(a)(2) and the matter was closed.

Components of Our Results of Operations

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● formulation, research and development expenses related to QRX003;

and other products we may choose to develop;

and other product candidates we may choose to develop;

● costs for sponsored research.

Research and development activities will continue to be central to our business plan.

Products in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

We expect our research and development expenses to be significant over the next several years as personnel and compensation costs increase and we conduct late-stage clinical studies and prepare to seek regulatory approval for QRX003 and any other future product.

The duration, costs and timing of clinical trials of QRX003 and any other future product will depend on a variety of factors that include, but are not limited to:

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

The duration, costs and timing of clinical trials of QRX003 and any other future product candidate will depend on a variety of factors that include, but are not limited to:

● the number of trials required for approval;

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General and Administrative Expenses

General and administrative expenses consist primarily of compensation for the founders and executive officers, professional fees and other corporate expenses, including significant costs incurred in 2021 in connection with the Merger and associated regulatory filings.

General and administrative expenses consist primarily of compensation and employee related expenses including non-cash stock-based compensation, professional fees and other corporate expenses.

We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities.

These increases will likely include increased costs related to the hiring of personnel, including compensation and employee-related expenses, and fees to outside consultants, lawyers and accountants.

Additionally, we anticipate increased costs associated with being a public company, including compliance with The Nasdaq Capital Market and SEC requirements, insurance and investor relations costs.

Other Expenses

Other expenses consist primarily of non-cash costs associated with the financing arrangements entered into during 2020 and 2021, including fair value adjustments to notes payable and warrants and interest expense associated with debt instruments.

The majority of such expenses ceased upon conversion of the debt instruments and exchange of the warrants, most of which occurred at the Merger date.

These increases will likely include compensation and employee-related expenses including stock-based compensation, increased costs related to the potential hiring of personnel, travel costs and fees to outside consultants, lawyers and accountants.

Other Expenses (income)

Other expenses (income) consist primarily of non cash fair value adjustments of warrants, forgiveness of trade payable, interest income and unrealized loss on investments.

Results of Operations - Year ended December 31, 2023 compared to Year ended December 31, 2022

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Total operating expenses

Other Expenses

Other (income) and expenses

Forgiveness of trade payable

Fair value adjustments to convertible notes payable

Warrant liability (income) expense

Financing expense

Unrealized income

Interest income

Realized and accrued interest income

Interest and financing expense

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General and Administrative Expenses

General and administrative expenses were approximately $6,585,000 and $4,500,000, in the year ended December 31, 2022 and 2021, respectively, representing an increase of $2,085,000, or 46%.

The increase was primarily due to the build-up of the company infrastructure post the Merger which included, $810,000 in increased costs of becoming a public company related to professional services, filing and insurance costs, $318,000 in increased salary and benefits expenses, $283,000 in travel related expenses and stock-based compensation expense of $664,000 following the issuance of options under the Amended and Restated Equity Incentive Plan (the “Amended Plan”) in April 2022.

General and administrative expenses were approximately $6,071,000 and $6,585,000, in the year ended December 31, 2023 and 2022, respectively, representing a decrease of $514,000, or 7.8%.

The decrease was primarily due to a decrease in legal fees and other public company expenses of $574,000, a decrease in insurance of $197,000, offset by an increase of $278,000 in non-cash stock-based compensation expense.

Research and Development Expenses

Our research and development expenses during the year ended December 31, 2023 and 2022 were approximately $3,308,000 and $2,673,000, respectively, representing an increase of $635,000, or approximately 23.8%.

The increase was primarily due to $1,010,000 in increased expenditures on our development programs following the completion of our financings in October 2021, including work related to the filing of our IND for QRX003 in March 2022, work related to commencing the clinical studies for the development of QRX003 following the FDA clearance of our IND in April 2022.

Also, included in the 2022 expenses were approximately $100,000 of stock-based compensation expense following the issuance of options under the Amended and Restated Equity Incentive Plan (the “Amended Plan”) in April 2022.

We expect to significantly increase our research and development efforts by conducting the remaining studies necessary for the development and approval of QRX003, see “Components of Our Results of Operations - Research and Development Expenses” above.

The increase was primarily due to an increase of $566,000 worth of expenditures on our development programs, including work related to the clinical studies for the development of QRX003 and our research collaborations with Queensland University of Technology, and manufacturing costs for material used in our clinical studies.

The increase also included approximately $52,000 in non-cash stock-based compensation expense.

We expect to continue our research and development efforts by conducting the remaining studies necessary for the development and approval of QRX003, see “Components of Our Results of Operations - Research and Development Expenses” above.

We amortize licensed or acquired intellectual property over its expected useful life, included in research and development expenses set out above.

