This Quarterly Report on Form 10-Q contains predictions, estimates and other
forward-looking statements relating to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as "may", "should", "intends", "expects", "plans",
"anticipates", "believes", "estimates", "predicts", "potential", or "continue"
or the negative of these terms or other comparable terminology. Forward-looking
statements involve known and unknown risks, uncertainties and other factors
including the risks set forth in the section entitled "Risk Factors" in our
Post-Effective Amendment No. 1 to our Registration Statement on Form S-1, as
filed with the Securities and Exchange Commission (the "SEC") on March 15, 2018,
that may cause our actual results, performance or achievements to be materially
different from any future results, performances or achievements expressed or
implied by the forward-looking statements
Forward-looking statements represent our management's beliefs and assumptions
only as of the date of this Report. You should read this Report with the
understanding that our actual future results may be materially different from
what we expect.
All forward-looking statements speak only as of the date on which they are made.
We undertake no obligation to update such statements to reflect events that
occur or circumstances that exist after the date on which they are made, except
as required by federal securities and any other applicable law.
The management's discussion and analysis of our financial condition and results
of operations are based upon our condensed financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP").
The following discussion of our financial condition and results of operations
should be read in conjunction with our unaudited condensed financial statements
for the nine months ended September 30, 2020 and the notes thereto appearing
elsewhere in this Report and the Company's audited financial statements for the
fiscal year ended December 31, 2019, as filed with the SEC in its Annual Report
on Form 10-K on March 30, 2020, along with the accompanying notes. As used in
this Quarterly Report, the terms "we", "us", "our" and the "Company" means Qrons
Inc.
Overview
The Company is a preclinical stage biotechnology company developing advanced
stem cell synthetic hydrogel-based solutions to combat neuronal injuries and
other nervous system pathologies focused on achieving a breakthrough in the
treatment of traumatic brain injuries ("TBIs") for both concussions and
penetrating injuries, an unmet medical need. We believe that our approach is
pushing the boundaries of science by using the latest advances in molecular
biology and chemistry. The Company has collaborated with universities and
scientists in the fields of regenerative medicine, tissue engineering and 3D
printable hydrogels to develop a treatment that integrates proprietary,
engineered mesenchymal stem cells ("MSCs"), 3D printable implant, smart
materials and a novel delivery system.
To date, the Company has two product candidates for treating penetrating and
non-penetrating (concussion-like) TBIs, both integrating proprietary, anti-brain
inflammation synthetic hydrogel and modified MSCs. QS100TM is an injury
specific, 3D printable, implantable MSCs-synthetic hydrogel, to treat
penetrating brain injuries and QS200TM is an injectable MSCs-synthetic hydrogel
for the treatment of diffused injuries commonly referred to as concussions.
The Company has relied primarily on its two co-founders, Jonah Meer, Chief
Executive Officer, and Ido Merfeld, President, who are its sole directors to
manage its day-to-day business and has outsourced professional services to third
parties in an effort to maintain lower operational costs.
Messrs. Meer and Merfeld, as the holders of the Company's issued and outstanding
shares of the Company's Class A Preferred Stock, collectively have 66 2/3% of
the voting rights of the Company. Acting together, they will be able to
influence the outcome of all corporate actions requiring approval of our
stockholders.
The Company's common stock was approved by the Financial Industry Regulatory
Authority ("FINRA") for quotation on the OTC pink sheets under the symbol "BLMB"
as of July 3, 2017. FINRA announced the Company's name change to Qrons Inc. on
August 9, 2017 and the new symbol "QRON", became effective on August 10, 2017.
The Company's common stock was upgraded from the Pink Market and commenced
trading on the OTCQB Venture Market on August 12, 2019.
Recent Developments
Covid-19 Pandemic
The recent COVID-19 pandemic has resulted in a delay of our planned research and
development activities. As a result in April 2020, we terminated our employees,
In addition, the universities with which we have collaborated have closed for
extended periods of time and reopened with capacity restrictions therefore we
discontinued our service agreements with Ariel Scientific Innovation Ltd.
