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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

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

For the quarterly period ended: February 28, 2023

or

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

For the transition period from ____________ to _____________

Commission File Number: 000-55535

Q BIOMED INC.

(Exact name of registrant as specified in its charter)

Nevada

30-0967746

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

c/o Ortoli Rosenstadt LLP

366 Madison Avenue, 3rd Floor

New York, NY 10017

(Address of principal executive offices)

 

 

(212) 588-0022

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Symbol

Name of each exchange on which registered

None

None

None

Indicate by check mark whether the registrant (1) 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      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    No   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition 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        

Smaller reporting company          

 

Emerging growth company          

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 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  No 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $0.001 par value

145,094,531 shares

(Class)

(Outstanding at June 15, 2023)

Table of Contents

CAUTIONARY NOTE

We note that this Quarterly report does not meet fully the requirements of quarterly reports as required by Form 10-Q. Particularly, we note that the financial statements included in this Form 10-Q have not been reviewed by an independent auditor. These are not the type of financial statement that an investor would expect to see from a company that has had its financial statements audited and reviewed by an independent accounting firm per the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.  This quarterly report is non-reviewed, therefore incomplete and should not be relied upon as accurate, timely or fit for any purpose. Although the Company intends to amend this quarterly report as soon as practicable and invites any inquiries to be directed to Company management, it may not be able to ever amend it.

Table of Contents

Q BIOMED INC.

Table of Contents

   

Page

PART I - FINANCIAL INFORMATION

1

Item 1. Condensed Consolidated Financial Statements (Unaudited)

1

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

23

Item 3. Quantitative and Qualitative Disclosure About Market Risk

29

Item 4. Controls and Procedures

29

PART II - OTHER INFORMATION

31

Item 1. Legal Proceedings

31

Item 1A. Risk Factors

31

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

31

Item 3. Defaults Upon Senior Securities

32

Item 4. Mine Safety Disclosures

32

Item 5. Other Information

32

Item 6. Exhibits

33

SIGNATURES

34

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Q BIOMED INC.

Condensed Consolidated Balance Sheets

    

As of February 28, 

    

As of November 30, 

2023

    

2022

(Unaudited)

(Unaudited)

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash

$

23,173

$

49,973

Accounts receivable

11,535

Prepaid expenses and other current assets

 

10,808

 

10,808

Total current assets

 

33,981

 

72,316

Investment

3,143,201

3,143,201

Intangible assets, net

 

287,500

 

300,000

Total Assets

$

3,464,682

$

3,515,517

LIABILITIES AND STOCKHOLDERS‘ DEFICIT

 

 

Current liabilities:

 

 

Accounts payable

$

2,252,815

$

2,132,063

Accrued expenses

3,221,201

1,545,052

Accrued interest payable

 

257,297

 

254,686

Debt

4,083,262

4,109,981

Derivative liabilities

91,158

91,158

Total current liabilities

 

9,905,733

 

8,132,940

Total Liabilities

 

9,905,733

 

8,132,940

Commitments and Contingencies (Note 8)

 

  

 

  

Stockholders' Deficit:

 

  

 

  

Preferred stock, $0.001 par value; 100,000,000 shares authorized as of February 28, 2023 and November 30, 2022

 

 

Convertible Series A, 500,000 shares designated - 227,998 shares issued and outstanding at February 28, 2023 and November 30, 2022, respectively

 

2,206,516

 

2,160,916

Convertible Series B, 1,000,000 shares designated - 296,000 shares issued and outstanding at February 28, 2023 and November 30, 2022, respectively

2,933,823

2,874,623

Convertible Series C, 100,000,000 shares designated – 1,000,000 shares issued and outstanding at February 28, 2023 and November 30, 2022, respectively

50,000

50,000

Common stock, $0.001 par value; 250,000,000 shares authorized; 133,027,272 and 84,328,041 shares issued and outstanding as of February 28, 2023 and November 30, 2022, respectively

133,027

84,328

Additional paid-in capital

 

56,552,997

 

56,308,513

Accumulated deficit

 

(68,317,414)

 

(66,095,802)

Total Stockholders' Deficit

 

(6,441,051)

 

(4,617,422)

Total Liabilities and Stockholders' Deficit

$

3,464,682

$

3,515,517

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

1

Table of Contents

Q BioMed Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

For the Three Months Ended

    

February 28, 2023

    

February 28, 2022

    

Net Sales

$

$

75,059

Cost of sales

2,500

73,945

Gross income (loss)

(2,500)

1,114

Operating expenses:

General and administrative expenses

439,818

1,096,300

Research and development expenses

 

2,691

 

69,268

Total operating expenses

 

442,510

 

1,165,568

Loss from operations

(445,010)

(1,164,454)

Other expenses:

 

 

Interest expense

 

276,602

 

414,377

Change in fair value of embedded derivatives

 

 

235,817

Loss on debt extinguishment

232,100

Settlement of registration liability

241,875

Total other expenses

 

276,602

 

1,124,169

Net loss

(721,612)

(2,288,623)

Accumulated dividend on convertible preferred stock

(104,800)

(122,808)

Net loss attributable to common stockholders

$

(826,412)

$

(2,411,431)

Net income (loss) per share - basic and diluted

$

(0.02)

$

(0.08)

Weighted average shares outstanding, basic and diluted

 

108,730,450

 

29,594,999

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

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Q BIOMED INC.