The license from Skinvisible was obtained in October 2019, see “Research and Development, Patents and Licenses.” Amortization of intangible assets was approximately $104,000 in each of the years ended December 31, 2022 and 2021.

The license from Skinvisible was obtained in October 2019, see “Research and Development, Patents and Licenses.” Amortization of intangible assets was approximately $104,000 and $104,000 in each of the years ended December 31, 2023 and 2022.

As of December 31, 2023 we determined that the Polytherapeutics asset was no longer of use and reduced the carrying value to zero.

Other Expenses:

Interest and financing expense

Interest expense on the 2020 Notes and Bridge Notes was $714,000 and $1,090,000 in the year ended December 31, 2022 and 2021 respectively.

Interest on the Bridge Notes was paid in October 2021 upon closing of the Primary Financing, and interest on the 2020 Notes did not accrue after October 2021 but remained unpaid and included as a liability on our consolidated balance sheet as of December 31, 2021 a portion of which was paid in the year ended December 31, 2022.

Approximately $312,000 was paid to two of the five 2020 Noteholders during the year ended December 31, 2022.

Based on the terms of the cash settlement with these two 2020 Noteholders, our estimate of the liability to the remaining three 2020 Noteholders was increased to $1,146,000 as of December 31, 2022.

We expect to settle the remaining liability in 2023.

We earned $96,000 in interest income in the year ended December 31, 2022 from our cash and investments in marketable securities.

In the year ended December 31, 2021 we incurred $275,000 in finance expenses in connection with the Primary Financing.

Fair value adjustment to convertible notes payable

We elected to value the 2020 Notes and the Bridge Notes at fair value, which was remeasured at each reporting period.

In the year ended December 31, 2021 we incurred a fair value adjustment of $1,250,000 related to the Bridge Notes.

The Bridge Notes and 2020 Notes were converted into equity in October 2021 on the closing of the Primary Financing.

Warrant liability expense

We determined our warrants required liability treatment at fair value, which was remeasured at each reporting period.

In the year ended December 31, 2022, and December 31, 2021 we incurred a fair value gain of ($77,000) related to the warrants associated with the 2020 Notes, and expense of $12,784,000 related to the warrants associated with the 2020 Notes and the Bridge Notes, respectively.

The Bridge Note warrants which were exchanged for the Investor Exchange Warrants with a fixed exercise price of $49.74 per ADS and reclassified as an equity instrument in October 2021 upon closing of the Primary Financing.

The 2020 Note warrants were exchanged for warrants on the same terms as the Investor Exchange Warrants and reclassified as an equity instrument in March 2022.

Forgiveness of Trade Payable

In our balance sheet as of December 31, 2021 we had a liability of $584,000 representing amounts due to an investor relations firm for services commencing in 2017.

In May 2022, we entered into a settlement with such firm to decrease the liability to $168,000 which resulted in $416,000 of income recognized in the year ended December 31, 2022.

Effective March 31, 2022, we entered into a settlement with such firm to decrease the liability to $168,000 which resulted in approximately $416,000 of income recognized in the year ended December 31, 2022.

There was no additional forgiveness of trade payable during the year ended December 31, 2023.

Warrant liability expense

We determined our warrants issued to investors in our 2020 Notes (the “2020 Noteholder Warrants”) required liability treatment at fair value, which was remeasured at each reporting period up to March 2022.

The 2020 Noteholder Warrants were exchanged for new

warrants and reclassified as an equity instrument in March 2022.

In the year ended December 31, 2022, we incurred a fair value gain of ($77,000) related to the 2020 Noteholder Warrants.

The Company had no recorded warrant liability as of December 31, 2023.

Interest and financing expense

We earned approximately $695,000 in interest income and incurred approximately $3,000 in unrealized loss, and earned approximately $96,000 in interest income and incurred approximately $1,000 in unrealized loss, in the year ended December 31, 2023 and December 31 2022, respectively, from our cash and cash equivalents and investments in marketable debt securities.

The increase in interest income in the year ending December 31, 2023 is the result of higher average investment balances.

Interest expense on the 2020 Notes was approximately $714,000 in the year ended December 31, 2022.

The Company had no interest expense during the year ended December 31, 2023.

Liquidity and Capital Resources

We have incurred net losses every year since inception.

We believe that we have sufficient resources to effect our business plan for at least one year from the issuance of the audited consolidated financial statements included in this report;

However, we do not expect to generate revenue from product sales unless and until we successfully complete development and obtain marketing approval for one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty.

however, the Company is subject to risks common to development stage biopharmaceutical companies including, but not limited to, unanticipated clinical trial costs and the ability to estimate such occurrences, if any, on the Company’s cash, liquidity, additional financing requirements, and availability.

