QRONS INC.
CONDENSED BALANCE SHEETS
(Unaudited)
The accompanying notes are an integral part of these unaudited condensed financial statements.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
The accompanying notes are an integral part of these unaudited condensed financial statements.
QRONS INC.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(unaudited)
The accompanying notes are an integral part of these unaudited condensed financial statements.
QRONS INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
The accompanying notes are an integral part of these unaudited condensed financial statements.
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 2021 and 2020
Note 1 – Description of Business and Basis of Presentation
Organization and Nature of Business:
Qrons Inc. ("Qrons" or the "Company") was incorporated under the laws of the State of Wyoming on August 22, 2016 under the name BioLabMart Inc.
On July 6, 2017, the board of directors and a majority of the Company's shareholders approved an amendment to the Company's Articles of Incorporation to change the name of the Company from "BioLabMart Inc." to
"Qrons Inc." On August 8, 2017, the Company filed Amended Articles of Incorporation with the State of Wyoming to effectuate such name change. 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. The new name and symbol change to "QRON" for the OTC Market was effective 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.
The Company is an innovative biotechnology company dedicated to developing biotech products, treatments and technologies to combat neuronal diseases, which are an enormous social and economic burden on society. The
Company seeks to engage in strategic arrangements with companies and institutions that are developing breakthrough technologies in the fields of artificial intelligence, machine learning, molecular biology, stem cells and tissue engineering, for
deployment in the fight against neuronal diseases. The Company's search is currently focused on researchers based in Israel, a country which is world-renowned for biotech innovations.
The Company’s principal executive office is located at 50 Battery Place, #7T, New York, New York 10280.
Note 2 – Summary of Significant Accounting Policies
Financial Statement Presentation: The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission (the "SEC"), including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted
accounting principles in the United States of America ("U.S. GAAP"), have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for
comprehensive financial statements and should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.
In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three and nine-month periods have been made. Results for
the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year.
Fiscal Year End: The Company has selected December 31 as its fiscal year end.
Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported
therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.
Cash Equivalents: The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents.
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 $11,836 and $171,568 for the three-month periods ended March 31, 2021 and 2020, respectively.
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 2021 and 2020
Note 2 – Summary of Significant Accounting Policies (continued)
Advertising and Marketing Costs: Advertising and marketing costs are expensed as incurred. The Company incurred $0 and $19,500 in advertising and marketing costs during the
three-month periods ended March 31, 2021 and 2020, respectively.
Related Parties: For the purposes of these financial statements, parties are considered to be related if one party has the ability, directly or indirectly, to control the
party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be
individuals or other entities.
Stock-Based Compensation and Other Share-Based Payments: The Company records stock-based compensation in accordance with ASC 718, Compensation
- Stock Compensation, using the fair value method on grant date. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the equity
instruments issued. The expense attributable to the Company's directors is recognized over the period 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.
Fair Value of Financial Instruments
ASC 820, Fair Value Measurements, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models,
discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level of input that is significant to the fair value
measurement of the instrument.
The following table provides a summary of the fair value of the Company’s derivative liabilities as of March 31, 2021 and December 31, 2020:
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 2021 and 2020
Note 2 – Summary of Significant Accounting Policies (continued)
Warrants: The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in ASC 815 Derivatives
and Hedging, 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.
Income taxes: The Company has adopted ASC 740, Income Taxes, which requires the use of the asset and liability method of accounting
for income taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled.
Basic and Diluted Loss Per Share: In accordance with ASC 260, Earnings Per Share, the basic loss per common share is computed by
dividing net loss available to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include
the number of additional shares of common stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were dilutive.
Potential common stock consists of the incremental common stock issuable upon the exercise of common stock warrants (using the if-converted method), convertible notes, classes of shares with conversion features,
and stock awards and stock options. The computation of basic loss per share for the three months ended March 31, 2021 and the year ended December 31, 2020 excludes potentially dilutive securities of underlying share purchase warrants, convertible
notes, stock options and preferred shares, because their inclusion would be antidilutive. As a result, the computations of net loss per share for each period presented is the same for both basic and fully diluted.
The table below reflects the potentially dilutive securities at each reporting period which have been excluded from the computation of diluted net loss per share:
New Accounting Pronouncements: Certain new accounting pronouncements that have been issued are not expected to have a material effect on the Company’s financial statements.
