UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended Septemberquarterly period ended June 30, 20172023

OROr

[  ]☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Periodtransition period from _____________ to _____________

Commission File Number: 001-37428Qualigen Therapeutics, Inc.

RITTER PHARMACEUTICALS, INC.

(Exact name of Registrantregistrant as specified in its Charter)charter)

1880 Century Park East, Suite 10002042 Corte Del Nogal, Carlsbad, California92011

Los Angeles, CA 90067

(Address and zip code of principal executive offices) (Zip Code)

(760)918-9165

(Registrant’s telephone number, including area code)

n/a

(Former name or former address, if changed since last report)

Registrant’s Telephone Number, Including Area Code:(310) 203-1000Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes [X] ☐ No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes [X] ☐ No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes [  ] ☒ No [X]

As of October 27, 2017,August 10, 2023, there were 49,506,5215,052,463 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RITTER PHARMACEUTICALS,QUALIGEN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

QUALIGEN THERAPEUTICS, INC.

RITTER PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

QUALIGEN THERAPEUTICS, INC.

RITTER PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSCHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

RITTER PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

QUALIGEN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIESSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

Organization

Qualigen, Inc., a subsidiary of Qualigen Therapeutics, Inc., was incorporated in Minnesota in 1996 to design, develop, manufacture and sell point-of-care quantitative immunoassay diagnostic products for use in physician offices and other point-of-care settings worldwide, and was reincorporated in Delaware in 1999. Qualigen Therapeutics, Inc. (the “Company”) operates in one business segment. In May 2020, Qualigen, Inc. completed a reverse recapitalization transaction with Ritter Pharmaceuticals, Inc. (“Ritter” or) and Ritter was renamed Qualigen Therapeutics, Inc. All shares of Qualigen, Inc.’s capital stock were exchanged for Qualigen Therapeutics, Inc.’s capital stock in the “Company”merger. Ritter/Qualigen Therapeutics common stock, which was previously traded on the Nasdaq Capital Market under the ticker symbol “RTTR,” commenced trading on the Nasdaq Capital Market, on a post-reverse-stock-split adjusted basis, under the trading symbol “QLGN” on May 26, 2020.

On May 26, 2022, the Company acquired 2,232,861 shares of Series A-1 Preferred Stock of NanoSynex, Ltd. (“NanoSynex”) from Alpha Capital Anstalt (“Alpha Capital”), a related party, in exchange for 350,000 reverse split adjusted shares of the Company’s common stock and a prefunded warrant to purchase 331,464 reverse split adjusted shares of the Company’s common stock at an exercise price of $0.001 per share. These warrants were subsequently exercised on September 13, 2022. Concurrently with this transaction, the Company also purchased 381,786 shares of Series B preferred stock from NanoSynex for a total purchase price of $600,000. The transactions resulted in the Company acquiring a 52.8% interest in NanoSynex (the “NanoSynex Acquisition”). NanoSynex is a Delaware corporation headquarteredmicro-biologics diagnostics company domiciled in Los Angeles, California. TheIsrael. On July 20, 2023, the Company was formed asentered into an Amendment and Settlement Agreement with NanoSynex Ltd. (the “NanoSynex Amendment”), which amended the Master Funding Agreement for the Operational and Technology Funding of NanoSynex Ltd., dated May 26, 2022, by and between the Company and NanoSynex (the “NanoSynex Funding Agreement”), a Nevada limited liability company on March 29, 2004 under the name Ritter Natural Sciences, LLC, and converted into a Delaware corporation on September 16, 2008.

Ritter develops therapeutic products that modulate the human gut microbiome to treat gastrointestinal diseases. The Company conducts human gut health research by exploring metabolic capacitymajority owned subsidiary of the gut microbiota and translating the functionality of prebiotic-based therapeutics. The Company’s lead compound, RP-G28, is currently under developmentCompany, to, among other things, provide for the treatmentfurther funding of lactose intolerance. There currently is no drug approvedNanoSynex, as contemplated by the FoodNanoSynex Funding Agreement (see Note 16 - Subsequent Events: Amendment and Drug Administration (“FDA”) for the treatmentSettlement Agreement with NanoSynex Ltd. ).

Basis of lactose intolerance, a debilitating disease that affects over one billion people worldwide.Presentation

The Company currently operates in one business segment focusing on the development and commercialization of RP-G28. The Company is not organized by market and is managed and operated as one business. A single management team reports to the chief operating decision maker, the Chief Executive Officer. The Company does not currently operate any separate lines of business or separate business entities.

NOTE 2 — BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordanceconformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), Regulation S-X and applicable rules and regulations of the SEC regarding interim financial reporting. Accordingly, they do not include allSecurities and Exchange Commission (“SEC”).

Principles of the information and footnotes required by GAAP for complete financial statements. However, in the opinion of management, all adjustments consisting of normal recurring adjustments considered necessary for a fair presentation of the financial position and results of operations have been included and management believes the disclosures that are made are adequate to make the information presented not misleading.Consolidation

The condensed balance sheet at December 31, 2016 has been derived from the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the SEC on February 27, 2017 (the “2016 Annual Report”), but does not include all of the information and footnotes required by GAAP for complete financial statements.

The results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results expected for the full fiscal year or any other period. The accompanying interim period unaudited condensed financial statements and related financial information included in this Quarterly Report on Form 10-Q (“Quarterly Report”) should be read in conjunction with the audited financial statements and notes thereto included in the Company’s 2016 Annual Report.

Going Concern and Liquidity

The accompanying condensed consolidated financial statements have been prepared assuminginclude the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company has not generated any product revenue and has not achieved profitable operations. For the nine months ended September 30, 2017, the Company had a net loss of approximately $5.6 million and had net cash used in operating activities of approximately $5.2 million. At September 30, 2017, the Company had working capital of approximately $0.9 million, an accumulated deficit of approximately $51.1 million, and cash and cash equivalents of approximately $3.6 million. There is no assurance that profitable operations will ever be achieved, and, if achieved, could be sustained on a continuing basis. In addition, development activities, clinical and pre-clinical testing, and commercialization of the Company’s products will require significant financing. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

RITTER PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Since inception, the operationsaccounts of the Company and its majority owned subsidiaries. All intercompany balances and transactions have been funded througheliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP. The Company views its operations and manages its business in one operating segment. In general, the salefunctional currency of common shares, preferred shares and convertible debt. Management cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that the Company raises additional funds by issuing equity securities,and its subsidiaries is the U.S. dollar, however for NanoSynex, the functional currency is the local currency, New Israeli Shekels (NIS). As such, assets and liabilities for NanoSynex are translated into U.S. dollars and the effects of foreign currency translation adjustments are reflected as a component of accumulated other comprehensive income within the Company’s stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact the Company’s ability to conduct business. If the Company is not able to raise additional capital when required or on acceptable terms, the Company may have to (i) significantly delay, scale back or discontinue the development and/or commercializationconsolidated statements of RP-G28; (ii) seek collaborators at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available; and/or (iii) relinquish or otherwise dispose of its rights to RP-G28.

