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COMMITMENTS AND CONTINGENCIES
 12 Months Ended
Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 13 — COMMITMENTS AND CONTINGENCIES

 

Leases

 

The Company leases its facilities under a long-term operating lease agreement. On December 15, 2021, our wholly-owned subsidiary Qualigen, Inc. entered into a Second Amendment to Lease with Bond Ranch LP. This Amendment extended the Company’s triple-net leasehold on the Company’s existing 22,624-square-feet headquarters/manufacturing facility at 2042 Corte del Nogal, Carlsbad, California for the 61-month period of November 1, 2022 to November 30, 2027. Over the 61 months, the base rent payable by Qualigen, Inc. will total $1,950,710; however, the base rent for the first 12 months of the 61-month period is only $335,966. Additionally, under the Second Amendment to Lease Qualigen, Inc. is entitled to a $339,360 tenant improvement allowance.

 

The tables below show the operating lease right-of-use assets and operating lease liabilities and the balances as of December 31, 2022 and 2021, including the changes during the periods:

 

   Operating lease
right-of-use assets		 
Net right-of-use assets at December 31, 2021  $1,645,568 
Less amortization of operating lease right-of-use assets   (223,030)
Operating lease right-of-use assets at December 31, 2022  $1,422,538 

 

   Operating lease
liabilities		 
Lease liabilities at December 31, 2021  $1,676,655 
Less principal payments on operating lease liabilities   (134,091)
Lease liabilities at December 31, 2022   1,542,564 
Less non-current portion   (1,301,919)
Current portion at December 31, 2022  $240,645 

 

As of December 31, 2022, the Company’s operating leases have a weighted-average remaining lease term of 4.9 years and a weighted-average discount rate of 8.9%.

 

As of December 31, 2022, the maturities of operating lease liabilities are as follows:

 

Year Ending December 31,  Amount 
2023   368,341 
2024   379,392 
2025   390,773 
2026   402,497 
2027   379,164 
Total   1,920,168 
Less present value discount   (377,604)
Operating lease liabilities  $1,542,564 

 

Total lease expense was approximately $462,000 and $342,000, respectively, for the years ended December 31, 2022 and December 31, 2021. Lease expense was recorded in cost of product sales, general and administrative expenses, research and development and sales and marketing expenses.

 

Termination of Sekisui Distribution Agreement

 

Sekisui’s Distribution Arrangement expired on March 31, 2022. Following the expiration of the Sekisui Distribution Agreement on March 31, 2022, the Company had a commitment to purchase leased FastPack rental systems back from Sekisui at Sekisui’s net book value, in the amount of $154,000 which is included in equipment held for lease and accrued expenses on the consolidated balance sheet.

 

NanoSynex Funding Commitment

 

As a condition to the NanoSynex Acquisition, the Company agreed to provide NanoSynex with up to $10.4 million of future funding in the form of promissory notes to the Company based on NanoSynex’s achievement of certain future development milestones and subject to other terms and conditions described in the Funding Agreement entered into with NanoSynex. Of this amount approximately $2.4 million was funded during the year ended December 31, 2022, and an additional $0.5 million was funded in February 2023 (See Note 2-Liquidity for further details regarding the terms and conditions of the Funding Agreement).

 

 

Litigation and Other Legal Proceedings

 

On November 9, 2021, the Company was named as a defendant in an action brought by Mediant Communications Inc. (“Mediant”) in the U.S. District Court for the Southern District of New York. The complaint alleged that Qualigen entered into an implied contract with Mediant, whereby Qualigen retained Mediant to distribute proxy materials and subsequently conduct shareholder vote tabulations. The Company filed a Motion to Dismiss with the District Court and on March 14, 2022 a hearing was held during which the presiding judge ruled in favor of the Motion to Dismiss. The Company and Mediant settled the litigation on April 5, 2022 in the amount of $96,558, at which time the amount was paid.