XML 18 R9.htm IDEA: XBRL DOCUMENT

ACQUISITION

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

NOTE 3 — ACQUISITION

Business Combination

The Company acquired a 52.8% voting equity interest in NanoSynex on May 26, 2022 (the “NanoSynex Acquisition Date”) through: (1) the purchase of 2,232,861 shares Preferred A-1 Stock of NanoSynex from Alpha Capital, a related party, for 350,000 reverse split adjusted shares of the Company’s common stock and a prefunded warrant to purchase 331,464 reverse split adjusted shares of the Company’s common stock at a purchase price of $0.001 per share (these warrants were subsequently exercised on September 13, 2022), and (2) the purchase of 381,786 shares of Series B preferred stock of NanoSynex from NanoSynex in exchange for $600,000 (collectively, the “NanoSynex Acquisition”).

The NanoSynex Acquisition was accounted for as a business combination using the acquisition method, in accordance with FASB ASC Topic 805. Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value. Determining the fair value of assets acquired, liabilities assumed and noncontrolling interest requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates and asset lives among other items. The Company uses third-party valuations for intangible assets in a business combination using a discounted cash flow analysis, incorporating various assumptions.

A summary of the consideration transferred and fair value of assets acquired and liabilities assumed in the NanoSynex Acquisition is as follows (all shares shown post Reverse Stock Split):

SCHEDULE OF CONSIDERATION TRANSFERRED

Consideration transferred, net of cash acquired
Cash paid for NanoSynex preferred stock:		$	600,000

FMV of 350,000 shares of Qualigen stock issued to Alpha Capital		$	1,904,989
FMV of 331,464 shares of Qualigen stock related to prefunded warrant issued to Alpha Capital (See Note 15)		$	1,804,102
Total consideration paid for NanoSynex preferred stock		$	3,709,091

FMV of consideration related to repricing of 7,048 shares of Alpha Capital/Qualigen warrants *		$	696

NanoSynex cash acquired			(735,354	)
Total consideration transferred, net of cash acquired		$	3,574,433

*

See Note 15 – Stockholders’ Equity and disclosure under Noncompensatory Equity Classified Warrants for additional details regarding the warrants issued to Alpha Capital in the NanoSynex Acquisition.

		Purchase Price Allocation
Accounts receivable		$	75,336
Property and equipment			120,942
In process R&D			5,700,000
Accounts payable			(4,588	)
Accrued expenses and other payables			(291,093	)
R&D grant liability			(1,362,264	)
Short term debt			(941,898	)
Deferred tax liability			(629,379	)
Noncontrolling interest assumed			(3,882,225	)
Identifiable net assets acquired			(1,215,169	)
Goodwill			4,789,602
Total consideration transferred, net of cash acquired		$	3,574,433

During the year ended December 31, 2022, the Company made measurement period adjustments to the preliminary purchase price allocation, which included: (i) a decrease to noncontrolling interest of $117,775, and (ii) a decrease to goodwill of $106,621. The measurement period adjustments were made to reflect facts and circumstances that existed as of the acquisition date and are reflected in the table above.

Company transaction costs, which were immaterial, have been expensed as incurred and charged to the Company’s condensed consolidated statements of operations and comprehensive loss. There was no provision for reimbursement of transaction costs from the Company to NanoSynex.

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired as of the acquisition date. Goodwill represents the value of the future technology to be developed in excess of the identifiable assets as well as the operational synergies of the combined companies to be recognized. Goodwill has an indefinite useful life and is not amortized. None of the Goodwill is expected to be deductible for tax purposes.

As a condition to the closing, the Company agreed to provide NanoSynex with up to $10.4 million of future funding 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. (See Note 2 - Liquidity for further details regarding the terms and conditions of the Funding Agreement).

The Company’s condensed consolidated statements of operations and comprehensive loss for three months ended March 31, 2023 and 2022 include approximately $0.5 million and $0, respectively, of net loss associated with the results of operations of NanoSynex.