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 2021 and 2020
Note 3 – Going Concern
The Company has experienced net losses to date, and has not generated revenues from operations. While the Company raised proceeds of $211,000 during the year ended December 31, 2020 by way of private placement
offerings to accredited investors, loans and advances from its officers and directors and third-party short term loans, it does not believe its resources will be sufficient to meet its operating and capital needs beyond the third quarter of 2021.
The Company expects it will require additional capital to fully implement the scope of its proposed business operations, which raises substantial doubt about its ability to continue as a going concern. The Company will have to continue to rely
on equity and debt financing, and continued support from its officers and directors. There can be no assurance that financing, whether debt or equity, will be available to the Company in the amount required at any particular time or for any
particular period or, if available, that it can be obtained on favorable terms. In addition, if the Company is unable to obtain adequate financing due to the continued effect of COVID-19 on the capital markets, the Company may be required to
reduce the scope, delay, or eliminate some or all of its planned operations.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amount and classification of liabilities that might cause results from this
uncertainty.
The COVID-19 pandemic has had an adverse impact on the research and development of our product candidates. Research facilities at Dartmouth were subject to closures as well as laboratories at Ariel in Israel during
fiscal 2020. This resulted in our discontinuing our research at these Universities and was part of our decision to adjust our research to be collaborative and to seek aligning with third parties to advance our expanded goals. We do not
currently know the full extent of potential delays of research in the future as a result of the continuing pandemic restrictions.
COVID-19 has also caused significant disruptions to the global financial markets, which severely impacts our ability to raise additional capital. We terminated our employees in April 2020 in an effort to conserve
resources as we evaluate our business development efforts. The ultimate impact on us and our research relationships is currently uncertain. We may be required to further reduce operations or cease operations if we are unable to finance our
operations.
Management is actively monitoring the situation but given the daily evolution of the COVID-19 outbreak, the Company is not able to fully estimate the effects of the COVID-19 outbreak on its planned operations or
financial condition in the next 12 months. However, while significant uncertainty remains, the Company believes it is likely that the COVID-19 outbreak will have a negative impact on its ability to raise additional financing and will result in
delays as it continues to impact the Company’s workforce and its collaborative development efforts.
Note 4 – Convertible Note – Related Party and Derivative Liabilities
On September 1, 2016, the Company entered into a convertible debenture agreement with CubeSquare, LLC ("CubeSquare"), of which its Chief Executive Officer is the managing partner and its President is a 25% owner of
CubeSquare. The Company received proceeds of $10,000 during fiscal 2016 ("Note 1"). The note bears interest at 8% per annum and was due on September 1, 2017. Interest accrues from September 1, 2016 and is payable on maturity. Interest is payable,
at the lender's option, in cash or common stock. Any portion of the loan and unpaid interest is convertible at any time at the option of CubeSquare into shares of common stock of the Company at a conversion price of the greater of (i) $0.0625 per
share if the Company's shares are not trading on a public market and; (ii) in the event the Company's shares are listed for trading on a public market, the conversion price shall be equal to a 50% discount to the average of the five lowest
trading prices during the previous twenty trading days prior to the date of the notice of conversion from the lender.
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 2021 and 2020
Note 4 – Convertible Note – Related Party and Derivative Liabilities (continued)
On September 29, 2017, the Company and CubeSquare amended Note 1 to extend the maturity date from September 1, 2017 to September 1, 2018; on September 9, 2018, the Company further amended Note 1 to extend the
maturity date to September 1, 2019; on November 6, 2019, the Company further amended Note 1 to extend the maturity date to September 1, 2020; and on October 30, 2020, the Company further amended Note 1 to extend the maturity date to September 1,
2021, under the same terms and conditions.
On September 27, 2017, the Company entered into a second convertible debenture agreement with CubeSquare under which the Company received proceeds of $15,000 (Note 2). Note 2 bears interest at 8% per annum and was
due on September 27, 2018. Interest accrues from September 27, 2017 and is payable on maturity. Any portion of the principal and unpaid interest under the note is convertible at any time at the option of CubeSquare into shares of common stock
of the Company at a conversion price equal to a 50% discount to the average of the five lowest trading prices during the previous twenty trading days prior to the date of the notice of conversion from CubeSquare. On September 9, 2018, Note 2 was
amended to extend the maturity date to September 27, 2019. On November 6, 2019, Note 2 was amended to extend the maturity date to September 27, 2020 and on October 30, 2020 Note 2 was amended to extend the maturity date to September 27, 2021.
