Item 1. Condensed Consolidated Financial Statements
Q BIOMED INC.
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
As of February 28,
|
|
|
As of November 30,
|
|
|
|
2021
|
|
|
2020
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
435,124
|
|
|
$
|
177,145
|
|
Prepaid expenses and other current assets
|
|
|
39,714
|
|
|
|
46,339
|
|
Total current assets
|
|
|
474,838
|
|
|
|
223,484
|
|
Intangible assets, net
|
|
|
387,500
|
|
|
|
400,000
|
|
Total Assets
|
|
$
|
862,338
|
|
|
$
|
623,484
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
869,642
|
|
|
$
|
721,744
|
|
Accrued expenses
|
|
|
834,250
|
|
|
|
837,660
|
|
Accrued expenses - related party
|
|
|
49,500
|
|
|
|
4,000
|
|
Accrued interest payable
|
|
|
6,104
|
|
|
|
43,376
|
|
Convertible note payable, net
|
|
|
889,176
|
|
|
|
92,185
|
|
Total current liabilities
|
|
|
2,648,672
|
|
|
|
1,698,965
|
|
Total Liabilities
|
|
|
2,648,672
|
|
|
|
1,698,965
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value; 100,000,000 shares authorized as of February 28, 2021 and November 30, 2020
|
|
|
|
|
|
|
-
|
|
Convertible Series A, 500,000 shares designated - 227,998 shares issued and outstanding at February 28, 2021 and November 30, 2020, respectively
|
|
|
2,160,966
|
|
|
|
2,161,980
|
|
Convertible Series B, 1,000,000 shares designated - 400,000 and 503,134 shares issued and outstanding at February 28, 2021 and November 30, 2020, respectively
|
|
|
3,928,208
|
|
|
|
4,968,368
|
|
Common stock, $0.001 par value; 250,000,000 shares authorized; 26,002,728 and 23,816,489 shares issued and outstanding as of February 28, 2021 and November 30, 2020, respectively
|
|
|
26,002
|
|
|
|
23,816
|
|
Additional paid-in capital
|
|
|
50,459,561
|
|
|
|
47,656,423
|
|
Accumulated deficit
|
|
|
(58,361,071
|
)
|
|
|
(55,886,068
|
)
|
Total Stockholders' Deficit
|
|
|
(1,786,334
|
)
|
|
|
(1,075,481
|
)
|
Total Liabilities and Stockholders' Deficit
|
|
$
|
862,338
|
|
|
$
|
623,484
|
|
The accompanying notes are an integral part of
these condensed consolidated financial statements
Q BioMed Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
For the three months ended
|
|
|
|
February 28, 2021
|
|
|
February 29, 2020
|
|
Net Sales
|
|
$
|
-
|
|
|
$
|
-
|
|
Cost of sales
|
|
|
40,593
|
|
|
|
-
|
|
Gross loss
|
|
|
(40,593
|
)
|
|
|
-
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
2,137,332
|
|
|
|
5,569,971
|
|
Research and development expenses
|
|
|
173,430
|
|
|
|
262,872
|
|
Total operating expenses
|
|
|
2,310,762
|
|
|
|
5,832,843
|
|
Loss from operations
|
|
|
(2,351,355
|
)
|
|
|
(5,832,843
|
)
|
Other (income) expenses:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
50,125
|
|
|
|
197,516
|
|
Change in fair value of embedded derivatives
|
|
|
17,401
|
|
|
|
(88,522
|
)
|
Loss on debt extinguishment
|
|
|
56,122
|
|
|
|
-
|
|
Total other expenses
|
|
|
123,648
|
|
|
|
108,994
|
|
Net loss
|
|
|
(2,475,003
|
)
|
|
|
(5,941,837
|
)
|
Accumulated dividend on convertible preferred stock
|
|
|
(136,393
|
)
|
|
|
-
|
|
Net loss attributable to common stockholders
|
|
$
|
(2,611,396
|
)
|
|
$
|
(5,941,837
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
$
|
(0.11
|
)
|
|
$
|
(0.29
|
)
|
Weighted average shares outstanding, basic and diluted
|
|
|
24,644,761
|
|
|
|
20,311,768
|
|
The accompanying notes are an integral part of
these condensed consolidated financial statements
Q BIOMED INC.
Condensed Consolidated Statements of Changes in Shareholders’ Deficit
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Series A
Preferred Stock
|
|
Series B
Preferred Stock
|
|
Common Stock
|
|
Additional
Paid
|
|
Accumulated
|
|
Stockholders'
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
in
Capital
|
|
Deficit
|
|
Deficit
|
|
Balance as of December 1, 2020
|
|
|
227,998
|
|
$
|
2,161,980
|
|
|
503,134
|
|
$
|
4,968,368
|
|
|
23,816,489
|
|
$
|
23,816
|
|
$
|
47,656,423
|
|
$
|
(55,886,068
|
)
|
$
|
(1,075,481
|
)
|
Issuance of common stock for
cash
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
100,000
|
|
|
100
|
|
|
99,900
|
|
|
-
|
|
|
100,000
|
|
Issuance common stock for dividend
payment on preferred stock
|
|
|
-
|
|
|
(45,600
|
)
|
|
-
|
|
|
(100,627
|
)
|
|
135,394
|
|
|
135
|
|
|
146,092
|
|
|
-
|
|
|
-
|
|
Issuance of common stock to convert
notes payable
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
167,780
|
|
|
168
|
|
|
202,846
|
|
|
-
|
|
|
203,014
|
|
Issuance of common stock to convert
Series B preferred stock
|
|
|
-
|
|
|
-
|
|
|
(103,134
|
)
|
|
(1,031,340
|
)
|
|
1,245,089
|
|
|
1,245
|
|
|
1,030,095
|
|
|
-
|
|
|
-
|
|
Issuance cost related to issuance
of convertible notes
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
35,000
|
|
|
35
|
|
|
34,790
|
|
|
-
|
|
|
34,825
|
|
Beneficial conversion feature
related to convertible notes
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
65,217
|
|
|
-
|
|
|
65,217
|
|
Accumulated dividend on preferred
stock
|
|
|
-
|
|
|
44,586
|
|
|
-
|
|
|
91,807
|
|
|
-
|
|
|
-
|
|
|
(136,393
|
)
|
|
-
|
|
|
-
|
|
Share based compensation for
services
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
502,976
|
|
|
503
|
|
|
1,360,591
|
|
|
-
|
|
|
1,361,094
|
|
Net loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,475,003
|
)
|
|
(2,475,003
|
)
|
Balance as of February 28,
2021
|
|
|
227,998
|
|
$
|
2,160,966
|
|
|
400,000
|
|
$
|
3,928,208
|
|
|
26,002,728
|
|
$
|
26,002
|
|
$
|
50,459,561
|
|
$
|
(58,361,071
|
)
|
$
|
(1,786,334
|
)
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
Paid in
|
|
Accumulated
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
Deficit
|
|
Balance as of December 1, 2019
|
|
|
19,709,068
|
|
|
$
|
19,709
|
|
$
|
37,328,827
|
|
$
|
(42,393,877
|
)
|
$
|
(5,045,341
|
)
|
Issuance of common stock to convert notes payable
|
|
|
1,518,202
|
|
|
|
1,518
|
|
|
1,134,295
|
|
|
-
|
|
|
1,135,813
|
|
Cashless warrants exercise
|
|
|
20,860
|
|
|
|
21
|
|
|
(21
|
)
|
|
-
|
|
|
-
|
|
Share based compensation for services
|
|
|
60,141
|
|
|
|
60
|
|
|
4,515,227
|
|
|
-
|
|
|
4,515,287
|
|
Share based compensation related to warrants modification
|
|
|
-
|
|
|
|
-
|
|
|
105,488
|
|
|
-
|
|
|
105,488
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
(5,941,837
|
)
|
|
(5,941,837
|
)
|
Balance as of February 29, 2020
|
|
|
21,308,271
|
|
|
$
|
21,308
|
|
$
|
43,083,815
|
|
$
|
(48,335,714
|
)
|
$
|
(5,230,589
|
)
|
The accompanying notes are an integral part of
these condensed consolidated financial statements
Q BIOMED INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
For the three months ended
|
|
|
|
February 28, 2021
|
|
|
February 29, 2020
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,475,003
|
)
|
|
$
|
(5,941,837
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Share based compensation for services
|
|
|
1,361,094
|
|
|
|
4,515,287
|
|
Share based compensation related to warrants modification
|
|
|
-
|
|
|
|
105,488
|
|
Change in fair value of embedded conversion option
|
|
|
17,401
|
|
|
|
(88,522
|
)
|
Accretion of debt discount
|
|
|
39,632
|
|
|
|
91,184
|
|
Amortization expense
|
|
|
12,500
|
|
|
|
12,500
|
|
Loss on debt extinguishment
|
|
|
56,122
|
|
|
|
-
|
|
Inventory write-off
|
|
|
33,093
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
6,625
|
|
|
|
(39,500
|
)
|
Inventory
|
|
|
(33,093
|
)
|
|
|
-
|
|
Accounts payable and accrued expenses
|
|
|
201,880
|
|
|
|
(157,925
|
)
|
Accrued interest payable
|
|
|
(37,272
|
)
|
|
|
106,333
|
|
Net cash used in operating activities
|
|
|
(817,021
|
)
|
|
|
(1,396,992
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds received from issuance of convertible note, net
|
|
|
975,000
|
|
|
|
1,965,000
|
|
Proceeds received for issuance of common stock
|
|
|
100,000
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
1,075,000
|
|
|
|
1,965,000
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
257,979
|
|
|
|
568,008
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
177,145
|
|
|
|
172,636
|
|
Cash at end of the period
|
|
$
|
435,124
|
|
|
$
|
740,644
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures for noncash investing and financing activities:
|
|
|
|
|
|
|
|
|
Issuance of common stock to convert notes payable and accrued interest
|
|
$
|
203,014
|
|
|
$
|
1,135,814
|
|
Issuance of common stock to convert Series B preferred stock
|
|
$
|
1,031,340
|
|
|
|
|
|
Accumulated dividend on convertible preferred stock
|
|
$
|
136,393
|
|
|
$
|
-
|
|
Issuance of common stock for dividend payment on preferred stock
|
|
$
|
146,226
|
|
|
$
|
-
|
|
Beneficial conversion feature related to convertible notes
|
|
$
|
65,217
|
|
|
$
|
-
|
|
Cashless warrants exercise
|
|
$
|
-
|
|
|
$
|
21
|
|
The accompanying notes are an integral part of
these condensed consolidated financial statements
Q BIOMED INC.