("Ariel") and although we continue to collaborate with Professor Chenfeng Ke at
Dartmouth College ("Dartmouth") on 3D printing research under a grant from the
State of New Hampshire, we have not extended our sponsored research agreement
with Dartmouth which expired in July 2020. We are investigating other
laboratories and methods to continue our research in traumatic brain injuries
and other neurodegenerative and neuromuscular diseases, while advancing and
protecting our intellectual property. However, the full impact of the COVID-19
pandemic continues to evolve, is highly uncertain and subject to change.
Management is monitoring the situation but given the daily evolution of the
COVID-19 outbreak, the Company is not currently able to estimate the effects of
the COVID-19 outbreak on its operations or financial condition. The ultimate
impact on our workforce and collaborative development efforts is currently
uncertain.
27
--------------------------------------------------------------------------------
Plan of Operations
To date, we have two product candidates for treating penetrating and
non-penetrating (concussion-like) TBIs. We have completed an in-vivo efficacy
experiment with QS100TM for treating penetrating brain injuries in an animal
model that was successful in substantiating our theories and practices regarding
cell regeneration. We have completed animal in-vivo efficacy experiments with
QS200TM for treating concussions and other diffused axonal injuries. Prior to
the COVID-19 pandemic, we planned to continue working with Dartmouth to develop
innovative 3D printable biocompatible advanced materials and stem cell delivery
techniques for our product candidates and with our stem cells team on the
development of our proprietary, neuro-regenerative MSC lines at Ariel's
laboratories. We are currently exploring alternative laboratories and strategies
to maximize our development efforts in the field of neuronal injuries and
nervous system pathologies.
We have not generated revenues from the sales of products and we do not
currently have sufficient resources to accomplish the conditions necessary for
us to generate revenue.
As we monitor the full impact of the COVID-19 outbreak, we continue exploring
sources of debt and equity financings as well as available grants. We are
currently exploring and are in discussions for potential strategic alternatives
in the biotechnology field which could advance our MSCs and neurodegenerative
research. There can be no assurance the necessary financing will be available
or that a suitable strategic partner will be identified. In such event, we may
explore relationships with third parties to develop or commercialize products or
technologies that we have not previously sought to develop or commercialize,
decide to exit our existing business, cease operations altogether or pursue an
acquisition of our company.
Results of Operations
Three Months Ended September 30, 2020 and September 30, 2019
Revenue
We have not generated any revenue since our inception and do not expect to
generate any revenue from the sale of products in the near future.
Net Loss
We had a net loss of $153,933 in the three months ended September 30, 2020
compared to $454,158 in the three months ended September 30, 2019, as follows:
For Three Months Ended
September 30,
2020 2019
Net sales $ - $ -
Operating expenses:
Research and development expenses 33,441 136,080
Professional fees 9,010 14,928
General and administrative expenses 20,977 308,735
Total operating expenses 63,428 459,743
Income (loss) from operations (63,428 ) (459,743 )
Other income (expense)
Interest expense (12,460 ) (1,243 )
Change in derivative liabilities (78,045 ) 6,828
Total other income (expense) (90,505 ) 5,585
Net (loss) $ (153,933 ) $ (454,158 )
28
--------------------------------------------------------------------------------
Operating Expenses
Total operating expenses for the three months ended September 30, 2020 were
$63,428 compared to total operating expenses of $459,743 for the three months
ended September 30, 2019. The substantial decrease in operating expenses during
the three months ended September 30, 2020 is due to the suspension of certain
research and development and other operating activities as a result of the
impact of COVID 19. During the three months ended September 30, 2020, the
Company incurred $33,441 of research and development expenses which included
service fees related to certain research and development agreements of $19,840,
legal and filing fees related to patents of $5,610 and technology licensing fees
of $7,991, compared to $136,080 of research and development expenses which
included payroll of $59,012, service fees related to certain research and
development agreements of $57,670, fees associated with a sponsored research
agreement of $9,073, legal and filing fees related to patents of $2,263,
purchases of expendable lab supplies and equipment of $5,979 and technology
licensing fees of $2,083 during the three months ended September 30, 2019. The
Company incurred general and administrative expenses of $20,977 for the three
months ended September 30, 2020 compared to general and administrative expenses
of $308,735 for the three months ended September 30, 2019. The substantial
decrease in general and administrative expense during the three months ended
September 30, 2020 was primarily due to a suspension of certain research and
development and other operating activities as a result of the impact of COVID
19 during the current period, and a decrease in stock-based compensation costs
for the three months ended September 30, 2020 compared to the three months ended
September 30, 2019. Professional fees were $9,010 for the three months ended
September 30, 2020, which reflect a decrease in both accounting fees and legal
fees compared to professional fees of $14,928 during the three months ended
September 30, 2019.
Other Income (Expense)
Other expense in the three months ended September 30, 2020 was $90,505, which
included a loss of $78,045 as a result of the change in value of derivative
liabilities, and interest expense of $12,460 which is comprised of accretion
of convertible notes of $8,931 and accrued interest on convertible notes payable
of $3,529. Other income in the three months ended September 30, 2019 was $5,585
and included a gain of $6,828 as a result of the change in value of our
derivative liabilities and interest expense of $1,243.
Nine Months Ended September 30, 2020 and September 30, 2019
Revenue
We have not generated any revenue since our inception and do not expect to
generate any revenue from the sale of products in the near future.
Net Loss
We had a net loss of $410,796 in the nine months ended September 30, 2020
compared to $933,202 in the nine months ended September 30, 2019 as follows:
For Nine Months Ended
September 30,
2020 2019
Net sales $ - $ -
Operating expenses:
Research and development expenses 207,900 439,608
Professional fees
39,526 58,154
General and administrative expenses 48,528 424,652
Total operating expenses 295,954 922,414
Income (loss) from operations (295,954 ) (922,414 )
Other income (expense)
Interest expense (39,559 ) (3,159 )
Change in derivative liabilities (75,283 (7,629 )
Total other income (expense) (114,842 ) (10,788 )
Net (loss) $ (410,796 ) $ (933,202 )
29
--------------------------------------------------------------------------------
Operating Expenses
Total operating expenses for the nine months ended September 30, 2020 were
$295,954 compared to total operating expenses of $922,414 for the nine months
ended September 30, 2019. The substantial decrease in operating expenses during
the nine months ended September 30, 2020 is due to the suspension of certain
research and development and other operating activities as a result of the
impact of COVID 19, and a decrease to stock-based compensation in the nine
months ended September 30, 2020. During the nine months ended September 30,
2020, the Company incurred $207,900 of research and development expenses which
included payroll of $79,274, service fees related to certain research and
development agreements of $124,820, a credit offsetting prior accrued fees
associated with a sponsored research agreement of $26,809, legal and filing fees
related to patents of $6,197, purchases of expendable lab supplies and equipment
of $445, and technology licensing fees of $23,973, compared to $439,608 of
research and development expenses which included payroll of $166,074, service
fees related to certain research and development agreements of $180,720, fees
associated with a sponsored research agreement of $45,366, legal and filing fees
related to patents of $21,760, software fees of $1,374, technology licensing
fees of $2,083 and purchases of expendable lab supplies and equipment of $22,231
during the nine months ended September 30, 2019. The Company incurred general
and administrative expenses of $48,528 for the nine months ended September 30,
2020 compared to general and administrative expenses of $424,652 for the nine
months ended September 30, 2019. The substantial decrease in general and
administrative expense during the nine months ended September 30, 2020 was
primarily due to a decrease in stock-based compensation costs from $254,682 in
the nine months ended September 30, 2019 to $0 in the nine months ended
September 30, 2020, and a reduction in certain advertising and marketing costs
from $79,577 in the nine months ended September 30, 2019 to $24,307 in the nine
months ended September 30, 2020. Professional fees were $39,526 for the nine
months ended September 30, 2020, which reflect a decrease in both accounting and
legal fees in the nine months ended September 30, 2020 compared to professional
fees of $58,154 during the nine months ended September 30, 2019.
Other Income (Expense)
Other expense in the nine months ended September 30, 2020 was $114,842 and
included a loss of $75,283 as a result of the change in value of derivative
liabilities, and interest expense of $39,559 which is comprised of accretion of
convertible notes of $26,350, financing costs of $3,400 and accrued interest on
convertible notes of $9,809. Other expense in the nine months ended September
30, 2019 included a loss of $7,629 as a result of the change in value of our
derivative liabilities and interest expense of $3,159.
Working Capital
September 30, December 31,
2020 2019
Current Assets $ 94,201 $ 123,290
Current Liabilities 792,608 631,412
Working Capital (Deficiency) $ (698,407 ) $ (508,122 )
Cash Flows
At September At September
30, 2020 30, 2019
Net cash (used in) operating activities $ (185,567 ) $ (411,366 )
Net cash provided by investing activities - -
Net cash provided by financing activities $ 211,000 $ 315,000
Net increase (decrease) in cash during period $ 25,433 $ (96,366 )
Operating Activities
Net cash used in operating activities was $185,567 for the nine months ended
September 30, 2020 compared to $411,366 for the nine months ended September 30,
2019. Cash used in operating activities for the nine months ended September 30,
2020 was primarily the result of net loss, offset by non-cash items including
compensation in the form of stock options for research and development expense
totaling $117,111, warrants granted as financing costs valued at $3,400,
accretion of debt discount of $26,350, a loss from the change in our derivative
liabilities of $75,284 and changes to our operating assets and liabilities,
including a decrease to prepaid expenses of $54,522, a decrease to accounts
payable of $62,483 and an increase to accounts payable-related parties of
$11,045. Cash used in operating activities for the nine months ended September
30, 2019 was primarily the result of our net loss, offset by non-cash items
including compensation in the form of stock options for research and development
expense totaling $126,686, stock options recorded as advisory and consulting
services of $201,375, stock options granted for administrative and advisory
services of $53,307 and changes to our operating assets and liabilities
including a decrease to prepaid expenses and increases to our accounts payable
and accounts payable - related parties.
Investing Activities
There were no investing activities during the nine months ended September 30,
2020 and 2019.
30
--------------------------------------------------------------------------------
Financing Activities
Net cash provided by financing activities was $211,000 for the nine months ended
September 30, 2020 compared to $315,000 for the nine months ended September 30,
2019. We received $100,000 in proceeds from private offerings in the nine
months ended September 30, 2020 as compared to $65,000 in the nine months ended
September 30, 2019. During the nine months ended September 30, 2020 we received
$101,000 in proceeds from related parties in the form of short-term advances
from our officers compared to $100,000 during the nine months ended September
30, 2019. During the nine months ended September 30, 2020 we also received
$10,000 in the form of convertible notes with no similar financing in the nine
months ended September 30, 2019. During the nine months ended September 30, 2019
we received $100,000 in an unsecured short-term advance from a third party, with
no similar financing in the nine months ended September 30, 2020.
Liquidity and Capital Resources
As of September 30, 2020, we had cash of $92,458. We are in the early stage of
development and have experienced net losses to date and have not generated
revenue from operations which raises substantial doubt about our ability to
continue as a going concern. There are a number of conditions that we must
satisfy before we will be able to commercialize potential products and generate
revenue, including successful development of product candidates, which includes
clinical trials, FDA approval, demonstration of effectiveness sufficient to
generate commercial orders by customers, establishing production capabilities as
well as effective marketing and sales capabilities for our product. We do not
currently have sufficient resources to accomplish any of these conditions
necessary for us to generate revenue and expect to incur increasing operating
expenses. We will require substantial additional funds for operations, the
service of debt and to fund our business objectives. There can be no assurance
that financing, whether debt or equity, will be available to us in the amount
required at any particular time or for any particular period or, if available,
that it can be obtained on terms favorable to us. If additional funds are raised
by the issuance of equity securities, such as through the issuance and exercise
of warrants, then existing stockholders will experience dilution of their
ownership interest. If additional funds are raised by the issuance of debt or
other equity instruments, we may be subject to certain limitations in our
operations, and issuance of such securities may have rights senior to those of
the then existing stockholders. We currently have no agreements, arrangements or
understandings with any person or entity to obtain funds through bank loans,
lines of credit or any other sources. Additionally, the COVID-19 pandemic has
resulted in significant disruptions to the global financial markets and the
Company's ability to access capital for its research and development and
operating activities. Without additional financing, we do not believe our
resources will be sufficient to meet our operating and capital needs beyond the
first quarter of 2021.
Going Concern
Our financial statements have been prepared assuming that we will continue as a
going concern and, accordingly, do not include adjustments relating to the
recoverability and realization of assets and classification of liabilities that
might be necessary should we be unable to continue in operation. Our report from
our independent registered public accounting firm for the fiscal year ended
December 31, 2019 includes an explanatory paragraph expressing substantial doubt
regarding our ability to continue as a going concern, stating the Company has
not generated revenues sufficient to cover operating expenses and will need
additional capital to service its debt obligations. Also, if the Company is
unable to obtain adequate capital due to the continued spread of COVID-19, the
Company may be required to further reduce the scope, delay, or eliminate some or
all of its planned operations. These factors, among others, raise substantial
doubt about the Company's ability to continue as a going concern.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of our financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an on-going basis, management evaluates its
estimates and judgments which are based on historical experience and on various
other factors that are believed to be reasonable under the circumstances. The
results of their evaluation form the basis for making judgments about the
carrying values of assets and liabilities. Actual results may differ from these
estimates under different assumptions and circumstances. Our significant
accounting policies are more fully discussed in Note 2 to our unaudited
financial statements contained herein.
31
--------------------------------------------------------------------------------
Research and Development Costs: The Company charges research and development
costs to expense when incurred in accordance with FASB ASC 730, "Research and
Development." Research and development costs were $33,441 and $207,900 for
the three and nine months ended September 30, 2020, respectively. Research and
development costs were $136,080 and $439,608 for the three and nine months ended
September 30, 2019, respectively.
Stock-Based Compensation and Other Share-Based Payments: The Company records
stock-based compensation in accordance with ASC 718, Share-Based Payments, using
the fair value method on grant date. All transactions in which goods or services
are the consideration received for the issuance of equity instruments are
accounted for based on the fair value of the consideration received or the fair
value of the equity instrument issued, whichever is more reliably measurable.
The expense attributable to the Company's directors is recognized over the
period the amounts are earned and vested, and the expense attributable to the
Company's non-employees is recognized when vested, as described in Note
11, Stock Plan.
Warrants: The Company accounts for common stock warrants in accordance with
applicable accounting guidance provided in ASC Topic 815 "Derivatives and
Hedging - Contracts in Entity's Own Equity" (ASC Topic 815), as either
derivative liabilities or as equity instruments depending on the specific terms
of the warrant agreement. For warrants classified as equity instruments the
Company applies the Black Scholes model and expenses the fair value as financing
costs.
Recent Accounting Pronouncements
There were various accounting standards and interpretations issued recently,
none of which are expected to have a material effect on the Company's
operations, financial position or cash flows.
© Edgar Online, source Glimpses