The Company analyzed the amendment to Note 1 and Note 2 under ASC 815-10-15-83 and concluded that these two convertible Notes meet the definition of a derivative. The Company estimated the fair value of the
derivative at each report date using the Black-Scholes valuation model to value the derivative liability related to the variable conversion rate.
The carrying value of these convertible notes is as follows:
We recorded interest expenses of $493 and $501 for the three-month periods ended March 31, 2021 and 2020, respectively. As of March 31, 2021 and December 31, 2020, the unpaid interest balance under Accounts payable
and accrued liabilities – related party was $7,942 and $7,449, respectively.
As a result of the application of ASC 815, the fair value of the derivative liability associated with the conversion feature is summarized as follows:
The fair value at the commitment and re-measurement dates for the Company's derivative liabilities were based upon the following management assumptions as of March 31, 2021 and December 31, 2020 and the commitment
date:
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 2021 and 2020
Note 5 – Convertible Note and Derivative Liabilities
In December 2019, we issued and sold in a private offering 8% convertible notes in the aggregate principal amount of $70,000. Such notes are due on December 31, 2021 and are convertible into shares of our common
stock at a conversion price (the "Conversion Price") for each share of common stock equal to the lesser of: (a) $0.50, (b) the lowest price at which the Company has converted any convertible security of the Company (to the holder or to any third
party) within 30 trading days prior to the date of delivery of the applicable Notice of Conversion; and (c) so long as lower than (a) or (b), such price per share of common stock as the Company and the holder may agree from time to time. In
connection with the 8% convertible note issuance, we issued warrants to purchase an aggregate of 70,000 shares of common stock at an exercise price of $1.00.
On February 19, 2020 we issued and sold in a private offering 8% convertible notes in the principal amount of $10,000, due on February 19, 2022. Such notes are convertible into shares of common stock at a
conversion price per share equal to the lesser of: (a) $0.50; (b) the lowest price at which the Company has converted any convertible security of the Company within 30 trading days prior to the date of delivery of the applicable notice of
conversion; and (c) such other as the Company and the holder may agree. In connection with the 8% convertible note issuance, we issued warrants to purchase an aggregate of 10,000 shares of common stock at an exercise price of $1.00.
We recorded interest expenses of $675 and $1,486 for the three-month periods ended March 31, 2021 and 2020, respectively, with respect to the aforementioned notes. As of March 31, 2021 and December 31, 2020, the
unpaid interest balance under Accounts payable and accrued liabilities was $8,047 and $7,372, respectively.
The convertible notes qualify for derivative accounting and bifurcation under ASC 815. The derivative liability of the $80,000 convertible notes was calculated using the Black-Scholes pricing model to be $72,689.
The carrying value of these convertible notes is as follows:
Amortization of the discount during the three month periods ended March 31, 2021 and 2020 totaled $8,833 and $8,390, respectively, which amounts have been recorded as interest expense.
As a result of the application of ASC 815 as of March 31, 2021 and 2020, the fair value of the derivative liability associated with the conversion feature is summarized as follows:
The fair value at the commitment and re-measurement dates for the Company's derivative liabilities were based upon the following management assumptions as of December 31, 2020 and March 31, 2021 and the commitment
date:
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 2021 and 2020
Note 6 – Unsecured Short-Term Advance from Third Party
On June 20, 2019, the Company received $100,000 from a third party in the form of an unsecured, demand, non-interest bearing, short term advance to meet its operating needs. The advance remains outstanding at March
31, 2021 and December 31, 2020.
Note 7 – Related Party Transactions
On May 1, 2019, the Company issued a promissory note (the "Note") to CubeSquare in the principal amount of $50,000. The Note bears interest at the rate of 8% per annum and is due and payable by the Company upon
demand from CubeSquare. We recorded interest expenses of $986 and $1,008 for the three months period ended March 31, 2021 and 2020, respectively. As of March 31, 2021 and December 31, 2020, the unpaid interest balance under Accounts payable and
accrued liabilities – related party was $7,660 and $6,674, respectively.
