This Quarterly Report on Form 10-Q contains predictions, estimates and other
forward-looking statements relating to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as "may", "should", "intends", "expects", "plans",
"anticipates", "believes", "estimates", "predicts", "potential", or "continue"
or the negative of these terms or other comparable terminology. Forward-looking
statements involve known and unknown risks, uncertainties and other factors
including the risks set forth in the section entitled "Risk Factors" in our
Post-Effective Amendment No. 1 to our Registration Statement on Form S-1, as
filed with the Securities and Exchange Commission (the "SEC") on March 15, 2018,
that may cause our actual results, performance or achievements to be materially
different from any future results, performances or achievements expressed or
implied by the forward-looking statements.
Forward-looking statements represent our management's beliefs and assumptions
only as of the date of this Report. You should read this Report with the
understanding that our actual future results may be materially different from
what we expect.
All forward-looking statements speak only as of the date on which they are made.
We undertake no obligation to update such statements to reflect events that
occur or circumstances that exist after the date on which they are made, except
as required by federal securities and any other applicable law.
The management's discussion and analysis of our financial condition and results
of operations are based upon our condensed financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP").
The following discussion of our financial condition and results of operations
should be read in conjunction with our unaudited condensed financial statements
for the six months ended June 30, 2020 and the notes thereto appearing elsewhere
in this Report and the Company's audited financial statements for the fiscal
year ended December 31, 2019, as filed with the SEC in its Annual Report on Form
10-K on March 30, 2020, along with the accompanying notes. As used in this
Quarterly Report, the terms "we", "us", "our", and the "Company" means
BioLabMart Inc. prior to August 8, 2017 and Qrons Inc. since August 8, 2017.
Overview
The Company is a preclinical stage biotechnology company developing advanced
stem cell synthetic hydrogel-based solutions to combat neuronal injuries and
focused on achieving a breakthrough in the treatment of traumatic brain injuries
("TBIs") for both concussions and penetrating injuries, an unmet medical need.
We believe that our approach is pushing the boundaries of science by using the
latest advances in molecular biology and chemistry. The Company has collaborated
with universities and scientists in the fields of regenerative medicine, tissue
engineering and 3D printable hydrogels to develop a treatment that integrates
proprietary, engineered mesenchymal stem cells ("MSCs"), 3D printable implant,
smart materials and a novel delivery system.
To date, the Company has two product candidates for treating penetrating and
non-penetrating (concussion-like) TBIs, both integrating proprietary, anti-brain
inflammation synthetic hydrogel and modified MSCs. QS100TM is an injury
specific, 3D printable, implantable MSCs-synthetic hydrogel, to treat
penetrating brain injuries and QS200TM is an injectable MSCs-synthetic hydrogel
for the treatment of diffused injuries commonly referred to as concussions.
The Company has relied primarily on its two co-founders, Jonah Meer, Chief
Executive Officer, and Ido Merfeld, President, who are its sole directors to
manage its day-to-day business and has outsourced professional services to third
parties in an effort to maintain lower operational costs.
Messrs. Meer and Merfeld, as the holders of the Company's issued and outstanding
shares of the Company's Class A Preferred Stock, collectively have 66 2/3% of
the voting rights of the Company. Acting together, they will be able to
influence the outcome of all corporate actions requiring approval of our
stockholders.
The Company's common stock was approved by the Financial Industry Regulatory
Authority ("FINRA") for quotation on the OTC pink sheets under the symbol "BLMB"
as of July 3, 2017. FINRA announced the Company's name change to Qrons Inc. on
August 9, 2017 and the new symbol "QRON", became effective on August 10, 2017.
The Company's common stock was upgraded from the Pink Market and commenced
trading on the OTCQB Venture Market on August 12, 2019.
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Recent Developments
Covid-19 Pandemic
The COVID-19 pandemic and the significant disruptions to the global financial
markets has had an adverse impact our ability to raise additional capital for
the research and development of our product candidates. As a result, we
discontinued our service agreements with Ariel Scientific Innovation Ltd.
("Ariel") for laboratory work at Ariel's facilities. Although we continue to
collaborate with Professor Chenfeng Ke at Dartmouth College ("Dartmouth") on 3D
printing research under a research grant from the State of New Hampshire, we
have not extended our sponsored research agreement with Dartmouth that expired
on July14, 2020. In April 2020, we terminated our employees until we could
determine the continuing effect of COVID-19. However, its ultimate impact on us
continues to evolve, is highly uncertain and subject to change.
