Qrons Inc. - Quarter Report: 2020 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

	For the quarterly period ended June 30, 2020

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

	For the transition period from __________ to __________

000-55800
(Commission File Number)

QRONS INC.
(Exact name of registrant as specified in its charter)

Wyoming	81-3623646
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

50 Battery Place, #7T, New York, New York	10280
(Address of principal executive offices)	(Zip Code)

(212)-945-2080
(Registrant's telephone number, including area code)

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

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		N/A		N/A

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 [X] 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 [X] 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[X]	Smaller reporting company [X]
	Emerging growth company [X]

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 7(a)(2)(B) of the Securities Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X ]

As of August 13, 2020, there were 13,189,789 shares of the registrant's common stock outstanding.

QRONS INC. TABLE OF CONTENTS
		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	2

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	33

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	34

Item 6.	Exhibits	34

	SIGNATURES	35

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

QRONS INC.

CONDENSED BALANCE SHEETS

(Unaudited)

	June 30, 2020			December 31, 2019

ASSETS
Current assets
Cash and cash equivalents	$	8,527		$	67,025
Prepaid expenses		7,651			56,265
Total current assets		16,178			123,290

TOTAL ASSETS	$	16,178		$	123,290

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities
Accounts payable and accrued liabilities	$	84,919		$	140,967
Accounts payable and accrued liabilities – related party		39,476			34,907
Demand loans, related party		50,000			50,000
Advances from related party		261,000			185,000
Unsecured short-term advances		100,000			100,000
Convertible note – related party, net of debt discount		25,000			25,000
Convertible note, net of debt discount		25,577			6,171
Derivative liabilities		94,520			89,367
Total current liabilities		680,492			631,412

Total liabilities		680,492			631,412

Stockholders' equity (deficit)
Series A Preferred stock: $0.001 par value, shares authorized 10,000; 2,000 shares issued and outstanding at June 30, 2020 and December 31, 2019		2			2
Common stock, $0.0001 par value: shares authorized 100,000,000; 13,089,789 shares issued and outstanding at June 30, 2020 and December 31, 2019		1,309			1,309
Additional paid-in capital		6,661,718			6,561,047
Accumulated deficit		(7,327,343	)		(7,070,480	)
Total stockholder's equity (deficit)		(664,314	)		(508,122	)
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)	$	16,178		$	123,290

The accompanying notes are an integral part of these unaudited condensed financial statements.

QRONS INC.

CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months ended						Six Months ended
	June 30,						June 30,
	2020			2019			2020			2019

Net sales	$	-		$	-		$	-		$	-

Operating expenses:
Research and development expenses		2,891			138,374			174,459			303,528
Professional fees		6,893			27,640			30,517			43,226
General and administrative expenses		3,805			33,143			27,551			115,917
Total operating expenses		13,589			199,157			232,527			462,671

Income (loss) from operations		(13,589	)		(199,157	)		(232,527	)		(462,671	)

Other income (expense)
Interest expense		(12,814	)		(1,420	)		(27,098	)		(1,916	)
Change in derivative liabilities		9,672			(17,006			2,762			(14,457	)
Total other (expense)		(3,142	)		(18,426	)		(24,336	)		(16,373	)

Net (loss)	$	(16,731	)	$	(217,583	)	$	(256,863	)	$	(479,044	)

Net (loss) per common shares (basic and diluted)	$	(0.00	)	$	(0.02	)	$	(0.02	)	$	(0.04	)

Weighted average shares outstanding
(basic and diluted)		13,089,789			12,966,485			13,089,789			12,938,828

The accompanying notes are an integral part of these unaudited condensed financial statements.

QRONS INC.

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

(Unaudited)

	Series A Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Capital		Deficit			(Deficit)
Balance, December 31, 2019		2,000	$	2		13,089,789	$	1,309	$	6,561,047	$	(7,070,480	)	$	(508,122	)
Stock options granted to non-employees as research and development costs		-		-		-		-		67,554		-			67,554
Warrants granted as financing costs		-		-		-		-		3,400		-			3,400
Net loss for the period		-		-		-		-		-		(240,132	)		(240,132	)
Balance, March 31, 2020		2,000		2		13,089,789		1,309		6,632,001		(7,310,612	)		(677,300	)
Stock options granted to non-employees as research and development costs										29,717					29,717
Net loss for the period												(16,731	)		(16,731	)
Balance June 30, 2020		2,000	$	2		13,089,789	$	1,309	$	6,661,718	$	(7,327,343	)	$	(664,314	)

	Series A Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Capital		Deficit			(Deficit)

Balance, December 31, 2018		2,000	$	2		12,872,309	$	1,287	$	5,629,694	$	(5,523,708	)	$	107,275
Shares issued for stock awards for business advisory services		-		-		30,000		3		37,497		-			37,500
Issuance of common stock for private placement		-		-		40,000		4		39,996		-			40,000
Stock option granted to non-employees as research and development costs		-		-		-		-		45,442		-			45,442
Net loss for the period		-		-		-		-		-		(261,461	)		(261,461	)
Balance, March 31, 2019		2,000		2		12,942,309		1,294		5,752,629		(5,785,169	)		(31,244	)
Issuance of common stock for private placement		-		-		25,000		3		24,997		-			25,000
Stock option granted to non-employees as research and development costs		-		-		-		-		42,491		-			42,491
Net loss for the period		-		-		-		-		-		(217,583	)		(217,583	)
Balance, June 30, 2019		2,000	$	2		12,967,309	$	1,297	$	5,820,117	$	(6,002,752	)	$	(181,336	)

The accompanying notes are an integral part of these unaudited condensed financial statements.

QRONS INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

	For the six months ended June 30,
	2020			2019
Cash Flows From Operating Activities
Net loss	$	(256,863	)	$	(479,044	)
Adjustments to reconcile net loss to net cash (used by) operating activities:
Stock options issued for research and development expense		97,271			87,933
Stock awards issued for advisory and consulting services		-			37,500
Warrants granted as financing costs		3,400			-
Accretion of debt discount		17,321			-
Change in derivative liabilities		(2,762	)		14,457
Changes in operating assets and liabilities:
Prepaid expenses		48,614			27,099
Accounts payable and accrued liabilities		(56,048	)		18,254
Accounts payable and accrued liabilities, related party		4,569			1,644
Net cash (used by) operating activities		(144,498	)		(292,157	)

Cash Flows From Investing Activities
Net cash provided from (used by) investing activities		-			-

Cash Flows From Financing Activities
Proceeds from convertible notes		10,000			-
Proceeds from unsecured short-term advances		-			100,000
Proceeds from private placement		-			65,000
Proceeds from related party advances		76,000			50,000
Net cash provided from financing activities		86,000			215,000

Increase (decrease) in cash and cash equivalents		(58,498	)		(77,157	)

Cash at beginning of year		67,025			143,862
Cash at end of period	$	8,527		$	66,705

SUPPLEMENTAL DISCLOSURES
Interest paid	$	-		$	-
Income taxes paid	$	-		$	-

SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES
Derivative liability associated with debt discount	$	7,915		$	-

The accompanying notes are an integral part of these unaudited condensed financial statements.

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

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 its Daily List 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 a preclinical stage biotechnology company developing advanced stem cell-synthetic hydrogel-based solutions to combat neuronal injuries and focused on achieving a breakthrough in the treatment of traumatic brain injuries ("TBIs") for both concussions and penetrating injuries, an unmet medical need. The Company has collaborated with universities and scientists in the fields of regenerative medicine, tissue engineering and 3D printable hydrogels to develop a treatment that integrates proprietary, engineered mesenchymal stem cells (“MSCs”), synthetic hydrogels, 3D printable implant, smart materials and a novel delivery system.

On March 15, 2019, the Company relocated its principal executive office from Miami, Florida to 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, 2019.

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 six-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.

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 $2,891 and $174,459 for the three and six months ended June 30, 2020, respectively. Research and development costs were $138,374 and $303,528 for the three and six months ended June 30, 2019, respectively.

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 2 – Summary of Significant Accounting Policies (continued)

Advertising and Marketing Costs: Advertising and marketing costs are expensed as incurred. The Company incurred $4,000 and $23,500 in advertising and marketing costs during the three and six months ended June 30, 2020, respectively. The Company incurred $19,203 and $90,590 in advertising and marketing costs during the three and six months ended June 30, 2019, 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 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

FASB ASC 820, Fair Value Measurements and Disclosures 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. FASB 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. FASB 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 June 30, 2020 and December 31, 2019:

	Fair value measurements on a recurring basis
	Level 1			Level 2			Level 3
As of June 30, 2020:
Liabilities
Derivative liabilities		$	-		$	-		$	94,520

As of December 31, 2019:
Liabilities
Derivative liabilities		$	-		$	-		$	89,367

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 2 – Summary of Significant Accounting Policies

Warrants: The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in ASC Topic 815 "Derivatives and Hedging – Contracts in Entity's Own Equity" (ASC Topic 815), 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 Topic 740 – "Income Taxes" ASC Topic 740 which requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC Topic 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 Topic 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 six months ended June 30, 2020 and the year ended December 31, 2019 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:

	June 30, 2020		December 31, 2019
Research Warrants at 3% of issued and outstanding shares		392,694		392,694
Convertible Notes		478,251		261,107
Series A Preferred shares		700		700
Stock options vested		2,433,335		2,331,669
Stock options not yet vested		131,665		183,331
Stock purchase warrants		80,000		70,000
Total		3,516,645		3,239,501

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

June 30, 2020 and 2019

Note 3 – Going Concern

The Company has experienced net losses to date, and it has not generated revenue from operations. While the Company raised proceeds of $86,000 during the six months ended June 30, 2020 and $470,000 during the year ended December 31, 2019 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 2020. 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 capital due to the continued spread of COVID-19, 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.

Covid-19 Pandemic

The recent COVID-19 pandemic has resulted in a delay to the planned research and development of our product candidates. As a result of such pandemic, the laboratory at Ariel has been closed and Professor Chenfeng Ke’s research laboratory at Dartmouth was closed in mid-March 2020 and has currently opened with limited capacity. Although the Sponsored Research Agreement expired by its terms on July 14, 2020, we are currently continuing work on research offsite and working on perfecting our intellectual property until we can better determine the full affect of COVID-19 on our operations. We currently intend to continue work with Professor Ke on certain 3D printing research under a research grant from the State of New Hampshire. Presently, our service and research agreements have expired, been terminated or suspended. The full impact of the COVID-19 outbreak continues to evolve, is highly uncertain and subject to change. Management is monitoring the situation but given the daily evolution of the COVID-19 outbreak, the Company is not currently able to estimate the effects of the COVID-19 outbreak on its operations or financial condition. The ultimate impact on our workforce, and collaborative development efforts through contracted relationships is currently uncertain.

COVID-19 has also caused significant disruptions to the global financial markets, which severely impacts our ability to raise additional capital. We gave 30- days’ notice of termination of employment to our employees on March 23, 2020 in an effort to conserve resources as we evaluate our business development efforts. We may be required to further reduce operations or cease operations if we are unable to finance our operations.

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

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 4 – Convertible Note – Related Party and Derivative Liabilities (continued)

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.

On September 28, 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; and on September 1, 2019, the Company further amended Note 1 to extend the maturity date to September 1, 2020, 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 September 27, 2019, Note 2 was amended to extend the maturity date to September 27, 2020.

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 on the inception dates, and subsequently, using the Black-Scholes valuation technique, adjusted for the effect of dilution, because that technique embodies all of the assumptions (including, volatility, expected terms, and risk-free rates) that are necessary to fair value complex derivate instruments.

The carrying value of these convertible notes is as follows:

	June 30, 2020		December 31, 2019
Face value of certain convertible notes	$	25,000	$	25,000
Less: unamortized discount		-		-
Carrying value	$	25,000	$	25,000

We recorded interest expenses of $501 and $1,003 for the three and six months ended June 30, 2020, respectively. As of June 30, 2020, and December 31, 2019, the unpaid interest balance under Accounts payable and accrued liabilities – related party was $6,435 and $5,432, respectively.

As a result of the application of ASC No. 815, the fair value of the conversion feature is summarized as follows:

Balance at December 31, 2018	$	36,827
Change in fair value		355
Balance at December 31, 2019		37,182
Change in fair value		(5,381	)
Balance at June 30, 2020	$	31,801

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 4 – Convertible Note – Related Party and Derivative Liabilities (continued)

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 June 30, 2020 and December 31, 2019 and the commitment date:

Commitment

Date

June 30,

2020

December 31, 2019

Expected dividends

Expected volatility

101% ~103%

62% ~ 73%

167% ~ 180%

Expected term

0.92 ~ 1 year

0.17 year

0.26 year

Risk free interest rate

1.33%

0.16

1.60%

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) $.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.

During the six months ended June 30, 2020 we issued and sold in a private offering 8% convertible notes in the principal amount of $10,000, due on February 19, 2022 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 10,000 shares of common stock at an exercise price of $1.00.

We recorded interest expenses of $1,895 and $3,381 for the three and six months ended June 30, 2020, respectively, with respect to the aforementioned notes. As of June 30, 2020, and December 31, 2019, the unpaid interest balance under Accounts payable and accrued liabilities was $3,542 and $161, respectively.

The convertible notes qualify for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” 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:

	June 30, 2020			December 31, 2019
Face value of certain convertible notes	$	80,000		$	70,000
Less: unamortized discount		(54,423	)		(63,829	)
Carrying value	$	25,577		$	6,171

Amortization of the discount during the three and six months ended June 30, 2020 totaled $8,931 and $17,321, respectively, which amounts have been recorded as interest expense.

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 5 – Convertible Note and Derivative Liabilities (continued)

As a result of the application of ASC No. 815 as of June 30, 2020 and December 31, 2019, the fair value of the conversion feature is summarized as follows:

Balance at December 31, 2018	$	-
Derivative addition associated with convertible notes		64,774
Change in fair value		(12,589	)
Balance at December 31, 2019		52,185
Derivative addition associated with convertible notes		7,915
Change in fair value		2,619
Balance at June 30, 2020	$	62,719

Commitment

Date

June 30,

2020

December 31, 2019

Expected dividends

Expected volatility

154% ~173%

194% ~ 196%

156%

Expected term

2.10 year

1.58 ~ 1.66 year

2 year

Risk free interest rate

1.42 ~ 1.65%

0.16%

1.58%

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 June 30, 2020 and December 31, 2019.

Note 7 – Related Party Transactions

(1)	Demand Loan from related party

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 $1,994 for the three and six months ended June 30, 2020, respectively. We recorded interest expenses of $646 for the three and six months ended June 30, 2019. As of June 30, 2020, and December 31, 2019, the unpaid interest balance under Accounts payable and accrued liabilities – related party was $4,658 and $2,663, respectively.

(2)	Advances from Related Parties

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 six months ended June 30, 2020, the Company received an additional $45,000 from Jonah Meer.

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 7 – Related Party Transactions (continued)

(2)	Advances from Related Parties (cont’d)

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 six months ended June 30, 2020, the Company received an additional $21,000 from Ido Merfeld.

During the six months ended June 30, 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.

(3)

Others

During the year ended December 31, 2019, Jonah Meer, the Company’s Chief Executive Officer, made payments to various vendors in the accumulated amount of $25,642. During the six months ended June 30, 2020, Jonah Meer, the Company’s Chief Executive Officer, made payments to various vendors in the accumulated amount of $3,664, and was repaid $2,092. The balance payable to Mr. Meer of $27,214 is reflected in accounts payable, related party.

During the year ended December 31, 2019, Ido Merfeld, the Company’s President, made payments to various vendors in the accumulated amount of $1,169. The balance payable to Mr. Merfeld of $1,169 is reflected in accounts payable, related party.

Note 8 – License and Research Funding Agreement / Royalty Agreement

Ariel Scientific Innovation Ltd.

On December 14, 2016, the Company entered into a license agreement (the “License Agreement”) with Ariel Scientific Innovation Ltd. (“Ariel”) under which the Company paid Ariel $100,000 to fund research for 12 months (with an option to extend such research financing and research period). In consideration therefor, the Company received an exclusive worldwide royalty-bearing license in Ariel patents and know-how to develop and commercialize products based on or incorporating coral-based conditioned medium for neuronal tissue regeneration and/or repair, resulting from Ariel's research or technology or the Company's research funding in accordance with milestones set forth in the Agreement.

In addition, upon the occurrence of an Exit Event (as defined in the License Agreement) of the Company or of any affiliate commercializing the products, the Company was obligated to issue to Ariel an immediately exercisable warrant for shares equal to 4% of the issued and outstanding shares of the Company at the time of issuance. The Company and Ariel entered into Addendum #1 to the License Agreement, effective December 13, 2017 (the "Addendum") pursuant to which Ariel was permitted to exercise a portion of the warrant granted pursuant to the License Agreement. On December 13, 2017, the Company issued 119,950 shares of common stock to Ariel, representing 1% of the issued and outstanding shares of the Company on such date, and valued at $335,860. The right to the balance of the shares subject to the warrant remained subject to the terms of the License Agreement and the occurrence of an Exit Event. In addition, the Addendum provided that Ariel may not request a demand registration until the balance of the shares subject to the warrant was exercised.

In addition to the other payments, the Company was obligated to pay Ariel upon the occurrence of the following milestone events, additional payments within 6 months of completion of the milestone:

-	Upon successful clinical FDA Phase II completion - $130,000; and
-	Upon successful clinical FDA Phase III completion - $390,000

Upon successful development and commercialization and in recognition of the rights and licenses granted to the Company pursuant to the License Agreement, the Company was subject to certain royalty payments as specified in the License Agreement.

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 8 – License and Research Funding Agreement / Royalty Agreement (continued)

In lieu of extending the research financing and research period under the License Agreement with Ariel beyond the initial 12 months, on December 14, 2017, the Company entered into a Services Agreement (the “First Services Agreement”) pursuant to which a team at Ariel University, with Professor Danny Baranes as Principal Investigator, will conduct molecular biology research activities involving the testing of scaffold materials for the Company. As compensation for such services, the Company paid Ariel (i) $17,250 on December 19, 2017 and an additional $17,250 on April 26, 2018. On April 12, 2018, the First Services Agreement was amended (the “First Amendment”) to provide for the payment by the Company of an additional monthly fee, commencing March 2018, of up to 8,000 Israeli shekels as compensation for additional costs which the Company may request.

On March 6, 2018, the Company entered into an additional service agreement with Ariel (the “Second Services Agreement”) for the services of Professor Gadi Turgeman and his neurobiology research team in their lab pursuant to which the Company paid Ariel $20,580 on each of March 19, 2018 and August 22, 2018.

On December 12, 2018, the Company further amended the First Services Agreement (the "Second Amendment") with Ariel to extend the term thereof for an additional twelve-month period until December 14, 2019. Pursuant to the Second Amendment, the Company paid Ariel $17,250 on each of December 28, 2018 and June 24, 2019. All other terms and conditions of the Services Agreement not amended remain in effect.

On December 8, 2019, the Company further amended the First Services Agreement with Ariel (the "Third Amendment") to extend the term thereof for an additional twelve-month period until December 14, 2020. Pursuant to the Third Amendment, the Company paid Ariel $17,250 on January 13, 2020 and was obligated to pay Ariel an additional $17,250 by May 1, 2020. Due to the continuing uncertainties of the COVID-19 pandemic on the capital markets and the ability to finance our operations, we notified Ariel of our early termination of the First Services Agreement. The last payment of $17,250 was cancelled and Ariel refunded certain unused funds.

On November 30, 2019, the Company entered into a royalty and license fee sharing agreement (the “Royalty Agreement”) with Ariel which, among other things, supersedes and terminates the License Agreement. Certain services agreements related to laboratory access and other services are not affected by such termination.

From and after 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 issued and outstanding shares of common stock of the Company at the time Ariel exercises such right.

Dartmouth College

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 shall be owned by such party and intellectual property jointly invented or developed shall be jointly owned. Dartmouth retains an irrevocable worldwide right to use intellectual property owned by it resulting from its research under the Agreement on a non-exclusive royalty-free basis for research and education purposes. The Agreement may be terminated earlier than one year upon written agreement of the parties, a material breach which is not cured within 30 days of notice thereof, if Professor Ke no longer conducts the research under the Agreement and a successor acceptable to both parties is not available, or in the event of an unauthorized assignment of the Company's rights and obligations under the Agreement. On November 4, 2019, the parties entered into an amendment to the Sponsored Research Agreement to extend the term of the Agreement through July 14, 2020.

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 9 – Intellectual Property License Agreement

On October 2, 2019, the Company entered into an Intellectual Property License Agreement (the “Agreement”) with the Trustees of Dartmouth College (“Dartmouth”) pursuant to which, effective September 3, 2019 (the Effective Date”), 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. Dartmouth has reserved certain rights in its intellectual property for educational and research purposes.

As consideration for the license grant, the Company paid Dartmouth a license issue fee of $25,000. The Agreement also provides for (i) an annual license maintenance fee of $25,000, commencing on the first anniversary of the Agreement until the date of the first commercial sale of a licensed product or service; (iii) an earned royalty of 2% of net sales (as defined in the Agreement) of licensed products and services by the Company or a sublicensee; (v)15% of all consideration received by the Company under a sublicense; and (vi) beginning as of the date of the first commercial sale, an annual minimum royalty payment of $500,000 in the first calendar year after the first commercial sale, $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.

Under the Agreement, the Company must diligently proceed with the development, manufacture and sale of licensed products and licensed services, including funding at least $1,000,000 of research in each calendar year beginning in 2019 and ending with the first commercial sale of a licensed product; filing an IND/BLA (or equivalent) with the FDA or a comparable European regulatory agency before the four-year anniversary of the Effective Date, make the first commercial sale of a licensed product before the twelve-year anniversary of the Effective Date and achieve annual net sales of at least $50,000,000 by 2033. If the Company fails to perform any of these obligations, Dartmouth has the option to terminate the Agreement or change the exclusive license to a nonexclusive license. 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.

The Agreement also includes indemnification and insurance requirements by the Company and customary confidentiality provisions.

The Company recorded the $25,000 license fee under prepaid expenses, which amount is expensed ratably over the initial one-year term of the Agreement.

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 10 – Commitments

(1)	Service Agreement with Ariel Scientific Innovations Ltd.

On December 14, 2017, the Company entered into the First Services Agreement pursuant to which a team at Ariel with Prof. Danny Baranes, as Principal Investigator, will conduct molecular biology research activities involving the testing of implant materials for the Company. As compensation for the services provided, the Company paid Ariel $17,250 on each of December 19, 2017 and April 26, 2018.

On April 12, 2018, the First Services Agreement was amended to provide for the payment by the Company of an additional monthly fee, commencing March 31, 2018, of up to $2,200 (8,000 Israeli shekels) as compensation for additional costs which the Company may request. During the year ended December 31, 2018, the Company paid $16,935 for these additional costs.

On December 12, 2018, the Company further amended the First Services Agreement with Ariel (the "Second Amendment") to extend the term thereof for an additional twelve-month period until December 14, 2019. Pursuant to the Second Amendment, the Company paid Ariel $17,250 on each of December 28, 2018 and June 24, 2019. All other terms and conditions of the Services Agreement not amended remain in effect.

As a result, during the three months ended June 30, 2020, we recorded a gain of $917 with respect to the First Services Agreement and during the six months ended June 30, 2020 we expensed a total of $7,708. During the three and six months ended June 30, 2019, $9,343 and $17,968 were expensed, respectively.

(2)	Service Agreement with Ariel - Dr. Gadi Turgeman

On March 6, 2018, the Company entered into the Second Services Agreement for the services of Professor Gadi Turgeman and his neurobiology research team in their lab. As compensation for the services provided, the Company paid Ariel $20,580 on each of March 19, 2018 and August 22, 2018.

The Second Services Agreement may be terminated by the non-breaching party upon a material breach that is not cured within 30 days or by the Company upon thirty days' prior written notice to Ariel. Ariel must keep confidential information of the Company confidential for six years after the term of the Services Agreement.

On April 11, 2019, the Company amended the Second Services Agreement (the "First Amendment") with Ariel which it entered into on March 6, 2018, to extend the term thereof for an additional twelve months until March 6, 2020. Pursuant to the First Amendment, the Company paid Ariel an aggregate of $41,160 in quarterly payments of $10,290 on each of April 11, 2019, June 1, 2019, September 1, 2019 and December 1, 2019 for the services of Professor Gadi Turgeman and his neurobiology research team and the use of his lab. The agreement was not renewed upon expiration and certain unused funds were returned to the Company during the six months ended June 30, 2020.

During the three months ended June 30, 2020, we recorded a gain of $(10,290) with respect to amounts previously accrued for the Second Services Agreement during the first quarter of fiscal 2020. During the six months ended June 30, 2020 we incurred no additional expenses. During the three and six months ended June 30, 2019, $10,290 and $20,580 were expensed, respectively.

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 10 – Commitments (continued)

(3)	Science Advisory Board Member Consulting Agreements (the " Consulting Agreements")

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:

Scientific Advisory Board and Consulting Services - Advisor shall provide general consulting services to Company (the "Services") as a member of its Scientific Advisory Board ("SAB"). As a member of the SAB, Advisor agrees to provide the Services as follows: (a) attending meetings of the Company's SAB; (b) performing the duties of a SAB member at such meetings, as established from time to time by the mutual agreement of the Company and the SAB members, including without limitation meeting with Company employees, consultants and other SAB members, reviewing goals of the Company and assisting in developing strategies for achieving such goals, and providing advice, support, theories, techniques and improvements in the Company's scientific research and product development activities; and (c) providing consulting services to Company at its request, including a reasonable amount of informal consultation over the telephone or otherwise as requested by Company. Advisor's consultation with Company will involve services as scientific, technical and business advisor to the Company and its management with respect to neuronal injuries and neuro degenerative diseases.

-	SAB Consulting Compensation - the Company shall grant to Advisor the option to purchase certain number of shares of the common stock of the Company as per the stock option award grant. The options are subject to terms and provisions of the Company's 2016 Stock Option and Stock Award Plan.

(4)	Business Advisory Board Agreement

On January 23, 2018, the Company entered into a one-year advisory board member consulting agreement with Pavel Hilman, the controlling shareholder of Conventus Holdings SA, a BVI corporation ("Conventus"), under which Mr. Hilman will serve on the Company's Advisory Board as a business advisor. The Advisory Board Agreement will automatically renew 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 awarded 10,000 shares of its common stock to Mr. Hilman under its 2016 Stock Option and Stock Award Plan. On January 28, 2019, the Company issued 30,000 shares of common stock to Mr. Hilman for his continuing service on the Company's Advisory Board.

On September 18, 2019, the Company entered into a one-year advisory board member consulting agreement with Derrick Chambers under which Mr. Chambers will serve on the Company's Advisory Board as a business advisor. The Advisory Board Agreement will automatically renew 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 awarded 25,000 shares of its common stock to Mr. Chambers under its 2016 Stock Option and Stock Award Plan, which shares were fully vested and recorded as advisory services on issuance.

On February 10, 2020, the Company entered into a one-year advisory board member consulting agreement with Michael Maizel under which Mr. Maizel will serve on the Company's Advisory Board as a business advisor. The Advisory Board Agreement will automatically renew 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, we notified Mr. Maizel of the termination of this agreement.

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 10 – Commitments (continued)

(5)	Investor Relations Agreement

On August 8, 2019, the Company entered into a six-month services agreement with PCG Advisory, Inc. ("PCG") under which agreement PCG will provide investor relations and capital market advisory services to the Company. In consideration therefor, the Company will pay PCG a monthly cash fee of $5,000 ($2,500 of which will be deferred until the Company raises at least $300,000 in a financing) and issued 50,000 shares of its common stock on August 8, 2019. After the initial six-month term, the agreement will automatically renew on a month-to-month basis unless either party notifies the other of its desire to terminate the agreement or by the Company if PCG fails to comply with securities laws, makes an untrue statement of material facts or omits to state any material fact in connection with an investment in the Company or breaches a representation, warranty or covenant in the agreement. The Company notified PCG in March 2020 that it currently was not renewing the agreement.

(6)	Sponsored Research Agreement

On July 12, 2018, the Company entered into a one-year Sponsored Research Agreement with 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 shall be owned by such party and intellectual property jointly invented or developed shall be jointly owned. Dartmouth retains an irrevocable worldwide right to use intellectual property owned by it resulting from its research under the Agreement on a non-exclusive royalty-free basis for research and education purposes. The Company funded $36,293 on August 20, 2018, $18,147 on December 17, 2018 and $18,146 on June 20, 2019.

On November 4, 2019, the parties entered into an amendment to the Sponsored Research Agreement to extend the term of the Agreement through July 14, 2020. Under the terms of the amendment, the Company was required to fund $37,790 on November 4, 2019, an additional $18,895 on December 1, 2019, and a final payment of $18,895 on June 1, 2020, none of which amounts were funded as required. Due to the uncertainty caused by the current COVID-19 pandemic, the Agreement was terminated, and Dartmouth issued the Company a closing invoice related to the Agreement of approximately $7,800.

During the three and six months ended June 30, 2020, we recorded gains of ($45,704) and ($26,809), respectively relative to the above contract in order to reverse prior period accruals related to the various payment obligations set out above. These amounts were recorded as offsets to research and development expenses. During the three and six months ended June 30, 2019, $18,147 and $36,293 were expensed, respectively.

Note 11 – Stock Plan

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 Administrator of the Plan appointed by the Company's Board of Directors (the "Board"), or in the absence of an Administrator, by the Board. The Company has reserved 10 million shares for issuance under the Plan.

Stock Awards:

On January 28, 2019, the Company issued 30,000 shares to Pavel Hilman under its 2016 Stock Option and Stock Award Plan which shares were fully vested and recorded as advisory services on issuance of common stock to Pavel Hilman for his continuing service on the Company's Board of Advisors.

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 11 – Stock Plan (continued)

Stock Awards (cont’d):

In connection with a Term Sheet, on July 1, 2019, Dr. Bonfiglio was granted (i) 50,000 shares of common stock of the Company, 37,500 of which shares vested upon issuance on July 1, 2019 and 12,500 of which shares will vest on the earlier of (i) January 1, 2020 and (ii) the date the Company raises equity capital of $500,000, provided Dr. Bonfiglio is in the employ of the Company on such date. Mr. Bonfiglio was terminated, effective November 30, 2019. All unvested stock awards were terminated on such date.

On September 18, 2019, the Company awarded 25,000 shares of common stock to Derrick Chambers, a member of its advisory board, under its 2016 Stock Option and Stock Award Plan, which shares were fully vested and recorded as advisory services on issuance.

	June 30,			June 30,
	2020			2019
Number of shares vested in period			-			30,000
Weighted average fair market value per share		$	-		$	1.25
Stock based compensation recognized		$	-		$	37,500

Stock Options:

(a) Stock Options granted to Science Advisors and Business Advisors

On November 15, 2017, under the 2016 Stock Option and Award 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 the advisors are still providing services to the Company.

On November 15, 2017, under the 2016 Stock Option and Award Plan, the Board awarded a Science Advisor, the following three-year stock options: (i) an option to purchase 15,000 shares of common stock, exercisable on November 15, 2018 at an exercise price of $0.40 per share and (ii) an option to purchase 15,000 shares of common stock exercisable on November 15, 2019 at an exercise price of $0.40 per share, provided the advisor is still providing services to the Company.

On April 16, 2018, under the 2016 Stock Option and Award 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 still providing services to the Company.

On August 15, 2018, under the 2016 Stock Option and Award 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 still providing services to the Company.

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 11 – Stock Plan (continued)

(a) Stock Options granted to Science Advisors and Business Advisors (cont’d)

On July 1, 2019, under the 2016 Stock Option and Award 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 still providing services to the Company.

On February 10, 2020 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 Michael Maizels for serving as 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. Subsequent to June 30, 2020 25,000 unvested options were forfeited.

(b)	Stock Options granted to Employees:

On December 10, 2018, under the 2016 Stock Option and Award Plan, the Board awarded an employee the following three-year stock options: (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 advisor is still providing services to the Company. On March 23, 2020, the Company accelerated the vesting provision such that options previously vesting on December 10, 2020 shall vest immediately with an expiration date of March 23, 2023.

On December 10, 2019, under the 2016 Stock Option and Award Plan, the Board awarded an employee, the following three-year stock options: (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 advisor is still providing services to the Company. On March 23, 2020, the Company accelerated the vesting provision such that options previously vesting on December 10, 2020 and December 10, 2021 shall vest immediately with an expiration date of March 23, 2023.

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:

	Three Months ended				Six Months ended
	June 30,				June 30,
	2020		2019		2020		2019

Research and development expenses (1)	$	29,717	$	42,491	$	97,271	$	87,933

(1) During the three and six months ended June 30, 2020, we recorded gains of ($45,704) and ($26,809), respectively, related to certain research and development contracts as described in Note 10(2) and (6) in order to reverse prior period accruals related to various payment obligations. These amounts were recorded as offsets to research and development expenses.

As of June 30, 2020, and December 31, 2019, total unrecognized compensation remaining to be recognized in future periods totaled $33,882 and $105,683 respectively.

(c)	Stock Options granted to Officers:

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

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 11 – Stock Plan (continued)

(c)	Stock Options granted to Officers (cont’d):

shares will vest on each of July 1, 2020 and July 1, 2021, provided Dr. Bonfiglio is in the employ of the Company on such dates. If the Company raised equity capital of $1.5 million before December 31, 2019, unvested shares subject to the option will immediately vest and become exercisable, so long as Dr. Bonfiglio is in the Company's employ on such date. Mr. Bonfiglio was terminated as chief operating officer as of November 30, 2019. Accordingly, all unvested stock options terminated on such date.

On December 10, 2019, the Board granted five-year options to each of its two officers for the purchase of 325,000 shares of the common stock of the Company. The options have an exercise price of $2.00 and are immediately exercisable.

The following table is the recognized compensation in respect of the above stock option compensation, which amounts have been allocated as general and administrative expenses:

	Three and Six Months ended
	June 30,
	2020		2019
General and administrative expenses	$	-	$	-

As of June 30, 2020, and December 31, 2019, total unrecognized compensation remaining to be recognized in future periods totaled $0.

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):

	Measurement date
Dividend yield		0%
Expected volatility	114.69 ~ 186.80%
Risk-free interest rate	1.36% ~ 2.68%
Expected life (years)	3 ~ 5
Stock Price	$	0.62 ~ 2.80
Exercise Price	$	0.40 ~ 2.00

A summary of the activity for the Company's stock options at June 30, 2020 and December 31, 2019, is as follows:

	June 30, 2020				December 31, 2019
			Weighted Average					Weighted Average
	Shares		Exercise Price		Shares			Exercise Price
Outstanding, beginning of period		2,515,000	$	1.97		1,615,000		$	1.97
Granted		50,000	$	2		950,000		$	2
Exercised		-	$	-		-		$	-
Canceled/forfeited		-	$	2		(50,000	)	$	2
Outstanding, end of period		2,565,000	$	1.987		2,515,000		$	1.987
Options exercisable, end of period		2,433,335	$	1.98		2,331,669		$	1.98
Options expected to vest, end of period		131,665	$	1.98		183,331		$	1.98
Weighted average fair value of options granted			$	1.60				$	1.62

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 12 – Capital Stock

Authorized:

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 June 30, 2020 and December 31, 2019.

Common Stock

Common stock issued during the six months ended June 30, 2020.

None.

Common Stock issuances during the year ended December 31, 2019

During the year ended December 31, 2019, the Company sold an aggregate of 65,000 shares of its common stock to investors and received aggregate proceeds of $65,000 pursuant to subscription agreements in private offerings. The proceeds will be used for research and general corporate purposes.

On January 28, 2019, the Company issued 30,000 shares for advisory services (Note10 (4)). The shares were valued at fair market value on the date of issuance for a total of $37,500 or $1.25 per share.

On July 1, 2019, the Company issued 37,500 shares to its Chief Operating Officer (Note 10 (3)). The shares were valued at fair market value on the date of issuance for a total of $49,125 or $1.31 per share.

On August 8, 2019, the Company issued 50,000 shares for advisory services (Note 10 (7)). The shares were valued at fair market value on the date of issuance for a total of $74,500 or $1.49 per share.

On September 18, 2019, the Company issued 25,000 shares for advisory services (Note 10(4)). The shares were valued at fair market value on the date of issuance for a total of $40,250 or $1.61 per share.

During the year ended December 31, 2019, the Company received a warrant exercise notice for a warrant to purchase 52,000 shares of common stock from a subscriber and issued 9,980 shares of common stock on a cashless exercise basis as per the cashless exercise formula contained in the warrant.

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 12 – Capital Stock (continued)

Common Stock issuances during the year ended December 31, 2019 (cont’d)

There was a total of 13,089,789 shares of common stock issued and outstanding as of June 30, 2020 and December 31, 2019.

Common Stock Purchase Warrants

As of June 30, 2020, and December 31, 2019, the following common stock purchase warrants were outstanding:

	Warrants				Weighted Average Exercise Price
Outstanding – December 31, 2018		52,000		⁽¹⁾	$	0.40
Granted		70,000		⁽³⁾		1.00
Canceled/forfeited		-				-
Exercised		(52,000	)	⁽²⁾		0.40
Outstanding – December 31, 2019		70,000				1.00
Granted		10,000		⁽⁴⁾		1.00
Canceled/forfeited		-				-
Exercised		-				-
Outstanding – June 30, 2020		80,000			$	1.00

(1) Each two shares of common stock purchased in a private placement offering included one warrant to purchase an additional share of common stock at an exercise price of $0.40.

(2) During the year ended December 31, 2019, investors exercised warrants to purchase an aggregate of 52,000 shares of common stock and received 9,980 shares for exercises on a cashless basis.

(3) During the year ended December 31, 2019, the Company granted convertible notes holders accumulated 70,000 stock purchase warrants at an exercise price of $1.00. The fair value of the aforementioned warrants was $36,410 and recorded as financing cost.

(4) During the six months ended June 30, 2020, the Company granted a convertible note holder 10,000 stock purchase warrants at an exercise price of $1.00. The fair value of the aforementioned warrants was $3,400 and recorded as financing cost.

In accordance with authoritative accounting guidance, 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):

	Measurement date
Dividend yield		0%
Expected volatility	97.90~155.19%
Risk-free interest rate	0.37~1.72%
Expected life (years)	2.71~5.00
Stock Price		$0.25 ~ $0.65
Exercise Price		$0.40 ~ $1.00

QRONS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2020 and 2019

Note 13 – Subsequent Events

On August 11, 2020, the Company sold 100,000 shares of its common stock with a five-year warrant to purchase 50,000 shares of common stock at an exercise price of $1.00 per share (the “Warrant Shares”) to an accredited investor in a private offering for proceeds of $50,000. 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 outstanding shares of common stock.

The Company has evaluated events for the period from June 30, 2020 through the date of the issuance of these financial statements and determined that there are no additional events requiring disclosure.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains predictions, estimates and other forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "intends", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" or the negative of these terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors including the risks set forth in the section entitled "Risk Factors" in our Post-Effective Amendment No. 1 to our Registration Statement on Form S-1, as filed with the Securities and Exchange Commission (the "SEC") on March 15, 2018, that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

Forward-looking statements represent our management's beliefs and assumptions only as of the date of this Report. You should read this Report with the understanding that our actual future results may be materially different from what we expect.

All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by federal securities and any other applicable law.

The management's discussion and analysis of our financial condition and results of operations are based upon our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements for the six months ended June 30, 2020 and the notes thereto appearing elsewhere in this Report and the Company's audited financial statements for the fiscal year ended December 31, 2019, as filed with the SEC in its Annual Report on Form 10-K on March 30, 2020, along with the accompanying notes. As used in this Quarterly Report, the terms "we", "us", "our", and the "Company" means BioLabMart Inc. prior to August 8, 2017 and Qrons Inc. since August 8, 2017.

Overview

The Company is a preclinical stage biotechnology company developing advanced stem cell synthetic hydrogel-based solutions to combat neuronal injuries and focused on achieving a breakthrough in the treatment of traumatic brain injuries ("TBIs") for both concussions and penetrating injuries, an unmet medical need. We believe that our approach is pushing the boundaries of science by using the latest advances in molecular biology and chemistry. The Company has collaborated with universities and scientists in the fields of regenerative medicine, tissue engineering and 3D printable hydrogels to develop a treatment that integrates proprietary, engineered mesenchymal stem cells (“MSCs”), 3D printable implant, smart materials and a novel delivery system.

To date, the Company has two product candidates for treating penetrating and non-penetrating (concussion-like) TBIs, both integrating proprietary, anti-brain inflammation synthetic hydrogel and modified MSCs. QS100TM is an injury specific, 3D printable, implantable MSCs-synthetic hydrogel, to treat penetrating brain injuries and QS200TM is an injectable MSCs-synthetic hydrogel for the treatment of diffused injuries commonly referred to as concussions.

The Company has relied primarily on its two co-founders, Jonah Meer, Chief Executive Officer, and Ido Merfeld, President, who are its sole directors to manage its day-to-day business and has outsourced professional services to third parties in an effort to maintain lower operational costs.

Messrs. Meer and Merfeld, as the holders of the Company's issued and outstanding shares of the Company's Class A Preferred Stock, collectively have 66 2/3% of the voting rights of the Company. Acting together, they will be able to influence the outcome of all corporate actions requiring approval of our stockholders.

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 and the new symbol "QRON", became effective on 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.

Recent Developments

Covid-19 Pandemic

The COVID-19 pandemic and the significant disruptions to the global financial markets has had an adverse impact our ability to raise additional capital for the research and development of our product candidates. As a result, we discontinued our service agreements with Ariel Scientific Innovation Ltd. (“Ariel”) for laboratory work at Ariel’s facilities. Although we continue to collaborate with Professor Chenfeng Ke at Dartmouth College (“Dartmouth”) on 3D printing research under a research grant from the State of New Hampshire, we have not extended our sponsored research agreement with Dartmouth that expired on July14, 2020. In April 2020, we terminated our employees until we could determine the continuing effect of COVID-19. However, its ultimate impact on us continues to evolve, is highly uncertain and subject to change.

Plan of Operations

To date, we have two product candidates for treating penetrating and non-penetrating (concussion-like) TBIs. We have completed an in-vivo efficacy experiment with QS100TM for treating penetrating brain injuries in an animal model that was successful in substantiating our theories and practices regarding cell regeneration. We have completed animal in-vivo efficacy experiments with QS200TM for treating concussions and other diffused axonal injuries. Prior to the COVID-19 pandemic, we planned to continue working with Dartmouth to develop innovative 3D printable biocompatible advanced materials and stem cell delivery techniques for our product candidates and with our stem cells team on the development of our proprietary, neuro-regenerative MSC lines at Ariel’s laboratories. However, there is substantial doubt that we can continue these endeavors unless we obtain additional capital to pay our operating expenses.

We have not generated revenues from the sales of products and we do not currently have sufficient resources to accomplish the conditions necessary for us to generate revenue.

As we monitor the full impact of the COVID-19 outbreak, we continue exploring sources of debt and equity financings as well as available grants. If we cannot obtain additional financing we will not be able to resume product development under our current business plan. We are currently exploring and are in discussions for potential strategic alternatives in the biotechnology field which could advance our MSCs and neurodegenerative research. There can be no assurance the necessary financing will be available or that a suitable strategic partner will be identified. In such event, we may explore relationships with third parties to develop or commercialize products or technologies that we have not previously sought to develop or commercialize, decide to exit our existing business, cease operations altogether or pursue an acquisition of our company.

Results of Operations

Three Months Ended June 30, 2020 and June 30, 2019

Revenue

We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future.

Net Loss

We had a net loss of $16,731 in the three months ended June 30, 2020 compared to a net loss of $217,583 in the three months ended June 30, 2019, as follows:

	For Three Months Ended
	June 30,
	2020			2019

Net sales	$	-		$	-

Operating expenses:
Research and development expenses		2,891			138,374
Professional fees		6,893			27,640
General and administrative expenses		3,805			33,143
Total operating expenses		13,589			199,157

Income (loss) from operations		(13,589	)		(199,157	)

Other income (expense)
Interest expense		(12,814	)		(1,420	)
Change in derivative liabilities		9,672			(17,006	)
Total other income (expense)		(3,142	)		(18,426	)

Net (loss)	$	(16,731	)	$	(217,583	)

Operating Expenses

Total operating expenses for the three months ended June 30, 2020 were $13,589 compared to total operating expenses of $199,157 for the three months ended June 30, 2019. The substantial decrease in operating expenses during the three months ended June 30, 2020 are directly related to the suspension of certain research and development and other operating activities as a result of the impact of COVID 19. During the three months ended June 30, 2020, the Company incurred $2,891 of research and development expenses which included payroll of $21,961, service fees related to certain research and development agreements of $29,717, a credit offsetting prior accrued fees associated with a sponsored research agreement of $(45,704), purchases of expendable lab supplies and equipment of $133, technology licensing fees of $7,991 and a credit from prior accrued research and development fees of $(11,207), compared to $138,374 of research and development expenses which included payroll of $54,968, service fees related to certain research and development agreements of $63,006, fees associated with a sponsored research agreement of $18,146, legal and filing fees related to patents of $1,659, and purchases of expendable lab supplies and equipment of $595 during the three months ended June 30, 2019. The Company incurred general and administrative expenses of $3,805 for the three months ended June 30, 2020 compared to general and administrative expenses of $33,143 for the three months ended June 30, 2019. The substantial decrease in general and administrative expense during the three months ended June 30, 2020 was primarily due to a decrease in activity during the current period, and more specifically related to a decrease in travel, shareholder expenses and advertising and marketing expenses as compared to the three months ended June 30, 2019. Professional fees were $6,893 for the three months ended June 30, 2020, which reflect a decrease in accounting fees in the three months ended June 30, 2020 compared to professional fees of $27,640 during the three months ended June 30, 2019, as a result of certain audit fees incurred in fiscal 2018 being invoiced in the second quarter of fiscal 2019. Other expense in the three months ended June 30, 2020 was $3,142, which included a gain of $9,672 as a result of the change in value of derivative liabilities, and interest expense of $12,814 which is comprised of accretion of convertible notes of $8,930 and accrued interest on convertible notes payable of $3,884. Other expense in the three months ended June 30, 2019 was $18,426 which included a loss of $17,006 as a result of the change in value of derivative liabilities, and interest expense of $1,420.

Six Months Ended June 30, 2020 and June 30, 2019

Revenue

We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future.

Net Loss

We had a net loss of $256,863 in the six months ended June 30, 2020 compared to a net loss of $479,044 in the six months ended June 30, 2019 as follows:

	For Six Months Ended
	June 30,
	2020			2019

Net sales	$	-		$	-

Operating expenses:
Research and development expenses		174,459			303,528
Professional fees		30,517			43,226
General and administrative expenses		27,551			115,917
Total operating expenses		232,527			462,671

Income (loss) from operations		(232,527	)		(462,671	)

Other income (expense)
Interest expense		(27,098	)		(1,916	)
Change in derivative liabilities		2,762			(14,457	)
Total other income (expense)		(24,336	)		(16,373	)

Net (loss)	$	(256,863	)	$	(479,044	)

Operating Expenses

Total operating expenses for the six months ended June 30, 2020 were $232,527 compared to total operating expenses of $462,671for the six months ended June 30, 2019. The substantial decrease in operating expenses during the six months ended June 30, 2020 are directly related to the suspension of certain research and development and other operating activities as a result of the impact of COVID 19. . During the six months ended June 30, 2020, the Company incurred $174,459 of research and development expenses which included payroll of $79,274, service fees related to certain research and development agreements of $104,979, a credit offsetting prior accrued fees associated with a sponsored research agreement of $26,809, legal and filing fees related to patents of $588, purchases of expendable lab supplies and equipment of $445, and technology licensing fees of $15,982, compared to $303,528 of research and development expenses which included payroll of $107,062, service fees related to certain research and development agreements of $123,050, fees associated with a sponsored research agreement of $36,293, legal and filing fees related to patents of $19,497, software fees of $1,374 and purchases of expendable lab supplies and equipment of $16,252 during the six months ended June 30, 2019 . The Company incurred general and administrative expenses of $27,551 for the six months ended June 30, 2020 compared to general and administrative expenses of $115,917 for the six months ended June 30, 2019. The substantial decrease in general and administrative expense during the six months ended June 30, 2020 was primarily due to a decrease in stock-based compensation costs from $37,500 in the six months ended June 30, 2019 to $0 in the six months ended June 30, 2020, and a reduction in certain advertising and marketing costs from $53,090 in the six months ended June 30, 2019 to $23,500 in the six months ended June 30, 2020. Professional fees were $30,517 for the six months ended June 30, 2020, which reflect a decrease in accounting fees in the six months ended June 30, 2020 compared to professional fees of $43,226 during the six months ended June 30, 2019, as a result of certain audit fees incurred in fiscal 2018 being invoiced during the six months ended June 30, 2019. Other expense in the six months ended June 30, 2020 was $24,336 and included a gain of $2,762 as a result of the change in value of derivative liabilities, and interest expense of $27,098 which is comprised of accretion of convertible notes of $17,321, financing costs of $3,400 and accrued interest on convertible notes of $6,377. Other expense in the six months ended June 30, 2019 included a loss of $14,457 as a result of the change in value of derivative liabilities and interest expense of $1,916.

Working Capital

	June 30, 2020			December 31, 2019
Current Assets	$	16,178		$	123,290
Current Liabilities		680,492			631,412
Working Capital (deficiency)	$	(664,314	)	$	(508,122	)

Cash Flows

	At June 30, 2020			At June 30, 2019
Net cash (used in) operating activities	$	(144,498	)	$	(292,157	)
Net cash provided by investing activities		-			-
Net cash provided by financing activities	$	86,000		$	215,000
Net increase (decrease) in cash during period	$	(58,498	)	$	(77,157	)

Operating Activities

Net cash used in operating activities was $144,498 for the six months ended June 30, 2020 compared to $292,157 for the six months ended June 30, 2019. Cash used in operating activities for the six months ended June 30, 2020 was primarily the result of net loss, offset by non-cash items including compensation in the form of stock options for research and development expense totaling $97,271, warrants granted as financing costs valued at $3,400, accretion of debt discount of $17,321, a gain from the change in our derivative liabilities of $2,762 and changes to our operating assets and liabilities, including a decrease to prepaid expenses of $48,614, reduction to accounts payable of $56,048 and an increase to accounts payable-related parties. Cash used in the six months ended June 30, 2019 was primarily the result of net loss, offset by non-cash items including compensation in the form of stock options for research and development expense totaling $87,933, stock awards totaling $37,500, the change in derivative liabilities of $14,457 and changes to our operating assets and liabilities, including a decrease to prepaid expenses of $27,099 and increases to our accounts payable and accounts payable-related parties.

Investing Activities

There were no investing activities during the six months ended June 30, 2020 and 2019.

Financing Activities

Net cash provided by financing activities was $86,000 for the six months ended June 30, 2020 compared to $215,000 for the six months ended June 30, 2019. We received no proceeds from private placement offerings in the six months ended June 30, 2020 as compared to $65,000 in the six months ended June 30, 2019. During the six months ended June 30, 2020 we received $76,000 in proceeds from related parties in the form of short-term advances from our officers compared to $50,000 during the six months ended June 30, 2019. During the six months ended June 30, 2020 we also received $10,000 in the form of convertible notes with no similar financing in the six months ended June 30, 2019. During the six months ended June 30, 2019 we received $100,000 in an unsecured short-term advance from a third party, with no similar financing in the six months ended June 30, 2020.

Liquidity and Capital Resources

As of June 30, 2020, we had cash of $8,527. We are in the early stage of development and have experienced net losses to date and have not generated revenue from operations which raises substantial doubt about our ability to continue as a going concern. There are a number of conditions that we must satisfy before we will be able to commercialize potential products and generate revenue, including successful development of product candidates, which includes clinical trials, FDA approval, demonstration of effectiveness sufficient to generate commercial orders by customers, establishing production capabilities as well as effective marketing and sales capabilities for our product. We do not currently have sufficient resources to accomplish any of these conditions necessary for us to generate revenue and expect to incur increasing operating expenses. We will require substantial additional funds for operations, the service of debt and to fund our business objectives. There can be no assurance that financing, whether debt or equity, will be available to us in the amount required at any particular time or for any particular period or, if available, that it can be obtained on terms favorable to us. If additional funds are raised by the issuance of equity securities, such as through the issuance and exercise of warrants, then existing stockholders will experience dilution of their ownership interest. If additional funds are raised by the issuance of debt or other equity instruments, we may be subject to certain limitations in our operations, and issuance of such securities may have rights senior to those of the then existing stockholders. We currently have no agreements, arrangements or understandings with any person or entity to obtain funds through bank loans, lines of credit or any other sources. Additionally, the continued spread of COVID-19 and uncertain market conditions will limit the Company’s ability to access capital. Without additional financing, we do not believe our resources will be sufficient to meet our operating and capital needs beyond the third quarter of 2020.

Going Concern

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. Our report from our independent registered public accounting firm for the fiscal year ended December 31, 2019 includes an explanatory paragraph stating the Company has not generated revenues sufficient to cover operating expenses and will need additional capital to service its debt obligations. Also, if the Company is unable to obtain adequate capital due to the continued spread of COVID-19, the Company may be required to further reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments which are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of their evaluation form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and circumstances. Our significant accounting policies are more fully discussed in Note 2 to our unaudited financial statements contained herein.

Stock-Based Compensation and Other Share-Based Payments: The expense attributable to the Company's directors is recognized over the period in which 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.

Recent Accounting Pronouncements

There were various accounting standards and interpretations issued recently, none of which are expected to have a material effect on the Company's operations, financial position or cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company and are not required to provide this information.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, as of June 30, 2020, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, based on the material weaknesses discussed below, our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Act Commission's rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our internal controls and procedures are not effective for the following reasons: (i) there is an inadequate segregation of duties consistent with control objectives as management is comprised of only two persons, one of which is the Company's principal executive officer and principal financial officer and, (ii) the Company does not have a formal audit committee with a financial expert, and thus the Company lacks the board oversight role within the financial reporting process.

In order to mitigate the foregoing material weakness, we have engaged an outside accounting consultant with significant experience in the preparation of financial statements in conformity with GAAP to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity with GAAP. We will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate.

We would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will continue to reassess this matter to determine whether improvement in segregation of duty is feasible. In addition, we would need to expand our board to include independent members.

Going forward, we intend to evaluate our processes and procedures and, where practicable and resources permit, implement changes in order to have more effective controls over financial reporting.

Changes in Internal Control over Financial Reporting

During the period covered by this report, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company's property is not the subject of any pending legal proceedings.

ITEM 1A. RISK FACTORS

The Company is a smaller reporting company and is not required to provide this information.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no sales of equity securities during the period covered by this Report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibit Number	Exhibit
31	Certification of the Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of the Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
101.INS	XBRL INSTANCE DOCUMENT
101.SCH	XBRL TAXONOMY EXTENSION SCHEMA
101.CAL	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB	XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	QRONS INC.

Date: August 14, 2020	By:	/s/Jonah Meer
		Name: Jonah Meer
		Title: Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer)