Large accelerated filer
|
|
|
Accelerated filer
|
|
Non-accelerated filer
|
|
(Do not check if smaller reporting company)
|
Smaller reporting company
|
|
|
Emerging growth company
|
|
Common Stock, $0.001 par value
|
11,695,472 shares
|
(Class)
|
(Outstanding as at October 17, 2017)
|
|
|
|
|
|
|
Page
|
|
||
PART I – FINANCIAL INFORMATION
|
|
|
2
|
|
Item 1. Condensed Consolidated Financial Statements
|
|
|
2
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
16
|
|
Item 3. Quantitative and Qualitative Disclosure About Market Risk
|
|
|
23
|
|
Item 4. Controls and Procedures
|
|
|
23
|
|
PART II – OTHER INFORMATION
|
|
|
24
|
|
Item 1. Legal Proceedings
|
|
|
24
|
|
Item 1A. Risk Factors
|
|
|
24
|
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
|
|
24
|
|
Item 3. Defaults Upon Senior Securities
|
|
|
24
|
|
Item 4. Mine Safety Disclosures
|
|
|
24
|
|
Item 5. Other Information
|
|
|
24
|
|
Item 6. Exhibits
|
|
|
24
|
|
SIGNATURES
|
25
|
|
August 31, 2017
|
November 30, 2016
|
||||||
|
(Unaudited)
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash
|
$
|
2,499,169
|
$
|
1,468,724
|
||||
Prepaid expenses
|
5,000
|
-
|
||||||
Total current assets
|
2,504,169
|
1,468,724
|
||||||
Total Assets
|
$
|
2,504,169
|
$
|
1,468,724
|
||||
|
||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY DEFICIT
|
||||||||
Current liabilities:
|
||||||||
Accounts payable and accrued expenses
|
$
|
382,055
|
$
|
497,936
|
||||
Accrued expenses - related party
|
17,500
|
70,502
|
||||||
Accrued interest payable
|
33,299
|
48,813
|
||||||
Convertible notes payable (See Note 5)
|
1,922,474
|
2,394,849
|
||||||
Note payable
|
138,856
|
100,152
|
||||||
Warrant liability
|
-
|
168,070
|
||||||
Total current liabilities
|
2,494,184
|
3,280,322
|
||||||
|
||||||||
Long-term liabilities:
|
||||||||
Convertible notes payable (See Note 5)
|
-
|
231,517
|
||||||
Total long term liabilities
|
-
|
231,517
|
||||||
Total Liabilities
|
2,494,184
|
3,511,839
|
||||||
|
||||||||
Commitments and Contingencies (Note 6)
|
||||||||
|
||||||||
Stockholders' Equity Deficit:
|
||||||||
Preferred stock, $0.001 par value; 100,000,000 shares authorized; no shares issued and outstanding as of August 31, 2017 and November 30, 2016
|
-
|
-
|
||||||
Common stock, $0.001 par value; 250,000,000 shares authorized; 11,496,169 and 9,231,560 shares issued and outstanding as of August 31, 2017 and November 30, 2016, respectively
|
11,496
|
9,231
|
||||||
Additional paid-in capital
|
18,667,736
|
6,249,357
|
||||||
Accumulated deficit
|
(18,669,247
|
)
|
(8,301,703
|
)
|
||||
Total Stockholders' Equity Deficit
|
9,985
|
(2,043,115
|
)
|
|||||
Total Liabilities and Stockholders' Equity Deficit
|
$
|
2,504,169
|
$
|
1,468,724
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements
|
|
For the three months ended August 31,
|
For the nine months ended August 31,
|
||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
Operating expenses:
|
||||||||||||||||
General and administrative expenses
|
$
|
3,038,018
|
$
|
1,150,964
|
$
|
6,122,565
|
$
|
3,637,868
|
||||||||
Research and development expenses
|
697,966
|
443,222
|
2,296,324
|
663,500
|
||||||||||||
Total operating expenses
|
3,735,984
|
1,594,186
|
8,418,889
|
4,301,368
|
||||||||||||
|
||||||||||||||||
Other income (expenses):
|
||||||||||||||||
Interest expense
|
(202,160
|
)
|
(114,847
|
)
|
(635,267
|
)
|
(304,596
|
)
|
||||||||
Interest income
|
15
|
-
|
123
|
-
|
||||||||||||
Loss on conversion of debt
|
-
|
(29,032
|
)
|
(365,373
|
)
|
(89,210
|
)
|
|||||||||
Loss on extinguishment of debt
|
(76,251
|
)
|
-
|
(76,251
|
)
|
-
|
||||||||||
Loss on issuance of convertible notes
|
-
|
(28,000
|
)
|
-
|
(481,000
|
)
|
||||||||||
Change in fair value of embedded conversion option
|
32,983
|
50,000
|
(812,017
|
)
|
362,000
|
|||||||||||
Change in fair value of warrant liability
|
-
|
-
|
(59,870
|
)
|
-
|
|||||||||||
Total other expenses
|
(245,413
|
)
|
(121,879
|
)
|
(1,948,655
|
)
|
(512,806
|
)
|
||||||||
|
||||||||||||||||
Net loss
|
$
|
(3,981,397
|
)
|
$
|
(1,716,065
|
)
|
$
|
(10,367,544
|
)
|
$
|
(4,814,174
|
)
|
||||
|
||||||||||||||||
Net loss per share - basic and diluted
|
$
|
(0.37
|
)
|
$
|
(0.19
|
)
|
$
|
(1.03
|
)
|
$
|
(0.55
|
)
|
||||
|
||||||||||||||||
Weighted average shares outstanding, basic and diluted
|
10,816,282
|
8,909,414
|
10,074,766
|
8,784,373
|
||||||||||||
|
||||||||||||||||
|
For the nine months ended August 31,
|
|||||||
|
2017
|
2016
|
||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(10,367,544
|
)
|
$
|
(4,814,174
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities
|
||||||||
Issuance of common stock, warrants and options for services
|
4,181,693
|
3,039,277
|
||||||
Issuance of common stock for acquired in-process research and development
|
487,500
|
-
|
||||||
Change in fair value of embedded conversion option
|
812,017
|
(362,000
|
)
|
|||||
Change in fair value of warrant liability
|
59,870
|
-
|
||||||
Accretion of debt discount
|
525,864
|
261,672
|
||||||
Loss on conversion of debt
|
365,373
|
89,210
|
||||||
Loss on extinguishment of debt
|
76,251
|
-
|
||||||
Loss on issuance of convertible debt
|
-
|
481,000
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Prepaid expenses
|
(5,000
|
)
|
(10,000
|
)
|
||||
Accounts payable and accrued expenses
|
(115,881
|
)
|
363,593
|
|||||
Accrued expenses - related party
|
(53,002
|
)
|
40,000
|
|||||
Accrued interest payable
|
109,404
|
42,925
|
||||||
Net cash used in operating activities
|
(3,923,455
|
)
|
(868,497
|
)
|
||||
|
||||||||
Cash flows from financing activities:
|
||||||||
Proceeds received from issuance of convertible notes
|
2,500,000
|
815,000
|
||||||
Proceeds received from exercise of warrants
|
70,000
|
-
|
||||||
Proceeds received for issuance of common stock and warrants , net of offering costs
|
2,383,900
|
60,075
|
||||||
Net cash provided by financing activities
|
4,953,900
|
875,075
|
||||||
|
||||||||
Net increase in cash
|
1,030,445
|
6,578
|
||||||
|
||||||||
Cash at beginning of period
|
1,468,724
|
131,408
|
||||||
Cash at end of period
|
$
|
2,499,169
|
$
|
137,986
|
||||
|
||||||||
Non-cash financing activities:
|
||||||||
Issuance of common stock upon conversion of convertible notes payable
|
$
|
3,540,838
|
$
|
244,897
|
||||
Issuance of common stock and warrants in exchange for extinguishment of convertible notes payable
|
$
|
442,149
|
$
|
-
|
||||
Issuance of warrants to settle accounts payable to related party
|
$
|
-
|
$
|
30,000
|
||||
Reclassification of warrant liability to equity
|
$
|
227,940
|
$
|
-
|
||||
|
||||||||
Cash paid for interest
|
$
|
-
|
$
|
-
|
||||
Cash paid for income taxes
|
$
|
-
|
$
|
-
|
||||
|
Potentially dilutive securities
|
August 31, 2017
|
August 31, 2016
|
||||||
Warrants (Note 10)
|
3,033,995
|
976,500
|
||||||
Convertible debt (Note 5)
|
567,407
|
506,757
|
|
August 31, 2017
|
November 30, 2016
|
||||||
Series A Notes:
|
||||||||
Principal value of 10%, convertible at $2.00 at November 30, 2016.
|
$
|
-
|
$
|
12,500
|
||||
Fair value of bifurcated embedded conversion option of Series A Notes
|
-
|
12,000
|
||||||
Debt discount
|
-
|
(2,194
|
)
|
|||||
Carrying value of Series A Notes
|
-
|
22,306
|
||||||
|
||||||||
Series B Notes:
|
||||||||
Principal value of 10%, convertible at $2.00 at November 30, 2016.
|
-
|
55,000
|
||||||
Fair value of bifurcated embedded conversion option of Series B Notes
|
-
|
55,000
|
||||||
Debt discount
|
-
|
(19,229
|
)
|
|||||
Carrying value of Series B Notes
|
-
|
90,771
|
||||||
|
||||||||
Series C Notes:
|
||||||||
Principal value of 10%, convertible at $1.55 at November 30, 2016.
|
-
|
576,383
|
||||||
Fair value of bifurcated embedded conversion option of Series C Notes
|
-
|
838,000
|
||||||
Debt discount
|
-
|
(250,969
|
)
|
|||||
Carrying value of Series C Notes
|
-
|
1,163,414
|
||||||
|
||||||||
Series D Notes:
|
||||||||
Principal value of 10%, convertible at $1.85 at November 30, 2016.
|
-
|
160,000
|
||||||
Debt discount
|
-
|
(140,961
|
)
|
|||||
Carrying value of Series D Notes
|
-
|
19,039
|
||||||
|
||||||||
Series E Notes:
|
||||||||
Principal value of 10%, convertible at $2.50 at August 31, 2017 and November 30, 2016.
|
30,000
|
180,000
|
||||||
Debt discount
|
(4,062
|
)
|
(124,164
|
)
|
||||
Carrying value of Series E Notes
|
25,938
|
55,836
|
||||||
|
||||||||
Convertible Debenture:
|
||||||||
Principal value of 5%, convertible at $3.60 and $2.98 at August 31, 2017 and November 30, 2016, respectively.
|
2,000,000
|
1,500,000
|
||||||
Fair value of bifurcated contingent put option of Secured Convertible Debenture
|
2,000
|
72,000
|
||||||
Debt discount
|
(105,464
|
)
|
(297,000
|
)
|
||||
Carrying value of Secured Convertible Debenture Note
|
1,896,536
|
1,275,000
|
||||||
Total short-term carrying value of convertible notes
|
$
|
1,922,474
|
$
|
2,394,849
|
||||
Total long-term carrying value of convertible notes
|
$
|
-
|
$
|
231,517
|
||||
|
Volatility
|
101.58% - 146.26
|
%
|
||
Risk-free rate
|
0.53% - 1.08
|
%
|
|
||||||||
Embedded derivatives at inception and upon conversion
|
||||||||
|
For the nine months ended August 31,
|
|||||||
|
2017
|
2016
|
||||||
Stock price
|
$
|
4.93 - $7.05
|
$
|
2.60 - $3.26
|
||||
Terms (years)
|
0.11 - 0.85
|
1.5
|
||||||
Volatility
|
144.26% - 157.35
|
%
|
116.77
|
%
|
||||
Risk-free rate
|
0.53% - 0.76
|
%
|
0.51% - 0.76
|
%
|
||||
Dividend yield
|
0.00
|
%
|
0.00
|
%
|
||||
|
||||||||
|
||||||||
|
||||||||
Embedded derivatives at period end
|
||||||||
|
August 31, 2017
|
November 30, 2016
|
||||||
Stock price
|
-
|
$
|
3.43
|
|||||
Term (years)
|
-
|
0.25 - 1.05
|
||||||
Volatility
|
-
|
156.74% - 163.49
|
%
|
|||||
Risk-free rate
|
-
|
0.48% - 0.80
|
%
|
|||||
Dividend yield
|
-
|
0.00
|
%
|
Rollforward of Level 3 Fair Value Measurement for the Nine Months Ended August 31, 2017
|
|||||||||||||||||||
Balance at November 30, 2016
|
Issuance
|
Net unrealized gain/(loss)
|
Conversion
|
Balance at August 31, 2017
|
|||||||||||||||
$
|
977,000
|
86,000
|
812,017
|
(1,873,017
|
)
|
$
|
2,000
|
|
Principal
|
Shares
|
||||||
Series A conversions
|
12,500
|
5,936
|
||||||
Series B conversions
|
55,000
|
27,995
|
||||||
Series C conversions
|
576,383
|
407,484
|
||||||
Series D conversions
|
160,000
|
91,782
|
||||||
Series E conversions
|
150,000
|
63,255
|
||||||
Secured Debenture conversions
|
2,000,000
|
461,203
|
||||||
Total
|
$
|
2,953,883
|
1,057,655
|
|||||
|
-
|
the filing of an investigational new drug application (the “IND”) with the US Food and Drug Administration (“FDA”);
|
-
|
successful interim results of Phase II/III clinical trial of the product candidate;
|
-
|
FDA acceptance of a new drug application;
|
-
|
FDA approval of the product candidate; and
|
-
|
achieving certain worldwide net sales.
|
|
the completion of certain preclinical studies (the “Pre-Clinical Trials”);
|
|
the filing of an investigational new drug application (the “IND”) with the US Food and Drug Administration (“FDA”) or the filing of the equivalent of an IND with the foreign equivalent of the FDA;
|
|
successful completion of each of Phase I, Phase II and Phase III clinical trials;
|
|
FDA approval of the product candidate;
|
|
approval by the foreign equivalent of the FDA of the product candidate;
|
|
achieving certain worldwide net sales; and
|
|
a change of control of QBIO.
|
|
For the three months ended August 31,
|
For the nine months ended August 31,
|
||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
Related parties
|
$
|
102,500
|
$
|
104,632
|
$
|
322,500
|
$
|
207,875
|
Fair value of warrant liability at November 30, 2016
|
$
|
168,070
|
||
Issuance of new warrant liability
|
-
|
|||
Change in fair value of warrant liability
|
59,870
|
|||
Reclassification of warrant liability to equity
|
(227,940
|
)
|
||
Fair value of warrant liability at August 31, 2017
|
$
|
-
|
|
Weighted Average
|
|||||||||||||||
|
Weighted Average
|
Remaining Contractual
|
||||||||||||||
|
Warrants
|
Exercise Price
|
Intrinsic Value
|
Life (years)
|
||||||||||||
Outstanding at November 30, 2016
|
1,047,500
|
$
|
2.54
|
$
|
1,158,000
|
4.10
|
||||||||||
Issued
|
2,006,495
|
-
|
-
|
-
|
||||||||||||
Exercised
|
(20,000
|
)
|
3.50
|
-
|
-
|
|||||||||||
Outstanding at August 31, 2017
|
3,033,995
|
$
|
3.66
|
$
|
1,659,285
|
4.29
|
||||||||||
Exercisable at August 31, 2017
|
2,245,995
|
$
|
3.54
|
$
|
1,617,235
|
4.19
|
||||||||||
|
|
For the nine months ended August 31, 2017
|
|||
Stock price
|
$
|
3.50 - $7.87
|
||
Term (years)
|
1.75 – 5.0
|
|||
Volatility
|
129.81% - 142.93
|
%
|
||
Risk-free rate
|
1.17% - 1.74
|
%
|
||
Dividend yield
|
0.00
|
%
|
|
Weighted Average
|
|||||||||||||||
|
Weighted Average
|
Remaining Contractual
|
||||||||||||||
|
Options
|
Exercise Price
|
Intrinsic Value
|
Life (years)
|
||||||||||||
Outstanding at November 30, 2016
|
-
|
$
|
-
|
$
|
-
|
-
|
||||||||||
Issued
|
450,000
|
4.00
|
26,100
|
4.76
|
||||||||||||
Exercised
|
-
|
-
|
-
|
-
|
||||||||||||
Outstanding at August 31, 2017
|
450,000
|
$
|
4.00
|
$
|
26,100
|
4.76
|
||||||||||
Exercisable at August 31, 2017
|
-
|
$
|
-
|
$
|
-
|
-
|
||||||||||
|
For the three months ended August 31,
|
|||||||
|
2017
|
2016
|
||||||
Operating expenses:
|
||||||||
General and administrative expenses
|
$
|
3,038,018
|
$
|
1,150,964
|
||||
Research and development expenses
|
697,966
|
443,222
|
||||||
Total operating expenses
|
3,735,984
|
1,594,186
|
||||||
|
||||||||
Other income (expenses):
|
||||||||
Interest expense
|
(202,160
|
)
|
(114,847
|
)
|
||||
Interest income
|
15
|
-
|
||||||
Loss on conversion of debt
|
-
|
(29,032
|
)
|
|||||
Loss on extinguishment of debt
|
(76,251
|
)
|
-
|
|||||
Loss on issuance of convertible notes
|
-
|
(28,000
|
)
|
|||||
Change in fair value of embedded conversion option
|
32,983
|
50,000
|
||||||
Change in fair value of warrant liability
|
-
|
-
|
||||||
Total other expenses
|
(245,413
|
)
|
(121,879
|
)
|
||||
|
||||||||
Net loss
|
$
|
(3,981,397
|
)
|
$
|
(1,716,065
|
)
|
|
For the nine months ended August 31,
|
|||||||
|
2017
|
2016
|
||||||
Operating expenses:
|
||||||||
General and administrative expenses
|
$
|
6,122,565
|
$
|
3,637,868
|
||||
Research and development expenses
|
2,296,324
|
663,500
|
||||||
Total operating expenses
|
8,418,889
|
4,301,368
|
||||||
|
||||||||
Other income (expenses):
|
||||||||
Interest expense
|
(635,267
|
)
|
(304,596
|
)
|
||||
Interest income
|
123
|
-
|
||||||
Loss on conversion of debt
|
(365,373
|
)
|
(89,210
|
)
|
||||
Loss on extinguishment of debt
|
(76,251
|
)
|
-
|
|||||
Loss on issuance of convertible notes
|
-
|
(481,000
|
)
|
|||||
Change in fair value of embedded conversion option
|
(812,017
|
)
|
362,000
|
|||||
Change in fair value of warrant liability
|
(59,870
|
)
|
-
|
|||||
Total other expenses
|
(1,948,655
|
)
|
(512,806
|
)
|
||||
|
||||||||
Net loss
|
$
|
(10,367,544
|
)
|
$
|
(4,814,174
|
)
|
||
|
For the nine months ended August 31,
|
|||||||
|
2017
|
2016
|
||||||
|
||||||||
Net cash (used in) provided by:
|
||||||||
Operating activities
|
$
|
(3,923,455
|
)
|
$
|
(868,497
|
)
|
||
Financing acitivities
|
4,953,900
|
875,075
|
||||||
Net (decrease) increase in cash
|
$
|
1,030,445
|
$
|
6,578
|
||||
|
|
the filing of an investigational new drug application (the “IND”) with the US Food and Drug Administration (“FDA”);
|
|
successful interim results of Phase II/III clinical trial of the product candidate;
|
|
FDA acceptance of a new drug application;
|
|
FDA approval of the product candidate; and
|
|
achieving certain worldwide net sales.
|
|
the completion of certain preclinical studies (the “Pre-Clinical Trials”);
|
|
the filing of an investigational new drug application (the “IND”) with the US Food and Drug Administration (“FDA”) or the filing of the equivalent of an IND with the foreign equivalent of the FDA;
|
|
successful completion of each of Phase I, Phase II and Phase III clinical trials;
|
|
FDA approval of the product candidate;
|
|
approval by the foreign equivalent of the FDA of the product candidate;
|
|
achieving certain worldwide net sales; and
|
|
a change of control of QBIO.
|
|
Q BIOMED INC.
|
|
|
|
|
October 18, 2017
|
By:
|
/s/ Denis Corin
|
|
|
Denis Corin
|
|
|
President, Chief Executive Officer, Acting Principal Accounting Officer, Principal Financial Officer
|
|
(1)
|
I have reviewed this quarterly report on Form 10-Q for the quarterly period ended August 31, 2017 of Q BioMed Inc.;
|
|
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
(4)
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
(5)
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Dated: October 18, 2017
|
|
/s/ Denis Corin
|
|
Denis Corin
|
|
Chief Executive Officer (Principal Executive Officer and
Acting Principal Financial and Accounting Officer)
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Dated: October 18, 2017
|
|
/s/ Denis Corin
|
|
Denis Corin
|
|
Chief Executive Officer (Principal Executive Officer and
Acting Principal Financial and Accounting Officer)
|