Plan of Operations
To date, we have two product candidates for treating penetrating and
non-penetrating (concussion-like) TBIs. We have completed an in-vivo efficacy
experiment with QS100TM for treating penetrating brain injuries in an animal
model that was successful in substantiating our theories and practices regarding
cell regeneration. We have completed animal in-vivo efficacy experiments with
QS200TM for treating concussions and other diffused axonal injuries. Prior to
the COVID-19 pandemic, we planned to continue working with Dartmouth to develop
innovative 3D printable biocompatible advanced materials and stem cell delivery
techniques for our product candidates and with our stem cells team on the
development of our proprietary, neuro-regenerative MSC lines at Ariel's
laboratories. However, there is substantial doubt that we can continue these
endeavors unless we obtain additional capital to pay our operating expenses.
We have not generated revenues from the sales of products and we do not
currently have sufficient resources to accomplish the conditions necessary for
us to generate revenue.
As we monitor the full impact of the COVID-19 outbreak, we continue exploring
sources of debt and equity financings as well as available grants. If we cannot
obtain additional financing we will not be able to resume product development
under our current business plan. We are currently exploring and are in
discussions for potential strategic alternatives in the biotechnology field
which could advance our MSCs and neurodegenerative research. There can be no
assurance the necessary financing will be available or that a suitable strategic
partner will be identified. In such event, we may explore relationships with
third parties to develop or commercialize products or technologies that we have
not previously sought to develop or commercialize, decide to exit our existing
business, cease operations altogether or pursue an acquisition of our company.
Results of Operations
Three Months Ended June 30, 2020 and June 30, 2019
Revenue
We have not generated any revenue since our inception and do not expect to
generate any revenue from the sale of products in the near future.
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Net Loss
We had a net loss of $16,731 in the three months ended June 30, 2020 compared to
a net loss of $217,583 in the three months ended June 30, 2019, as follows:
For Three Months Ended
June 30,
2020 2019
Net sales $ - $ -
Operating expenses:
Research and development expenses 2,891 138,374
Professional fees 6,893 27,640
General and administrative expenses 3,805 33,143
Total operating expenses 13,589 199,157
Income (loss) from operations (13,589 ) (199,157 )
Other income (expense)
Interest expense (12,814 ) (1,420 )
Change in derivative liabilities 9,672 (17,006 )
Total other income (expense) (3,142 ) (18,426 )
Net (loss) $ (16,731 ) $ (217,583 )
Operating Expenses
Total operating expenses for the three months ended June 30, 2020 were $13,589
compared to total operating expenses of $199,157 for the three months ended June
30, 2019. The substantial decrease in operating expenses during the three months
ended June 30, 2020 are directly related to the suspension of certain research
and development and other operating activities as a result of the impact of
COVID 19. During the three months ended June 30, 2020, the Company incurred
$2,891 of research and development expenses which included payroll of $21,961,
service fees related to certain research and development agreements of $29,717,
a credit offsetting prior accrued fees associated with a sponsored research
agreement of $(45,704), purchases of expendable lab supplies and equipment of
$133, technology licensing fees of $7,991 and a credit from prior accrued
research and development fees of $(11,207), compared to $138,374 of research and
development expenses which included payroll of $54,968, service fees related to
certain research and development agreements of $63,006, fees associated with a
sponsored research agreement of $18,146, legal and filing fees related to
patents of $1,659, and purchases of expendable lab supplies and equipment of
$595 during the three months ended June 30, 2019. The Company incurred general
and administrative expenses of $3,805 for the three months ended June 30, 2020
compared to general and administrative expenses of $33,143 for the three months
ended June 30, 2019. The substantial decrease in general and administrative
expense during the three months ended June 30, 2020 was primarily due to a
decrease in activity during the current period, and more specifically related to
a decrease in travel, shareholder expenses and advertising and marketing
expenses as compared to the three months ended June 30, 2019. Professional
fees were $6,893 for the three months ended June 30, 2020, which reflect a
decrease in accounting fees in the three months ended June 30, 2020 compared to
professional fees of $27,640 during the three months ended June 30, 2019, as a
result of certain audit fees incurred in fiscal 2018 being invoiced in the
second quarter of fiscal 2019. Other expense in the three months ended June 30,
2020 was $3,142, which included a gain of $9,672 as a result of the change in
value of derivative liabilities, and interest expense of $12,814 which is
comprised of accretion of convertible notes of $8,930 and accrued interest on
convertible notes payable of $3,884. Other expense in the three months ended
June 30, 2019 was $18,426 which included a loss of $17,006 as a result of the
change in value of derivative liabilities, and interest expense of $1,420.
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Six Months Ended June 30, 2020 and June 30, 2019
Revenue
We have not generated any revenue since our inception and do not expect to
generate any revenue from the sale of products in the near future.
Net Loss
We had a net loss of $256,863 in the six months ended June 30, 2020 compared to
a net loss of $479,044 in the six months ended June 30, 2019 as follows:
For Six Months Ended
June 30,
2020 2019
Net sales $ - $ -
Operating expenses:
Research and development expenses 174,459 303,528
Professional fees
30,517 43,226
General and administrative expenses 27,551 115,917
Total operating expenses 232,527 462,671
Income (loss) from operations (232,527 ) (462,671 )
Other income (expense)
Interest expense (27,098 ) (1,916 )
Change in derivative liabilities 2,762 (14,457 )
Total other income (expense) (24,336 ) (16,373 )
Net (loss) $ (256,863 ) $ (479,044 )
Operating Expenses
Total operating expenses for the six months ended June 30, 2020 were $232,527
compared to total operating expenses of $462,671for the six months ended June
30, 2019. The substantial decrease in operating expenses during the six months
ended June 30, 2020 are directly related to the suspension of certain research
and development and other operating activities as a result of the impact of
COVID 19. . During the six months ended June 30, 2020, the Company incurred
$174,459 of research and development expenses which included payroll of
$79,274, service fees related to certain research and development agreements of
$104,979, a credit offsetting prior accrued fees associated with a sponsored
research agreement of $26,809, legal and filing fees related to patents of $588,
purchases of expendable lab supplies and equipment of $445, and technology
licensing fees of $15,982, compared to $303,528 of research and development
expenses which included payroll of $107,062, service fees related to certain
research and development agreements of $123,050, fees associated with a
sponsored research agreement of $36,293, legal and filing fees related to
patents of $19,497, software fees of $1,374 and purchases of expendable lab
supplies and equipment of $16,252 during the six months ended June 30, 2019
. The Company incurred general and administrative expenses of $27,551 for the
six months ended June 30, 2020 compared to general and administrative expenses
of $115,917 for the six months ended June 30, 2019. The substantial decrease in
general and administrative expense during the six months ended June 30, 2020 was
primarily due to a decrease in stock-based compensation costs from $37,500 in
the six months ended June 30, 2019 to $0 in the six months ended June 30, 2020,
and a reduction in certain advertising and marketing costs from $53,090 in the
six months ended June 30, 2019 to $23,500 in the six months ended June 30,
2020. Professional fees were $30,517 for the six months ended June 30, 2020,
which reflect a decrease in accounting fees in the six months ended June 30,
2020 compared to professional fees of $43,226 during the six months ended June
30, 2019, as a result of certain audit fees incurred in fiscal 2018 being
invoiced during the six months ended June 30, 2019. Other expense in the six
months ended June 30, 2020 was $24,336 and included a gain of $2,762 as a result
of the change in value of derivative liabilities, and interest expense of
$27,098 which is comprised of accretion of convertible notes of $17,321,
financing costs of $3,400 and accrued interest on convertible notes of $6,377.
Other expense in the six months ended June 30, 2019 included a loss of $14,457
as a result of the change in value of derivative liabilities and interest
expense of $1,916.
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Working Capital
June 30, December 31,
2020 2019
Current Assets $ 16,178 $ 123,290
Current Liabilities 680,492 631,412
Working Capital (deficiency) $ (664,314 ) $ (508,122 )
Cash Flows
At June 30, At June 30, 2019
2020
Net cash (used in) operating activities $ (144,498 ) $ (292,157 )
Net cash provided by investing activities - -
Net cash provided by financing activities $ 86,000 $ 215,000
Net increase (decrease) in cash during period $ (58,498 ) $ (77,157 )
Operating Activities
Net cash used in operating activities was $144,498 for the six months ended June
30, 2020 compared to $292,157 for the six months ended June 30, 2019. Cash used
in operating activities for the six months ended June 30, 2020 was primarily the
result of net loss, offset by non-cash items including compensation in the form
of stock options for research and development expense totaling $97,271, warrants
granted as financing costs valued at $3,400, accretion of debt discount of
$17,321, a gain from the change in our derivative liabilities of $2,762 and
changes to our operating assets and liabilities, including a decrease to prepaid
expenses of $48,614, reduction to accounts payable of $56,048 and an increase to
accounts payable-related parties. Cash used in the six months ended June 30,
2019 was primarily the result of net loss, offset by non-cash items including
compensation in the form of stock options for research and development expense
totaling $87,933, stock awards totaling $37,500, the change in derivative
liabilities of $14,457 and changes to our operating assets and liabilities,
including a decrease to prepaid expenses of $27,099 and increases to our
accounts payable and accounts payable-related parties.
Investing Activities
There were no investing activities during the six months ended June 30, 2020 and
2019.
Financing Activities
Net cash provided by financing activities was $86,000 for the six months ended
June 30, 2020 compared to $215,000 for the six months ended June 30, 2019. We
received no proceeds from private placement offerings in the six months ended
June 30, 2020 as compared to $65,000 in the six months ended June 30, 2019.
During the six months ended June 30, 2020 we received $76,000 in proceeds from
related parties in the form of short-term advances from our officers compared to
$50,000 during the six months ended June 30, 2019. During the six months ended
June 30, 2020 we also received $10,000 in the form of convertible notes with no
similar financing in the six months ended June 30, 2019. During the six months
ended June 30, 2019 we received $100,000 in an unsecured short-term advance from
a third party, with no similar financing in the six months ended June 30, 2020.
Liquidity and Capital Resources
As of June 30, 2020, we had cash of $8,527. We are in the early stage of
development and have experienced net losses to date and have not generated
revenue from operations which raises substantial doubt about our ability to
continue as a going concern. There are a number of conditions that we must
satisfy before we will be able to commercialize potential products and generate
revenue, including successful development of product candidates, which includes
clinical trials, FDA approval, demonstration of effectiveness sufficient to
generate commercial orders by customers, establishing production capabilities as
well as effective marketing and sales capabilities for our product. We do not
currently have sufficient resources to accomplish any of these conditions
necessary for us to generate revenue and expect to incur increasing operating
expenses. We will require substantial additional funds for operations, the
service of debt and to fund our business objectives. There can be no assurance
that financing, whether debt or equity, will be available to us in the amount
required at any particular time or for any particular period or, if available,
that it can be obtained on terms favorable to us. If additional funds are raised
by the issuance of equity securities, such as through the issuance and exercise
of warrants, then existing stockholders will experience dilution of their
ownership interest. If additional funds are raised by the issuance of debt or
other equity instruments, we may be subject to certain limitations in our
operations, and issuance of such securities may have rights senior to those of
the then existing stockholders. We currently have no agreements, arrangements or
understandings with any person or entity to obtain funds through bank loans,
lines of credit or any other sources. Additionally, the continued spread of
COVID-19 and uncertain market conditions will limit the Company's ability to
access capital. Without additional financing, we do not believe our resources
will be sufficient to meet our operating and capital needs beyond the third
quarter of 2020.
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Going Concern
Our financial statements have been prepared assuming that we will continue as a
going concern and, accordingly, do not include adjustments relating to the
recoverability and realization of assets and classification of liabilities that
might be necessary should we be unable to continue in operation. Our report from
our independent registered public accounting firm for the fiscal year ended
December 31, 2019 includes an explanatory paragraph stating the Company has not
generated revenues sufficient to cover operating expenses and will need
additional capital to service its debt obligations. Also, if the Company is
unable to obtain adequate capital due to the continued spread of COVID-19, the
Company may be required to further reduce the scope, delay, or eliminate some or
all of its planned operations. These factors, among others, raise substantial
doubt about the Company's ability to continue as a going concern.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of our financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an on-going basis, management evaluates its
estimates and judgments which are based on historical experience and on various
other factors that are believed to be reasonable under the circumstances. The
results of their evaluation form the basis for making judgments about the
carrying values of assets and liabilities. Actual results may differ from these
estimates under different assumptions and circumstances. Our significant
accounting policies are more fully discussed in Note 2 to our unaudited
financial statements contained herein.
Research and Development Costs: The Company charges research and development
costs to expense when incurred in accordance with FASB ASC 730, "Research and
Development." Research and development costs were $2,891 and $174,459 for
the three and six months ended June 30, 2020, respectively. Research and
development costs were $138,374 and $303,528 for the three and six months ended
June 30, 2019, respectively.
Stock-Based Compensation and Other Share-Based Payments: The expense
attributable to the Company's directors is recognized over the period in which
the amounts are earned and vested, and the expense attributable to the Company's
non-employees is recognized when vested, as described in Note 11, Stock Plan.
Warrants: The Company accounts for common stock warrants in accordance with
applicable accounting guidance provided in ASC Topic 815 "Derivatives and
Hedging - Contracts in Entity's Own Equity" (ASC Topic 815), as either
derivative liabilities or as equity instruments depending on the specific terms
of the warrant agreement. For warrants classified as equity instruments the
Company applies the Black Scholes model and expenses the fair value as financing
costs.
Recent Accounting Pronouncements
There were various accounting standards and interpretations issued recently,
none of which are expected to have a material effect on the Company's
operations, financial position or cash flows.
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