During the year ended December 31, 2019, the Company received $135,000 from Jonah Meer, its Chief Executive Officer, in the form of an unsecured, demand, non-interest bearing, short term advance to help meet its
operating needs. During the year ended December 31, 2020, the Company received an additional $70,000 from Jonah Meer.
On August 20, 2019, the Company received $50,000 from Ido Merfeld, its President, in the form of an unsecured, demand, non-interest bearing, short term advance to help meet its operating needs. During the year
ended December 31, 2020, the Company received an additional $21,000 from Ido Merfeld.
During the year ended December 31, 2020, the Company received $10,000 from CubeSquare in the form of an unsecured, demand, non-interest bearing, short term advance to help meet its operating needs. The
Company’s Chief Executive Officer is the managing partner and the Company’s President is a 25% owner of CubeSquare.
Jonah Meer, the Company’s Chief Executive Officer, made payments to various vendors during the years ended December 31, 2019 and 2020. The balance payable to Mr. Meer of $24,600 and $28,475 is reflected in accounts
payable, related party as of March 31, 2021 and December 31, 2020, respectively.
During the year ended December 31, 2019, Ido Merfeld, the Company’s President, made payments to various vendors in the aggregate amount of $1,169. The balance payable to Mr. Merfeld of $1,169 is reflected in
accounts payable, related party as of March 31, 2021 and December 31, 2020, respectively.
Note 8 – License and Research Funding Agreement / Royalty Agreement
Ariel Scientific Innovation Ltd.
On November 30, 2019, the Company entered into a royalty and license fee sharing agreement (the “Royalty Agreement”) with Ariel Scientific Innovations Ltd., a wholly owned subsidiary of Ariel University, in Ariel,
Israel (“Ariel”), which, among other things, superseded and terminated the original license and research funding agreement, dated December 14, 2016, as amended, between the Company and Ariel (the “License Agreement”). Upon the occurrence of an
Exit Event, as such term is described in the Royalty Agreement, including an underwritten public offering of the Company’s shares with proceeds of at least $25 million, a consolidation, merger or reorganization of the Company, and a sale of all
or substantially all of the shares and/or the assets of the Company, Ariel has the right to require the Company to issue up to 3% of the then issued and outstanding shares of its common stock. The issuance of any such shares in the future will
result in dilution to the interests of other stockholders. In consideration for the parties’ agreement to terminate the License Agreement and for future general scientific collaboration between the parties, the Company agreed to pay Ariel a
royalty of 1.25% of net sales (as defined in the Royalty Agreement) of products sold by the Company, or its affiliates and licensees for fifteen years from the first commercial sale in a particular country.
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 2021 and 2020
Note 8 – License and Research Funding Agreement / Royalty Agreement (continued)
Ariel Scientific Innovation Ltd. (cont’d)
Services agreements which the Company had with Ariel related to laboratory access, molecular biology and neurobiology research, and other services terminated during the year ended December 31, 2020. During 2020,
Ariel refunded to the Company certain previously advanced and unused funds.
During the three month periods ended March 31, 2021 and 2020, the Company expensed a total of $0 and $8,625, respectively, in relation to the aforementioned agreements.
Note 9 – Intellectual Property License Agreement and Sponsored Research Agreement
On October 2, 2019, the Company entered into the Intellectual Property License Agreement pursuant to which Dartmouth granted the Company an exclusive world-wide license under the patent application entitled
“Mechanically Interlocked Molecules-based Materials for 3D Printing” in the field of human and animal health and certain additional patent rights to use and commercialize licensed products and services. The license grant includes the right of the
Company to sublicense to third parties subject to the terms of the Agreement.
The Agreement provided for: (i) a $25,000 license issue fee; (ii) an annual license maintenance fee of $25,000, until the first commercial sale of a licensed product or service; (iii) an earned royalty of 2% of net
sales of licensed products and services by the Company or a sublicensee; (iv) 15% of consideration received by the Company under a sublicense; and (v) beginning in the first calendar year after the first commercial sale, an annual minimum
royalty payment of $500,000, $1,000,000 in the second calendar year, and $2,000,000 in the third calendar year and each year thereafter. The Company will also reimburse Dartmouth for all patent preparation, filing, maintenance and defense costs.
Failure to timely make any payment due under the Agreement will result in interest charges to the Company of the lower of 10% per year or the maximum amount of interest allowable by applicable law.
The Agreement may be terminated by Dartmouth if the Company is in material breach of the Agreement which is not cured after 30 days of notice thereof or if the Company becomes insolvent. Dartmouth may terminate the
Agreement if the Company challenges a Dartmouth patent or does not terminate a sublicensee that challenges a Dartmouth patent, except in response to a valid court or governmental order. The Company may terminate the Agreement at any time upon six
months written notice to Dartmouth.
If the Company or any sublicensee or affiliate institutes or participates in a licensed patent challenge, the then current earned royalty rate for licensed products covered by Dartmouth patents will automatically
be increased to three times the then current earned royalty rate.
On March 23, 2021, the United States Patent and Trademark Office issued U.S. Patent No. 10,954,315 to the Trustees of Dartmouth College which is directed to mechanically interlocked, molecules-based materials for
3-D printing. The patent's inventors are Professor Chenfeng Ke, a member of the Company's Scientific Advisory Board and Qianming Lin, Professor Ke's assistant. The patent grant is the culmination of the Intellectual Property License Agreement
between the Company and Dartmouth with respect to an exclusive world-wide license of intellectual property related to 3D printable materials in the fields of human and animal health.
The Company recorded $6,250 as license fees during the three month periods ended March 31, 2021 and 2020 with respect to such annual fee.
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 2021 and 2020
Note 9 – Intellectual Property License Agreement and Sponsored Research Agreement (continued)
On July 12, 2018, the Company entered into a one-year sponsored research agreement (the “Sponsored Research Agreement”) with the Trustees of Dartmouth College (“Dartmouth”) pursuant to which the Company will
support and fund the cost of research conducted by Dartmouth of mutual interest to the parties in accordance with the Agreement. Intellectual property invented or developed solely by a party will be owned by such party and intellectual property
jointly invented or developed shall be jointly owned. On November 4, 2019, the parties entered into an amendment to the Sponsored Research Agreement which extended the term of the Agreement through July 14, 2020. The Sponsored Research Agreement
expired by its terms in July 2020.
During the three month periods ended March 31, 2021 and 2020, the Company recorded expenses of $0 and $18,895, respectively, related to the Sponsored Research Agreement.
As part of its ongoing program of research and development, the Company has retained distinguished scientists and other qualified individuals to advise the Company with respect to its technology and business
strategy and to assist it in the research, development and analysis of the Company's technology and products. In furtherance thereof, the Company has retained certain Advisors as members of its Scientific Advisory Board and Business Advisory
Board as described below, and the Company and Advisors have entered into Consulting Agreements with the following terms and conditions:
On February 10, 2020, the Company entered into a one-year advisory board member consulting agreement with Michael Maizel to serve on the Company's Advisory Board as a business advisor. The Advisory Board Agreement
automatically renews for up to two additional one-year periods, unless earlier terminated by either party upon 30 days' prior written notice to the other party. In consideration for serving on the Advisory Board, the Company granted an option to
purchase 50,000 shares of common stock under the 2016 Stock Option and Award Plan subject to certain vesting terms. Due to continuing Covid-19 pandemic concerns, on August 17, 2020, the Company notified Mr. Maizel of the termination of this
agreement. Mr. Maizel’s 25,000 vested options were forfeited unexercised in the three months ended March 31, 2021.
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 2021 and 2020
2016 Stock Option and Stock Award
On December 14, 2016, the Board adopted the Company's 2016 Stock Option and Stock Award Plan (the "Plan"). The Plan provides for the award of stock options (incentive and non-qualified), stock awards and stock
appreciation rights to officers, directors, employees and consultants who provide services to the Company. The terms of awards under the Plan are made by the Board. The Company has reserved 10 million shares for issuance under the Plan.
Stock Options:
(a) Stock Options granted to Science Advisors and Business Advisors
On November 15, 2017, under the Plan, the Board awarded two of its Science Advisors the following three-year stock options: (i) an immediately exercisable option to purchase 6,667 shares of common stock at an
exercise price of $2.00 per share, (ii) an option to purchase 6,667 shares of common stock exercisable on November 15, 2018 at an exercise price of $2.00 per share and (iii) an option to purchase 6,666 shares of common stock exercisable on
November 15, 2019 at an exercise price of $2.00 per share, provided that such Advisors are providing services to the Company at the time of exercise. During the year ended December 31, 2020, 13,334 shares subject to such options expired
unexercised.
On April 16, 2018, under the Plan, the Board awarded a Science Advisor, the following three-year stock options: (i) an option to purchase 10,000 shares of common stock, exercisable on April 16, 2018 at an exercise
price of $2.00 per share (ii) an option to purchase 10,000 shares of common stock exercisable on April 16, 2019 at an exercise price of $2.00 per share, and (iii) an option to purchase 10,000 shares of common stock exercisable on April 16, 2020
at an exercise price of $2.00 per share, provided the Advisor is providing services to the Company at the time of exercise.
On August 15, 2018, under the Plan, the Board awarded a Science Advisor, the following three-year stock options: (i) an option to purchase 6,667 shares of common stock, exercisable on August 15, 2018 at an exercise
price of $2.00 per share (ii) an option to purchase 6,667 shares of common stock exercisable on August 15, 2019 at an exercise price of $2.00 per share, and (iii) an option to purchase 6,666 shares of common stock exercisable on August 15, 2020
at an exercise price of $2.00 per share, provided the Advisor is providing services to the Company at the time of exercise.
On July 1, 2019, under the Plan, the Board awarded a Science Advisor, the following three-year stock options: (i) an option to purchase 33,334 shares of common stock, exercisable on July 1, 2019 at an exercise
price of $2.00 per share (ii) an option to purchase 33,333 shares of common stock exercisable on July 1, 2020 at an exercise price of $2.00 per share, and (iii) an option to purchase 33,333 shares of common stock exercisable on July 1, 2021 at an
exercise price of $2.00 per share, provided the advisor is providing services to the Company at the time of exercise.
On February 10, 2020 under the Plan, the Company granted three-year options to purchase an aggregate of 50,000 shares of its common stock at an exercise price of $2.00 per share, to a Business Advisor. 25,000 of
such shares subject to the option were immediately exercisable and expire on February 10, 2023, and 25,000 shares vest on February 10, 2021 and expire on February 10, 2024. On July 15, 2020, 25,000 unvested options were forfeited. During the
three months ended March 31, 2021, 25,000 vested options were forfeited.
On December 10, 2018, the Board awarded an employee the following three-year stock options under the Plan: (i) an option to purchase 33,334 shares of common stock, exercisable on December 10, 2018 at an exercise
price of $2.00 per share (ii) an option to purchase 33,333 shares of common stock exercisable on December 10, 2019 at an exercise price of $2.00 per share, and (iii) an option to purchase 33,333 shares of common stock exercisable on December 10,
2020 at an exercise price of $2.00 per share, provided the employee is providing services to the Company at the time of exercise. On March 23, 2020, the options previously vesting on December 10, 2020 shall vest immediately with an expiration
date of March 23, 2023.
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 2021 and 2020
Note 11 – Stock Plan (continued)
On December 10, 2019, the Board awarded an employee, the following three-year stock options under the Plan: (i) an option to purchase 33,334 shares of common stock, exercisable on December 10, 2019 at an exercise
price of $2.00 per share (ii) an option to purchase 33,333 shares of common stock exercisable on December 10, 2020 at an exercise price of $2.00 per share, and (iii) an option to purchase 33,333 shares of common stock exercisable on December 10,
2021 at an exercise price of $2.00 per share, provided the employee is providing services to the Company at the time of exercise. On March 23, 2020, the Company accelerated the vesting provision such that options previously vesting on December
10, 2020 and December 10, 2021 immediately vested and expire on March 23, 2023.
On December 10, 2020, under the Plan, the Board awarded an employee, an immediately exercisable three-year stock option to purchase 100,000 shares of the common stock of the Company at an exercise price of $2.00
per share.
The following table is the recognized compensation in respect of the above stock option compensation ((a) and (b)) which amount has been allocated as below:
As of March 31, 2021 and December 31, 2020, total unrecognized compensation remaining to be recognized in future periods totaled $3,100 and $6,100, respectively.
On June 25, 2019, the Company appointed John N. Bonfiglio, PhD as its chief operating officer, effective July 1, 2019. As compensation, Dr. Bonfiglio was granted a three-year stock option to purchase 100,000 shares
of common stock at an exercise price of $2.00 per share, 50,000 of which shares vested upon grant and 25,000 shares vest on each of July 1, 2020 and July 1, 2021, provided Dr. Bonfiglio is in the employ of the Company on such dates. Mr. Bonfiglio
was terminated as chief operating officer as of November 30, 2019. Accordingly, all unvested stock options terminated on such date. During the three months ended March 31, 2021, 50,000 vested options were forfeited.
On December 10, 2019, the Board granted five-year options to purchase 325,000 shares of common stock to each of its two officers. The options have an exercise price of $2.00 per share and are immediately
exercisable.
On December 10, 2020, the Board granted five-year options to purchase 325,000 shares of common stock to each of its two officers. The options have an exercise price of $2.00 per share and are immediately
exercisable.
There was no compensation recognized in the three month periods ended March 31, 2021 and 2020 related to stock option grants. As of March 31, 2021, and December 31, 2020, there was no unrecognized compensation
remaining to be recognized in future periods.
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 2021 and 2020
Note 11 – Stock Plan (continued)
The fair value of each option award referenced above is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions at the measurement date(s):
A summary of the activity for the Company's stock options at March 31, 2021 and December 31, 2020, is as follows:
The Company has authorized 100,000,000 shares of common stock, par value $0.0001, and 10,000 shares of preferred stock which is designated as Series A Preferred Stock, par value $0.001.
Series A Preferred Stock:
The Series A Preferred Stock is redeemable at the option of the Company at any time, in whole or in part, upon 10 trading days prior notice, at a price of $1.00 per share plus 4% per annum from the date of issuance
(the "Stated Value"). The holders of the Series A Preferred Stock are entitled to a liquidation preference equal to the Stated Value, prior to the holders of other preferred stock or common stock. The holders of the Series A Preferred Stock have
the right to convert such stock into common stock at a conversion rate equal to the Stated Value as of the conversion date divided by the average closing price of the common stock for the five previous trading days. The Company is required to
reserve sufficient number of shares for the conversion of the Series A Preferred Stock. The holders of Class A Preferred Stock shall vote together as a single class with the holders of the Company's common stock and the holders of any other class
or series of shares entitled to vote with the common stock, with the holders of Class A Preferred Stock being entitled to 66 2/3% of the total votes on all such matters, regardless of the actual
number of shares of Class A Preferred Stock then outstanding.
There was a total of 2,000 shares of Series A Preferred Stock issued and outstanding as of March 31, 2021 and December 31, 2020.
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 2021 and 2020
Note 12 – Capital Stock (continued)
Common Stock
In August 2020, the Company sold an aggregate of 200,000 shares of its common stock with a five-year warrant to purchase an aggregate of 100,000 shares of common stock at an exercise price of $1.00 per share (the
“Warrant Shares”) to investors in a private offering for aggregate gross proceeds of $100,000. The proceeds will be used for general corporate purposes. The Warrant Shares have “piggyback” registration rights and the warrant has a provision for
cashless exercise. In addition, the warrant may not be exercised if it would result in beneficial ownership by the holder and his affiliates of more than 9.99% of the Company’s outstanding shares of common stock.
There was a total of 13,289,789 shares of common stock issued and outstanding as of March 31, 2021 and December 31, 2020.
Common Stock Purchase Warrants
As of March 31, 2021 and December 31, 2020, the following common stock purchase warrants were outstanding:
(1) During the year ended December 31, 2019, the Company granted certain convertible notes holders warrants to purchase an aggregate of 70,000 shares of common stock at an exercise price of $1.00. The fair value of
the warrants was $36,410 and recorded as financing cost.
(2) During the year ended December 31, 2020, the Company granted a convertible note holder a warrant to purchase 10,000 shares of common stock at an exercise price of $1.00. The fair value of the warrant was $3,400
and recorded as financing cost.
(3) Each two shares of common stock purchased in a private offering included one warrant to purchase an additional share of common stock at an exercise price of $1.00.
The fair value of the outstanding common stock purchase warrants was calculated using the Black-Scholes option-pricing model with the following assumptions at the measurement date(s):
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 2021 and 2020
Note 13 – Subsequent Events
Subsequent to March 31, 2021, a total of 10,000 options were forfeited unexercised.
The Company has evaluated events for the period from March 31, 2021 through the date of the issuance of these financial statements and determined that there are no additional events requiring disclosure.