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

QUALIGEN THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

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

QUALIGEN THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

Organization

Qualigen, Inc., now a subsidiary of Qualigen Therapeutics, Inc., was incorporated in Minnesota in 1996 to design, develop, manufacture and sell point-of-carePhysician Office Laboratory (“POL”) market 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”) 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 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. Qualigen Therapeutics, Inc. (the “Company”) operates in one business segment.

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. NanoSynex is a micro-biologics diagnostics company domiciled in Israel.

Basis of Presentation

The accompanying 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 the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim reports of companies filing as a smaller reporting company. These financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities Exchange Commission on March 31, 2022, as amended on April 29, 2022 (the “2021 Annual Report”). In the opinion of management, the accompanying condensed consolidated interim financial statements include all adjustments necessary in order to make the financial statements not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or any other future period. Certain notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Company’s 2021 Annual Report have been omitted. The accompanying condensed consolidated balance sheet at December 31, 2021 has been derived from the audited balance sheet at December 31, 2021 contained in the 2021 Annual Report.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its whollymajority owned subsidiary.subsidiaries. All intercompany balances and transactions have been eliminated 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. All long-lived assetsIn general, the functional currency of the Company 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 locatedtranslated 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 condensed consolidated statements of changes in the United States.stockholders’ equity.

Accounting Estimates

Management uses estimates and assumptions in preparing its unaudited condensed consolidated financial statements in accordance with U.S. GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the 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 Company’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 related disclosures have been adjusted retrospectively to reflect the Reverse Stock Split. The number of authorized shares of common stock and the par 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 bank deposits whichaccounts at banking institutions in the U.S. that are of high quality. Cash held in these accounts often exceed federally insured limitsthe FDIC insurance limits. If such banking institutions were to fail, the Company could lose all or a portion of amounts held in excess of such insurance limitations. The FDIC recently took control of two such banking institutions, Silicon Valley Bank on March 10, 2023 and could potentially be subject to significant concentrationsSignature Bank on March 12, 2023. While the Company did not have an account at either of credit risk on cash. The Company reviewsthese two banks, in the event of failure of any of the financial stability ofinstitutions where the Company maintains its depository institutions oncash and cash equivalents, there can be no assurance that the Company would be able to access uninsured funds in a regular basis,timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and has not experienced any losses in such accounts.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 reviews the components of its inventory on a periodic basis for excess or obsolete inventory, and records reserves for inventory components identified as excess or obsolete.

Impairment of Long-Lived Assets

The Company assesses 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 fiscal year ended December 31, 2022 the Company recorded a non-cash goodwill and fixed asset impairment loss of $4,239,000 related to the NanoSynex acquisition. There were no impairment losses during the three months ended March 31, 20222023 and 2021, 0 such impairment losses have been recorded.2022.

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 the current status of trade accounts receivable.

Accounts receivable net is comprised of the following at:

SCHEDULE OF ACCOUNTS RECEIVABLE

Research and Development

TheExcept 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 the applicable costs being incurred. When such cash funding is received from these grants in advance, the proceeds are recorded as a current or non-current R&D grant liability based on the time from the condensed consolidated balance sheets date to the expected future date of recognition as a reduction to research and development expenses.

Patent Costs

The Company expenses all costs as incurred in connection with patent applications (including direct application fees, and the legal and consulting expenses related to making such applications) and such costs are included in general and administrative expenses in the condensed consolidated statement of operations.

Shipping 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 $39,00066,000 and $30,00039,000, respectively, for the three months ended March 31, 20222023 and 2021.2022, Other shipping and handling costs included in general and administrative, research and development, and sales and marketing expenses totaled approximately $4,0008,000 and $1,0004,000 for the three months ended March 31, 20222023 and 2021,2022, respectively.

Revenue from Contracts with Customers

We applyThe Company applies the following five-step model in accordance with ASC 606, Revenue from Contracts with Customers, in order to determine the 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, (“PSA”), 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 (“FOB”) shipping 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.

License Revenue

The Company enters into out-license agreements with counterparties to develop and/or commercialize its products in exchange for nonrefundable upfront license fees and/or sales-based royalties.

If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from nonrefundable upfront fees allocated to the license when the license is transferred to the customer and the customer can benefit from the license. For licenses that are bundled with other performance obligations, management uses judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable upfront fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of progress and related revenue recognition. During the three months ended March 31, 2022 and 2021, the Company recognized license revenue of $0 and approximately $479,000, respectively.