Accordingly, we may need to raise additional funds sooner than planned.

Additional financing will be required to complete the research and development of our therapeutic targets and our other operating requirements, which may not be available at acceptable terms, if at all.

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Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of planned clinical trials and our expenditures on other research and development activities.

We anticipate that our expenses will continue to increase substantially in 2023 as we advance the clinical development of QRX003.

Future Funding Requirements

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Adequate additional funding may not be available to us on acceptable terms, or at all.

If we are unable to raise capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of QRX003, any future product, or potentially discontinue operations.

To the extent that we raise additional capital through the sale of our equity or convertible debt securities, and pursuant to the exercise of warrants issued to our investors in the August Offering and February Offering, the ownership interest of our equity holders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our equity holders.

To the extent that we raise additional capital through the sale of our equity or convertible debt securities, and pursuant to the exercise of the warrants issued to our investors in the 2022 Offering, the 2023 Offering and the 2024 Offering, the ownership interest of our equity holders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our equity holders.

Debt financing and preferred equity 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.

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If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market any future product that we would otherwise prefer to develop and market ourselves.

Summary Statement of Cash Flows

Summary Statement of Cash Flows – Year ended December 31, 2023 compared to Year ended December 31, 2022

As of December 31, 2023, we had approximately $10,695,000 in cash and investments in marketable securities.

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Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net increase (decrease) in cash

Net change in cash and cash equivalents

Operating Activities

Net cash used in operating activities was approximately $7,864,000 and $8,481,000 for the year ended December 31, 2023 and 2022, respectively.

The increase in 2022 was primarily due to the increase in research and development and general and administrative expenses, including significant expenses incurred in connection with becoming a public company and increased compensation costs.

The decrease in 2023 was primarily due to a decrease in operating expense, an increase in stock based compensation and an increase in accounts payable and accrued expenses for the year ended December 31, 2023.

Investing Activities

Net cash used in investing activities was $10,149,000 and $625,000 in the year ended December 31, 2022 and 2021, respectively.

The increase in cash used in investing activities for the year ended December 31, 2022 was primarily due to the purchases of short maturity US Treasury Bills from the proceeds of the August Offering, offset by a decrease of $375,000 in license acquisition costs.

Net cash provided by investing activities in the year ended December 31, 2023 was approximately $2,188,000 and net cash used in investing activities in the year ended December 31, 2022 was approximately $10,149,000.

The cash provided in investing activities for the year December 31, 2023 consisted of net purchases of short maturity US Treasury Bills from the proceeds of the 2023 Offering, and the cash used in investing activities in the year ended December 31, 2022 consisted of net purchases of short maturity US Treasury Bills from the proceeds of the 2022 Offering and payments of remaining amounts due under our license agreement with Skinvisible, see “Research and Development Commitments” below.

Financing Activities

Net cash provided by financing activities was $14,008,000 for the year ended December 31, 2022.

The net cash provided increased due to the receipt of $14.9 million in net proceeds from the August Offering partially offset by repayments of amounts due to officers at the aggregate rate of $50,000 per month and approximately $312,000 partial pay-down of accrued interest on the 2020 Notes.

Net cash from financing activities in the year ended December 31, 2021 was $13,504,000, primarily representing net proceeds received from the issuance of Bridge Notes and the Primary Financing.

Net cash provided by financing activities was approximately $5,217,000 for the year ended December 31, 2023.

The net cash provided decreased due to the receipt of approximately $5,849,000 in net proceeds from the 2023 Offering partially offset by repayments of amounts due to officers of $600,000 and $33,000 in deferred financing costs.

Net cash provided by financing activities in the year ended December 31, 2022 was approximately $14,545,000, representing net proceeds of $14,900,000 from the 2022 Offering, offset by repayments of amounts due to officers of approximately $600,000 and the repayment of approximately $312,000 of bridge notes.

Research and Development Commitments

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In November 2020, Quoin Inc.

entered into a Master Service Agreement for an initial term of three years with Therapeutics Inc.

for managing preclinical and clinical development for new products in the field of dermatology.

The agreement required the execution of individual work orders.

entered into a Master Service Agreement with Therapeutics Inc.

for the management of the preclinical and clinical development of QRX003 for Netherton Syndrome.

The initial term of the agreement was three years with automatic one year extensions, and the agreement required the execution of individual work orders.

may terminate any work order for any reason with 90 days written notice subject to costs incurred through termination and a defined termination fee, unless there is a material breach by Therapeutics Inc.

A work order was entered into in June 2022 for the first QRX003 clinical study at an expected estimated cost of approximately $4.4 million through 2024.

A further work order was entered into in December 2022 for the second QRX003 clinical study at an expected estimated cost of approximately $830,000 through 2024.

For the years ended December 31, 2022 and 2021, we incurred a research and development expense under these agreements of approximately $1.2 million and $340,000 respectively.

In November 2021, we entered into a commitment with Queensland University of Technology for research related services associated with Netherton Syndrome of approximately $250,000 for an expected period of eighteen months.

For the years ended

December 31, 2022 and 2021, we incurred research and development costs related to this agreement of approximately $77,000 and $25,000, respectively.

In May 2022, we entered into a commitment with Queensland University of Technology for research related services associated with Scleroderma of approximately $610,000 for an expected period of eighteen months.

We incurred research and development expenses of approximately $276,000 for the year ended December 31, 2022.

Critical Accounting Policies and Use of Estimates

The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities.

On an ongoing basis, we evaluate our estimates, including those related to accrued expenses, valuation allowance on deferred tax assets and valuation of intangible assets.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Results may differ from these estimates due to actual outcomes being different from those on which we based our assumptions.

These estimates and judgments are regularly reviewed by management on an ongoing basis at the end of each quarter prior to the public release of our financial results.

Critical accounting policies are those that, in management’s view, are most important to the portrayal of a company’s financial condition and results of operations and most demanding on their calls on judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

We believe our most critical accounting policies and estimates relate to:

Use of estimates:

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes.

Actual results could materially differ from those estimates.

Management considers many factors in developing the estimates and assumptions that are used in the preparation of these financial statements including:

expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends.

The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates.

Estimates are used in the following areas, among others:

settlement of debt or other obligations, fair value of debt instruments, stock-based compensation and warrants, research and development expense recognition, intangible asset estimated useful lives and impairment assessments, allowances of deferred tax assets, contingency recognition, and cash flow assumptions regarding going concern considerations.

An additional work order was entered into in December 2022 for a second QRX003 clinical study at an expected estimated cost of approximately $830,000.

In the years ended December 31, 2023 and 2022, we incurred research and development costs under these agreements of approximately $1.5 million and $1.2 million, respectively.

During the year ended December 31, 2023, we received a credit of approximately $278,000 applied to prior expenses incurred during the period of March 2023 to July 2023.

In November 2021, we entered into a research agreement with Queensland University of Technology (QUT) for a pre-clinical research program for the development of a product to treat Netherton Syndrome of approximately $250,000.

In May 2022, we entered into a second research agreement with QUT for the development of a product to treat Scleroderma of approximately $610,000.

Each agreement remains in place until the completion of the research program, which in each case was initially anticipated to be 18 months from execution.

For the years December 31, 2023 and 2022, we incurred research and development costs related to these agreements of approximately $361,000 and $353,000 respectively.

Critical Accounting Estimates

Critical accounting estimates are those that, in management’s view, are most important to the portrayal of a company’s financial condition and results of operations and most demanding on their calls on judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

We believe our most critical accounting estimates relate to:

Research and Development

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Based on the timing of amounts invoiced by service providers, we may also record payments made to those providers as prepaid expenses that will be recognized as expense in future periods as the related services are rendered.

We classify as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the us with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock.

We classify as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside of our control) or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

We assess classification of our warrants and other free-standing derivatives at each reporting date to determine whether a change in classification between assets, liabilities and equity is required.

We evaluated our warrants to assess their proper classification using the applicable criteria enumerated under U.S.

GAAP and determined that such warrants meet the criteria for equity classification in the accompanying balance sheets as of December 31, 2022.

Stock based compensation:

We recognize compensation costs resulting from the issuance of stock-based awards to employees, non-employees and directors as an expense in the consolidated statements of operations over the requisite service period based on a measurement of fair value for each stock-based award.

The fair value of each option grant is estimated as of the date of grant using the Black-Scholes option-pricing model, net of actual forfeitures.

The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period.

Since we have a limited history of trading as a public company, our expected stock volatility is based on a weighting of its historical volatility along with a group of a publicly traded set of peer companies.

We utilize the simplified method to estimate the expected term.

The risk-free interest rate was determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

The expected dividend yield was assumed to be zero as we have not paid dividends since our inception and we do not anticipate paying dividends in the foreseeable future.

Long-lived assets

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Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

During the year ended December 31, 2022 and 2021, there were no impairment indicators which required an impairment loss measurement.

During the year ended December 31, 2023 there was one impairment indicator which required an impairment loss measurement (see Note 10).

During the year ended December 31, 2022, there were no impairment indicators which required an impairment loss measurement.

Quantitative and Qualitative Disclosures About Market Risk

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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