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes in the Company’s significant accounting policies as ofstockholders’ equity.

Accounting Estimates

Management uses estimates and for the nine months ended September 30, 2017, as compared with the significant accounting policies describedassumptions in the Company’s 2016 Annual Report.

Use of Estimates

The preparation ofpreparing its condensed consolidated financial statements in conformityaccordance with GAAP requires management to makeU.S. GAAP. Those estimates and assumptions that affect the reported amounts of assets and liabilities, andthe disclosure of contingent assets and liabilities, and the reported revenues and expenses. The most significant estimates relate to the estimated fair value of in-process research and development, goodwill, warrant liabilities, stock-based compensation, amortization and depreciation, inventory reserves, allowances for doubtful accounts and returns, and warranty costs. Actual results could vary from the estimates that were used.

Reverse Stock Split

On November 23, 2022, the Company effected a 1-for-10, as determined by the Company’s board of directors, reverse stock split of its outstanding shares of common stock (the “Reverse Stock Split”). The Reverse Stock Split reduced the dateCompany’s shares of outstanding common stock, stock options, and warrants to purchase shares of our common stock. Fractional shares of common stock that would have otherwise resulted from the Reverse Stock Split were rounded down to the nearest whole share and cash in lieu of fractional shares was paid to stockholders. All share and per share data for all periods presented in the accompanying financial statements and the reported amountsrelated disclosures have been adjusted retrospectively to reflect the Reverse Stock Split. The number of revenuesauthorized shares of common stock and expenses during the reporting period. Actual resultspar value per share remains unchanged.

Cash

The Company considers all highly liquid investments purchased with an initial maturity of 90 days or less and money market funds to be cash equivalents. Restricted cash includes cash that is restricted due to Israeli banking regulations.

The Company maintains the majority of its cash in government money market mutual funds and in accounts at banking institutions in the U.S. that are of high quality. Cash held in these accounts often exceed the FDIC insurance limits. If such banking institutions were to fail, the Company could differ from those estimates.

Cash and Cash Equivalents

Cash consistslose all or a portion of amounts held in a financial institution and consists of immediately available fund balances. The funds are maintained at a stable financial institution, generally at amounts in excess of federally insured limits. Assuch insurance limitations. In March 2023, Silicon Valley Bank and Signature Bank, and more recently in May 2023, First Republic Bank, were closed due to liquidity concerns and taken over by the Federal Deposit Insurance Corporation (FDIC). While the Company did not have an account at any of September 30, 2017 and December 31, 2016, approximately $3.6 million and approximately $6.8 million, respectively,these banks, in the event of failure of any of the financial institutions where the Company maintains its cash and cash equivalents, were uninsured.there can be no assurance that the Company would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.

Inventory, Net

Inventory is recorded at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. The Company has not experienced any lossreviews the components of its inventory on depositsa periodic basis for excess or obsolete inventory, and records reserves for inventory components identified as excess or obsolete.

Impairment of cash and cash equivalents to date.Long-Lived Assets

Clinical Trial and Pre-Clinical Study Accruals

The Company makesassesses potential impairments to its long-lived assets when there is evidence that events or changes in circumstances indicate that assets may not be recoverable. An impairment loss would be recognized when the sum of the expected future undiscounted cash flows is less than the carrying amount of the assets. The amount of impairment loss, if any, will generally be measured as the difference between the net book value of the assets and their estimated fair values. During the three and six months ended June 30, 2023 and 2022, no such impairment losses have been recorded.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and managed its business as one segment operating primarily within the United States and Israel.

Accounts Receivable, Net

The Company grants credit to domestic physicians, clinics, and distributors. The Company performs ongoing credit evaluations of its customers and generally requires no collateral. Customers can purchase certain products through a financing agreement that the Company has with an outside leasing company. Under the agreement, the leasing company evaluates the credit worthiness of the customer. Upon acceptance of the product by the customer, the leasing company remits payment to the Company at a discount. This financing arrangement is without recourse to the Company.

The Company records an allowance for doubtful accounts and returns equal to the estimated uncollectible amounts or expected returns. The Company’s estimates are based on historical collections and returns and a review of accruedthe current status of trade accounts receivable.

Accounts receivable, net is comprised of the following at:

SCHEDULE OF ACCOUNTS RECEIVABLE

Research and Development

Except for acquired in process research and development (IPR&D), the Company expenses research and development costs as incurred including therapeutics license costs.

R&D Grants

NanoSynex has received R&D grants from Israel Innovation Authority (IIA) and from the European Commission. These grants may provide cash funding to NanoSynex from time to time in advance of each balance sheet datethe applicable costs being incurred. When such cash funding is received from these grants in its financial statementsadvance, the proceeds are recorded as a current or non-current R&D grant liability based on the facts and circumstances knowntime from the condensed consolidated balance sheets date to it at that time. Accrued expenses for pre-clinical studies and clinical trials are based on estimatesthe expected future date of costs incurred and fees that may be associated with services provided by contract research organizations, clinical trial investigational sites, and other related vendors. Payments under certain contracts with such parties depend on factors suchrecognition as successful enrollment of patients, site initiation and the completion of milestones. In accruing service fees, management estimates the time period over which services will be performed and the level of effort to be expended in each period. If possible, the Company obtains information regarding unbilled services directly from these service providers. However, the Company may be required to estimate these services based on other information available to it. If the Company underestimates or overestimates the activity or fees associated with a study or service at a given point in time, adjustmentsreduction to research and development expenses.

Patent Costs

The Company expenses may be necessaryall costs as incurred in future periods. Historically, estimated accrued liabilities have approximated actual expense incurred. Subsequent changesconnection with patent applications (including direct application fees, and the legal and consulting expenses related to making such applications) and such costs are included in estimates may result in a material changegeneral and administrative expenses in the Company’s accruals.condensed consolidated statement of operations.

RITTER PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTSShipping and Handling Costs

The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with inbound and outbound freight are generally recorded in cost of sales which totaled approximately $78,000 and $72,000, respectively, for the three months ended June 30, 2023 and 2022, and approximately $144,000 and $111,000, respectively, for the six months ended June 30, 2023 and 2022. Other shipping and handling costs included in general and administrative, research and development, and sales and marketing expenses were $0 and $4,000 for the three months ended June 30, 2023 and 2022, respectively, and approximately $4,000 and $8,000 for the six months ended June 30, 2023 and 2022, respectively.

Recent Accounting PronouncementsRevenue from Contracts with Customers

In February 2016,The Company applies the Financial Accounting Standardsfollowing five-step model in accordance with ASC 606, Revenue from Contracts with Customers, in order to determine revenue: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

Product Sales

The Company generates revenue from selling FastPack System analyzers, accessories and disposable products used with the FastPack System. Disposable products include reagent packs, which are diagnostic tests for prostate-specific antigen, testosterone, thyroid disorders, pregnancy, and Vitamin D.

The Company provides disposable products and equipment in exchange for consideration, which occurs when a customer submits a purchase order and the Company provides disposable products and equipment at the agreed upon prices in the invoice. Generally, customers purchase disposable products using separate purchase orders after the equipment (“analyzer”) has been provided to the customer. The initial delivery of the equipment and reagent packs represents a single performance obligation and is completed upon receipt by the customer. The delivery of each subsequent individual reagent pack represents a separate performance obligation because the reagent packs are standardized, are not interrelated in any way, and the customer can benefit from each reagent pack without any other product. There are no significant discounts, rebates, returns or other forms of variable consideration. Customers are generally required to pay within 30 days.

The performance obligation arising from the delivery of the equipment is satisfied upon the delivery of the equipment to the customer. The disposable products are shipped Free on Board (“FASB”FOB”) issuedshipping point. For disposable products that are shipped FOB shipping point, the customer has the significant risks and rewards of ownership and legal title to the assets when the disposable products leave the Company’s shipping facilities, thus the customer obtains control and revenue is recognized at that point in time.

The Company has elected the practical expedient and accounting policy election to account for the shipping and handling as activities to fulfill the promise to transfer the disposable products and not as a separate performance obligation.

The Company’s contracts with customers generally have an expected duration of one year or less, and therefore the Company has elected the practical expedient in ASC 606 to not disclose information about its remaining performance obligations. Any incremental costs to obtain contracts are recorded as selling, general and administrative expense as incurred due to the short duration of the Company’s contracts.

Contract Asset and Liability Balances

The timing of the Company’s revenue recognition may differ from the timing of payment by the Company’s customers. The Company records a receivable when revenue is recognized prior to payment and there is an unconditional right to payment. Alternatively, when payment precedes the performance of the related services, the Company records deferred revenue until the performance obligations are satisfied.

Multiple performance obligations include contracts that combine both the Company’s analyzer and a customer’s future reagent purchases under a single contract. In some sales contracts, the Company provides analyzers at no charge to customers. Title to the analyzer is maintained by the Company and the analyzer is returned by the customer to the Company at the end of the purchase agreement.

During the three months ended June 30, 2023 and 2022, product sales are stated net of an allowance for estimated returns of approximately $28,000 and $10,000, respectively. During the six months ended June 30, 2023 and 2022, product sales are stated net of an allowance for estimated returns of approximately $33,000 and $53,000, respectively.

Deferred Revenue

Payments received in advance from customers pursuant to certain collaborative research license agreements, deposits against future product sales, multiple element arrangements and extended warranties are recorded as a current or non-current deferred revenue liability based on the time from the condensed consolidated balance sheets date to the future date of revenue recognition.

Operating Leases

Effective April 1, 2020, the Company adopted Accounting Standards Update 2016-02,(“ASU”) No. 2018-11, Leases (Topic 842) Targeted Improvements (“ASU 2016-02”Topic 842”). The provisions of ASU 2016-02 set outIn accordance with the principles forguidance in Topic 842, the recognition, measurement, presentationCompany recognizes lease liabilities and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liabilitycorresponding right-of-use-assets for all leases with a termterms of greater than 12 months regardless of their classification.months. Leases with a term of 12 months or less will be accounted for underin a manner similar to the existing guidance for operating leases today.prior to the adoption of Topic 842 supersedes842. (See Note 12 - Commitments and Contingencies for more information).

Property and Equipment, Net

Property and equipment are stated at cost and are presented net of accumulated depreciation. Depreciation is provided for on a straight-line basis over the previousestimated useful lives of the related assets as follows:

SCHEDULE OF USEFUL LIVES OF PROPERTY AND EQUIPMENT

Leasehold improvements are amortized on a straight-line basis over the shorter of the lease standard,term or their estimated useful lives. The Company occasionally designs and builds its own machinery. The costs of these projects, which includes the cost of construction and other direct costs attributable to the construction, are capitalized as construction in progress. No provision for depreciation is made on construction in progress until the relevant assets are completed and placed in service.

The Company’s policy is to evaluate the remaining lives and recoverability of long-term assets on at least an annual basis or when conditions are present that indicate impairment.

Business Combinations

The Company accounts for business combinations using the acquisition method pursuant to FASB ASC Topic 840805. This method requires, among other things, that results of operations of acquired companies are included in Qualigen’s financial results beginning on the respective acquisition date, and that assets acquired and liabilities assumed are recognized at fair value as of the acquisition date. Intangible assets acquired in a business combination are recorded at fair value using a discounted cash flow model. The discounted cash flow model requires assumptions about the timing and amount of future net cash flows, the cost of capital and terminal values from the perspective of a market participant. Each of these factors can significantly affect the value of the intangible asset. Any excess of the fair value of consideration transferred (the “purchase price”) over the fair values of the net assets acquired is recognized as goodwill. The fair value of assets acquired and liabilities assumed in certain cases may be subject to revision based on the final determination of fair value during a period of time not to exceed 12 months from the acquisition date. Legal costs, due diligence costs, business valuation costs and all other acquisition-related costs are expensed when incurred.

Leases

Goodwill

Goodwill represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets acquired, when accounted for using the purchase method of accounting. Goodwill has an indefinite useful life and is not amortized but is reviewed for impairment annually and whenever events or changes in circumstances indicate that the carrying value of the goodwill may not be recoverable. In testing for impairment, the fair value of the reporting unit is compared to the carrying value. If the net assets assigned to the reporting unit exceed the fair value of the reporting unit, an impairment loss equal to the difference is recorded. As a result of the annual goodwill impairment analysis, the Company recognized a $4,239,000 non-cash goodwill and fixed asset impairment charge in the valuation of its business acquisition of NanoSynex for the fiscal year ended December 31, 2022. There were no impairment losses during the three and six months ended June 30, 2023 and 2022.

Intangible Assets

In Process R&D

Acquired in process R&D (IPR&D) represents the fair value assigned to the research and development assets that have not reached technological feasibility. The value assigned to IPR&D is determined by estimating the costs to develop the acquired technology into commercially viable products, estimating the resulting revenue from the projects, and discounting the net cash flow to present value. The revenue and cost projections used to value acquired IPR&D are, as applicable, reduced based on the probability of success of developing the new product. Additionally, projections consider relevant market sizes and growth factors, expected trends in technology and the nature and expected timing of new product introductions. The rates utilized to discount the net cash flow to its present value are commensurate with the stage of development of the project and uncertainties in the economic estimates used in the projections. Upon the acquisition of acquired IPR&D, an assessment is completed as to whether the acquisition constitutes an acquisition of a single asset or a group of assets. Multiple factors are considered in this assessment, including the nature of the technology acquired, the presence or absence of separate cash flows, the development process and stage of completion, quantitative significance, and the Company’s rationale for entering into the transaction.

If a business is acquired, as defined under the applicable accounting standards, then the acquired IPR&D is capitalized as an intangible asset. If an asset or group of assets is acquired that do not meet the definition under the applicable accounting standards, then the acquired IPR&D is expensed on its acquisition date. Future costs to develop these assets are recorded to research and development expense in the Company’s condensed consolidated statements of operations and other comprehensive income (loss) as they are incurred.

IPR&D is evaluated for impairment annually using the same methodology as described above for calculating fair value. If the carrying value of the acquired IPR&D exceeds the fair value, then the intangible asset is written down to its fair value, with the resulting adjustment recorded as a charge to operations. Changes in estimates and assumptions used in determining the fair value of acquired IPR&D could result in an impairment.

Other Intangible Assets, Net

Other intangible assets consist of patent-related costs and costs for license agreements. Management reviews the carrying value of other intangible assets that are being amortized on an annual basis or sooner when there is evidence that events or changes in circumstances may indicate that impairment exists. The Company considers relevant cash flow and profitability information, including estimated future operating results, trends and other available information, in assessing whether the carrying value of intangible assets being amortized can be recovered.

If the Company determines that the carrying value of other intangible assets will not be recovered from the undiscounted future cash flows expected to result from the use and eventual disposition of the underlying assets, the Company considers the carrying value of such intangible assets as impaired and reduces them by a charge to operations in the amount of the impairment.

Costs related to acquiring patents and licenses are capitalized and amortized over their estimated useful lives, which is generally 5 to 17 years, using the straight-line method. Amortization of patents and licenses commences once final approval of the patent or license has been obtained. Patent and license costs are charged to operations if it is determined that the patent or license will not be obtained.

Derivative Financial Instruments and Warrant Liabilities

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations and other comprehensive income (loss). Depending on the features of the derivative financial instrument, the Company uses either the Black-Scholes option-pricing model or a Monte-Carlo simulation to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period (See Note 9- Warrant Liabilities).

Fair Value Measurements

The Company determines the fair value measurements of applicable assets and liabilities based on a three-tier fair value hierarchy established by accounting guidance and prioritizes the inputs used in measuring fair value. The Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:

Fair Value of Financial Instruments

Cash, accounts receivable, prepaids, accounts payable, and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments.

Comprehensive Loss

Comprehensive loss consists of net income and foreign currency translation adjustments. Comprehensive gains (losses) have been reflected in the statements of operations and comprehensive loss and as a separate component in the statements of stockholders’ equity for all periods presented.

Stock-Based Compensation

Stock-based compensation cost for equity awards granted to employees and non-employees is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018,measured at the grant date based on the calculated fair value of the award using the Black-Scholes option-pricing model, and is effectiverecognized as an expense, under the straight-line method, over the requisite service period (generally the vesting period of the equity grant). If the Company determines that other methods are more reasonable, or other methods for calculating these assumptions are prescribed by regulators, the fair value calculated for the Company’s stock options could change significantly. Higher volatility, lower risk-free interest rates, and longer expected lives would result in an increase to stock-based compensation expense to employees and non-employees determined at the date of grant.

Income Taxes

Deferred income taxes are recognized for temporary differences in the basis of assets and liabilities for financial statement and income tax reporting that arise due to net operating loss carry forwards, research and development credit carry forwards and from using different methods and periods to calculate depreciation and amortization, allowance for doubtful accounts, accrued vacation, research and development expenses, and state taxes. A provision has been made for income taxes due on taxable income and for the deferred taxes on the temporary differences.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Realization of the deferred income tax asset is dependent on generating sufficient taxable income in future years.

Sales and Excise Taxes

Sales and other taxes collected from customers and subsequently remitted to government authorities are recorded as accounts receivable with corresponding tax payable. These balances are removed from the condensed consolidated balance sheet as cash is collected from customers and remitted to the tax authority.

Warranty Costs

The Company’s warranty policy generally provides for one year of coverage against defects and nonperformance within published specifications for sold analyzers and for the term of the contract for equipment held for lease. The Company accrues for estimated warranty costs in the period in which the revenue is recognized based on historical data and the Company’s best estimates of analyzer failure rates and costs to repair.

Accrued warranty liabilities were approximately $140,000 and $138,000, respectively, as of June 30, 2023 and December 31, 2022 and are included in accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets. Warranty costs were approximately $63,000 and $22,000 for the three months ended June 30, 2023 and 2022, respectively, and approximately $104,000 and $41,000 for the six months ended June 30, 2023 and 2022, respectively, and are included in cost of product sales in the condensed consolidated statements of operations and other comprehensive loss.

Foreign Currency Translation

The functional currency for the Company is the U.S. dollar. The functional currency for NanoSynex, the Company’s newly acquired majority owned subsidiary, is the New Israeli Shekel (NIS). The financial statements of NanoSynex are translated into U.S. dollars using exchange rates in effect at each period end for assets and liabilities; using exchange rates in effect during the period for results of operations; and using historical exchange rates for certain equity accounts. The adjustment resulting from translating the financial statements of NanoSynex is reflected as a separate component of other comprehensive income (loss).

Other comprehensive loss related to the effects of foreign currency translation adjustments attributable to NanoSynex was ($56,747) and $65,540 for the three months ending June 30, 2023 and 2022, respectively, and $119,473 and $65,540 for the six months ending June 30, 2023 and 2022, respectively.

War in Ukraine

In February 2022, Russia invaded Ukraine. While the Company has no direct exposure in Russia and Ukraine, the Company continues to monitor any broader impact to the global economy, including with respect to inflation, supply chains and fuel prices. The full impact of the conflict on the Company’s business and financial results remains uncertain and will depend on the severity and duration of the conflict and its impact on regional and global economic conditions.

Inflation and Global Economic Conditions

During the year ending December 31, 2019.ended 2022 and continuing into the current fiscal year, global commodity and labor markets experienced significant inflationary pressures attributable to ongoing economic recovery and supply chain issues. The Company is currently evaluatingsubject to inflationary pressures with respect to raw materials, labor and transportation. Accordingly, the Company continues to take actions with its customers and suppliers to mitigate the impact of these inflationary pressures in the future. Actions to mitigate inflationary pressures with suppliers include aggregation of purchase requirements to achieve optimal volume benefits, negotiation of cost-reductions and identification of more cost competitive suppliers. While these actions are designed to offset the impact of inflationary pressures, the Company cannot provide assurance that it will be successful in fully offsetting increased costs resulting from inflationary pressure. In addition, the implementationglobal economy suffers from slowing growth and rising interest rates, and some economists believe that there may be a global recession in the near future. If the global economy slows, our business would be adversely affected.

Impact of this standard will haveCOVID-19 Pandemic

The COVID-19 pandemic has had a dramatic impact on businesses globally and on the Company’s financial statements.business as well. During the height of the pandemic sales of diagnostic products decreased significantly and the Company’s net loss increased significantly, as deferral of patients’ non-emergency visits to physician offices, clinics and small hospitals sharply reduced demand for FastPack tests. For 2023 we continue to experience recovery in demand.

On March 30, 2016,Other accounting standard updates are either not applicable to the FASB issued Accounting Standards Update No. 2016-09,Compensation - Stock Compensation (Topic 718): ImprovementsCompany or are not expected to Employee Share-Based Payment Accounting (“ASU 2016-09”). Among other things, ASU 2016-09 requires that entities recognize excess tax benefits and deficiencies related to employee share-based payment transactions as income tax expense or benefit. ASU 2016-09 also eliminates the requirement to reclassify excess tax benefits and deficiencies from operating activities to financing activities in the statement of cash flows. The guidance is effective for the annual periods and interim periods within those annual periods beginning after December 15, 2016. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.

On August 26, 2016,

NOTE 2 — LIQUIDITY

As of June 30, 2023, we had approximately $1.3 million in cash and an accumulated deficit of $110.7 million. For the FASB issued Accounting Standards Update No. 2016-15,Statement of Cash Flows (Topic 230),a consensus of the FASB’s Emerging Issues Task Force (“ASU 2016-15”). The new guidance amends Accounting Standards Codification No. 230 (“ASC 230”) to add or clarify guidance on the classification of certain cash receiptssix months ended June 30, 2023 and payments in the statement of cash flows. ASC 230 lacks consistent principles for evaluating the classification of cash payments and receipts in the statement of cash flows. This has led to diversity in practice and, in certain circumstances, financial statement restatements. Therefore, the FASB issued the ASU 2016-15 with the intent of reducing diversity in practice with respect to eight types of cash flows. ASU 2016-15 is effective for annual and interim periods in fiscal years beginning after December 15, 2017, and is effective for the Company for the year endingended December 31, 2018. The Company is currently evaluating the impact that the implementation2022, we used cash of this standard will have on the Company’s financial statements.$5.6 million and $13.2 million, respectively, in operations.

In May 2017, the FASB issued Accounting Standards Update No. 2017-09,Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting(“ASU 2017-09”). ASU 2017-09 provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting. An entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The amendments are effective for the Company’s interim and annual reporting periods beginning January 1, 2018. The Company does not expect the adoption of ASU 2017-09 to have a material impact on its financial statements.

Other accounting standards updates effective after September 30, 2017 are not expected to have a material effect on the Company’s financial statements.

RITTER PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 4 — PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

Depreciation expense of approximately $1,300 was recognized for each of the three months ended September 30, 2017 and 2016 and approximately $3,900 was recognized for the nine months ended September 30, 2017 and 2016, and classified in general and administrative expense in the accompanying unaudited condensed statements of operations.

NOTE 5 — COMMITMENTS AND CONTINGENCIES

Master Services Agreement

On December 30, 2015,July 20, 2023, the Company entered into a Master Servicestock purchase agreement (the “Purchase Agreement”) with Chembio Diagnostics, Inc. (“Chembio”), Biosynex, S.A. and Qualigen, Inc., a wholly-owned subsidiary of the Company (see Note 16 - Subsequent Events). Pursuant to the Purchase Agreement, the Company agreed to sell to the Buyer all of the issued and outstanding shares of common stock (collectively, the “Shares”) of Qualigen, Inc., which was the legal entity operating the Company’s FastPack™ diagnostics business (the “Transaction”). The Transaction closed on July 20, 2023. Following the consummation of the Transaction, our Qualigen, Inc. subsidiary became a wholly-owned subsidiary of Chembio.

The aggregate net purchase price paid to the Company for the Shares was $5.2 million in cash, based on a base purchase price of $5.8 million, subject to certain post-closing adjustments, upward or downward, as applicable, for: (i) cash held by Qualigen, Inc. as of the closing of the Transaction; (ii) net working capital of Qualigen, Inc. as of the closing of the Transaction, (iii) certain indebtedness of Qualigen, Inc. as of the closing of the Transaction, and (iv) certain Transaction expenses as of the closing of the Transaction. Of the $5.2 million in cash, $450,000 is being held in escrow to satisfy certain Company indemnification obligations (the “Indemnity Escrow”). Any amounts remaining in the Indemnity Escrow that have not been offset or reserved for claims will be released to the Company within five business days following the date that is 18 months after the closing.

The Company’s cash balances as of the date that these financial statements were issued along with the proceeds from the above sale to Chembio, without additional financing, are expected to fund operations into the first quarter of 2024. The Company expects to continue to have net losses and negative cash flow from operations, which over time will challenge its liquidity. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the one-year period following the date that these financial statements were issued.

There is no assurance that profitable operations will ever be achieved, or, if achieved, could be sustained on a continuing basis. In order to fully execute its business plan, the Company will require significant additional financing for planned research and development activities, capital expenditures, clinical testing for its QN-302 clinical trials, preclinical development of RAS and QN-247, and funding for NanoSynex operations, as well as commercialization activities.

Historically, the Company’s principal sources of cash have included proceeds from the issuance of common and preferred equity and proceeds from the issuance of debt. In December 2021, the Company raised $8.8 million from the issuance of common stock to several institutional investors, and in December 2022 the Company raised $3.0 million from the sale of an 8% Senior Convertible Debenture (the “Debenture”) to a related party (see Note 10 - Convertible Debt - Related Party). There can be no assurance that further financing can be obtained on favorable terms, or at all. If we are unable to obtain funding, we could be required to delay, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect our business prospects.

On July 20, 2023, the Company entered into an Amendment and Settlement Agreement with Covance, Inc. (“Covance”NanoSynex Ltd. (the “NanoSynex Amendment”), which amended the Master Funding Agreement for the Operational and Technology Funding of NanoSynex Ltd., dated May 26, 2022, by and between the Company and NanoSynex (the “NanoSynex Funding Agreement”), a majority owned subsidiary of the Company, to, among other things, provide for the further funding of NanoSynex, as contemplated by the NanoSynex Funding Agreement (see Note 16 - Subsequent Events: Amendment and Settlement Agreement with an effective date of December 29, 2015. NanoSynex Ltd. ).

Pursuant to the terms of the Master Service Agreement, Covance (or oneNanoSynex Amendment, the Company agreed to advance to NanoSynex an aggregate amount of $1,610,000 as follows: (i) $380,000 within five business days of the execution of the NanoSynex Amendment, (ii) $560,000 on or morebefore November 30, 2023, against which NanoSynex will issue a promissory note to the Company with a face value in the amount of such funding, and (iii) $670,000 on or before March 31, 2024, against which NanoSynex will issue a promissory note to the Company with a face value in the amount of such funding. The NanoSynex Amendment further provides that the initial payment of $380,000 will be satisfied by the Company’s surrender of the 281,000 Preferred B Shares of NanoSynex currently held by the Company, resulting in the Company’s ownership in NanoSynex being reduced from approximately 52.8% to approximately 49.97% of the issued and outstanding voting equity of NanoSynex.

In the event we fail to make any future advances, we have agreed to forfeit additional shares in a number that will be equal to a fraction, the numerator of which is the amount of the default (i.e., the amount that we should have, but failed, to advance to NanoSynex pursuant to the terms of the NanoSynex Amendment), and the denominator of which shall be the price per share that we originally paid in consideration for our Preferred A-1 shares of NanoSynex to the previous holder thereof, being $1.5716 per share.

To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the ownership interests of its affiliates)common stockholders will provide Phase 1, 2,be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If the Company raises additional funds through government or other third-party funding, commercialization, marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, it may have to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to the Company. Additional funding may not be available to the Company on acceptable terms, or at all. In addition, any future financing (depending on the terms and conditions) may be subject to the approval of Alpha Capital, the holder of the Debenture, or trigger certain adjustments to the Debenture or warrants held by Alpha Capital.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The financial statements do not include any adjustments that would be necessary should the Company be unable to continue as a going concern, and therefore, be required to liquidate its assets and discharge its liabilities in other than the normal course of business and at amounts that may differ from those reflected in the accompanying financial statements

NOTE 3— INVENTORY, NET

Inventory, net consisted of the following at June 30, 2023 and December 31, 2022:

SCHEDULE OF INVENTORY

NOTE 4 clinical services— PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following at June 30, 2023 and December 31, 2022:

SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

NOTE 5 — PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following at June 30, 2023 and December 31, 2022:

SCHEDULE OF PROPERTY AND EQUIPMENT

Depreciation expense relating to property and equipment was approximately $19,000 and $24,000 for the three months ended June 30, 2023 and 2022, respectively, and $37,000 and $48,000 for the six months ended June 30, 2023 and 2022, respectively.

Upon termination of the Sekisui Distribution Agreement on March 31, 2022, the Company had a clinical study or studiescommitment to purchase leased FastPack rental systems back from Sekisui at Sekisui’s net book value, which was determined to be approximately $154,000. An assignment agreement was executed by the parties on June 26, 2023 to legally transfer title to this equipment from Sekisui to the Company, and this amount is included in accounts payable at June 30, 2023.

NOTE 6 — GOODWILL, IPR&D AND OTHER INTANGIBLES

SCHEDULE OF GOODWILL AND OTHER INTANGIBLES

The Company periodically reviews goodwill for impairment in accordance with relevant accounting standards. Goodwill is attributable to the requestNanoSynex Acquisition. Goodwill and intangible assets are recognized at fair value during the period in which an acquisition is completed, from updated estimates during the measurement period, or when they are considered to be impaired. These non-recurring fair value measurements, primarily for goodwill and intangible assets acquired, were based on Level 3 inputs. The Company estimates the fair value of long-lived assets on a non-recurring basis based on a market valuation approach, engaging independent valuation experts to assist in the determination of fair value. In the fourth quarter of fiscal 2022, in conjunction with the annual impairment assessment, the Company determined that the fair value of the reporting unit was less than the carrying value. In addition to continued losses in the reporting unit, the Company considered macroeconomic conditions including a deterioration in the equity markets evidenced by sustained declines in the Company’s stock price, peer companies, and major market indices since the acquisition date. The Company engaged independent valuation experts to assist in determining the fair value of the reporting unit. As a result of this analysis, the Company recorded a $4,239,000 goodwill and fixed asset impairment charge associated with the designreporting unit for fiscal year ended December 31, 2022. There were no impairment losses during the three and six months ended June 30, 2023 and 2022.

The carrying value of such studies,the patents of approximately $131,000 and $140,000 at June 30, 2023 and December 31, 2022, respectively, are stated net of accumulated amortization of approximately $348,000 and $339,000, respectively. Amortization of patents charged to operations for the three months ended June 30, 2023 and 2022 was approximately $9,000 and $5,000 respectively, and for the six months ended June 30, 2023 and 2022 was approximately $9,000 and $9,000, respectively.

The carrying value of the in-licenses of approximately $2,000 and $5,000 at June 30, 2023 and December 31, 2022, respectively, are stated net of accumulated amortization of approximately $417,000 and $414,000, respectively, and amortization of licenses charged to both the three months ended June 30, 2023 and 2022 was approximately $3,000. Amortization of licenses charged to operations for both the six months ended June 30, 2023 and 2022 was approximately $3,000.

On July 20, 2023, the Company entered into a Purchase Agreement with Chembio, Biosynex, S.A. (“Biosynex”), and Qualigen, Inc., a wholly-owned subsidiary of the Company. Pursuant to the Purchase Agreement, the Company agreed to sell to Chembio all of the issued and outstanding shares of common stock of Qualigen, Inc. (see Note 16 - Subsequent Events: Stock Purchase Agreement with Chembio Diagnostics, Inc. and Biosynex, S.A.). Therefore, there is no future estimated amortization of patent and license costs for the five succeeding years.

NOTE 7 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following at June 30, 2023 and December 31, 2022:

SCHEDULE OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

NOTE 8 – SHORT TERM DEBT-RELATED PARTY

NanoSynex has four separate Notes Payable (‘the Notes”) outstanding to Alpha Capital, dated between March 26, 2020 and September 2, 2021, aggregating to a total principal outstanding balance of $905,000, and aggregate accrued interest of $60,155 for a total outstanding balance of $965,155 as of June 30, 2023. The Notes all accrue interest at 2.62% per annum, accrued daily, and provide that the full amount of principal and interest under each Note shall be due immediately prior to a Liquidation Event (the Maturity Date) unless due earlier in accordance with the terms of separate individual project agreementsthe Notes. “Liquidation Event” means either i) the merger or consolidation of NanoSynex into any other entity, other than one in control or under control of NanoSynex or NanoSynex’s majority shareholder; ii) a transaction or series of transactions resulting in the transfer of all or substantially all of NanoSynex’s assets or issued and outstanding share capital (other than to be entered into by the parties. The term of the agreement is for three years and will renew automatically for successive one year periods unless Covance is no longer providing servicesa company under the agreementcontrol of NanoSynex or either party has terminatedNanoSynex’s majority shareholders; or iii) an underwritten public offering by NanoSynex of its ordinary shares. Notwithstanding the agreementabove, if NanoSynex receives subsequent debt, convertible debt, or equity funding with gross proceeds of USD $3,000,000 or more, then the unused portion of these Notes shall be due and payable upon written notice. The Company may terminate the Master Service Agreement or any individual project agreement entered into under the Master Service Agreement prior to the applicable study’s completion at any time for any reason upon 30 days written notice to Covance, except when the reason for termination is the safetyactual receipt of subjects, in which case it may be terminated immediately. Covance may not terminate any individual project agreement without cause, except when the reason for the termination is the safety of subjects, in which case it may be terminated immediately. In the event of a termination of the Master Service Agreement, Covance will be entitled to full payment for (i) work performed on the applicable project through the date work on such project is concluded and (ii) reimbursement for all non-cancellable and non-refundable expenses and financial obligations which Covance (or an affiliate) has incurred or undertaken on behalf of the Company.

Clinical Supply and Cooperation Agreement with Ricerche Sperimentali Montale (“Ricerche”) and Inalco SpA (“Inalco”)

Effectivefunding. On July 24, 2015,20, 2023, the Company entered into an Amendment and Settlement Agreement with NanoSynex Ltd. (the “NanoSynex Amendment”), which amended Clinical Supplythe Master Funding Agreement for the Operational and Cooperation AgreementTechnology Funding of NanoSynex Ltd., dated May 26, 2022, by and between the Company and NanoSynex (the “Amended Supply“NanoSynex Funding Agreement”) with Ricerche and Inalco (collectively, “RSM”). The Amended Supply Agreement amends certain terms, a majority owned subsidiary of the Clinical Supply and Cooperation Agreement, dated December 16, 2009, amended on September 25, 2010.

RITTER PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

PursuantCompany, to, among other things, provide for the termsfurther funding of the Amended Supply Agreement, the Company purchased the exclusive worldwide assignment of all right, title and interest to a purified GOS product (“Improved GOS”), the composition of matter of the Improved GOS and any information relating to the Improved GOS, including certain specified technical information and other intellectual property rights (the “Improved GOS IP”) on July 30, 2015 for $800,000. The Company also issued 100,000 shares of its common stock to RSM pursuant to a stock purchase agreement. The shares issued to RSM were subject to a lock-up agreement, pursuant to which RSM agreed that it would not sell these shares for a period ending on the earlier of (i) the public releaseNanoSynex, as contemplated by the Company of the final results of its Phase 2b/3 clinical trial of RP-G28NanoSynex Funding Agreement (see Note 16 - Subsequent Events: Amendment and (ii) the filing of a Form 10-QSettlement Agreement with the SEC for the fiscal quarter in which the Company receives the results of its Phase 2b/3 clinical trial of RP-G28, which condition was satisfied with the filing of the Company’s quarterly report on Form 10-Q on August 7, 2017.NanoSynex Ltd. ).

Under the terms of the Amended Supply Agreement, if the Company fails to make any future option payment to RSM as required under the terms of the Amended Supply Agreement, the Company may be required to return the Improved GOS IP to RSM. The Amended Supply Agreement provides that the Company must pay RSM $400,000 within 10 days following FDA approval of a new drug application for the first product owned or controlled by the Company using Improved GOS as its active pharmaceutical ingredient and to pay RSM the sum of $250 per kilo for clinical supply of Improved GOS.NOTE 9 – WARRANT LIABILITIES

Lease Agreement

The Company leases office space for its headquarters in California. On July 9, 2015, the Company entered into a lease with Century Park, a California limited partnership, pursuant to which the Company is leasing approximately 2,780 square feet of office space in Los Angeles, California for its headquarters. The lease provides for a term of sixty-one (61) months, commencing on October 1, 2015. The Company paid no rent for the first month of the term, paid base rent of $9,174 per month for months 2 through 13 of the term, and will pay base rent of $9,449 per month for months 14 to 25 with increasing base rent for each twelve-month period thereafter under the term of the lease to a maximum of $10,325 per month for months 50 through 61. The base rent payments do not include the Company’s proportionate share of any operating expenses, including real estate taxes. The Company has the option to extend the term of the lease for one five-year term, provided that the rent would be subject to market adjustment at the beginning of the renewal term.

Rent expense, which is recognized on a straight-line basis over the lease term, was approximately $29,000 and $28,000 for the three months ended September 30, 2017 and 2016, respectively, and $86,000 for the nine months ended September 30, 2017 and 2016, and is recorded in general and administrative expenses in the accompanying unaudited condensed statements of operations.

Legal

The Company is not currently involved in any legal matters arising in the normal course of business. From time to time, the Company could become involved in disputes and various litigation matters that arise in the normal course of business. These may include disputes and lawsuits related to intellectual property, licensing, contract law and employee relations matters. Periodically, the Company reviews the status of significant matters, if any exist, and assesses its potential financial exposure. If the potential loss from any claim or legal claim is considered probable and the amount can be estimated, the Company accrues a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation.

RITTER PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 6 — STOCKHOLDERS’ EQUITY

Authorized Shares

On September 15, 2017, the Company amended its Amended and Restated Certificate of Incorporation to authorize the issuance of up to 225,000,000 shares of common stock, $0.001 par value per share, and 15,000,000 shares of preferred stock, $0.001 par value per share.

As of September 30, 2017, the Company had 14,756,521 shares of common stock issued and outstanding. Each share of the Company’s common stock is entitled to one vote, and all shares rank equally as to voting and other matters. There are currently no shares of preferred stock issued and outstanding. Any preferred stock issued in the future will have the rights, preferences and privileges that the Company’s Board of Directors may determine from time to time.

Aspire Capital Financing Arrangement

On December 18, 2015, the Company entered into a common stock purchase agreement (the “2015 Aspire Purchase Agreement”) with Aspire Capital Fund, LLC (“Aspire Capital”), pursuant to which Aspire Capital was committed to purchase up to an aggregate of $10.0 million of the Company’s shares of common stock over the approximate 30-month term of the 2015 Aspire Purchase Agreement. As of September 30, 2017, the Company had issued an aggregate of 4,577,699 shares of its common stock to Aspire Capital under the 2015 Aspire Purchase Agreement for approximate proceeds of $5.0 million.

On May 4, 2017, the Company terminated the 2015 Aspire Purchase Agreement and entered into a new common stock purchase agreement with Aspire Capital (the “2017 Aspire Purchase Agreement”), which provides that upon the terms and conditions set forth therein, Aspire Capital is committed to purchase up to an aggregate of $6.5 million of shares of the Company’s common stock over the 30-month term of the 2017 Aspire Purchase Agreement. On any trading day on which the closing sale price of the Company’s common stock exceeds $0.25, the Company has the right, in its sole discretion, to present Aspire Capital with a purchase notice, directing Aspire Capital (as principal) to purchase up to 100,000 shares of the Company’s common stock per trading day, for up to $6.5 million of the Company’s common stock in the aggregate at a per share price, calculated by reference to the prevailing market price of the Company’s common stock (as provided in the 2017 Aspire Purchase Agreement).

As a condition to the 2017 Aspire Purchase Agreement,In 2004, the Company issued 137,324 shareswarrants to various investors and brokers for the purchase of itsSeries C preferred stock in connection with a private placement (the “Series C Warrants”). The Series C Warrants were subsequently extended and, upon closing of the reverse recapitalization transaction with Ritter, exchanged for warrants to purchase common stock to Aspire Capital as a commitment fee. As of the dateCompany, pursuant to the Series C Warrant terms as adjusted.

In exchange for the Series C Warrants, upon closing of this Quarterly Report, no shares of common stock have been soldthe merger with Ritter, the holders received warrants to Aspire Capital under the 2017 Aspire Purchase Agreement.

October 2016 Public Offering

On October 31, 2016, the Company closed a public offering, selling 2,127,660purchase shares of the Company’s common stock at a price$7.195 per share, subject to adjustment. As of June 30, 2023, the Series C Warrants have remaining terms ranging from .40 to .99 years. The Series C Warrants were determined to be liability-classified pursuant to the publicguidance in ASC 480 and ASC 815-40, based on the inclusion of $2.35 per share,a leveraged ratchet provision for aggregate gross proceedssubsequent dilutive issuances. On April 25, 2022, the Series C Warrants were repriced from $7.195 to $6.00 with 49,318 additional ratchet Warrants issued, and on May 26, 2022, the Series C Warrants were repriced from $6.00 to $5.136 with 49,952 additional ratchet Warrants issued. As a result of these repricings, 247,625 warrants were forfeited and 346,896 warrants were reissued. On December 22, 2022, the Series C Warrants were repriced again from $5.136 to $1.32 with 1,002,717 additional ratchet Warrants issued.

Additionally, on December 22, 2022, in conjunction with the issuance of the Debenture to Alpha Capital (see Note 10 – Convertible Debt – Related Party), the Company issued to Alpha Capital a warrant to purchase 2,500,000 shares of approximately $5.0 million.the Company’s common stock (the “Alpha Warrant”). The Company paidexercise price of the Alpha Warrant is $1.65 (equal to 125% of the underwriters underwriting discountsconversion price of the Debenture on the closing date). The Alpha Warrant may be exercised by Alpha Capital, in whole or in part, at any time on or after June 22, 2023 and commissionsbefore June 22, 2028, subject to certain terms and conditions described in the Alpha Warrant, including the Company’s receipt of approximately $0.4 million in connection with the offering, and approximately $0.2 million of other expenses in connection with the offering.necessary stockholder approvals.

RITTER PHARMACEUTICALS, INC.The following table summarizes the activity in liability classified warrants for the six months ended June 30, 2023:

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

SCHEDULE OF WARRANTS ACTIVITY

The following table summarizes the activity in liability classified warrants for the six months ended June 30, 2022:

The following table presents the Company’s fair value hierarchy for its liabilities measured at fair value on a recurring basis as of June 30, 2023:

SCHEDULE OF FAIR VALUE HIERARCHY FOR WARRANT LIABILITIES