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 includedinclude contracts that combinedcombine both the Company’s analyzer and a customer’s future reagent purchases under a single contract. In some sales contracts, the Company providedprovides analyzers at no charge to customers. Title to the analyzer wasis maintained by the Company and the analyzer wasis returned by the customer to the Company at the end of the purchase agreement.

During the three months ended March 31, 20222023 and 2021,2022, product sales are stated net of an allowance for estimated returns of approximately $43,00035,000 and $043,000, respectively.

Deferred Revenue

Payments received in advance from customers pursuant to certain collaborative research and 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 sheetssheet date to the future date of revenue recognition.

Operating Leases

Effective April 1, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2018-11, Leases (Topic 842) Targeted Improvements (“Topic 842”). In accordance with the guidance in Topic 842, the Company recognizes lease liabilities and corresponding right-of-use-assets for all leases with terms of greater than 12 months. Leases with a term of 12 months or less will be accounted for in a manner similar to the guidance for operating leases prior to the adoption of Topic 842. Refer to(See Note 9 for more information.13 - Commitments and Contingencies).

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 estimated 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 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.

Intangible Assets, NetBusiness Combinations

IntangiblesThe Company accounts for business combinations using the acquisition method pursuant to FASB ASC Topic 805. 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 dates, and that assets acquired and liabilities assumed and noncontrolling interests 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. We have third-party valuations completed for intangible assets in a business combination using a discounted cash flow analysis, incorporating various assumptions. 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.

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 months ended March 31, 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 comprehensive 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.

The carrying value of the patents of approximately $154,000 and $159,000 at March 31, 2022 and December 31, 2021, respectively, are stated net of accumulated amortization of approximately $325,000 and $320,000, respectively. Amortization of patents charged to operations for the three months ended March 31, 2022 and 2021 was approximately $5,000 and $3,000, respectively. Total future estimated amortization of patent costs for the five succeeding years is approximately $14,000 for the remaining nine months in the year ending December 31, 2022, approximately $18,000 for the year ending December 31, 2023, approximately $15,000 for year 2024, approximately $14,000 for years 2025 and 2026, and approximately $79,000 thereafter.

The carrying value of the in-licenses of approximately $11,000 and $12,000 at March 31, 2022 and December 31, 2021, respectively, are stated net of accumulated amortization of approximately $408,000 and $407,000, respectively. Amortization of licenses charged to operations for the three months ended March 31, 2022 and 2021 was approximately $2,000 for each period. Total future estimated amortization of license costs is approximately $6,000 for the remaining nine months in the year ending December 31, 2022, approximately $5,000 for the year ending December 31, 2023.

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.operations and comprehensive 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 7)10 - Warrant Liabilities and Note 11- Convertible Debt - Related Party).

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.

Advertising

Advertising expense consists primarily of print and digital media promotional materials for distributors. Advertising costs are expensed as incurred.

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 measured at the grant date based on the calculated fair value of the award using the Black-Scholes option-pricing model, and is recognized 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 $72,000151,000 and $60,000138,000, respectively, as of March 31, 20222023 and December 31, 20212022 and are included in accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets. Warranty costs were approximately $53,00041,000 and $25,00053,000 for the three months ended March 31, 20222023 and 2021,2022, respectively, and are included in cost of product sales in the condensed consolidated statements of operations.operations and 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 $119,722 and $50,721 at March 31, 2023 and December 31, 2022, respectively.

Recent Accounting PronouncementsGlobal Economic Conditions

War in Ukraine

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which supersedes current guidance by requiring recognition of credit losses when it is probable that a loss has been incurred. The new standard requires the establishment of an allowance for estimated credit losses on financial assets including trade and other receivables at each reporting date. The new standard will result in earlier recognition of allowances for losses on trade and other receivables and other contractual rights to receive cash. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842), which extends the effective date of Topic 326 for certain companies until fiscal years beginning after December 15, 2022. The new standard will be effective forFebruary 2022, Russia invaded Ukraine. While the Company has no direct exposure in Russia and Ukraine, the first quarterCompany 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.

Inflationary Cost Environment

During the year ended 2022 and continuing into the current fiscal year, beginning January 1, 2023,global commodity and early adoption is permitted.labor markets experienced significant inflationary pressures attributable to ongoing economic recovery and supply chain issues. The Company has not completedis subject to inflationary pressures with respect to raw materials, labor and transportation. Accordingly, the Company continues to take actions with its review ofcustomers and suppliers to mitigate the impact of this standard on its condensed consolidated financial statements. However, based onthese inflationary pressures in the Company’s historyfuture. Actions to mitigate inflationary pressures with suppliers include aggregation of immaterial credit lossespurchase 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 trade receivables, management does not expect that the adoption of this standard will have a material effect on the Company’s condensed consolidated financial statements.inflationary pressure.

Impact of the COVID-19 Pandemic

Events surrounding the SARS-CoV-2 virus that emerged in late 2019 and the ensuing globalThe COVID-19 pandemic havehas had a dramatic impact on businesses globally and ouron the Company’s business as well. OurDuring the pandemic sales of diagnostic products felldecreased significantly during 2020 and ourthe 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. Since thenFor 2023 we have experienced somecontinue to experience recovery in demand. The severity and duration of the pandemic and economic repercussions of the virus and government actions taken in response to the pandemic remain uncertain and will ultimately depend on many factors, including the speed of global dissemination and effectiveness of the vaccination and containment efforts throughout the world, the duration and spread of the virus, as well as seasonality, variants or new outbreaks.

In the United States, federal, state, and local government directives and policies have been put in place throughout the course of the pandemic to manage public health concerns and address the economic impacts of the pandemic, including reduced business activity and overall uncertainty presented by this new healthcare challenge. Similar actions have been taken by governments around the world. Our facilities could be required to temporarily curtail production levels or temporarily cease operations based on government mandates or as a result of the pandemic. To mitigate risks, we continue to evaluate the extent to which COVID-19 may impact our business and operations and adjust risk mitigation planning and business continuity activities as needed.

Other accounting standard updates are either not applicable to the Company or are not expected to have a material impact on the Company’s unaudited condensed consolidated financial statements.

NOTE 2 — LIQUIDITY AND GOING CONCERN

The Company has incurred recurring losses from operationsAs of March 31, 2023, we had approximately $4.4 million in cash and has an accumulated deficit atof $107.2 million. For the three months ended March 31, 2022.2023 and the three months ended March 31, 2022, we used cash of $2.6 million and $3.9 million, respectively, in operations. The Company’s cash balances are expected to fund operations into the third quarter of 2023. As a pre-clinical development-stage therapeutics biotechnology company, the Company expects to continue to incurhave net losses subsequent to the condensed consolidated balance sheet date of March 31, 2022. In December 2021, the Company raised $8.82 million through a Securities Purchase Agreement with several institutional investors. Based onand negative cash flow from operations, which over time will challenge its liquidity. These factors raise substantial doubt about the Company’s current cash position, and assuming currently planned expenditures and level of operations, the Company believes it has sufficient capitalability to fund operationscontinue as a going concern for the 12-monthone-year period subsequent tofollowing the issuance of the accompanying unaudited condenseddate that these financial statements. However, therestatements were issued.

There is no assurance that profitable operations will ever be achieved, or, if achieved, could be sustained on a continuing basis. Also, beyond such 12-month period,In order to fully execute its business plan, the Company will require significant additional financing for planned research and development activities, capital expenditures, clinical and pre-clinical testing for its QN-302 clinical trials, preclinical development of RAS and QN-247, and funding for NanoSynex operations (See Note 3 - Acquisition), as well as commercialization activitiesactivities.

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 a convertible debt - related party (see Note 11 - 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.

As a condition to the NanoSynex closing, the Company agreed to provide NanoSynex with up to $10.4 million of future funding based on NanoSynex’s achievement of certain future development milestones and subject to other terms and conditions described in the Master Agreement for the Operational and Technological Funding of NanoSynex (the “Funding Agreement”) entered into with NanoSynex. These funding commitments are in the form of convertible promissory notes to be issued to the Company with a face value equal to the amount paid by the Company to NanoSynex upon satisfaction of the Company’s productsapplicable performance milestone, bearing interest at the rate of 9% per annum on the principal balance from time to time outstanding under the particular promissory note, convertible at the option of the Company into additional shares of NanoSynex in order for the Company to maintain at least a 50.1% controlling ownership interest in NanoSynex, should NanoSynex issue additional shares. The principal of the convertible notes are expecteddue and payable upon the sooner to require significantoccur of: i) five years from the date of issuance of the particular promissory note; ii) the acquisition by any person or entity of all or substantially all of the share capital of NanoSynex, through share purchase, issuance or shares or merger of NanoSynex, or the purchase of all or substantially all of the assets of NanoSynex; or iii) the initial public offering of NanoSynex. The Company provided funding to NanoSynex of $2.4 million during 2022 and $0.5 million in February 2023 pursuant to this agreement. The Company may terminate the Funding Agreement upon 120 days’ notice, but would still be liable for any payments due for milestones achieved prior to termination.