Notes to Condensed Consolidated Financial Statements
Note 1 - Organization of the Company and Description of the Business
Q BioMed Inc. (“Q BioMed”), and its
wholly owned subsidiaries Q BioMed Cayman SEZC and QBMG Q BioMed Germany UG (collectively, “the Company”), is a biomedical
acceleration and development company focused on licensing, acquiring and providing strategic resources to life sciences and healthcare
companies. Q BioMed intends to mitigate risk by acquiring multiple assets over time and across a broad spectrum of healthcare related
products, companies and sectors. The Company intends to develop these assets to provide returns via organic growth, revenue production,
out-licensing, sale or the spinoff of new public companies.
The accompanying condensed consolidated financial
statements include the accounts of the Company’s wholly-owned subsidiaries. All intercompany balances and transactions have been
eliminated in consolidation.
Note 2 – Basis of Presentation and Going
Concern
Basis of Presentation
The accompanying interim period unaudited condensed
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”)
regarding interim financial reporting. These condensed consolidated financial statements are unaudited and should be read in conjunction
with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended
November 30, 2020. Certain disclosures included in the annual financial statements have been condensed or omitted from these financial
statements as they are not required for interim financial statements under U.S. GAAP and the rules of the SEC. These unaudited condensed
consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the
results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period operating results may not
be indicative of the operating results for a full year.
Going Concern
The accompanying condensed consolidated financial
statements are prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liquidation
of liabilities in the normal course of business. The Company has and is expected to incur net losses and cash outflows from operations
in pursuit of extracting value from its acquired intellectual property. These matters, amongst others, raise doubt about the Company’s
ability to continue as a going concern.
Management anticipates that the Company will have
to raise additional funds and/or generate revenue from drug sales within twelve months to continue operations. Additional funding will
be needed to implement the Company’s business plan that includes various expenses such as fulfilling our obligations under licensing
agreements, legal, operational set-up, general and administrative, marketing, employee salaries and other related start-up expenses. Obtaining
additional funding will be subject to a number of factors, including general market conditions, investor acceptance of our business plan
and initial results from our business operations. These factors may impact the timing, amount, terms or conditions of additional financing
available to us. If the Company is unable to raise sufficient funds, management will be forced to scale back the Company’s operations
or cease its operations.
Management has determined that there is substantial
doubt about the Company’s ability to continue as a going concern within one year after the condensed consolidated financial statements
are issued. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability
and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
COVID 19
The impact of the worldwide spread of a novel
strain of coronavirus (“COVID-19”) has been unprecedented and unpredictable, but based on the Company’s current assessment,
the Company does not expect any material impact on its long-term strategic plans, operations and its liquidity due to the worldwide spread
of COVID-19. However, the Company is continuing to assess the effect on its operations by monitoring the spread of COVID-19 and the actions
implemented to combat the virus throughout the world and its assessment of the impact of COVID-19 may change.
Q BIOMED INC.
Notes to Condensed Consolidated Financial Statements
Note 3 - Summary of Significant Accounting
Policies
The Company’s significant accounting policies
are disclosed in the audited financial statements for the year ended November 30, 2020 included in the Company’s Form 10-K.
Note 4 - Loss per share
Basic net loss per share was calculated by dividing
net loss by the weighted-average shares of common stock outstanding during the period. Diluted net loss per share was calculated by dividing
net loss by the weighted-average shares of common stock outstanding during the period using the treasury stock method or the two-class
method, whichever is more dilutive. The table below summarizes potentially dilutive securities that were not considered in the computation
of diluted net loss per share because they would be anti-dilutive (amounts are rounded to nearest thousand).
Potentially dilutive securities
|
|
February 28, 2021
|
|
|
November 30, 2020
|
|
Series A convertible preferred stock
|
|
|
2,280,000
|
|
|
|
2,280,000
|
|
Series B convertible preferred stock
|
|
|
3,960,000
|
|
|
|
5,031,000
|
|
Common stock purchase warrants
|
|
|
10,023,000
|
|
|
|
10,023,000
|
|
Stock Options
|
|
|
3,850,000
|
|
|
|
3,850,000
|
|
Convertible Notes
|
|
|
996,000
|
|
|
|
56,000
|
|
Potentially dilutive securities
|
|
|
21,109,000
|
|
|
|
21,240,000
|
|
Q BIOMED INC.
Notes to Condensed Consolidated Financial Statements
Note 5 –Convertible Notes
The table below summarizes outstanding convertible
notes as of February 28, 2021 and November 30, 2020 (amounts are rounded to nearest thousand):
|
|
February 28, 2021
|
|
|
November 30, 2020
|
|
Convertible Notes Payable:
|
|
|
|
|
|
|
|
|
Principal value of 2020 Debenture
|
|
$
|
500,000
|
|
|
$
|
-
|
|
Fair value of bifurcated contingent put option
|
|
|
34,000
|
|
|
|
-
|
|
Debt discount
|
|
|
(50,000
|
)
|
|
|
-
|
|
Carrying value of 2020 Debenture
|
|
|
484,000
|
|
|
|
-
|
|
Principal value of 2021 Debenture
|
|
|
500,000
|
|
|
|
-
|
|
Fair value of bifurcated contingent put option
|
|
|
39,000
|
|
|
|
-
|
|
Debt discount
|
|
|
(133,000
|
)
|
|
|
-
|
|
Carrying value of 2021 Debenture
|
|
|
406,000
|
|
|
|
-
|
|
Principal value of 2019 August Debenture
|
|
|
-
|
|
|
|
100,000
|
|
Debt discount
|
|
|
-
|
|
|
|
(8,000
|
)
|
Carrying value of 2019 August Debenture
|
|
|
-
|
|
|
|
92,000
|
|
Total carrying value of convertible notes payable
|
|
$
|
890,000
|
|
|
$
|
92,000
|
|
On December 23, 2020, the Company issued
a debenture for $0.5 million (the “2020 Debenture”) pursuant to a securities purchase agreement with an accredited investor.
The debenture has a maturity date of the earlier of (a) June 23, 2021, or (b) the closing of the next financing transaction,
or series or transactions, pursuant to which the Company raises net proceeds of at least $1.0 million, or as may be extended at the option
of the Holder. The 2020 Debenture may be converted at any time on or prior to maturity at the lower of $2.70 or 93% of the average of
the four lowest daily VWAPs during the 10 consecutive trading days immediately preceding the conversion date, provided that as long as
we are not in default under the 2020 Debenture, the conversion price may never be less than $1.00. The debenture bears interest at the
rate of 5.5% per annum, and on issuance, the Company paid to the holder a commitment fee equal to 2% of the amount of the debenture.
On February 12, 2021, the Company issued
a debenture for $0.5 million (the “2021 Debenture”) pursuant to a securities purchase agreement with an accredited investor
dated February 12, 2021. The 2021 Debenture may be converted at any time on or prior to maturity at the lower of $1.15 or 93% of
the average of the four lowest daily VWAPs during the 10 consecutive trading days immediately preceding the conversion date, provided
that as long as we are not in default under the 2020 Debenture, the conversion price may never be less than $1.00. The debenture has a
maturity date of February 12, 2022, provided that in case of an event of default, the debenture may become at the holder’s
election immediately due and payable. The debenture bears interest at the rate of 5.5% per annum, and on issuance, the Company paid to
the holder a commitment fee equal to 2% of the amount of the debenture.
Upon issuance of the 2020 Debenture and 2021 Debenture,
the Company recognized a debt discount of approximately $216,000, resulting from the recognition of issuance costs of $95,000, beneficial
conversion feature of $65,000, and bifurcated embedded derivatives of $55,000. The contingent share-settled redemption feature and
contingent prepayment provision within the 2020 Debenture and the 2021 Debenture are both contingent put option that are required to be
separately measured at fair value, with subsequent changes in fair value recognized in the Condensed Consolidated Statement of Operations.
The fair value estimate is a Level 3 measurement. The Company estimated the fair value of the prepayment provision by estimating the probability
of the occurrence of a Triggering Date and applying the probability to the discounted maximum redemption premium for any given payment
with the following key inputs:
Q BIOMED INC.
Notes to Condensed Consolidated Financial Statements
|
|
February 12, 2021
|
|
|
December 23, 2020
|
|
Strike price
|
|
$
|
1.15
|
|
|
$
|
2.70
|
|
Terms (years)
|
|
|
1.0
|
|
|
|
0.5
|
|
Volatility
|
|
|
92
|
%
|
|
|
92
|
%
|
Risk-free rate
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
The fair value of the contingent put option in
all outstanding debentures with the feature are revalued as of February 28, 2021 based on the following weighted average key inputs:
|
|
February 28, 2021
|
|
Strike price
|
|
$
|
1.93
|
|
Terms (years)
|
|
|
0.6
|
|
Volatility
|
|
|
89
|
%
|
Risk-free rate
|
|
|
0.1
|
%
|
Dividend yield
|
|
|
0
|
%
|
Interest expense
Interest expense, included in the accompanying
Condensed Consolidated Statements of Operations, is comprised of the following for each period presented (amounts are rounded to nearest
thousand):
|
|
For the three months ended
|
|
|
|
February 28, 2021
|
|
|
February 29, 2020
|
|
Interest expense based on the coupon interest rate of the outstanding debt
|
|
$
|
10,000
|
|
|
$
|
107,000
|
|
Accretion of debt discount
|
|
|
40,000
|
|
|
|
91,000
|
|
Total interest expense
|
|
$
|
50,000
|
|
|
$
|
198,000
|
|
Note 6 - Commitments and Contingencies
Legal
Periodically, the Company reviews the status of
significant matters, if any exist, and assesses its potential financial exposure. If the potential loss from any claim or legal claim
is considered probable and the amount can be estimated, the Company accrues a liability for the estimated loss. Legal proceedings are
subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information
available at the time. As additional information becomes available, the Company reassesses the potential liability related to pending
claims and litigation.
Advisory Agreements
The Company entered into customary consulting
arrangements with various counterparties to provide consulting services, business development and investor relations services, pursuant
to which the Company agreed to issue shares of common stock as services are received.
Q BIOMED INC.
Notes to Condensed Consolidated Financial Statements
Lease Agreement
In December 2016, one of our subsidiaries
entered into a lease agreement for its office space located in Cayman Islands for $30,000 per annum. The initial term of the agreement
ended in December 2019, and the Company has renewed its office lease agreement for another three years with the same terms. This
agreement does not identify a specific asset and does not convey the use of substantially all of the shared office capacity. As such,
this agreement does not contain a lease under ASC 842. The Company recognizes monthly license payments as incurred over the term of the
arrangement.
Rent expense is classified within general and
administrative expenses on a straight-line basis.
Note 7 - Related Party Transactions
The Company entered into consulting agreements
with certain management personnel and stockholders for consulting and legal services. Consulting and legal expenses resulting from such
agreements were included within general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations
as follows (amounts are rounded to nearest thousand):
|
|
For the three months ended
|
|
|
|
February 28, 2021
|
|
|
February 29, 2020
|
|
Consulting and legal expenses
|
|
$
|
105,000
|
|
|
$
|
105,000
|
|
On February 1, 2021, the Company issued 35,000 shares to Mr. Rosenstadt,
the Company’s Chief Legal Officer and director, for his services performed in connection with December 2020 financing. The
fair value was approximate $35,000, which was recorded as part of debt issuance cost to the 2020 Debenture (see note 5).
Note 8 - Stockholders’ Deficit
Preferred Shares
The original issue price and the liquidation value per share, as of
February 28, 2021, of each class of preferred stock is as follows:
|
|
Original Issue Price
|
|
|
Liquidation Value
|
|
|
|
Per Share
|
|
|
Per Share
|
|
Series A Preferred Share
|
|
$
|
10.00
|
|
|
$
|
10.20
|
|
Series B Preferred Share
|
|
$
|
10.00
|
|
|
$
|
10.23
|
|
The Company had accumulated dividends payable
on the Preferred Shares of approximately $0.1 million as of February 28, 2021.
Common Shares
On December 18,
2020, the Company issued approximately 135,000 shares of common stock as dividend payment on Series A and Series B preferred
stock.
Between January and
February 2021, the Company issued approximately 1,245,000 shares of common stock to convert approximately 103,000 shares of Series B
preferred stock.
On February 8, 2021,
the Company issued approximately 168,000 shares of common stock to convert $0.1 million outstanding debt and interest.
On February 26,
2021, the Company issued 100,000 shares of common stock for cash proceeds of $0.1 million.
Q BIOMED INC.
Notes to Condensed Consolidated Financial Statements
During the three months ended February 29,
2020, the Company issued an aggregate of approximately 503,000 shares of the Company common stock to various vendors for advisory services,
valued at approximately $0.5 million based on the estimated fair market value of the stock on the date of grant and was recognized within
general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations.
Note 9 - Warrants and Options
Summary of warrants
The following represents a summary of all outstanding
warrants to purchase the Company’s common stock, including warrants issued to vendors for services and warrants issued as part of
the units sold in the private placements, at February 28, 2021:
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Remaining Contractual
|
|
|
|
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Life (years)
|
|
|
Intrinsic Value
|
|
Outstanding at December 1, 2020
|
|
|
|
10,023,000
|
|
|
$
|
2.09
|
|
|
|
3.2
|
|
|
$
|
870,000
|
|
Issued
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/expired
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at February 28, 2021
|
|
|
|
10,023,000
|
|
|
$
|
2.09
|
|
|
|
2.9
|
|
|
$
|
777,000
|
|
Exercisable at February 28, 2021
|
|
|
|
10,023,000
|
|
|
$
|
2.09
|
|
|
|
2.9
|
|
|
$
|
777,000
|
|
Options Issued for Services
The following represents a summary of all outstanding
options to purchase the Company’s common stock at February 28, 2021:
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Remaining Contractual
|
|
|
|
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Life (years)
|
|
|
Intrinsic Value
|
|
Outstanding at December 1, 2020
|
|
|
|
3,850,000
|
|
|
$
|
1.23
|
|
|
|
4.0
|
|
|
$
|
119,000
|
|
Issued
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at February 28, 2021
|
|
|
|
3,850,000
|
|
|
$
|
1.23
|
|
|
|
4.0
|
|
|
$
|
34,000
|
|
Exercisable at February 28, 2021
|
|
|
|
2,175,000
|
|
|
$
|
1.32
|
|
|
|
2.8
|
|
|
$
|
9,000
|
|
Stock-based Compensation
The Company recognized general and administrative
expenses of approximately $1.4 million and $4.5 million as a result of the shares, outstanding warrants and options issued to consultants
and employees during the three months ended February 28, 2021 and February 29, 2020, respectively.
As of February 28, 2021, the estimated unrecognized
stock-based compensation associate with these agreements is approximately $0.7 million and will be fully recognized over the next 9 months.
Note 10 - Subsequent Events
On March 4, 2021,
the Company issued 119,619 shares of common stock as dividend payment on Series A and Series B preferred stock.
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operation
Forward-Looking Statements
This Quarterly Report contains forward-looking
statements about our business, financial condition and prospects that reflect management’s assumptions and beliefs based on information
currently available. The expectations indicated by such forward-looking statements might not be realized. If any of our management’s
assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, our actual
results may differ materially from those indicated by the forward-looking statements.
The key factors that are not within our control
and that may have a direct bearing on operating results include, but are not limited to, acceptance of our services, our ability to create
and expand our customer base, managements’ ability to raise capital in the future, the retention of key employees and changes in
the regulation of our industry.
There may be other risks and circumstances that
management may be unable to predict. When used in this Quarterly Report, words such as, “believes,” “expects,”
“intends,” “plans,” “anticipates,” “estimates” and similar expressions are intended
to identify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions.
Overview
Q BioMed Inc. (or “the Company”) was
incorporated in the State of Nevada on November 22, 2013 and is a commercial stage biomedical acceleration and development company
focused on licensing, acquiring and providing strategic resources to life sciences and healthcare companies. We intend to mitigate risk
by acquiring multiple assets over time and across a broad spectrum of healthcare related products, companies and sectors. We intend to
develop these assets to provide returns via organic growth, revenue production, out-licensing, sale or spin out.
Since our inception in 2013, we have been building
value ranging from blockbuster potential drugs to our revenue producing product. Our mission is to solve problems by accelerating the
development of important therapies and availability of those therapies to patients.
Strontium-89 - FDA Approved Drug Launched
In January 2021, we announced that treatment
with Strontium-89 in the hospital out-patient setting is fully reimbursed by Medicare. In March, we were approved as a federal supplier
which will allow us to sell into federal hospital systems, notably the U.S. Department of Veteran Affairs and the U.S. Department of Defense.
We are preparing to launch a contract sales force to increase our presence and uptake in both government and non-government hospitals
and clinics in the second half of 2021.
We have been working with large regional and national
oncology organizations to bring Strontium89 to all of their radionuclide qualified clinics. Agreements and contracting are ongoing. We
have continued to deploy a multi-channel marketing campaign, driving awareness among our target audiences, both on the physician and the
patient side. We plan to exhibit Strontium-89 at several conferences including ASTRO (American Society of Therapeutic Radiation Oncology)
and will begin speaker programs in the first half of 2021. Virtual and live sales calls have been ongoing since June 2020 within
the confines of COVID-19 access, and we intend to expand our field force efforts in 2021 with the addition of a contract sales organization
once funding is in place.
In mid-2020, we began the regulatory registration
process for full commercial access in the European Union, with pan-EU approval expected by the second half of 2021. In parallel, we are
midway through the registration process in many other countries, with approvals expected to be obtained in the next few months and to
continue throughout 2021.
We anticipate revenues from Strontium-89 to continue
to ramp up in our 2021 fiscal year as we build capacity and demand worldwide. We are assessing several potential clinical trial programs
that may expand the indication beyond palliation into a therapeutic use that may increase utilization in years to come.
Launching Strontium-89 distinguishes us from publicly
traded biotech companies that have yet to launch a regulatory approved commercial product and generate revenues.
Mannin Technology Collaboration – COVID-19,
Glaucoma and Others – More Government Funding
In March 2021, our technology partner Mannin
Research Inc. (Mannin) was granted an additional CAD$1.7 million from the Canadian governments covid response budget, adding to the approximate
$7.7 million granted in Europe, which together will fund 65-75 percent of every dollar incurred to advance the Acute Respiratory Distress
Syndrome therapy for COVID patients as well as a portfolio of therapeutic assets for vascular diseases currently in development at Mannin,
including: glaucoma, cardiovascular diseases, acute kidney disease, and other infectious diseases.
Given the urgent need for therapeutics to treat
COVID-19, Mannin is rapidly accelerating the time to the first clinical milestone for MAN-19. Even as vaccines for COVID-19 are being
rolled out, the infection numbers continue to grow around the world. Together with Mannin Research Inc., our technology partner, we are
pursuing a treatment for Acute Respiratory Distress Syndrome, the condition that causes the most severe symptoms in COVID-19 patients
usually resulting in hospitalizations and worse. It is important to note that we believe the MAN-19 therapeutic is virus-agnostic, which
makes it relevant to other viral diseases today like influenza and future viral pandemic outbreaks. Therefore, a successful infectious
disease application in COVID-19 would position MAN-19 as a potential government stockpile drug for possible future pandemics. Furthermore,
a successful proof-of-concept clinical trial with MAN-19 in COVID-19 patients would provide the clinical dataset to support the development
of therapeutics for other vascular diseases such as sepsis, acute kidney injury and glaucoma. All of these are large markets with significant
potential.
We continue to support the development of Mannin’s
MAN-01 and MAN-11 therapeutics, a novel small-molecule, and novel biologic therapeutic for glaucoma, respectively. There are over 60 million
patients worldwide with primary open-angle glaucoma. The MAN-01 program is developing topical drops designed to reduce pressure build-up
in the eye by assisting with, and correcting, drainage problems in tiny vessels in the eye. We have advanced this asset from ‘concept
to compound’, and the preliminary data that we have reviewed has convinced us to continue pursuing these product candidates.
Our next steps for the MAN-01 and MAN-11 programs
are to initiate toxicology studies in 2021, with the goal of initiating a Phase 1 proof of concept trial in late 2021.
GDF 15 Diagnostic for Glaucoma - In Clinical
Trial and Product Development and FDA approval anticipated early 2022
In early 2019, we licensed a diagnostic biomarker
known as GDF-15 for determining the severity of glaucoma from Washington University in St. Louis. GDF-15 is a perfect companion diagnostic
for the MAN-01 and MAN-11 drugs, as well as a novel tool for practicing ophthalmologists and drug developers, because it is designed to
assess the efficacy of the treatment or disease progression in their practice. This product represents a unique opportunity, and we believe
that current clinical trials are yielding promising results. In partnership with Mannin Research Inc. and McMaster University, we are
nearing the completion of development of an in-vitro-diagnostic (IVD) with both point-of-care (detection in a doctor’s office) as
well as an external laboratory-based detection (i.e. for use in existing CLIA laboratories using existing diagnostic equipment). With
appropriate funding, we anticipate completion of the IVD device by the end of June 2021 with submission to the FDA (510K) for in
vitro diagnostic approval in late 2021.
Uttroside-B - Liver Cancer Chemotherapeutic
We are developing an innovative treatment for
liver cancer, a disease indication that currently has a high unmet need. Currently, there are only two approved first-line therapies.
We licensed and have advanced Uttroside-B, a new molecule that showed ten times the potency of the current standard of care in early pre-clinical
investigation. Uttroside-B was discovered in the leaf of the Black Nightshade plant in India. As it is not feasible to use the plant as
the source for a drug, we successfully synthesized the molecule thereby creating an exact replica of the naturally occurring chemical
compound. We are now preparing to advance this into a pre-clinical program and have recently been awarded Orphan Drug designation. Manufacturing
and scale-up of the drug for use in preclinical testing and IND application has begun. Testing is expected to begin in May 2021.
QBM-001 - Early-Stage Treatment for young minimally
verbal children on the Autism Spectrum
While our immediate focus is on the above-mentioned
assets, we are also developing a new drug candidate to treat young children with pediatric minimally verbal autism. The advancement of
this program will depend on the availability of funds and resources as we prioritize our clinical development milestones. There is no
effective treatment available to help an estimated 250,000 children born with the condition worldwide each year, 20,000 of them in the
United States. We are working on a discovery and development program to address this highly unmet need.
Corporate Strategic Goals
Our mission is to solve problems by accelerating
the development of important therapies and availability of those therapies to patients. We believe we are creating value for our shareholders
as we approach some milestones and catalysts. We have raised an additional $1.1 million since December 1, 2020 and our expected funding
in conjunction with any uplist to a national securities exchange will result in an enhanced valuation as a larger group of investors and
institutions can participate in our equity.
Financial Overview
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis
of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared
in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The preparation
of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and the disclosure of contingent assets and liabilities at the date of our condensed consolidated financial
statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our
historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions and any such differences may be material. We believe
that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate
to the more significant areas involving management’s judgments and estimates. Other than as set out in Note 3 to our accompanying
unaudited condensed consolidated financial statements, if anything, we believe there have been no significant changes in our critical
accounting policies as described in the Form 10-K.
Unaudited Results of Operations for the three
months ended February 28, 2021 and February 29, 2020:
|
|
For the three months ended
|
|
|
|
February 28, 2021
|
|
|
February 29, 2020
|
|
Net Sales
|
|
$
|
-
|
|
|
$
|
-
|
|
Cost of sales
|
|
|
40,593
|
|
|
|
-
|
|
Gross loss
|
|
|
(40,593
|
)
|
|
|
-
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
2,137,332
|
|
|
|
5,569,971
|
|
Research and development expenses
|
|
|
173,430
|
|
|
|
262,872
|
|
Total operating expenses
|
|
|
2,310,762
|
|
|
|
5,832,843
|
|
Loss from operations
|
|
|
(2,351,355
|
)
|
|
|
(5,832,843
|
)
|
Other (income) expenses:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
50,125
|
|
|
|
197,516
|
|
Change in fair value of embedded derivatives
|
|
|
17,401
|
|
|
|
(88,522
|
)
|
Loss on debt extinguishment
|
|
|
56,122
|
|
|
|
-
|
|
Total other expenses
|
|
|
123,648
|
|
|
|
108,994
|
|
Net loss
|
|
$
|
(2,475,003
|
)
|
|
$
|
(5,941,837
|
)
|
Cost of Sales
During the three months ended February 28,
2021, we recognized approximately $41,000 in cost of sales. These costs were related to raw materials cost, manufacturing cost, distribution
cost and write-offs of expired inventory.
Operating expenses
We incur various costs and expenses in the execution
of our business. The decrease in operating expenses was mainly due to a reduced charge in stock-based compensation compared to last year.
We recorded approximately $1.4 million and $4.6 million of stock-based compensation under general and administrative expense during the
three months ended February 28, 2021 and February 29, 2020, respectively.
Interest expense
During the three months ended February 29,
2020, interest expense decreased to approximately $50,000 from $0.2 million in the prior year.
The following table summarizes interest expense
incurred during the three months ended February 28, 2021 and February 29, 2020, respectively (amounts
are rounded to nearest thousand):
|
|
For the three months ended
|
|
|
|
February 28, 2021
|
|
|
February 29, 2020
|
|
Interest expense based on the coupon interest rate of the outstanding debt
|
|
$
|
10,000
|
|
|
$
|
107,000
|
|
Accretion of debt discount
|
|
|
40,000
|
|
|
|
91,000
|
|
Total interest expense
|
|
$
|
50,000
|
|
|
$
|
198,000
|
|
Change in fair value of embedded derivatives
We recognized approximately $17,000 loss and $89,000
gain resulting from the change in fair value of embedded contingent put options in convertible notes during the three months ended February 28,
2021 and February 29, 2020 respectively. The fluctuation is mainly due the change of stock price during the reporting periods.
Loss on debt extinguishment
We recognized a loss
of approximately $56,000 due to the exchange of outstanding debentures for shares of common stock during the three months ended February 28,
2021.
Net loss
During the three months ended February 28,
2021 and February 29, 2020, we incurred net losses of approximately $2.5 million and $5.9 million, respectively. Our management expects
to continue to incur net losses for the foreseeable future, due to our need to continue to establish a broader pipeline of assets, expenditure
on R&D and implement other aspects of our business plan.
Liquidity and Capital Resources
We prepared the accompanying condensed consolidated
financial statements assuming that we will continue as a going concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business.
We have not yet established an ongoing source
of significant revenues and must cover our operating through debt and equity financings to allow us to continue as a going concern. We
had approximately $0.4 million in cash as of February 28, 2021. Our ability to continue as a going concern depends on the ability
to obtain adequate capital to fund operating losses until we generate adequate cash flows from operations to fund our operating costs
and obligations. If we are unable to obtain adequate capital, we could be forced to cease operations.
We depend upon our ability, and will continue
to attempt, to secure equity and/or debt financing. We cannot be certain that additional funding will be available on acceptable terms,
or at all. Our management determined that there was substantial doubt about our ability to continue as a going concern within one year
after the condensed consolidated financial statements were issued, and management’s concerns about our ability to continue as a
going concern within the year following this report persist.
The accompanying condensed consolidated financial
statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification
of liabilities that might result from this uncertainty.
Cash Flows
The following table sets forth the significant
sources and uses of cash for the periods addressed in this report (amounts are rounded to nearest
thousand):
|
|
For the three months ended
|
|
|
|
February 28, 2021
|
|
|
February 29, 2020
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by:
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(817,000
|
)
|
|
$
|
(1,397,000
|
)
|
Financing activities
|
|
|
1,075,000
|
|
|
|
1,965,000
|
|
Net increase in cash
|
|
$
|
258,000
|
|
|
$
|
568,000
|
|
Net Cash Used in Operating Activities
During the three months
ended February 28, 2021, operating activities used $0.8 million of cash, resulting from a net loss of $2.5 million, partially offset
by $1.4 million of share-based compensation, change in fair value of embedded conversion options
of $17,000, loss on debt extinguishment of $56,000, and non-cash interest expense resulting from accretion of debt discounts of $40,000
and changes in our operating assets and liabilities of approximately $0.1 million. During the three months ended February 29,
2020, operating activities used $1.4 million of cash, resulting from a net loss of $5.9 million, partially offset by $4.6 million of share-based
compensation.
Net Cash Provided
by Financing Activities
Net cash provided by
financing activities for the three months ended February 28, 2021 and February 29, 2020 was $1.1 million and $2.0 million, respectively.
The net cash provided in the 2021 period relates to proceeds received from the issuance of common stock and debentures. The net cash provided
in the 2020 period relates to proceeds received from the issuance of convertible notes.
Commitments and Contingencies
Legal
Periodically, we review the status of significant
matters, if any exist, and assesses its potential financial exposure. If the potential loss from any claim or legal claim is considered
probable and the amount can be estimated, we accrue a liability for the estimated loss. Legal proceedings are subject to uncertainties,
and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the
time. As additional information becomes available, we reassess the potential liability related to pending claims and litigation.
Advisory Agreements
We entered into customary consulting arrangements
with various counterparties to provide consulting services, business development and investor relations services, pursuant to which we
agreed to issue shares of common stock as services are received.
Lease Agreement
In December 2016, we entered into a lease
agreement for office space located in Cayman Islands for $30,000 per annum. The initial term of the agreement ended in December 2019
and has been further renewed for another three years. This agreement does not identify a specific asset and does not convey the use of
substantially all of the shared office capacity. As such, this agreement does not contain a lease under ASC 842. We recognize monthly
license payments as incurred over the term of the arrangement.
Rent expense is classified within general and
administrative expenses on a straight-line basis.
Related Party Transactions
We entered into consulting agreements with certain
management personnel and stockholders for consulting and legal services. Consulting and legal expenses resulting from such agreements
were included within general and administrative expenses in the accompanying Consolidated Statements of Operations as follows (amounts
are rounded to nearest thousand):
|
|
For the three months ended
|
|
|
|
February 28, 2021
|
|
|
February 29, 2020
|
|
Consulting and legal expenses
|
|
$
|
105,000
|
|
|
$
|
105,000
|
|
On February 1, 2021, we issued 35,000 shares
to Mr. Rosenstadt, our Chief Legal Officer and director, for his services performed in connection
with December 2020 financing. The fair value was approximate $35,000, which was recorded as part of debt issuance cost to the 2020
Debenture (see note 5).
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.