Qualigen Therapeutics Inc

Previous wording

Our lead program, QN-302, is an investigational small molecule G-quadruplexes (G4)-selective transcription inhibitor with strong binding affinity to G4s prevalent in cancer cells (such as pancreatic cancer). Such binding could, by stabilizing the G4s against DNA “unwinding,” help inhibit cancer cell proliferation. QN-302 is currently undergoing a Phase 1a clinical trial at START Midwest in Grand Rapids, Michigan, and HonorHealth in Scottsdale, Arizona.

Current wording

Our lead program, QN-302, is an investigational small molecule G-quadruplexes (G4)-selective transcription inhibitor with strong binding affinity to G4s prevalent in cancer cells (such as pancreatic cancer). Such binding could, by stabilizing the G4s against DNA “unwinding,” help inhibit cancer cell proliferation. QN-302 is undergoing a Phase 1a clinical trial at START Midwest in Grand Rapids, Michigan, and HonorHealth in Scottsdale, Arizona.

Previous wording

In addition, under a Co-Development Agreement dated April 11, 2024 with Marizyme, Inc. (“Marizyme”), we are entitled to receive quarterly a 33% payment in the nature of royalties (capped at double the amount of Funding Payment cash we provide to Marizyme) on any Net Sales (as defined with a meaning tantamount to gross profit on net sales) of Marizyme’s DuraGraft™ vascular conduit solution, which is indicated for adult patients undergoing coronary artery bypass grafting surgeries and is intended for the flushing and storage of the saphenous vein grafts used in coronary artery bypass grafting surgery. No such payments-in-the-nature-of-royalties would accrue until after DuraGraft has been launched in the United States and a cumulative total of $500,000 of DuraGraft Net Sales have been made in the United States. To date we have provided $500,000 of Funding Payments to Marizyme.

Current wording

In addition, under a Co-Development Agreement dated April 11, 2024 with Marizyme, Inc. (“Marizyme”), we are entitled to receive quarterly a 33% payment in the nature of royalties (capped at double the amount of Funding Payment cash we provide to Marizyme) on any Net Sales (as defined with a meaning tantamount to gross profit on net sales) of Marizyme’s DuraGraft™ vascular conduit solution, which is indicated for adult patients undergoing coronary artery bypass grafting surgeries and is intended for the flushing and storage of the saphenous vein grafts used in coronary artery bypass grafting surgery. No such payments-in-the-nature-of-royalties would accrue until after DuraGraft has been launched in the United States and a cumulative total of $500,000 of DuraGraft Net Sales have been made in the United States. To date we have provided $1,750,000 of Funding Payments to Marizyme (inclusive of a $1,250,000 demand promissory note dated July 15, 2024 which bears interest at 18% per annum).

Previous wording

On July 20, 2023, we sold all of the issued and outstanding shares of common stock of Qualigen, Inc., a wholly-owned subsidiary and the legal entity operating our FastPack™ diagnostic business, to Chembio Diagnostics, Inc. (“Chembio”), a subsidiary of Biosynex, S.A. As consideration for the shares of Qualigen, Inc., we received cash payments of approximately $4.9 million, which payment is subject to post-closing adjustments. An additional $450,000 was delivered by Chembio to an escrow account to provide an available fund for payment of potential indemnification obligations. The escrow account was closed on June 4, 2024 by mutual agreement; $350,000 was paid to us, and $100,000 was paid to Chembio. Upon the consummation of the July 2023 transaction, Qualigen, Inc. became a wholly-owned subsidiary of Chembio.

Current wording

On July 20, 2023, we sold all of the issued and outstanding shares of common stock of Qualigen, Inc., a wholly-owned subsidiary and the legal entity operating our FastPack™ diagnostic business, to Chembio Diagnostics, Inc. (“Chembio”), a subsidiary of Biosynex, S.A. As consideration for the shares of Qualigen, Inc., we received cash payments of approximately $4.9 million, which payment is subject to post-closing adjustments. An additional $450,000 was delivered by Chembio to an escrow account to satisfy our indemnification obligations. The escrow account was closed on June 4, 2024 by mutual agreement; $350,000 was paid to us, and $100,000 was paid to Chembio. Upon the consummation of the July 2023 transaction, Qualigen, Inc. became a wholly-owned subsidiary of Chembio.

Previous wording

On April 11, 2024, we entered into a Co-Development Agreement with Marizyme. Under the Co-Development Agreement, we agreed to pay Marizyme a Funding Payment of up to $1,500,000 and an Exclusivity Fee of $200,000. The Exclusivity Fee of $200,000 and a Funding Payment of $500,000 was paid to Marizyme on April 12, 2024. The Exclusivity Fee entitles us to an exclusivity period until May 31, 2024 for purposes of proposing and outlining a broader strategic relationship with Marizyme with regard to Marizyme’s DuraGraft business. The Funding Payment is designed to provide financial support for commercialization of Marizyme’s DuraGraft™ vascular conduit solution, which is indicated for adult patients undergoing coronary artery bypass grafting surgeries and is intended for the flushing and storage of the saphenous vein grafts used in coronary artery bypass grafting surgery. In return for the Funding Payment we will receive quarterly a 33% payment in the nature of royalties on any Net Sales (as defined with a meaning tantamount to gross profit on net sales) of DuraGraft, capped at double the amount of the Funding Payment cash provided. No such payments-in-the-nature-of-royalties would accrue until after DuraGraft has been launched in the United States and a cumulative total of $500,000 of DuraGraft Net Sales have been made in the United States.

Current wording

On April 11, 2024, we entered into a Co-Development Agreement with Marizyme. Under the Co-Development Agreement (as amended on August 6, 2024), we agreed to pay Marizyme a Funding Payment of up to $1,750,000 and an Exclusivity Fee of $200,000. The Exclusivity Fee of $200,000 and a Funding Payment of $500,000 was paid to Marizyme on April 12, 2024. The Exclusivity Fee entitles us to an exclusivity period until May 31, 2024 for purposes of proposing and outlining a broader strategic relationship with Marizyme with regard to Marizyme’s DuraGraft business. The Funding Payment is designed to provide financial support for commercialization of Marizyme’s DuraGraft™ vascular conduit solution, which is indicated for adult patients undergoing coronary artery bypass grafting surgeries and is intended for the flushing and storage of the saphenous vein grafts used in coronary artery bypass grafting surgery. In return for the Funding Payment we will receive quarterly a 33% payment in the nature of royalties on any Net Sales (as defined with a meaning tantamount to gross profit on net sales) of DuraGraft, capped at double the amount of the Funding Payment cash provided. No such payments-in-the-nature-of-royalties would accrue until after DuraGraft has been launched in the United States and a cumulative total of $500,000 of DuraGraft Net Sales have been made in the United States.

Previous wording

Our condensed consolidated financial statements historically have not separated our diagnostics-related activities from our therapeutics-related activities. All of our historically reported revenue was diagnostics-related. Before the third quarter of 2023, our reported expenses represented the total of our diagnostics-related and therapeutics-related expenses. In this Quarterly Report, all diagnostics-related revenues and expenses have been reclassified to discontinued operations (See Note 5 - Discontinued Operations in our condensed consolidated financial statements).

Current wording

Our condensed consolidated financial statements historically have not separated our diagnostics-related activities from our therapeutics-related activities. All of our historically reported revenue was diagnostics-related. Before the third quarter of 2023, our reported expenses represented the total of our diagnostics-related and therapeutics-related expenses. In this Quarterly Report, all diagnostics-related revenues and expenses have been reclassified to discontinued operations (See Note 5 - Discontinued Operations).

Previous wording

General and administrative expenses decreased from $1.4 million for the three months ended March 31, 2023, to $1.0 million for the three months ended March 31, 2024, primarily due to a decrease in stock-based compensation of approximately $0.2 million, a decrease in professional fees of approximately $0.1 million, and a decrease in license and insurance costs of approximately $0.1 million.

Current wording

General and administrative expenses decreased from $2.4 million for the three months ended June 30, 2023, to $1.0 million for the three months ended June 30, 2024, a decrease of $1.4 million or 59%. This is primarily due to decreases in stock-based compensation of $0.6 million, payroll of $0.4 million, professional fees of $0.3 million and insurance of $0.1 million.

Previous wording

During the three months ended March 31, 2024 and 2023, we experienced a loss of approximately $0.1 million and a gain of approximately $1.0 million, respectively, on change in fair value of warrant liabilities, primarily due to a repricing of the exercise price of certain warrants from $0.73 per share to $0.26 per share during the current period, and changes in our stock price in the prior period. Typically, a decline in our stock price would result in a decline in the fair value of our warrant liabilities, generating a gain, while an increase in our stock price would result in an increase in the fair value of our warrant liabilities, generating a loss.

Current wording

During the three months ended June 30, 2024 and 2023, we experienced a gain of approximately $493,000 million and a gain of approximately $440,000 million, respectively, on change in fair value of warrant liabilities, primarily due to changes in our stock price and expiration of warrants during the current period, and changes in our stock price in the prior period. Typically, a decline in our stock price would result in a decline in the fair value of our warrant liabilities, generating a gain, while an increase in our stock price would result in an increase in the fair value of our warrant liabilities, generating a loss.

Previous wording

During the three months ended March 31, 2024 there were no voluntary conversions of convertible debt.

Current wording

During the three months ended June 30, 2024, we issued 1,400,000 shares of common stock with a fair value of approximately $280,000, upon Alpha’s partial voluntary conversion of the 2022 Alpha Debenture at a weighted average share price of $0.26. Upon conversion to shares, we recognized a gain on voluntary conversion of convertible debt into common stock of approximately $84,000. There were no voluntary conversions of convertible debt for the three months ended June 30, 2023.

Previous wording

During the three months ended March 31, 2024, we issued 1,138,535 shares of common stock with a fair value of approximately $545,000, in lieu of cash for monthly redemptions of $380,000 principal and approximately $19,000 accrued interest redeemed, pursuant to the terms of the 2022 Debenture at a weighted average share price of $0.35. Upon redemption in shares, we recognized a loss on monthly redemptions of convertible debt into common stock of approximately $147,000.

Current wording

During the three months ended June 30, 2024, we issued 1,136,312 shares of common stock with a fair value of approximately $357,000, in lieu of cash for monthly redemptions of $280,000 principal and approximately $15,000 accrued interest redeemed, pursuant to the terms of the 2022 Alpha Debenture at a weighted average share price of $0.26. Upon redemption in shares, we recognized a loss on monthly redemptions of convertible debt into common stock of approximately $62,000.

Previous wording

There was no loss from discontinued operations during the three months ended March 31, 2024, compared to a loss from discontinued operations of approximately $872,000 during the three months ended March 31, 2023. The $872,000 loss from discontinued operations during the three months ended March 31, 2023 consisted of approximately $376,000 from our former Qualigen, Inc. subsidiary and approximately $496,000 from NanoSynex.

Current wording

There was a $100,000 loss from discontinued operations during the three months ended June 30, 2024, compared to income from discontinued operations of approximately $30,000 during the three months ended June 30, 2023. The $100,000 loss from discontinued operations during the current period was generated from the early settlement of an escrow account from the sale of Qualigen, Inc. The income of $30,000 from discontinued operations during the three months ended June 30, 2023 consisted of approximately $114,000 in net income from our former Qualigen, Inc. subsidiary and approximately a net loss of approximately $84,000 from NanoSynex. (See Note 5 - Discontinued Operations).

Previous wording

There was no loss attributable to non-controlling interest from discontinued operations during the three months ended March 31, 2024, compared to a loss attributable to non-controlling interest from discontinued operations of approximately $261,000 during the three months ended March 31, 2023.

Current wording

There was no loss attributable to non-controlling interest from discontinued operations during the three months ended June 30, 2024, compared to a loss attributable to non-controlling interest from discontinued operations of approximately $43,000 during the three months ended June 30, 2023 (See Note 5 - Discontinued Operations).

Previous wording

During the three months ended March 31, 2024 we incurred a $0.3 million loss on issuance of convertible debt due to the fair value of the 2024 Alpha Debenture and derivative liabilities exceeding the cash proceeds.

Current wording

During the six months ended June 30, 2024 we incurred a loss on issuance of convertible debt of approximately $358,000 due to the fair value of the 2024 Alpha Debenture and derivative liabilities exceeding the cash proceeds.

Previous wording

During the three months ended March 31, 2024, we issued 1,138,535 shares of common stock with a fair value of approximately $545,000, in lieu of cash for monthly redemptions of $380,000 principal and approximately $19,000 accrued interest redeemed, pursuant to the terms of the 2022 Debenture at a weighted average share price of $0.35. Upon redemption in shares, we recognized a loss on monthly redemptions of convertible debt into common stock of approximately $147,000.

Current wording

During the six months ended June 30, 2024, we issued 2,274,847 shares of common stock with a fair value of approximately $903,000, in lieu of cash for monthly redemptions of $660,000 principal and approximately $34,000 accrued interest redeemed, pursuant to the terms of the 2022 Alpha Debenture at a weighted average share price of $0.29. Upon redemption in shares, we recognized a loss on monthly redemptions of convertible debt into common stock of approximately $209,000.

Previous wording

We currently expect our cash balances to fund operations only into the third quarter of 2024. We expect to continue to have net losses and negative cash flow from operations, which will challenge our liquidity. These factors raise substantial doubt regarding our ability to continue as a going concern for the one-year period following the date that the financial statements in this Quarterly Report were issued. There is no assurance that we will ever achieve profitable operations, or, if achieved, could be sustained on a continuing basis.

Current wording

We currently expect our cash balances to fund operations into the fourth quarter of 2024. We expect to continue to have net losses and negative cash flow from operations, which will challenge our liquidity. These factors raise substantial doubt regarding our ability to continue as a going concern for the one-year period following the date that the financial statements in this Quarterly Report were issued. There is no assurance that we will ever achieve profitable operations, or, if achieved, could be sustained on a continuing basis.

Previous wording

In the first quarter of 2024 we raised $500,000 (less expenses) by issuing to Alpha Capital Anstalt (“Alpha”) an 8% Convertible Debenture (the “2024 Alpha Debenture”) with a principal amount of $550,000; in connection with this issuance, we also issued to Alpha a 5-year common stock purchase warrant to purchase (at $0.26 per share) 900,016 shares of our common stock. We also granted to Alpha an option, exercisable until July 1, 2024, to purchase from us additional 8% Convertible Debentures, of like tenor, with face amounts of up to an aggregate of $1,100,000 (and with a proportional number of accompanying common stock warrants of like tenor, up to a total of 1,800,032 additional warrants). In April 2024, Alpha assigned this option to Yi Hua Chen (“Chen”) and Chen exercised the option in full; i.e., in exchange for $1,000,000 (less expenses) we issued to Chen an 8% Convertible Debenture with a principal amount of $1,100,000; in connection with this issuance, we also issued to Chen a 5-year common stock purchase warrant to purchase (at $0.26 per share) 1,800,032 shares of our common stock. (See “2024 Alpha Debenture” below.)

Current wording

During the six months ended June 30, 2024 we raised approximately $1.5 million less expenses, in convertible debt. In February 2024 we issued to Alpha Capital Anstalt (“Alpha”) an 8% Convertible Debenture (the “2024 Alpha Debenture”) with a principal amount of $550,000; in connection with this issuance, we also issued to Alpha a 5-year common stock purchase warrant to purchase (at $0.26 per share) 900,016 shares of our common stock. We also granted to Alpha an option, exercisable until July 1, 2024, to purchase from us additional 8% Convertible Debentures, of like tenor, with face amounts of up to an aggregate of $1,100,000 (and with a proportional number of accompanying common stock warrants of like tenor, up to a total of 1,800,032 additional warrants). In April 2024, Alpha assigned this option to Yi Hua Chen (“Chen”) and Chen exercised the option in full; in exchange for $1,000,000 (less expenses) we issued to Chen an 8% Convertible Debenture with a principal amount of $1,100,000; in connection with this issuance, we also issued to Chen a 5-year common stock purchase warrant to purchase (at $0.26 per share) 1,800,032 shares of our common stock.

Previous wording

In June 2024, by way of a negotiated early release of escrow, we received $350,000 from the $450,000 escrow account established in connection with our July 2023 sale of Qualigen, Inc. The escrow account had originally been subject to release in January 2025. In exchange for the early release, the other $100,000 of the $450,000 escrow account was paid to Chembio Diagnostics, Inc., the buyer of Qualigen, Inc.

Current wording

In June 2024, by way of a negotiated early release of escrow, we received $350,000 from the $450,000 escrow account established in connection with our July 2023 sale of Qualigen, Inc. The escrow account had originally been subject to release in January 2025. In exchange for the early release, $100,000 from the escrow account was paid to Chembio Diagnostics, Inc., the buyer of Qualigen, Inc.

Previous wording

Delisting of our common stock from Nasdaq would have a serious negative effect on any future financing efforts. As described in Note 14 in our condensed consolidated financial statements, a hearing before a Nasdaq Hearing Panel is currently scheduled for July 16, 2024; if the Panel does not grant our request for continued listing or if we are unable to regain compliance with the applicable Nasdaq listing criteria within any period of time that may be granted by the Panel, we expect the outcome would be that our common stock would be delisted from Nasdaq.

Current wording

Delisting of our common stock from Nasdaq would have a serious negative effect on any future financing efforts. As described in Note 14 in our condensed consolidated financial statements, a hearing before a Nasdaq Hearing Panel was held on July 16, 2024. On August 2, 2024, the Company received the Panel decision which granted the Company until October 31, 2024 to regain compliance with the Bid Price Rule and the Equity Rule. If the Company is unable to regain compliance with the listing standards of Nasdaq by October 31, 2024, the Company’s securities may be delisted from The Nasdaq Stock Market.

Previous wording

Our current liabilities at March 31, 2024 include $1.8 million of accounts payable, $1.0 million of convertible debt to a related party, $0.8 million of accrued expenses and other current liabilities, $0.2 million in warrant liabilities, and $0.7 million in derivative liabilities.

Current wording

Our current liabilities at June 30, 2024 include approximately $1.9 million of accounts payable, $1.7 million of convertible debt and derivative liabilities, $1.0 million of accrued expenses and other current liabilities, $0.3 million in warrant liabilities.

Previous wording

We have multiple license and sponsored research agreements with ULRF. Under these agreements, we have taken over development, regulatory approval and commercialization of various drug compounds from ULRF and are responsible for maintenance of the related intellectual property portfolio. Under the terms of these agreements, we are required to make patent maintenance payments and payments based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property. The maximum aggregate milestone payments we may be obligated to make per product are $5 million. We will also be required to pay a royalty on net sales of products covered by the in-licensed intellectual property in the low single digits. The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits. We have the right to sublicense our rights under these agreements, but we will be required to pay ULRF a percentage of any sublicense income.

Current wording

We have multiple license agreements with ULRF. Under these agreements, we have taken over development, regulatory approval and commercialization of various drug compounds from ULRF and are responsible for maintenance of the related intellectual property portfolio. Under the terms of these agreements, we are required to make patent maintenance payments and payments based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property. The maximum aggregate milestone payments we may be obligated to make per product are $5 million. We will also be required to pay a royalty on net sales of products covered by the in-licensed intellectual property in the low single digits. The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits. We have the right to sublicense our rights under these agreements, but we will be required to pay ULRF a percentage of any sublicense income.

Previous wording

On January 13, 2022, we entered into a License Agreement with UCL Business Limited to obtain an exclusive worldwide in-license of a genomic quadruplex (G4)-selective transcription inhibitor drug development program which had been developed at University College London, including lead and back-up compounds, preclinical data and a patent estate. (UCL Business Limited is the commercialization company for University College London.) We are further developing the program’s lead compound under the name QN-302. The License Agreement requires (if and when applicable) tiered royalty payments in the low to mid-single digits, clinical/regulatory/sales milestone payments, and sharing of a percentage of any non-royalty sublicensing consideration paid to us. In November 2023, we became obligated to pay $100,000 to UCL Business Limited upon the first patient dosing of QN-302, which was paid in January 2024.

Current wording

In January 2022, we entered into a License Agreement with UCL Business Limited to obtain an exclusive worldwide in-license of a genomic quadruplex (G4)-selective transcription inhibitor drug development program which had been developed at University College London, including lead and back-up compounds, preclinical data and a patent estate. (UCL Business Limited is the commercialization company for University College London.) We are further developing the program’s lead compound under the name QN-302. The License Agreement requires (if and when applicable) tiered royalty payments in the low to mid-single digits, clinical/regulatory/sales milestone payments, and sharing of a percentage of any non-royalty sublicensing consideration paid to the Company. In November 2023, we became obligated to pay $100,000 to UCL Business Limited upon the first patient dosing of QN-302, which was paid in January 2024.

Previous wording

On December 22, 2022, we issued to Alpha an 8% Senior Convertible Debenture in the aggregate principal amount of $3,300,000 for a purchase price of $3,000,000 pursuant to the terms of a Securities Purchase Agreement, dated December 21, 2022 (the “2022 Securities Purchase Agreement”). The 2022 Debenture has a maturity date of December 22, 2025 and is convertible, at any time, and from time to time, until the 2022 Debenture is no longer outstanding, at Alpha’s option, into shares of our common stock (the “Conversion Shares”), at a price initially equal to $1.32 per share, subject to adjustment as described in the 2022 Debenture and other terms and conditions described in the 2022 Debenture. On July 13, 2023, we obtained stockholder approval, for purposes of complying with Nasdaq Listing Rule 5635(d), for the issuance to Alpha of more than 20% of our issued and outstanding shares of common stock pursuant to the terms and conditions of (a) the 2022 Debenture, and (b) the common stock purchase warrant dated December 22, 2022 issued by us to Alpha. Between January 9 and 12, 2023, we issued 841,726 shares of common stock upon Alpha’s partial conversion of the 2022 Debenture at $1.32 per share for a total of $1,111,078 principal. In October and December 2023, we issued 309,665 shares of common stock to Alpha in lieu of cash for monthly redemption payments on the 2022 Debenture at a weighted average price of $0.71 per share. In January, February, and March 2024, we issued 1,138,535 shares of common stock to Alpha in lieu of cash for monthly redemption payments on the 2022 Debenture at a weighted average price of $0.33 per share. As of March 31, 2024, approximately 3,995,854 shares of common stock were issuable under the 2022 Debenture, based on the $0.26 per share figure. The 2022 Debenture includes a beneficial ownership blocker of 9.99%, which may only be waived by Alpha upon 61 days’ notice to us. Except in respect of an Exempt Issuance (as defined in the 2022 Securities Purchase Agreement), the 2022 Debenture contains a “ratchet” antidilution provision, with a $0.26 floor.

Current wording

On December 22, 2022, we issued to Alpha an 8% Senior Convertible Debenture in the aggregate principal amount of $3,300,000 for a purchase price of $3,000,000 pursuant to the terms of a Securities Purchase Agreement, dated December 21, 2022 (the “2022 Securities Purchase Agreement”). The 2022 Debenture has a maturity date of December 22, 2025 and is convertible, at any time, and from time to time, until the 2022 Debenture is no longer outstanding, at Alpha’s option, into shares of our common stock (the “Conversion Shares”), at a price initially equal to $1.32 per share, subject to adjustment as described in the 2022 Debenture and other terms and conditions described in the 2022 Debenture. On July 13, 2023, we obtained stockholder approval, for purposes of complying with Nasdaq Listing Rule 5635(d), for the issuance to Alpha of more than 20% of our issued and outstanding shares of common stock pursuant to the terms and conditions of (a) the 2022 Debenture, and (b) the common stock purchase warrant dated December 22, 2022 issued by us to Alpha. Between January 9 - 12, 2023, we issued 841,726 shares of common stock upon Alpha’s partial conversion of the 2022 Debenture at $1.32 per share for a total of $1,111,078 principal. In October and December 2023, we issued 309,665 shares of common stock to Alpha in lieu of cash for monthly redemption payments on the 2022 Debenture at a weighted average price of $0.71 per share. During the three months ending March 31, 2024, we issued 1,138,535 shares of common stock to Alpha in lieu of cash for monthly redemption payments of the 2022 Debenture at a weighted average conversion price of $0.33 per share, and a weighted average fair value of $0.49 per share, and during the three months ending June 30, 2024, we issued 2,536,312 shares of common stock to Alpha in lieu of cash for monthly redemption payments of the 2022 Debenture at a weighted average conversion price of $0.26 per share, and a weighted average fair value of $0.25 per share.

Previous wording

On February 27, 2024, upon our receipt of a cash purchase price payment of $500,000 (less expenses), we issued to Alpha an 8% Convertible Debenture (the “2024 Alpha Debenture”) in the principal amount of $550,000. The 2024 Alpha Debenture matures no later than December 31, 2024 and is convertible, at any time, and from time to time, at Alpha’s option, into shares of common stock of the Company, at $0.6111 per share, subject to adjustment as described in the 2024 Alpha Debenture. Except in respect of an Exempt Issuance, the 2024 Alpha Debenture contains a “ratchet” antidilution provision, with an $0.1164 floor. The 2024 Alpha Debenture accrues interest on its outstanding principal balance at the rate of 8% per annum, payable at maturity. In connection with this issuance, we also issued to Alpha a 5-year common stock purchase warrant to purchase (at $0.26 per share) 900,016 shares of our common stock. We also granted to Alpha an option, exercisable until July 1, 2024, to purchase from us additional 8% Convertible Debentures, of like tenor, with face amounts of up to an aggregate of $1,100,000 (and with a proportional number of accompanying common stock warrants of like tenor, up to a total of 1,800,032 additional warrants).

Current wording

On February 27, 2024, upon our receipt of a cash purchase price payment of $500,000 (less expenses), we issued to Alpha an 8% Convertible Debenture (the “2024 Alpha Debenture”) in the principal amount of $550,000. The 2024 Alpha Debenture matures no later than December 31, 2024 and is convertible, at any time, and from time to time, at Alpha’s option, into shares of common stock of the Company, at $0.6111 per share, subject to adjustment as described in the 2024 Alpha Debenture. Except in respect of an Exempt Issuance, the 2024 Alpha Debenture contains a “ratchet” antidilution provision, with an $0.1164 floor. The 2024 Alpha Debenture accrues interest on its outstanding principal balance at the rate of 8% per annum, payable at maturity. In connection with this issuance, we also issued to Alpha a 5-year common stock purchase warrant to purchase (at $0.26 per share) 900,016 shares of our common stock.

Previous wording

On April 11, 2024, we entered into a Co-Development Agreement with Marizyme, Inc. (“Marizyme”). Under the Co-Development Agreement, we agreed to pay Marizyme a Funding Payment of up to $1,500,000 and an Exclusivity Fee of $200,000. The Exclusivity Fee of $200,000 and a Funding Payment of $500,000 was paid to Marizyme on April 12, 2024. The Exclusivity Fee entitles us to an exclusivity period until May 31, 2024 for purposes of proposing and outlining a broader strategic relationship with Marizyme with regard to Marizyme’s DuraGraft business. The Funding Payment is designed to provide financial support for commercialization of Marizyme’s DuraGraft™ vascular conduit solution, which is indicated for adult patients undergoing coronary artery bypass grafting surgeries and is intended for the flushing and storage of the saphenous vein grafts used in coronary artery bypass grafting surgery. In return for the Funding Payment we will receive quarterly a 33% payment in the nature of royalties on any Net Sales (as defined with a meaning tantamount to gross profit on net sales) of DuraGraft, capped at double the amount of the Funding Payment cash provided. No such payments-in-the-nature-of-royalties would accrue until after DuraGraft has been launched in the United States and a cumulative total of $500,000 of DuraGraft Net Sales have been made in the United States.

Current wording

On April 11, 2024, we entered into a Co-Development Agreement with Marizyme, Inc. (“Marizyme”). Under the Co-Development Agreement (as amended on August 6, 2024), we agreed to pay Marizyme a Funding Payment of up to $1,750,000 and an Exclusivity Fee of $200,000. The Exclusivity Fee of $200,000 and a Funding Payment of $500,000 was paid to Marizyme on April 12, 2024. The Exclusivity Fee entitled us to an exclusivity period until May 31, 2024 for purposes of proposing and outlining a broader strategic relationship with Marizyme with regard to Marizyme’s DuraGraft business. The Funding Payment is designed to provide financial support for commercialization of Marizyme’s DuraGraft™ vascular conduit solution, which is indicated for adult patients undergoing coronary artery bypass grafting surgeries and is intended for the flushing and storage of the saphenous vein grafts used in coronary artery bypass grafting surgery. In return for the Funding Payment we will receive quarterly a 33% payment in the nature of royalties on any Net Sales (as defined with a meaning tantamount to gross profit on net sales) of DuraGraft, capped at double the amount of the Funding Payment cash provided. No such payments-in-the-nature-of-royalties would accrue until after DuraGraft has been launched in the United States and a cumulative total of $500,000 of DuraGraft Net Sales have been made in the United States.

Previous wording

During the three months ended March 31, 2024, operating activities used $0.8 million of cash, primarily resulting from a loss from continuing operations of $2.0 million. Cash flows from operating activities for the three months ended March 31, 2024 were positively impacted by adjustments for $0.4 million loss on issuance of convertible debt, $0.1 million in stock-based compensation expense, a $0.1 million increase in fair value of warrant liabilities, $0.1 million in accretion of discount on convertible debt, $0.1 million loss on monthly redemptions of convertible debt into common stock, a $0.7 million decrease in prepaid expenses and other assets, and a $0.3 million increase in accrued expenses and other current liabilities. Cash flows from operating activities for the three months ended March 31, 2024 were negatively impacted by a $0.4 million decrease in accounts payable, and an adjustment for a $0.2 million gain on change in fair value of derivative liabilities.

Current wording

During the six months ended June 30, 2024, operating activities used $2.3 million of cash, primarily resulting from a loss from continuing operations of $3.5 million. Cash flows from operating activities for the six months ended June 30, 2024 were positively impacted by adjustments for $0.4 million loss on issuance of convertible debt, $0.1 million in stock-based compensation expense, $0.3 million in accretion of discount on convertible debt, $0.2 million loss on monthly redemptions of convertible debt into common stock, and a $0.8 million decrease in prepaid expenses and other assets and a $0.5 million increase in accrued expenses and other current liabilities. Cash flows from operating activities for the six months ended June 30, 2024 were negatively impacted by adjustments for a $0.4 million gain on change in fair value of warrant liabilities, a $0.2 million gain on change in fair value of derivative liabilities, a $0.1 million gain on voluntary conversion of convertible debt into common stock and a $0.4 million decrease in accounts payable.

Previous wording

During the three months ended March 31, 2023, operating activities used $2.6 million of cash, primarily resulting from a loss from continuing operations of $3.2 million. Cash flows from operating activities for the three months ended March 31, 2023 were positively impacted by an adjustment for $0.3 million in stock-based compensation expense, a $1.1 million loss on voluntary conversion of convertible debt, accretion of discount of $0.5 million on convertible debt, a $0.2 million decrease in prepaid expenses and other assets, and a $0.3 million increase in accrued expenses and other current liabilities. Cash flows from operating activities for the three months ended March 31, 2023 were negatively impacted by an adjustment for a $1.0 million decrease in fair value of warrant liabilities, cash used in discontinued operations of $0.7 million, and a $0.1 million decrease in accounts payable.

Current wording

During the six months ended June 30, 2023, operating activities used $5.6 million of cash, primarily resulting from a loss from continuing operations of $6.8 million. Cash flows from operating activities for the six months ended June 30, 2023 were positively impacted by adjustments for $0.9 million in stock-based compensation expense, a $1.1 million loss on voluntary conversion of convertible debt, accretion of discount of $0.8 million on convertible debt, and a $0.6 million increase in accounts payable, a $0.2 million decrease in prepaid expenses and other assets and a $0.3 million increase in accrued expenses and other current liabilities. Cash flows from operating activities for the six months ended June 30, 2023 were negatively impacted by an adjustment for a $1.5 million decrease in fair value of warrant liabilities and net cash used in discontinued operations of $1.2 million.

Previous wording

During the three months ended March 31, 2023, net cash used in investing activities was approximately $0.2 million from discontinued operations, from the purchase of property and equipment.

Current wording

During the six months ended June 30, 2023, net cash used in investing activities from discontinued operations was approximately $246,000, due to purchase of property and equipment.