Condensed Consolidated Statements of Changes in Shareholders’ Deficit

(Unaudited)

    

For the Three Months Ended February 28, 2023

Total

Series A Preferred Stock

Series B Preferred Stock

Series C Preferred Stock

Common Stock

Additional Paid 

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

Shares

Amount

    

Shares

    

Amount

    

in Capital

    

Deficit

    

Deficit

Balance as of November 30, 2022

227,998

$

2,160,916

296,000

$

2,874,623

1,000,000

$

50,000

84,328,041

$

84,328

$

56,308,513

$

(66,095,802)

$

(4,617,422)

Issuance of common stock to convert notes payable

 

 

 

 

 

48,699,231

 

48,699

 

333,251

 

 

381,950

Accumulated dividend on preferred stock

 

 

45,600

 

 

59,200

 

 

 

(104,800)

 

 

Share based compensation for services

16,033

16,033

Net loss

 

 

 

 

 

 

 

 

(721,612)

 

(721,612)

Balance as of February 28, 2023 (Unaudited)

 

227,998

$

2,206,516

 

296,000

$

2,933,823

1,000,000

$

50,000

 

133,027,272

$

133,027

$

56,552,997

$

(68,317,414)

$

(6,441,051)

For the Three Months Ended February 28, 2022

Total

Series A Preferred Stock

Series B Preferred Stock

Series C Preferred Stock

Common Stock

Additional Paid

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

Shares

    

Amount

    

Shares

    

Amount

    

in Capital

    

Deficit

    

Deficit

Balance as of November 30, 2021

    

227,998

    

$

2,161,195

    

400,000

    

$

3,915,512

$

    

28,647,788

    

$

28,648

    

$

53,335,901

    

$

(64,126,618)

    

$

(4,685,362)

Issuance of common stock and warrants for cash

 

 

 

 

 

400,000

 

400

 

99,630

 

 

100,030

Cash proceeds from warrants modification

20,000

20,000

Issuance common stock for dividend payment on preferred stock

(45,600)

(80,000)

277,877

278

125,322

Issuance of common stock to convert notes payable

1,577,648

1,578

1,052,369

1,053,947

Issuance of common stock to extinguish accrued liabilities

26,627

26

9,773

9,799

Accumulated dividend on preferred stock

 

 

44,586

 

 

78,222

 

 

 

(122,808)

 

 

Share based compensation for services

 

 

 

 

 

94,925

 

95

 

151,420

 

 

151,515

Share based compensation for warrants modification

 

 

 

 

 

 

 

17,019

 

 

17,019

Adoption of ASU 2020-06

(290,967)

82,909

(208,058)

Net loss

 

 

 

 

 

 

 

 

(2,288,623)

 

(2,288,623)

Balance as of February 28, 2022 (Unaudited)

 

227,998

$

2,160,181

 

400,000

$

3,913,734

$

 

31,024,865

$

31,025

$

54,397,659

$

(66,332,332)

$

(5,829,733)

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

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Q BIOMED INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

For the Three Months Ended

    

February 28, 2023

    

February 28, 2022

Cash flows from operating activities:

Net loss

$

(721,612)

$

(2,288,623)

Adjustments to reconcile net loss to net cash used in in operating activities

 

 

Share based compensation for services

 

16,033

 

151,515

Accretion of debt discount

 

195,582

 

351,805

Amortization expense

12,500

12,500

Settlement on registration liability

241,875

Loss on debt extinguishment

232,100

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

11,535

 

52,389

Prepaid expenses and other current assets

 

 

(661)

Accounts payable and accrued expenses

296,901

583,974

Accrued interest payable

 

50,873

 

33,434

Net cash used in operating activities

 

(138,187)

 

(376,856)

Cash flows from financing activities:

 

  

 

  

Proceeds received from issuance of convertible notes, net

111,387

Proceeds received from issuance of common stock and warrants

100,030

Cash advances

 

 

50,000

Proceeds received for warrants modification

20,000

Net cash provided by financing activities

 

111,387

 

170,030

Net decrease in cash

 

(26,800)

 

(206,826)

Cash at beginning of the year

 

344,009

 

344,009

Cash at end of the year

$

49,973

$

137,183

Supplemental disclosures for noncash investing and financing activities:

Issuance of common stock to convert notes payable and accrued interest

$

381,950

$

1,053,947

Accumulated dividend on convertible preferred stock

$

104,800

$

122,808

Issuance of common stock for dividend payment on preferred stock

$

$

125,600

Issuance of common stock to extinguish accrued liabilities

$

$

9,799

Adoption of ASU 2020-06

$

$

208,058

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

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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 unaudited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended November 30, 2022 that was filed with SEC on May 26, 2023. 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 substantial 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 futher 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.

Risk and Uncertainties

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,

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

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.

Note 3 - Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the unaudited financial statements for the year ended November 30, 2022 included in the Company’s Form 10-K.

Modification of Equity Classified Awards

From time-to-time equity classified awards may be modified. On the modification date, the Company estimates the fair value of the awards immediately before and immediately after modification. The incremental increase in fair value is recognized as expense immediately to the extent the underlying equity awards are vested and on a straight-line basis over the same remaining amortization schedule as the unvested underlying equity awards. The classification of stock-based awards, including whether such instruments should be recorded as liabilities or as equity, is reassessed on the modification date.

Induced Conversion of Convertible Preferred Stock

The Company accounts for gains or losses on extinguishment of equity-classified preferred stock as deemed dividends, to be included in the net loss per common stockholder used to calculate earnings per share. The difference between (1) the fair value of the consideration transferred to the holders of the preferred stock and (2) the carrying amount of the preferred stock (net of issuance costs) is subtracted from (or added to) net loss to arrive at net loss available to common stockholders in the calculation of earnings per share.

Sequencing Policy

The Company adopted a sequencing policy under ASC 815-40-35 (“ASC 815”) whereby in the event that reclassification of contracts from equity to liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain financial instruments with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive financial instruments, with the earliest financial instruments receiving the first allocation of shares. Pursuant to ASC 815, issuance of stock-based awards to the Company’s employees, non-employees or directors recognized under ASC 718 are not subject to the sequencing policy. Any modifications of awards (e.g., options or warrants) that remain subject to vesting, or any modifications of awards that continue to be held by active employees, are not subject to the sequencing policy. Modifications of vested awards held by non-employees are subject to the sequencing policy.

Recent Accounting Standards

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. This ASU provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. It specifically addresses: (1) how an entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; (2) how an entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; and (3) how an entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. This ASU will be effective for all entities for fiscal years beginning after December 15, 2021. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted, including adoption in an interim period. The Company is still evaluating the impact of adoption the ASU 2021-04 on its condensed consolidated financial statements.

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

Recently Adopted Accounting Standards

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This ASU is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. This update permits the use of either the modified retrospective or fully retrospective method of transition. The Company elected to early adopt this guidance on December 1, 2021, on a modified retrospective basis. The adoption resulted in approximately $291,000 decrease in additional paid in capital from the derecognition of the bifurcated equity component, $208,000 increase in debt from the derecognition of the discount associated with the bifurcated equity component and $83,000 decrease to the opening balance of accumulated deficit.

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, 2023

    

November 30, 2022

Series A convertible preferred stock

2,280,000

2,280,000

Series B convertible preferred stock

8,457,000

8,457,000

Series C convertible preferred stock

1,000,000

1,000,000

Common stock purchase warrants

11,752,000

11,752,000

Stock Options

4,450,000

4,450,000

Convertible Notes

 

86,360,000

 

86,360,000

Potentially dilutive securities

 

114,299,000

 

114,299,000

Note 5 – Intangible Asset Acquisition

On November 23, 2018, the Company entered into an Asset Sale Agreement (“ASA”) with GE Healthcare Limited (“GE”) whereby the Company acquired GE’s radiopharmaceutical drug, Metastron® and all related intellectual property including, but not limited to sales and distribution data, market authorizations and trademarks for Metastron® in various countries in exchange for an upfront payment of $0.5 million, a one-time milestone payment based on future sales, and royalty payments based on future sales. The Company did not acquire any workforce, manufacturing, inventory, sales agreements, or distribution agreements associated with Metastron®. The first commercial sale of Metastron™ by the Company will occur only after the successful transfer or assignment of all intellectual property, material sales and distribution data, technical transfer, and the establishment of new manufacturing sites by the Company and under the appropriate regulatory filings required by the jurisdictions in which Metastron™ is sold.

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

The acquired assets are concentrated in a single asset and the set is not considered a business. As such, the transaction is recognized as the acquisition of a finite-lived intangible asset. The one-time milestone payment based on future sales, and royalty payments based on future sales will be recognized when the payments are probable and estimable, which is expected to be when the related sales targets are achieved and the payments payable to GE. The acquired asset is being amortized on a straight-line basis over its estimated 10-year life. Amortization expense for the three months ended February 28, 2023 and 2022 was $12,500, respectively. The estimated remaining amortization expense for each of the five succeeding fiscal year:

Three month ended February 28,

    

    

2023

 

37,500

2024

 

50,000

2025

 

50,000

2026

 

50,000

2027

 

50,000

Thereafter

 

50,000

$

287,500

Note 6 – Investment

For the year ended November 30, 2022, $3.6 million was converted from Licensing fees and Share awards expensed in Research and Development in recognition of shares received in Investment in an Associate – Mannin. We incurred a $500k loss between the value of shares received and the amount expended in Research and Development.

Note 7 - Debt

The table below summarizes outstanding debt as of February 28, 2023 and November 30, 2022 (amounts are rounded to nearest thousand):

    

February 28, 2023

    

November 30, 2022

Convertible Notes Payable:

Principal value of 2021 Debentures

$

2,194,000

$

2,408,000

Fair value of bifurcated contingent put option

 

1,099,000

 

1,099,000

Debt discount

 

 

(70,000)

2021 Convertible notes payable, net

3,293,000

3,437,000

Principal value of 2022 Debentures

440,000

560,000

Fair value of bifurcated contingent put option

333,000

333,000

Debt discount

(160,000)

(305,000)

2022 Convertible notes payable, net

613,000

588,000

Principal value of 2023 Debentures

 

111,000

 

Debt discount

 

(19,000)

 

2023 Convertible notes payable, net

92,000

Cash advances

85,000

85,000

Total carrying value of convertible notes payable

$

4,083,000

$

4,110,000

2023 Convertible Notes Payable

2023 Debentures

January 2023 Debenture

On January 12, 2023, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which the Company sold a convertible debenture (the “January Debenture”) in the principal amount of $49,000.

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

The January Debenture includes an original issue discount of $5,250. The Company also incurred an additional $3,750 of issuance cost resulting from the payment of the lender’s legal fees. The January Debenture has a maturity date of January 12, 2024, provided that in case of an event of default, the debenture may become at the holder’s election immediately due and payable. The January Debenture carries an interest rate of 12% per annum, provided that any principal or interest which is not paid when due shall bear interest at the rate of 22% per annum from the due date until payment (the “Default Interest”).  The Company shall pay ten (10) mandatory monthly payments of $5,488 commencing on March 1, 2023.  In the event of default the January Debenture shall become immediately due and payable and the Company shall pay to the lender an amount equal to 150% times the sum of (i) the then outstanding principal amount of the January Debenture plus (ii) accrued and unpaid interest on the unpaid principal amount to the date of payment plus (iii) default interest, if any, shall immediately become due and payable.

February 2023 Debenture

On February 13, 2023, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which the Company sold a convertible debenture (the “February Debenture”) in the principal amount of $62,387.

The February Debenture includes an original issue discount of $8,137. The Company also incurred an additional $4,250 of issuance cost resulting from the payment of the lender’s legal fees. The February Debenture has a maturity date of February 14, 2024, provided that in case of an event of default, the debenture may become at the holder’s election immediately due and payable. The February Debenture carries an interest rate of 6% per annum, provided that any principal or interest which is not paid when due shall bear interest at the rate of 22% per annum from the due date until payment (the “Default Interest”). The lender shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of the February Debenture and ending on the later of: (i) the Maturity Date, or (ii) the date of payment of the default amount (the “Conversion Period”), all or any part of the outstanding and unpaid amount into fully paid and non-assessable shares of Common Stock.

2022 Convertible Notes Payable

2022 Debentures

July 2022 Debenture

On July 1, 2022, the Company entered into a Securities Purchase Agreement with an accredited investor (“DL”) pursuant to which the Company issued to DL a Convertible Promissory Note (the “DL Note”) in the aggregate principal amount of $119,888. The DL Note includes an original issue discount of $16,888 (includes $1,250 due diligence fee retained by DL). The Company also incurred an additional $3,000 of issuance cost resulting from the payment of the lender’s legal fees. The DL Note has a maturity date of July 1, 2023, and the Company has agreed to pay interest on the unpaid principal balance of the DL Note at the rate of 10.0% per annum from the date on which the DL Note is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company has the right to prepay the DL Note, provided it makes a payment including a prepayment to DL as set forth in the DL Note. The outstanding principal amount of the DL Note may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, DL may convert the DL Note into shares of the Company’s common stock at a conversion price equal to 80% of the average of 3 lowest trading price with a 10-day look back immediately preceding the date of conversion.

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

The contingent share-settled redemption feature, contingent acceleration upon merger, acquisition, and event of default within the DL Note are all contingent put options that are required to be bifurcated as a single compound embedded derivative 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 put option on the merger, acquisition, and event of default by estimating the probability of the occurrence of triggering date (the “Probability factor”) and applying the probability to the discounted maximum redemption premium for any given payment with the following key inputs:

    

July 1, 2022

 

Strike price

$

0.05

Terms (years)

 

1.0

Volatility

 

138

%

Risk-free rate

 

2.8

%

Dividend yield

 

0

%

Probability factor

20

%

The aggregate fair value of the embedded put option on the issuance date was approximately $104,000, which exceeded the net proceeds of $100,000, resulting in an approximate loss of $4,000 upon the on issuance of the convertible note.

For the three months ended February 28, 2023, the Company issued 14,875,997 shares of common stock to convert approximately $120,000 of outstanding debt upon the conversion.

August 2022 Debenture

On August 10, 2022 (the “Effective Date’), the Company entered into a Securities Purchase Agreement with an accredited investor (“the Lender”) pursuant to which the Company issued to the Lender a Convertible Promissory Note (the “August Note”) in the aggregate principal amount of $275,000 for a purchase price of $250,000. The August Note has a maturity date of February 6, 2023, and the Company has agreed to pay interest on the unpaid principal balance of the August Note at the rate of 10.0% per annum. Upon the later of the date the obligations under this Note are satisfied or the 6-month anniversary and for 30 days thereafter, the Lender has the exclusive right to elect conversion of any original issue discount or interest amount due under this August Note, into shares of the Company’s common stock at a conversion price per share equal to $0.035. The conversion option does not apply to the principal amount. The conversion option and contingent put upon an event of default are required to be bifurcated as a single compound embedded derivative at fair value under ASC 815, because it is not considered to be classified in stockholders’ equity. The subsequent changes in fair value are recognized in the Condensed Consolidated Statement of Operations. The fair value estimate is a Level 3 measurement. The Company estimated the fair value with the following key inputs:

    

August 10, 2022

 

Strike price

$

0.04

Terms (years)

 

0.5

Volatility

 

200

%

Risk-free rate

 

3.1

%

Dividend yield

 

0

%

The aggregate fair value of the conversion option on the issuance date was approximately $23,000, which was recognized as an additional debt discount.

As additional consideration for making the August Note, the Company agreed to issue 300,000 unregistered common shares within 10 business days to the Lender (the “Commitment shares”). The commitment to issue the shares was valued at the Effective Date fair value of approximately $11,000 and recognized as an additional debt discount. The commitment is a forward contract, recognized at fair value, as a result of applying the Company’s sequencing policy, and recognized at fair value with changes in fair value recognized in the Company’s Condensed Consolidated Statements of Operations until settled on August 24, 2022.

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

September 2022 Debenture

On September 15, 2022, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which the Company sold a convertible debenture (the “September Debenture”) in the principal amount of $102,637.

The September Debenture has a maturity date of September 15, 2023, provided that in case of an event of default, the debenture may become at the holder’s election immediately due and payable. The September Debenture carries an interest rate of 6% per annum, provided that any principal or interest which is not paid when due shall bear interest at the rate of 22% per annum from the due date until payment (the “Default Interest”). The Company may prepay the Debenture at 120% of the outstanding aggregate principal amount within the first 60 days of issuance and at 130% of the sum of the outstanding principal amount, the accrued and unpaid interest on the unpaid principal amount and any Default Interest from 61 to 180 days after issuance.

November 2022 Debenture

On November 22, 2022, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which the Company sold a convertible debenture (the “November Debenture”) in the principal amount of $62,387.

The November Debenture has a maturity date of November 22, 2023, provided that in case of an event of default, the debenture may become at the holder’s election immediately due and payable. The November Debenture carries an interest rate of 6% per annum, provided that any principal or interest which is not paid when due shall bear interest at the rate of 22% per annum from the due date until payment (the “Default Interest”). The Company may prepay the Debenture at 120% of the outstanding aggregate principal amount within the first 60 days of issuance and at 130% of the sum of the outstanding principal amount, the accrued and unpaid interest on the unpaid principal amount and any Default Interest from 61 to 180 days after issuance.

2021 Debenture

February 2021 Debenture

On February 12, 2021, the Company issued a debenture for $0.5 million (the “February Debenture”) pursuant to a securities purchase agreement with an accredited investor dated February 12, 2021. The February 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.

The aggregate fair value of the contingent put options on the issuance date was approximately $28,000, which was recognized as an additional debt discount.

On January 21, 2022, the Company issued 1,055,000 shares of common stock to convert $0.5 million of outstanding debt and interest and extinguished $95,000 of embedded derivative liability upon the conversion. The conversion price was reduced to $0.50. The Company recognized a loss on debt extinguishment of approximately $232,000 as a result of the reduction of conversion price for the three months ended February 28, 2022.

July 2021 Debenture

On July 26, 2021, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which the Company sold a convertible debenture (the “July Debenture”) in the principal amount of $806,250 and a warrant to purchase up to 645,000 shares of common stock (the “Warrant”) for a total purchase price of $750,000. The Company also paid $18,750 for the lender's legal fee.

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

The July Debenture has a maturity date of April 26, 2022, provided that in case of an event of default, the debenture may become at the holder's election immediately due and payable. The July Debenture carries an interest rate of 10% per annum, provided that any principal or interest which is not paid when due shall bear interest at the rate of 15% per annum from the due date until payment (the “Default Interest”). The Company may prepay the Debenture at 120% of the outstanding aggregate principal amount within the first 60 days of issuance and at 130% of the sum of the outstanding principal amount, the accrued and unpaid interest on the unpaid principal amount and any Default Interest from 61 to 180 days after issuance.

The holder may convert the July Debenture in its sole discretion at any time on or prior to maturity at the lower of $1.00 or 85% of the average of the four (4) lowest VWAPs during the 20 Trading Days prior to the date of such calculation. The “Variable Conversion Price” shall equal, subject to an initial floor price of $0.35 (the “Floor Price”), the lower of $1.00 and 85% of the average of the four (4) lowest VWAPs during the 20 Trading Days prior to the date of such calculation. The initial Floor Price shall be readjusted to $0.10 if following the Issue Date, VWAP of the Company shall be less than $0.35 for a total of ten days.

The Warrant has an exercise price of $1.25 and may be exercised in cash or via cashless exercise, exercisable for five (5) years from issuance. The grant date relative fair value of the Warrant was estimated to be $253,000 as determined based on the relative fair value allocation of the proceeds received. The Warrant were valued using the Black-Scholes option pricing model using the following inputs:

The contingent share-settled redemption feature and contingent prepayment provision within the July Debenture are all contingent put options that are required to be bifurcated as a single compound embedded derivative 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 with the following key inputs:

    

July 1, 2022

 

Strike price

$

0.05

Terms (years)

 

1.0

Volatility

 

138

%

Risk-free rate

 

2.8

%

Dividend yield

 

0

%

Probability factor

20

%

The aggregate fair value of the contingent put options on the issuance date was approximately $209,000, which was recognized as an additional debt discount.

On December 15, 2021, the Company and the holder entered into a Mutual Release Agreement pursuant to which the holder agreed to add the $241,875 to the outstanding principal balance of July Debenture, for no consideration received by the Company, in order to resolve a breach of certain registration provisions of the securities purchase agreement.

The July Debenture is past maturity and is currently in default. However, the Company has not received any default notice from the holder.

During the year ended November 30, 2022, the Company issued an aggregate 3,633,862 shares of common stock to convert approximately $413,000 of outstanding debt and extinguished approximately $159,000 embedded derivative liability upon the conversion. The Company recognized a loss on debt extinguishment of approximately $152,000 as a result of the reduction of conversion price for the year ended November 30, 2022.

September 2021 Debenture

On September 29, 2021, the Company entered into a securities purchase agreement with an accredited investor (“Lender”), pursuant to which the Company sold a convertible debenture (the “September Debenture”) in the principal amount of $2,200,000 with twelve-months term. The September Debenture includes an original issue discount of $185,000 and $15,000 for the payment of the Lender’s legal fees and carries an interest rate of 6% per annum. The Company also incurred other issuance costs of $247,350. On October 26, 2021, the September Debenture maturity date was extended for an additional 3 months to December 20, 2022.

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

The Company may prepay the September Debenture at 105% of the outstanding aggregate principal amount plus accrued interest within the first 60 days of issuance, at 112% of the outstanding aggregate principal amount plus accrued interest from 61-120 days after issuance and at 124% of the outstanding aggregate principal amount plus accrued interest from 121-180 days after issuance. The Debenture may not be prepaid after 180 days.

The Lender has the right to convert all or any amount of the outstanding aggregate principal amount at any time at a fixed conversion price of $1.00 per share. The conversion price after six months shall be fixed at $0.50 per share.

However, in the event the Company’s Common Stock trades below $0.50 per share for more than ten (10) consecutive trading days, the Lender is entitled to convert all or any amount of the outstanding aggregate principal amount into shares of the Company’s Common Stock at a Conversion Price for each share of Common Stock equal to 85% of the average of the 4 lowest VWAP’s in the prior 20 trading days. As a result of entering into the “September Debenture”, for which such instruments contained a variable conversion feature with no floor, the Company has adopted sequencing policy (see Note 3).

The contingent share-settled redemption feature and contingent prepayment provision within the September Debenture are all contingent put options that are required to be bifurcated as a single compound embedded derivative 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 with the following key inputs:

    

September 29, 2021

 

Strike price

$

0.50

Terms (years)

 

1.0

Volatility

 

66

%

Risk-free rate

 

0.1

%

Dividend yield

 

%

The aggregate fair value of the contingent put options on the issuance date was approximately $278,000, which was recognized as an additional debt discount.

On April 8, 2022, the Company issued 245,000 shares of common stock as commitment shares pursuant to the securities purchase agreement. The commitment to issue the shares was valued at the Effective Date fair value of approximately $177,000 and recognized as an additional debt discount. The commitment is a forward contract, recognized at fair value, as a result of applying the Company’s sequencing policy, and recognized at fair value with changes in fair value recognized in the Company’s Condensed Consolidated Statements of Operations until settled on April 8, 2022.

For the three months ended February 28, 2023, the Company issued 33,823,234 shares of common stock to convert approximately $214,000 of outstanding debt and extinguished $146,000 of embedded derivative liability upon the conversion.

For the year ended November 30, 2022, the Company issued 21,025,054 shares of common stock to convert approximately $305,000 of outstanding debt and extinguished $146,000 of embedded derivative liability upon the conversion.

The fair value of the contingent put option in all outstanding debentures with the feature are revalued as of February 28, 2023 and November 30, 2022 based on the following weighted average key inputs:

    

February 28, 2023

    

November 30, 2022

 

Strike price

$

0.55

$

0.55

Terms (years)

 

0.3

 

0.3

Volatility

 

200

%  

 

200

%

Risk-free rate

 

2.9

%  

 

2.9

%

Dividend yield

 

0

%  

 

0

%

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

The following table presents changes in Level 3 liabilities measured at fair value for the period ended February 28, 2023 and for the year ended November 30, 2022. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs (amounts are rounded to nearest thousand:

Balance November 30, 2021

    

$

867,000

Issuance of convertible notes

 

271,000

Debt extinguishment

 

(425,000)

Change in fair value

 

721,000

Balance November 30, 2022

$

1,434,000

Issuance of convertible notes

 

Change in fair value

 

Balance February 28, 2023

$

1,434,000

Debt Conversion

The following table summarizes debt conversion during the period ended February 28, 2023 and the year ended November 30, 2022 (amounts are rounded to nearest thousand):

Debt Amendment

On October 26, 2021, the Company entered into an extension agreement with the holder of September 2021 Debenture (the "Holder") to extend the maturity date from September 30, 2022, to December 29, 2022. The amendment was recognized as a troubled debt restructuring.

On July 22, 2021, the Company entered into an amendment agreement to the securities purchase agreement with the Holder, pursuant to which, the floor price of the 2020 Debenture was reduced to $0.50 per share. Additionally, the maturity date of the 2020 Debenture was extended to December 31, 2021. The amendment was recognized as a debt extinguishment, resulting in a gain on debt extinguishment of approximately $15,000.

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, 2023

    

February 28, 2022

Interest expense based on the coupon interest rate of the outstanding debt

$

51,000

$

61,000

Accretion of debt discount

217,000

352,000

Other

9,000

1,000

Total interest expense

$

277,000

$

414,000

Cash Advances

Cash advances include cash provided by vendors that is subject to repayment on demand.

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

Note 8 - Commitments and Contingencies

Equity Financing

On May 5, 2021, the Company entered into an agreement with Aedesius Holdings Ltd. ("Aedesius") pursuant to which the Company has agreed with Aedesius that the Company would sell it up to 16,000,000 units (the "Units") for a total aggregate of up to $20,000,000.

Aedesius failed to perform on its obligation and to date has not invested any monies in the Company. As a result, the Company has terminated any and all rights with respect to future fundings and will pursue whatever rights and remedies the Company has at its disposal for breach of contract and damages.

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.

As previously reported, on July 12, 2022, the Company was notified that WSI PBG, LLC (“WSI”) filed a complaint against the Company seeking to recover $196,216 in unpaid consulting fees, plus costs and expenses of litigation.  The Company elected not to litigate this suit so as not to increase its liability exposure. Not unexpectedly, on August 24, 2022, WSI obtained a judgment against the Company in the amount of $203,784. The Company is exploring its options in addressing this judgment, including terms of settlement that would result in a satisfaction of this Judgment over a limited period of time.

On July 19, 2022, the Company received notice that the Activus Group (“Activus”) filed a complaint for fees it alleges are due in the amount of $129,600 plus fees and expenses for consulting services provided by Activus as a result of an agreement between the parties. The Company has not filed an answer and is currently determining their next steps in settlement.

On August 15, 2022, the Company received notice that another of its unpaid contractors, Diligent Health Solutions, LLC. (“DHS”), had filed suit against the Company seeking $106,000 in unpaid consulting fees.  Here, too, the Company elected not to litigate this suit so as not to increase its liability exposure.  As a result of the foregoing, DHS obtained a default judgment against the Company in the amount of $111,000.  The company is exploring its options in addressing this judgment, including terms of settlement that would result in a satisfy of this Judgment over a limited period of time.

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.

On March 11, 2022, the Company entered into an engagement letter agreement (“Agreement”) with EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”) to effectuate the Corporation’s Firm Commitment Public Offering and Uplisting and to engage EF Hutton to act as the placement agent for a bridge or other private offering consisting of approximately $2 million. The Company shall be responsible for EF Hutton’s external counsel’s legal costs irrespective of whether the Offering is consummated or not, subject to a maximum of $50,000 in the event that there is not a Closing. The Company incurred $15,000 of expense during year ended November 30, 2022, and no payment was made as of February 28, 2023.

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

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

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.

License Agreements

Mannin

On October 29, 2015, the Company entered into a Patent and Technology License and Purchase Option Agreement (“Exclusive License”) with a vendor whereby the Company was granted a worldwide, exclusive, license on, and option to, acquire certain intellectual property (“Mannin IP”) which initially focused on developing a first-in-class eye drop treatment for glaucoma within the four-year term of the Exclusive License.

On March 26, 2019, the Company entered into an amendment to the Patent and Technology License and Purchase Option Agreement that it initially entered into with Mannin Research Inc. on October 29, 2015 (the “Mannin Agreement”). Under such amendment, the term of the option granted under the Mannin Agreement was extended to October 29, 2021, in exchange for the Company issuing 100,000 shares to Mannin Research Inc. on April 9, 2019.

On September 1, 2020, the Company further amended the license agreement allowing Mannin to grant an exclusive license to Mannin GmbH (its wholly owned German subsidiary) in order fully take advantage of the German government grant to Mannin. The agreement also confirms our ongoing investment into the Tie2 platform to create, and therefore maintain economic value for us and our shareholders. The Company has agreed to contribute funds in Mannin GmbH. We shall pay Mannin $1.5 million in cash payable in three instalments, thereof $0.7 million of which has been paid, $0.4 million of which was due on December 31, 2020, and $0.4 million to be paid by June 30, 2021. In addition, we paid Mannin $0.75 million in shares of our common stock valued as of June 15, 2020, in full satisfaction of R&D payables, contracted by Mannin in development of the Tie2 platform. We continue to have the right to 100% of the revenues derived from the Mannin Tie2 technology platform, until such time that Mannin and its subsidiaries have independently raised at least $2.0 million in funds, at which time the parties have agreed to a profit share structure reducing our future capital commitments to Mannin R&D.

During the period ended February 28, 2023 and year ended November 30, 2022, the Company incurred approximately $0.0 and $0.1 million, respectively, in research and development expenses to fund the costs of development of the eye drop treatment for glaucoma pursuant to the Exclusive License.

For year ended November 30, 2022, $3.6 million was converted from Licensing fees and Share awards expensed in Research and Development in recognition of shares received in Investment in an Associate - Mannin. We incurred a $500k loss between the value of shares received and the amount expended in Research and Development.

Washington University

On March 9, 2019, the Company entered into an Exclusive License Agreement with Washington University for license of a diagnostic marker for determining the severity of glaucoma using the expression levels of Growth Differentiation Factor 15. The agreement calls for the Company to pay an initial fee of approximately $88,000, pay annual maintenance fees ranging from $15,000 to $75,000, make additional payments upon the following milestones:

The first commercial sale of a companion diagnostic product;

Initiation of a clinical trial for a diagnostic product to support FDA PMA or 510(k) regulatory approval or the foreign equivalent;

PMA or 510(k) regulatory approval by the FDA or the foreign equivalent; and

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Notes to Condensed Consolidated Financial Statements

The first commercial sale of a diagnostic product.

In addition to the above payments, royalty payments based upon sales of a companion diagnostic product or diagnostic product are required.

Note 9 - 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), but have not been paid to date:

For the Three Months Ended 

    

February 28, 2023

    

February 28, 2022

Consulting and legal expenses

$

106,000

$

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 approximately $35,000, which was recorded as part of debt issuance cost to the 2020 Debenture (see note 5).

On April 16, 2021, the Company entered into two unsecured promissory note agreements (the "Notes") with certain management personnel for an aggregate principal amount of $30,000. The Notes bear interest at 5% per annum and are payable by August 31, 2021. During the quarter ended August 31, 2021, the Company made full repayment of $30,000 to the management personnel, including all outstanding interest.

On May 29, 2022 the company issued 250,000 shares at a nominal value of 10c per share to Mr. Rosenstadt, the company's Chief Legal Officer and director, in lieu of cash for his monthly services.

On May 29, 2022, the company issued 200,000 shares at a nominal value of 10c per share to Mr Corin, the company's Chief Executive Officer, as partial payment of his monthly salary in lieu of cash.

Note 10 - Stockholders’ Deficit

As of February 28, 2023 and November 30, 2022, the Company is authorized to issue up to 250,000,000 shares of its $0.001 par value common stock and up to 100,000,000 shares of its $0.001 par value preferred stock.

Preferred Shares

The original issue price and the liquidation value per share, as of February 28, 2023, 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

$

10.25

Series C Preferred Share

$

0.05

$

0.05

During the year ended November 30, 2022, the Company issued 1,000,000 of Series C preferred stock in the amount of $50,000 for settlement of an amount due to officers and directors.

The Company had accumulated dividends payable on the Preferred Shares of approximately $105,000 as of February 28, 2023.

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

Common Shares

Issuance of common shares for services

The Company recognized approximately $16,000 related to the vesting of stock options and restricted awards. The $16,000 was recognized within general and administrative expenses in the accompanying Consolidated Statement of Operations for the three months ended February 28, 2023.

Issuance of common shares for cash

On February 14, 2022, the Company entered into a series of securities purchase agreements for the sale of 400,000 units at a $0.25 unit sales price. The Company raised $100,000 in cash. Each unit consisted of one common share and one warrant to purchase one share of common stock at an exercise price of $0.50. The common warrants issued on February 22, 2022, have a fair value of $0.28 per share, see Note 11.

Issuance of common shares for debt conversion

During the three months ended February 28, 2023, the Company issued 33,823,234 shares of common stock to convert approximately $238,000 of outstanding debt and interest. and extinguished approximately $146,000 of embedded derivative liabilities Additionally, the Company reversed approximately $118,000 of unamortized debt discount upon the conversion.

Note 11 - 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, 2023 and November 30, 2022 and the changes during the period then ended (warrants amount and intrinsic value are rounded to nearest thousand):

Weighted Average

Remaining

Weighted Average

Contractual

    

Warrants

    

Exercise Price

    

Life (years)

    

Intrinsic Value

Outstanding at November 30, 2022

 

11,220,000

$

1.01

 

3.8

$

Issued

 

0.50

 

2.23

Forfeited/expired

 

 

Outstanding and exercisable at February 28, 2023

 

11,220,000

$

1.01

 

3.8

$

Grant date fair value of all outstanding warrants was based on the following key inputs:

    

As of February 28, 2023

    

As of November 30, 2022

 

Strike price

$

1.25

$

1.25

Term (years)

 

5.0

 

5.0

Volatility

 

114

%  

 

114

%

Risk-free rate

 

0.4

%  

 

0.8

%

Dividend yield

 

0.0

%  

 

0.0

%

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

Modification date fair value of all outstanding warrants was based on the following key inputs:

    

After Modification

    

Before Modification

 

Strike price

$

1.77

$

2.51

Term (years)

 

3.5

 

0.8

Volatility

 

123

%  

 

77

%

Risk-free rate

 

0.5

%  

 

0.4

%

Dividend yield

 

0.0

%  

 

0.0

%

Warrants issued on February 22, 2022, were classified as liabilities. The fair value of the warrants on grant date was based on the following key inputs: