UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2024

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

For the transition period from ___________ to __________

Commission file number: 001-37846

QUOIN PHARMACEUTICALS LTD.

(Exact name of registrant as specified in its charter)


State of Israel		92-2593104
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)



42127 Pleasant Forest Court
Ashburn, VA		20148-7349
(Address of principal executive offices)		(Zip Code)

(703) 980-4182

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
American Depositary Shares, each representing one (1) Ordinary Shares, no par value per share	QNRX	The Nasdaq Stock Market LLC
Ordinary Shares, no par value per share*		N/A

*	Not for trading, but only in connection with the registration of the American Depositary Shares (“ADSs”) pursuant to requirements of the Securities and Exchange Commission.

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

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

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

As of May 8, 2024, the registrant had 3,979,970 ordinary shares, no par value per share, outstanding, and 3,979,970 ADSs outstanding (assuming all ordinary shares are represented by ADSs), with each ADS representing one (1) ordinary share.

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QUOIN PHARMACEUTICALS LTD.

INDEX

	Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	1

PART I-FINANCIAL INFORMATION	3

Item 1. Financial Statements.	3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	18

Item 3. Quantitative and Qualitative Disclosures About Market Risk.	27

Item 4. Controls and Procedures.	27

PART II-OTHER INFORMATION	28

Item 1. Legal Proceedings.	28

Item 1A. Risk Factors.	28

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	29

Item 3. Defaults Upon Senior Securities.	29

Item 4. Mine Safety Disclosures.	29

Item 5. Other Information.	29

Item 6. Exhibits.	30

SIGNATURES	31

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GENERAL INFORMATION

Unless otherwise indicated or the context otherwise requires, all references in this Quarterly Report on Form 10-Q (the “Quarterly Report”) to the terms “Quoin,” “Quoin Ltd.,” the “Company,” “us,” “we”, “our” and the “Registrant” refer to Quoin Pharmaceuticals Ltd., an Israeli company, and its consolidated subsidiaries. In this Quarterly Report, the U.S. Securities and Exchange Commission is referred to as the “SEC”, the Securities Act of 1933, as amended, is referred to as the “Securities Act” and the Securities Exchange Act of 1934, as amended, is referred to as the “Exchange Act.”

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

AND SUMMARY OF RISK FACTORS

Certain information included in this Quarterly Report may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements are often characterized by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are not the only way these statements are identified.

These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.

Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:

●

our limited operating history and the difficulties encountered by a small developing company;

●

our history of losses and need for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or at all;

●

our lack of revenue generated from product sales since inception, and potential inability to be profitable;

●

uncertainties of cash flows and inability to meet working capital needs;

●

our ability to obtain regulatory approvals;

●

our ability to generate favorable pre-clinical and clinical trial results;

●

our ability to identify and develop potential product candidates;

●

additional costs or delays associated with unsuccessful clinical trials;

●

the inability to predict the timing of revenue from sales of a future product;

●

the extensive regulatory requirements and future developmental and regulatory challenges we will still face even if we obtain approval for a product candidate;

●

our ability to obtain or maintain orphan drug designation or data exclusivity for our product candidates;

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●

our ability to obtain Orphan Disease and Rare Pediatric Disease designations for our product candidates;

●

the potential oversight of programs or product candidates that may be more profitable or more successful;

●

our manufacturing processes may not be validated and our methodology may not be accepted by the scientific community;

●

the ability to conduct clinical trials, because of difficulties enrolling patients or other reasons;

●

the requirements of being a publicly traded company may strain our resources;

●

potential adverse effects resulting from failure to maintain effective internal controls;

●

our ability to comply with the applicable continued listing requirements of Nasdaq;

●

the potential negative impact on our securities price and trading volume if securities or industry analysts do not publish reports about us or if they adversely change their recommendations about our business;

●

failure to meet the continued listing requirements of the Nasdaq Capital Market could result in a delisting of our ADSs;

●

the potential volatility of the market price for our ADSs;

●

the potential dilution of our shareholders’ potential ownership due to future issuances of share capital;

●

the requirement for holders of ADSs to act through the depositary to exercise their rights;

●

the potential limitations on ADS holders with respect to the transfer of their ADSs;

●

the risks of securities class action litigation; and

●

other risks and uncertainties, including those listed under described in Part I – Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023 (“Form 10-K”), as well as our subsequent reports filed with the SEC

You are urged to carefully review and consider the various disclosures made throughout this Quarterly Report which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

You should not put undue reliance on any forward-looking statements. Although the forward-looking statements in this Quarterly Report are based on our beliefs, assumptions and expectations, taking into account all information currently available to us, we cannot guarantee future transactions, results, performance, achievements or outcomes. No assurance can be made that the expectations reflected in our forward-looking statements will be attained, or that deviations from them will not be material and adverse. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

QUOIN PHARMACEUTICALS LTD.

Condensed Consolidated Balance Sheets


	March 31,		December 31,
	2024		2023
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,833,524	$	2,401,198
Investments		12,856,448		8,293,663
Prepaid expenses and other current assets		574,904		591,034
Total current assets		15,264,876		11,285,895

Prepaid expenses - long term		300,000		300,000
Intangible assets, net		558,334		583,334
Total assets	$	16,123,210	$	12,169,229

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	358,510	$	526,523
Accrued expenses		2,119,194		1,308,706
Accrued interest and financing expense		1,146,251		1,146,251
Due to officers - short term		600,000		600,000
Total current liabilities		4,223,955		3,581,480

Due to officers - long term		2,773,733		2,923,733
Total liabilities	$	6,997,688	$	6,505,213

Commitments and contingencies

Shareholders’ equity:
Ordinary shares, no par value per share, 100,000,000 ordinary shares authorized at	$	—	$	—
March 31, 2024 and December 31, 2023, respectively - 3,795,970 (3,795,970 ADSs) ordinary shares issued and outstanding at March 31, 2024 and 987,220 (987,220 ADSs) at December 31, 2023

Additional paid in capital		57,656,122		51,867,336
Accumulated deficit		(48,530,600)		(46,203,320)
Total shareholders' equity		9,125,522		5,664,016

Total liabilities and shareholders' equity	$	16,123,210	$	12,169,229

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

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QUOIN PHARMACEUTICALS LTD.

Condensed Consolidated Statements of Operations (Unaudited)


	Three months ended March 31,
	2024		2023
Operating expenses
General and administrative	$	1,615,452	$	1,683,817
Research and development		842,832		1,091,733

Total operating expenses		2,458,284		2,775,550

Other (income) and expenses
Unrealized loss (gain)		6,509		(20,427)
Realized and accrued interest income		(137,513)		(152,054)
Total other income		(131,004)		(172,481)
Net loss	$	(2,327,280)	$	(2,603,069)

Loss per ADS
Loss per ADS
Basic	$	(1.11)	$	(4.09)
Fully-diluted	$	(1.11)	$	(4.09)

Weighted average number of ADSs outstanding
Basic		2,103,292		637,217
Fully-diluted		2,103,292		637,217

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

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QUOIN PHARMACEUTICALS LTD.

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

Three months ended March 31, 2023


			No			Additional
	Ordinary		Par	Treasury		Paid in		Accumulated
	Shares	ADSs	Value	Stock		Capital		Deficit		Total
Balance at January 1, 2023	403,887	403,887	—	$	(2,932,000)	$	47,855,521	$	(37,516,747)	$	7,406,774

Net loss	—	—	—		—		—		(2,603,069)		(2,603,069)
Issuance of ADSs, pre-funded warrants and warrants, net	583,333	583,333	—		—		5,849,266		—		5,849,266
Cashless exercise of warrants											—
Stock based compensation	—	—	—		—		261,472		—		261,472

Balance at March 31, 2023	987,220	987,220	—	$	(2,932,000)	$	53,966,259	$	(40,119,816)	$	10,914,443

Three months ended March 31, 2024


			No			Additional
	Ordinary		Par	Treasury		Paid in		Accumulated
	Shares	ADSs	Value	Stock		Capital		Deficit		Total
Balance at January 1, 2024	987,220	987,220	—	$	—	$	51,867,336	$	(46,203,320)		5,664,016

Net loss	—	—	—		—		—		(2,327,280)		(2,327,280)
Issuance of ADSs, pre-funded warrants and warrants, net	2,808,750	2,808,750	—		—		5,482,472		—		5,482,472
Stock based compensation	—	—	—		—		306,314		—		306,314

Balance at March 31, 2024	3,795,970	3,795,970	—	$	—	$	57,656,122	$	(48,530,600)	$	9,125,522

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

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QUOIN PHARMACEUTICALS LTD.

Condensed Consolidated Statements of Cash Flows (unaudited)


	Three Months Ended March 31,
	2024		2023
Cash flows used in operating activities:
Net loss	$	(2,327,280)	$	(2,603,069)
Stock based compensation		306,314		261,472
Amortization of intangibles		25,000		26,011
Unrealized gain and accrued interest on investments		(97,011)		(133,621)
Changes in assets and liabilities:
Increase in accounts payable and accrued expenses		642,475		584,994
Decrease in prepaid expenses & other assets		16,130		117,678
Net cash used in operating activities	$	(1,434,372)	$	(1,746,535)

Cash flows used in investing activities:
Purchase of investments	$	(9,649,774)	$	(13,491,505)
Proceeds from maturity of investments		5,184,000		10,000,000
Net cash used in investing activities	$	(4,465,774)	$	(3,491,505)

Cash flows provided by financing activities:
Payment of amounts due to officers	$	(150,000)	$	(100,000)
Proceeds from sale of equity securities, net		5,482,472		5,849,266
Net cash provided by financing activities	$	5,332,472	$	5,749,266

Net change in cash and cash equivalents:		(567,674)		511,226
Cash and cash equivalents - beginning of period		2,401,198		2,860,628
Cash and cash equivalents - end of period	$	1,833,524	$	3,371,854

Supplemental information - Non cash items:
Offering expenses associated with warrant modification	$	209,225	$	238,231

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

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NOTE 1 – ORGANIZATION AND BUSINESS

Quoin Pharmaceuticals Ltd. (“Quoin Ltd.,” or the “Company”), formerly known as Cellect Biotechnology Ltd. (“Cellect”), is the holding company for Quoin Pharmaceuticals, Inc., a Delaware corporation (“Quoin Inc.”). Quoin Inc. was incorporated in Delaware on March 5, 2018. On October 28, 2021, Cellect completed the business combination with Quoin Inc., with Quoin Inc. surviving as a wholly-owned subsidiary of Cellect (the “Merger”). Immediately after completion of the Merger, Cellect changed its name to “Quoin Pharmaceuticals Ltd.”

The Company is a clinical stage specialty pharmaceutical company dedicated to the development and commercialization of therapeutic products that treat rare and orphan diseases for which there are currently no approved treatments or cures. The Company’s initial focus is on the development of products, using proprietary owned and in-licensed drug delivery technologies, that could help address rare skin diseases. The Company’s first lead product, QRX003, is a topical lotion comprised of a broad-spectrum serine protease inhibitor, formulated with the proprietary in-licensed Invisicare® technology, is under development as a potential treatment for Netherton Syndrome (“NS”), a rare hereditary genetic disease. QRX003 is currently being tested in two clinical studies in the United States (“U.S.”) under an open Investigational New Drug (“IND”) application with the Food and Drug Administration (“FDA”). Dosing of patients commenced in December 2022 for the first study and in March 2023 for the second study. The Company is also developing QRX004 as a potential treatment for Recessive Dystrophic Epidermolysis Bullosa (“RDEB”). In addition, the Company has entered into Research Agreements with the Queensland University of Technology (“QUT”), which include an option for global licenses to QRX007 for the potential treatment of NS and QRX008 for the potential treatment of scleroderma. To date, no products have been commercialized and no revenue has been generated.

NOTE 2 - LIQUIDITY RISKS AND OTHER UNCERTAINTIES

The unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”), which contemplates continuation of the Company as a going concern. The Company has incurred net losses every year since inception and has an accumulated deficit of approximately $48.5 million at March 31, 2024. The Company has a limited operating history and has historically funded its operations through debt and equity financings. The Company incurred net losses of approximately $2.3 million, and negative cash flows from operations of $1.4 million for the three months ended March 31, 2024. At March 31, 2024, the Company had cash and cash equivalents balances totaling $1.8 million and investments of $12.9 million. The Company has determined that it has sufficient cash and liquidity to effect its business plan for at least one year from the issuance of these unaudited condensed consolidated financial statements.

Additional financing will still be required to complete the research and development of the Company’s therapeutic targets and its other operating requirements until it achieves commercial profitability, if ever. Such financing may not be available at acceptable terms, if at all. If the Company is unable to obtain additional funding when it becomes necessary, the development of its product candidates will be impacted and the Company would likely be forced to delay, reduce, or terminate some or all of its development programs, all of which could have a material adverse effect on the Company’s business, results of operations and financial condition.

Other risks and uncertainties:

The Company is subject to risks common to development stage biopharmaceutical companies including, but not limited to, new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, product liability, pre-clinical and clinical trial outcome risks, regulatory approval risks, uncertainty of market acceptance and additional financing requirements.

The Company’s products require approval or clearance from the FDA prior to commencing commercial sales in the United States. There can be no assurance that the Company’s products will receive all of the required approvals or clearances. Approvals or clearances are also required in foreign jurisdictions in which the Company may license or sell its products.

There can be no assurance that the Company’s products, if approved, will be accepted in the marketplace, nor can there be any assurance that any future products can be developed or manufactured at an acceptable cost and with appropriate performance characteristics, or that such products will be successfully marketed.

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The Company is also dependent on several third party suppliers, in some cases a single source supplier including the contract research organization managing both of the Company’s current clinical studies, the supplier of the active pharmaceutical ingredient (API), as well as the contract manufacturer of the drug product for clinical development.

See Note 16, Subsequent Events.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of March 31, 2024 and for the three months then ended. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results for the year or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and related disclosures as of December 31, 2023 and for the year then ended which are included in the Company’s Annual Report on Form 10- K, filed with the SEC on March 14, 2024. The Company operates in one segment.

Effective July 18, 2023, the ratio of American Depositary Shares (“ADSs”) evidencing ordinary shares changed from 1 ADS representing five thousand (5,000) ordinary shares to 1 ADS representing sixty thousand (60,000) ordinary shares, which resulted in a 1 for 12 reverse split of the issued and outstanding ADSs. Effective November 8, 2023, the Company completed a 1 for 60,000 reverse split of the ordinary shares which resulted in the ratio of ADSs evidencing ordinary shares to be changed from 1 ADS representing sixty thousand (60,000) ordinary shares to 1 ADS representing one (1) ordinary share. When applicable ordinary share, ADSs and related option and warrant information presented in these unaudited condensed consolidated financial statements and accompanying footnotes has been retroactively adjusted to reflect the number of ordinary shares and ADSs resulting from the aforementioned ordinary share reverse split and ADS ratio changes.

Use of estimates:

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Management considers many factors in developing the estimates and assumptions that are used in the preparation of these unaudited condensed consolidated financial statements including: expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: settlement of debt or other obligations, stock-based compensation, research and development expense recognition, intangible asset estimated useful lives and impairment assessments, allowances of deferred tax assets, and cash flow assumptions regarding going concern considerations.

Cash and cash equivalents:

The Company considers all highly liquid investments and short-term debt instruments with original maturities of three months or less to be cash equivalents. The Company, from time to time during the periods presented, has had bank account balances in excess of federally insured limits where substantially all cash is held in the United States. The Company has not experienced losses in such accounts. The Company believes that it is not subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

Warrants:

The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) provided that such

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contracts are indexed to the Company’s own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

The Company assesses classification of its warrants and other free-standing derivatives at each reporting date to determine whether a change in classification between assets, liabilities and equity is required. The Company evaluated its warrants outstanding to assess their proper classification using the applicable criteria enumerated under U.S. GAAP and determined that such warrants meet the criteria for equity classification in the accompanying unaudited condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023, respectively.

Investments:

Investments as of March 31, 2024 and December 31, 2023 consist of U.S. Treasury Bills and Notes, which are classified as trading securities, totaling $12.9 million and $8.3 million, respectively. The Company determines the appropriate balance sheet classification of its investments at the time of purchase and evaluates the classification at each balance sheet date. All of the Company’s U.S. Treasury Bills and Notes held on March 31, 2024 have maturities within one year from the balance sheet date. As of March 31, 2024, the carrying value of the Company’s U.S. Treasury Bills and Notes approximates their fair value due to their short-term maturities.

Long-lived assets:

Long-lived assets are comprised of acquired technology and licensed rights to use technology, which are considered platform technology with alternative future uses beyond the current products in development. Such intangible assets are being amortized on a straight-line basis over their expected useful life of 10 years.

The Company assesses the impairment for long-lived assets whenever events or circumstances indicate the carrying value may not be recoverable. Factors we consider that could trigger an impairment review include the following:

●

Significant changes in the manner of the Company’s use of the acquired assets or the strategy for its overall business,

●

Significant underperformance relative to expected historical or projected development milestones,

●

Significant negative regulatory or economic trends, and

●

Significant technological changes which could render the platform technology obsolete.

The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. During the three months ended March 31, 2024, there were no impairment indicators which required an impairment loss measurement.

Research and development:

Research and development costs are expensed as incurred. Research and development expenses include personnel costs associated with research and development activities, including third-party contractors to perform research, conduct clinical trials and manufacture drug supplies and materials. The Company accrues for costs incurred by external service providers, including contract research organizations and clinical investigators, based on its estimates of service performed and costs incurred. These estimates include the level of services performed by third parties, patient enrollment in clinical trials when applicable, administrative costs incurred by third parties, and other indicators of the services completed. Based on the timing of amounts invoiced by service providers, the Company may also record payments made to those providers as prepaid expenses that will be recognized as expenses in future periods as the related services are rendered.

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Stock based compensation:

The Company recognizes compensation costs resulting from the issuance of stock-based awards to employees, non-employees and directors as an expense in the consolidated statements of operations over the requisite service period based on a measurement of fair value for each stock-based award. The fair value of each option grant is estimated as of the date of grant using the Black-Scholes option-pricing model, net of actual forfeitures. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period.

Since the Company has a limited history of trading as a public company, the Company’s expected stock volatility is based on a weighting of its historical volatility along with a group of a publicly traded set of peer companies. The Company utilizes the simplified method to estimate the expected term. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield was assumed to be zero as the Company has not paid and dividends since its inception and does not anticipate paying dividends in the foreseeable future.

Fair value of financial instruments:

The Company considers its cash and cash equivalents, investments, accounts payable, accrued expenses to meet the definition of financial instruments. The carrying amounts of these financial instruments approximated their fair values due to the short maturities.

The Company measures fair value as required by ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”). ASC Topic 820 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

Earnings (loss) per share:

The Company reports loss per share in accordance with ASC 260-10, Earnings Per Share, which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. The calculation of diluted net earnings (loss) per share gives effect to ordinary shares equivalents; however, other than unexercised prefunded warrants as described below, potential common shares are excluded if their effect is anti-dilutive.

For the three months ended March 31, 2024 and 2023, the number of shares excluded from the diluted net earnings (loss) per share included outstanding warrants to purchase 8,988,346 ADS and outstanding stock options to purchase 278,011 ADS, and outstanding warrants to purchase 864,068 ADS and outstanding stock options to purchase 25,595 ADS, respectively, as their inclusion in the denominator would be anti-dilutive. For the three months ended March 31, 2024 basic and diluted net earnings (loss) per share included 1,253,750 ADS issuable with respect to unexercised prefunded warrants (See Note 13).

NOTE 4 – ACCRUED INTEREST AND FINANCING EXPENSE

On October 2, 2020, Quoin Inc. issued promissory notes (the “2020 Notes”) to certain investors (“2020 Noteholders”). The 2020 Notes were mandatorily convertible into 432 ADSs, subject to adjustment and were converted in 2021. The ADSs issued to the 2020 Noteholders did not include accrued interest. Two of the five 2020 Noteholders received their amount due during the year ended December 31, 2022 and the Company’s estimate of the liability to the remaining three 2020 Noteholders was estimated to be $1,146,000 as of March 31, 2024 and December 31, 2023.

There was no interest expense recognized in both the three month periods ended March 31, 2024 and 2023.

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NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company applies fair value accounting for all assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities the Company considers the principal or most advantageous market in which it would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. For certain instruments, including cash and cash equivalents, accounts payable, and accrued expenses, it was estimated that the carrying amount approximated fair value because of the short maturities of these instruments.

Fair value is estimated using various valuation models, which utilize certain inputs and assumptions that market participants would use in pricing the asset or liability. The inputs and assumptions used in valuation models are classified in the fair value hierarchy as follows:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Quoted market prices for similar instruments in an active market; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations inputs of which are observable and can be corroborated by market data.

Level 3: Unobservable inputs and assumptions that are supported by little or no market activity and that are significant to the fair value of the asset and liability. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining the appropriate hierarchy levels, the Company analyzes the assets and liabilities that are subject to fair value disclosure. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy at March 31, 2024 and December 31, 2023:


March 31, 2024		Level 1		Level 2	Level 3		Total
US Treasury Bills and Notes	$	12,856,448	$	—	$	—	$	12,856,448
Total US Treasury Bills amd Notes Asset	$	12,856,448	$	—	$	—	$	12,856,448


December 31, 2023	Level 1		Level 2		Level 3		Total
US Treasury Bills and Notes	$	8,293,663	$	—	$	—	$	8,293,663
Total US Treasury Bills amd Notes Asset	$	8,293,663	$	—	$	—	$	8,293,663

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NOTE 6 – STOCK BASED COMPENSATION

In March 2022, the Board of Directors of the Company approved the Amended and Restated Equity Incentive Plan (the “Amended Plan”), which was approved by the shareholders at the Company’s Annual General Meeting of Shareholders held on April 12, 2022, which increased the number of ordinary shares reserved for issuance under such equity incentive plan to 15% of the Company’s outstanding ordinary shares on a fully-diluted basis, or 2,147,412 ordinary shares represented by 2,147,412 ADSs as of March 31, 2024. Under the Amended Plan, the Company may grant options to its directors, officers, employees, consultants, advisers and service providers. As of March 31, 2024, 1,869,401 shares remained available for issuance.

The following table summarizes stock-based activities under the Amended Plan:


		Weighted		Weighted
		Average		Average
	ADS Underlying	Exercise		Contractual
	Options	Price		Terms
Outstanding at December 31, 2023	278,011	$	25.34	9.68
Granted	—		—

SEC Form 10-Q filed by Quoin Pharmaceuticals Ltd.