To the extent that the Company raises additional financing. Additionalcapital through the sale of equity or convertible debt securities, the ownership interests of its common stockholders will 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 Company’s 8% Senior Convertible Debenture (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 — ACQUISITION

Business Combination

The Company acquired a 52.8% voting equity interest in NanoSynex on May 26, 2022 (the “NanoSynex Acquisition Date”) through: (1) the purchase of 2,232,861 shares Preferred A-1 Stock of NanoSynex from Alpha Capital, a related party, 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 a purchase price of $0.001 per share (these warrants were subsequently exercised on September 13, 2022), and (2) the purchase of 381,786 shares of Series B preferred stock of NanoSynex from NanoSynex in exchange for $600,000 (collectively, the “NanoSynex Acquisition”).

The NanoSynex Acquisition was accounted for as a business combination using the acquisition method, in accordance with FASB ASC Topic 805. Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value. Determining the fair value of assets acquired, liabilities assumed and noncontrolling interest requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates and asset lives among other items. The Company uses third-party valuations for intangible assets in a business combination using a discounted cash flow analysis, incorporating various assumptions.

A summary of the consideration transferred and fair value of assets acquired and liabilities assumed in the NanoSynex Acquisition is as follows (all shares shown post Reverse Stock Split):

SCHEDULE OF CONSIDERATION TRANSFERRED

SCHEDULE OF ASSETS ACQUIRED AND LIABILITIES

During the year ended December 31, 2022, the Company made measurement period adjustments to the preliminary purchase price allocation, which included: (i) a decrease to noncontrolling interest of $117,775, and (ii) a decrease to goodwill of $106,621. The measurement period adjustments were made to reflect facts and circumstances that existed as of the acquisition date and are reflected in the table above.

Company transaction costs, which were immaterial, have been expensed as incurred and charged to the Company’s condensed consolidated statements of operations and comprehensive loss. There was no provision for reimbursement of transaction costs from the Company to NanoSynex.

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired as of the acquisition date. Goodwill represents the value of the future technology to be developed in excess of the identifiable assets as well as the operational synergies of the combined companies to be recognized. Goodwill has an indefinite useful life and is not amortized. None of the Goodwill is expected to be deductible for tax purposes.

As a condition to the closing, the Company agreed to provide NanoSynex with up to $10.4 million of future funding based on NanoSynex’s achievement of certain future development milestones and subject to other terms and conditions described in the Funding Agreement entered into with NanoSynex. (See Note 2 - Liquidity for further details regarding the terms and conditions of the Funding Agreement).

The Company’s condensed consolidated statements of operations and comprehensive loss for three months ended March 31, 2023 and 2022 include approximately $0.5 million and $0, respectively, of net loss associated with the results of operations of NanoSynex.

NOTE 34 — INVENTORY, NET

Inventory, net consisted of the following at March 31, 20222023 and December 31, 2021:2022:

SCHEDULE OF INVENTORY

NOTE 45 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following at March 31, 20222023 and December 31, 2021:2022:

SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

NOTE 56 — PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following at March 31, 20222023 and December 31, 2021:2022:

SCHEDULE OF PROPERTY AND EQUIPMENT

Depreciation expense relating to property and equipment was approximately $23,00020,000 and $15,00023,000 for the three months ended March 31, 20222023 and 2021,2022, respectively.

Upon termination of the Sekisui Distribution Agreement on March 31, 2022, the Company had a commitment to purchase leased FastPack rental systems back from Sekisui at Sekisui’s net book value, which was determined to be approximately $154,000. This amount is included in equipment held for lease in the table above and accounts payable at March 31, 2023. An assignment agreement will be executed by the parties to legally transfer title to this equipment from Sekisui to the Company.

NOTE 67 — GOODWILL, IPR&D AND OTHER INTANGIBLES

SCHEDULE OF GOODWILL AND OTHER INTANGIBLE

The Company periodically reviews goodwill for impairment in accordance with relevant accounting standards. Goodwill is attributable to the NanoSynex 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 reporting unit for fiscal year ended December 31, 2022. There were no impairment losses during the three months ended March 31, 2023 and 2022.

The carrying value of the patents of approximately $136,000 and $140,000 at March 31, 2023 and December 31, 2022, respectively, are stated net of accumulated amortization of approximately $343,000 and $339,000, respectively. Amortization of patents charged to operations for the three months ended March 31, 2023 and 2022 was approximately $5,000 for each period. Total future estimated amortization of patent costs for the five succeeding years is approximately $14,000 for the remaining three months in the year ending December 31, 2023, approximately $15,000 for the year ending December 31, 2024, approximately $14,000 for year 2025 through year 2027 and approximately $65,000 thereafter.

The carrying value of the in-licenses of approximately $4,000 and $5,000 at March 31, 2023 and December 31, 2022 are stated net of accumulated amortization of approximately $415,000 and $414,000, respectively. Amortization of licenses charged to operations for the three months ended March 31, 2023 and 2022 was approximately $2,000 for each period. Total future estimated amortization of license costs is approximately $4,000 for the remaining nine months in the year ending March 31, 2023.

NOTE 8 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following at March 31, 20222023 and December 31, 2021:2022:

SCHEDULE OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

NOTE 9 – SHORT TERM DEBT - RELATED PARTY

NanoSynex has four separate Notes Payable (the “Notes”) outstanding to Alpha Capital, issued between March 26, 2020 and September 2, 2021, aggregating to a total principal outstanding balance of $905,000, and aggregate accrued interest of $53,952 for a total outstanding balance of $958,952 as of March 31, 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 the 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 a company under the control of NanoSynex or NanoSynex’s majority shareholders; or iii) an underwritten public offering by NanoSynex of its ordinary shares. Notwithstanding the above, if NanoSynex receives subsequent debt, convertible debt, or equity funding with gross proceeds of USD $3,000,000 or more, then these Notes shall be due and payable upon the actual receipt of such funding.

NOTE 710 – WARRANT LIABILITIES

In 2004, the Company issued warrants to various investors and brokers for the purchase of Series 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 of the Company, pursuant to the Series C Warrant terms as adjusted.

In exchange for the Series C Warrants, upon closing of the merger with Ritter, the holders received warrants to purchase an aggregate of 4,713,490shares of the Company’s common stock at $0.727.195 per share, subject to adjustment. As of March 31, 2022, the warrants received in exchange for2023, the Series C Warrants have remaining terms ranging from 1.7.65 to 2.21.24 years. The warrantsSeries C Warrants were determined to be liability-classified pursuant to the guidance in ASC 480 and ASC 815-40, resulting frombased on the inclusion of a leveraged ratchet provision for subsequent dilutive issuances. On April 25, 2022 the Series C Warrants were repriced from $7.195 to $6.00 with an additional 49,318 ratchet Warrants issued, and on May 26, 2022 the Series C Warrants were repriced from $6.00 to $5.136 with an additional 49,952 ratchet Warrants issued. On December 22, 2022, the Series C Warrants were repriced again from $5.136 to $1.32 with an additional 1,002,717 ratchet Warrants issued.

Additionally, on December 22, 2022, in conjunction with the issuance of the Debenture to Alpha Capital (see Note 11 – Convertible Debt – Related Party), the Company issued to Alpha Capital a warrant to purchase 2,500,000 shares of the Company’s common stock (the “Alpha Warrant”). The exercise price of the Alpha Warrant is $1.65 (equal to 125% of the conversion 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 before June 22, 2028, subject to certain terms and conditions described in the Alpha Warrant, including the Company’s receipt of the necessary stockholder approvals.

The following table summarizes the activity in the Common Stock Warrants (received in exchangeliability classified warrants for the Series C Warrants)three months ended March 31, 2023:

SCHEDULE OF WARRANTS ACTIVITY

The following table summarizes the activity in liability classified warrants for the three months ended March 31, 2022:

 SCHEDULE OF WARRANTS ACTIVITY

The following table summarizes the activity in the Common Stock Warrants (received in exchange for the Series C Warrants) activity for the three months ended March 31, 2021: