QRONS INC. 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
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 following discussion of our financial condition and results of operations
should be read in conjunction with our unaudited condensed financial statements
for the three months ended
Overview
The Company was incorporated under the laws of the
The Company is a preclinical stage biotechnology company developing advanced stem cell synthetic hydrogel-based solutions to combat neuronal injuries and 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 collaborates 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.
As described below, while continuing research under the Company's sponsored
research agreement (the "Sponsored Research Agreement") with the
In addition, the Company is engaged in laboratory research relating to neuronal
tissue regeneration and/or repair in
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The Company has relied primarily on its two co-founders,
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
The Company's common stock was upgraded from the Pink Market and commenced
trading on the OTCQB Venture Market on
Intellectual Property Agreement with Dartmouth
Pursuant to an option agreement with Dartmouth entered into on
The Company will pay Dartmouth: (i) a
Under the Agreement, the Company must diligently proceed with the development,
manufacture and sale of licensed products and licensed services, including
funding at least
Failure to timely make any payment due under the Agreement will result in interest charges to the Company of the lower of 10% per year or the maximum amount of interest allowable by applicable law.
The Agreement may be terminated by Dartmouth if the Company is in material breach of the Agreement which is not cured after 30 days of notice thereof or if the Company becomes insolvent. Dartmouth may terminate the Agreement if the Company challenges a Dartmouth patent or does not terminate a sublicensee that challenges a Dartmouth patent, except in response to a valid court or governmental order. The Company may terminate the Agreement at any time upon six months written notice to Dartmouth.
If the Company or any sublicensee or affiliate institutes or participates in a licensed patent challenge, the then current earned royalty rate for licensed products covered by Dartmouth patents will automatically be increased to three times the then current earned royalty rate.
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Sponsored Research Agreement with Dartmouth
On
If either party desires to obtain patent and copyright protection for
intellectual property created under the Sponsored Research Agreement, such party
shall notify the other party and the parties shall agree upon intellectual
property protection strategy and cost allocation. Each party shall have the
right to grant licenses under jointly-owned patents to third parties, subject to
the Company's option to the exclusive right to license Dartmouth intellectual
property and/or Dartmouth's ownership in jointly-owned intellectual property
upon notification to Dartmouth in accordance with the terms of the Agreement and
at the Company's cost. If the Company exercises its option to license
intellectual property, Dartmouth shall negotiate exclusively with the Company
for 180 days (or such additional period as agreed upon by the parties) for such
licenses. The Company will be required to reimburse Dartmouth for the costs of
patent prosecution and maintenance in
The Sponsored Research Agreement may be terminated earlier than one year upon
written agreement of the parties, a material breach which is not cured within 30
days of notice thereof, if
On
Royalty and License Fee Sharing Agreement with Ariel
On
From and after the occurrence of an Exit Event, as such term is described in the
Royalty Agreement, including an underwritten public offering of the Company's
shares with proceeds of at least
In consideration for the parties' agreement to terminate the License Agreement and for future general scientific collaboration between the parties, the Company agreed to pay Ariel a royalty of 1.25% of net sales (as defined in the Royalty Agreement) of products sold by the Company, or its affiliates and licensees for fifteen years from the first commercial sale in a particular country.
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Services Agreements with Ariel
On
The Services Agreement may be terminated by a non-breaching party upon a material breach that is not cured within 30 days by the other party. The Services Agreement may also be terminated by the Company upon thirty days' written notice to Ariel. Ariel must keep confidential information of the Company confidential for five years after the term of the Services Agreement.
On
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. Subject to the impact of the COVID-19 pandemic as described below, in the next 12 months, we plan on completing development of our product candidates. This will require us to continue working with Dartmouth under the Sponsored Research Agreement in our development of innovative 3D printable biocompatible advanced materials and stem cell delivery techniques. At our research facilities located in Ariel's labs, our Stem Cells Team will continue development of our proprietary, neuro-regenerative MSC lines. Upon completion of the development of our product candidates we will begin testing for efficacy. This will require us to establish an Efficacy Team, in preparation to reach clinical trials. As our research progresses, if and when we achieve functional supporting results, we intend to file for additional patents.
However, there is substantial doubt that we can continue as an on-going business unless we obtain additional capital to pay our expenditures. We have not generated revenues from the sales of products and we do not currently have sufficient resources to accomplish all of the conditions necessary for us to generate revenue. We will continue exploring sources of debt and equity financings as well as available grants.
Covid-19 Pandemic
We rely on our employees and, our agreements with Ariel and Dartmouth, for our
research and development. The recent COVID-19 pandemic could have an adverse
impact on the research and development of our product candidates. As a result of
such pandemic, the laboratory at Ariel has been closed and Professor
COVID-19 has also caused significant disruptions to the global financial
markets, which severely impacts our ability to raise additional capital. We gave
30- days' notice of termination of employment to our employees on
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The full impact of the COVID-19 outbreak continues to evolve as of the date of this report, is highly uncertain and subject to change. Management is actively 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. However, while significant uncertainty remains, the Company believes it is likely that the COVID-19 outbreak will have a negative impact on its ability to raise additional financing and will result in delays as it continues to impact the Company's workforce and its collaborative development efforts.
Results of Operations
Three Months Ended
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
Our net loss for the three months endedMarch 31, 2020 andMarch 31, 2019 is as follows: For Three Months Ended March 31, 2020 2019 Net sales $ - -
Operating expenses: Research and development expenses 171,568 165,154 Professional fees
23,624 15,586
General and administrative expenses 23,746 82,774
Total operating expenses 218,938 263,514
Income (loss) from operations (218,938 ) (263,514 )
Other income (expense)
Interest expense (14,284 ) (496 )
Change in derivative liabilities (6,910 ) 2,549
Total other income (expense) (21,194 ) 2,053
Net (loss) $ (240,132 ) (261,461 )
Operating Expenses
Total operating expenses for the three months ended
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We had a net loss of
Working Capital
March 31, December 31,
2020 2019
Current Assets $ 49,811 $ 123,290
Current Liabilities 727,111 631,412
Working Capital (deficiency) $ 677,300 $ 508,122
Cash Flows
At March At March
31, 2020 31, 2019
Net cash (used in) operating activities $ (109,064 ) (135,102 )
Net cash provided by investing activities - -
Net cash provided by financing activities $ 65,000 40,000
Net increase (decrease) in cash during period (44,064 ) (95,102 )
Operating Activities
Net cash used in operating activities was
Investing Activities
There were no investing activities during the three months ended
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Financing Activities
Net cash provided by financing activities was
Liquidity and Capital Resources
As of
Going Concern
Our financial statements have been prepared assuming that we will continue as a
going concern and, accordingly, does 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
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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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.
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
Stock-Based Compensation and Other Share-Based Payments: The expense attributable to the Company's directors is recognized over the period in which 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.
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