Nevada
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46-4013793
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(State or Other Jurisdiction of Incorporation or
Organization)
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(I.R.S. Employer Identification No.)
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Title of Each Class
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Name of Exchange on which Registered
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None
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None
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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(Do not check if smaller reporting
company)
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Smaller reporting company
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☒
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Emerging growth company
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☐
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PART I
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4
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10
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20
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20
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20
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20
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PART II
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21
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21
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21
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28
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29
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29
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29
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30
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PART III
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31
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31
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32
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33
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33
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PART IV
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33
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34
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(i)
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license
and acquire pre-commercial innovative life sciences assets in
different stages of development and therapeutic areas from academia
or small private companies;
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(ii)
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license
and acquire FDA approved drugs and medical devices with limited
current and commercial activity; and
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(iii)
|
accelerate
and advance our assets to the next value inflection point by
providing: strategic capital, business development and financial
advice and experienced sector specific advisors.
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●
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|
Strategically collaborate or in- and out-license select
programs.
We seek
to collaborate or in- and out-license certain potentially
therapeutic candidate products to biotechnology or pharmaceutical
companies for preclinical and clinical development and
commercialization.
|
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●
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Highly leverage external talent and resources.
We plan
to maintain and further build our team which is skilled in
evaluating technologies for development and product development
towards commercialization. By partnering with industry specific
experts, we are able to identify undervalued assets that we can
fund and assist in enhancing inherent value. We plan to continue to
rely on the extensive experience of our management team to execute
on our objectives.
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●
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Evaluate commercialization and monetization strategies on a
product-by-product basis in order to maximize the value of our
product candidates or future potential products.
As we
move our drug candidates through development toward regulatory
approval, we will evaluate several options for each drug
candidate’s commercialization or monetization strategy. These
options include building our own internal sales force; entering
into a joint marketing partnership with another pharmaceutical or
biotechnology company, whereby we jointly sell and market the
product; and out-licensing any product that we develop by ourselves
or jointly with another party, whereby another pharmaceutical or
biotechnology company sells and markets such product and pays us a
royalty on sales. Our decision will be made separately for each
product and will be based on a number of factors including capital
necessary to execute on each option, size of the market to be
addressed and terms of potential offers from other pharmaceutical
and biotechnology companies. It is too early for us to know which
of these options we will pursue for our drug candidates, assuming
their successful development.
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●
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Acquire commercially or near-commercially ready products and build
out the current market for such.
In
addition to acquiring pre-clinical products, in assembling a
diversified portfolio of healthcare assets, we plan on acquiring
assets that are either FDA approved or are reasonably expected to
be FDA approved within 12 months of our acquiring them. We
anticipate hiring a contract sales organization to assume the bulk
of the sales and distribution efforts related to any such
product.
|
(i)
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license
and acquire pre-commercial innovative life sciences assets in
different stages of development and therapeutic areas from academia
or small private companies;
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(ii)
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license
and acquire FDA approved drugs and medical devices with limited
current and commercial activity;
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(iii)
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accelerate
and advance our assets to the next value inflection point by
providing: (A) strategic capital, (B) business development and
financial advice and (C) experienced sector specific
advisors.
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●
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the
filing of an investigational new drug application, or IND, with the
US Food and Drug Administration;
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●
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successful
interim results of Phase II/III clinical trial of the product
candidate;
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●
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FDA
acceptance of a new drug application;
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●
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FDA
approval of the product candidate; and
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●
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achieving
certain worldwide net sales.
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●
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the
completion of certain preclinical studies;
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●
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the
filing of an investigational new drug application with the US Food
and Drug Administration or the filing of the equivalent application
with an equivalent governmental agency;
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●
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successful
completion of each of Phase I, Phase II and Phase III clinical
trials;
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●
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FDA
approval of the product candidate;
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●
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approval
by the foreign equivalent of the FDA of the product
candidate;
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●
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achieving
certain worldwide net sales; and
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●
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a
change of control of our Company.
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●
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the FDA
or comparable foreign regulatory authorities may disagree with the
design or implementation of our clinical trials;
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●
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we may
be unable to demonstrate to the satisfaction of the FDA that a
product candidate is safe and effective for any
indication;
|
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●
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the FDA
may not accept clinical data from trials which are conducted by
individual investigators or in countries where the standard of care
is potentially different from the United States;
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●
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the
results of clinical trials may not meet the level of statistical
significance required by the FDA for approval;
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●
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we may
be unable to demonstrate that a product candidate’s clinical
and other benefits outweigh its safety risks;
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●
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the FDA
may disagree with our interpretation of data from preclinical
studies or clinical trials;
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●
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the FDA
may fail to approve our manufacturing processes or facilities or
those of third-party manufacturers with which we or our
collaborators contract for clinical and commercial supplies;
or
|
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●
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|
the
approval policies or regulations of the FDA may significantly
change in a manner rendering our clinical data insufficient for
approval.
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●
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our
ability to continuously use the technology related to an eye drop
treatment for glaucoma, our Mannin platform, that we have licensed
from Mannin Research Inc.,
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●
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our
ability to continuously use our intellectual property relating to
generic Strontium Chloride-89, our BioNucleonics platform, that we
have licensed from Bio-Nucleonics, Inc.,
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●
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our
ability to continuously use our intellectual property relating to a
rare pediatric condition (nonverbal disorder), our ASDERA platform,
that we have licensed from ASDERA LLC and
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●
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our
ability to continuously use our intellectual property relating to a
chemical compound derived from the plant Solanum nigrum Linn, also known as
Black Nightshade or Makoi, that we seek to use to create
a chemotherapeutic agent against liver cancer, our
uttroside platform,
and that we have licensed from the Rajiv Gandhi Centre for
Biotechnology, an autonomous research institute under the
Government of India, known as RGCB, and the Oklahoma Medical
Research Foundation, or the OMRF.
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●
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the FDA or comparable foreign regulatory authorities may disagree
with the design or implementation of our clinical
trials;
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●
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we may be unable to demonstrate to the satisfaction of the FDA that
a product candidate is safe and effective for any
indication;
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●
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the FDA may not accept clinical data from trials which are
conducted by individual investigators or in countries where the
standard of care is potentially different from the United
States;
|
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●
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results of clinical trials may not meet the level of
statistical significance required by the FDA for
approval;
|
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●
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we may be unable to demonstrate that a product candidate’s
clinical and other benefits outweigh its safety risks;
|
|
●
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the FDA may disagree with our interpretation of data from
preclinical studies or clinical trials;
|
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●
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the FDA may fail to approve our manufacturing processes or
facilities or those of third-party manufacturers with which we or
our collaborators contract for clinical and commercial supplies;
or
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●
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the approval policies or regulations of the FDA may significantly
change in a manner rendering our clinical data insufficient for
approval.
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●
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obtaining regulatory clearance to commence a clinical
trial;
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●
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identifying, recruiting and training suitable clinical
investigators;
|
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●
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reaching agreement on acceptable terms with prospective clinical
research organizations (“CROs”) and trial sites, the
terms of which can be subject to extensive negotiation, may be
subject to modification from time to time and may vary
significantly among different CROs and trial sites;
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|
●
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obtaining sufficient quantities of a product candidate for use in
clinical trials;
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●
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obtaining Investigator Review Board, or IRB, or ethics committee
approval to conduct a clinical trial at a prospective
site;
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●
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identifying, recruiting and enrolling patients to participate in a
clinical trial; and
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●
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retaining patients who have initiated a clinical trial but may
withdraw due to adverse events from the therapy, insufficient
efficacy, fatigue with the clinical trial process or personal
issues.
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●
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failure to conduct the clinical trial in accordance with regulatory
requirements or our clinical protocols;
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●
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inspection of the clinical trial operations or clinical trial sites
by the FDA or other regulatory authorities resulting in the
imposition of a clinical hold;
|
|
●
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|
stopping rules contained in the protocol;
|
|
●
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|
unforeseen safety issues or any determination that the clinical
trial presents unacceptable health risks; and
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|
●
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lack of adequate funding to continue the clinical
trial.
|
|
●
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reliance
on the third party for regulatory compliance and quality
assurance;
|
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●
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the
possible breach of the manufacturing agreement by the third
party;
|
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●
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the
possible termination or nonrenewal of the agreement by the third
party at a time that is costly or inconvenient for us;
and
|
|
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●
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|
reliance
on the third party for regulatory compliance, quality assurance,
and safety and pharmacovigilance reporting.
|
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●
|
|
increase the cost of raising, or decrease our ability to raise,
additional funds; as we do not anticipate generating sufficient
revenue in the next twelve months to cover our operating costs, we
may need to raise additional funding to implement our business if
we do not raise sufficient funds in this offering. A recession or
other negative economic factors could make this more difficult or
prohibitive; or
|
|
●
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|
interfere with services provided by third parties; we use third
parties for research purposes and intend to use third parties for
the production and distribution of our generic SR89 product
candidate, and a general recession or other economic conditions
could jeopardize the ability of any third parties to fulfill their
obligations to us;
|
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●
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the efficacy and safety as demonstrated in clinical
trials;
|
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●
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the clinical indications for which the product is
approved;
|
|
●
|
|
acceptance by physicians, major operators of hospitals and clinics
and patients of the product as a safe and effective
treatment;
|
|
●
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acceptance of the product by the target population;
|
|
●
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the potential and perceived advantages of product candidates over
alternative treatments;
|
|
●
|
|
the safety of product candidates seen in a broader patient group,
including its use outside the approved indications;
|
|
●
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the cost of treatment in relation to alternative
treatments;
|
|
●
|
|
the availability of adequate reimbursement and pricing by third
parties and government authorities;
|
|
●
|
|
relative convenience and ease of administration;
|
|
●
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|
the prevalence and severity of adverse events;
|
|
●
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|
the effectiveness of our sales and marketing efforts;
and
|
|
●
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unfavorable publicity relating to the product.
|
|
●
|
|
patent
applications may not result in any patents being
issued;
|
|
|
|
|
|
●
|
|
patents
that may be issued or in-licensed may be challenged, invalidated,
modified, revoked, circumvented, found to be unenforceable, or
otherwise may not provide any competitive advantage;
|
|
|
|
|
|
●
|
|
our
competitors, many of which have substantially greater resources
than we or our partners and many of which have made significant
investments in competing technologies, may seek, or may already
have obtained, patents that will limit, interfere with, or
eliminate our ability to make, use and sell our potential
products;
|
|
|
|
|
|
●
|
|
there
may be significant pressure on the U.S. government and other
international governmental bodies to limit the scope of patent
protection both inside and outside the United States for disease
treatments that prove successful as a matter of public policy
regarding worldwide health concerns; and
|
|
|
|
|
|
●
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|
countries
other than the United States may have patent laws less favorable to
patentees than those upheld by U.S. courts, allowing foreign
competitors a better opportunity to create, develop, and market
competing products.
|
|
●
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obtain licenses, which may not be available on commercially
reasonable terms, if at all;
|
|
●
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abandon an infringing product candidate or redesign our products or
processes to avoid infringement;
|
|
●
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pay substantial damages, including the possibility of treble
damages and attorneys’ fees, if a court decides that the
product or proprietary technology at issue infringes on or violates
the third party’s rights;
|
|
●
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pay substantial royalties, fees and/or grant cross licenses to our
technology; and/or
|
|
●
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defend litigation or administrative proceedings which may be costly
whether we win or lose, and which could result in a substantial
diversion of our financial and management resources.
|
|
●
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sales or potential sales of substantial amounts of our common
stock;
|
|
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●
|
|
delay or failure in initiating or completing pre-clinical or
clinical trials or unsatisfactory results of these
trials;
|
|
●
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|
announcements about us or about our competitors, including clinical
trial results, regulatory approvals or new product
introductions;
|
|
●
|
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developments concerning our licensors, product manufacturers or our
ability to produce Man-01;
|
|
●
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|
developments concerning our licensors, product manufacturers or our
ability to produce SR89;
|
|
●
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litigation and other developments relating to our patents or other
proprietary rights or those of our competitors;
|
|
●
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|
conditions in the pharmaceutical or biotechnology
industries;
|
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●
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governmental regulation and legislation;
|
|
●
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|
variations in our anticipated or actual operating
results;
|
|
●
|
|
change in securities analysts’ estimates of our performance,
or our failure to meet analysts’ expectations;
|
|
●
|
|
change in general economic trends; and
|
|
●
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|
investor perception of our industry or our prospects.
|
●
|
approximately
6,660,000 of our outstanding shares of common stock recorded by our
transfer agent as of November 30, 2107 as unrestricted and freely
tradable;
|
●
|
shares
of our common stock that are, or are eligible to be, unrestricted
and free trading pursuant to Rule 144 or other exemptions from
registration under the Securities Act that have not yet been
recorded by our transfer agent as such;
|
●
|
1,711,875
shares of our common stock that were sold pursuant to a
registration statement on Form S-1 on February 1, 2018;
and
|
●
|
1,711,875
shares of our common stock underlying warrants that were sold
pursuant to a registration statement on Form S-1 on February 1,
2018.
|
|
High Bid
|
Low Bid
|
|
|
|
Fiscal Year 2018
|
|
|
December
1, 2017 through February 26, 2018
|
$5.55
|
$2.73
|
|
|
|
Fiscal Year 2017
|
|
|
November
30, 2017
|
$5.90
|
$3.35
|
August
31, 2017
|
$5.10
|
$3.19
|
May
31, 2017
|
$7.90
|
$3.35
|
February
29, 2017
|
$12.61
|
$3.20
|
|
|
|
Fiscal Year 2016
|
|
|
November
30, 2016
|
$6.00
|
$2.39
|
August
31, 2016
|
$4.14
|
$1.26
|
May
31, 2016
|
$4.10
|
$2.00
|
February
29, 2016
|
$4.69
|
$2.35
|
|
●
|
Level 1: The preferred inputs
to valuation efforts are “quoted prices in active markets for
identical assets or liabilities,” with the caveat that the
reporting entity must have access to that market. Information
at this level is based on direct observations of transactions
involving the same assets and liabilities, not assumptions, and
thus offers superior reliability. However, relatively few items,
especially physical assets, actually trade in active
markets.
|
|
●
|
Level 2: FASB acknowledged that
active markets for identical assets and liabilities are relatively
uncommon and, even when they do exist, they may be too thin to
provide reliable information. To deal with this shortage of direct
data, the board provided a second level of inputs that can be
applied in three situations.
|
|
●
|
Level 3: If inputs from levels
1 and 2 are not available, FASB acknowledges that fair value
measures of many assets and liabilities are less precise. The board
describes Level 3 inputs as “unobservable,” and limits
their use by saying they “shall be used to measure fair value
to the extent that observable inputs are not available.” This
category allows “for situations in which there is little, if
any, market activity for the asset or liability at the measurement
date”. Earlier in the standard, FASB explains that
“observable inputs” are gathered from sources other
than the reporting company and that they are expected to reflect
assumptions made by market participants.
|
|
For
the year ended November 30,
|
|
|
2017
|
2016
|
Operating
expenses:
|
|
|
General and
administrative expenses
|
$9,271,804
|
$5,032,257
|
Research and
development expenses
|
3,099,971
|
1,314,250
|
Total operating
expenses
|
12,371,775
|
6,346,507
|
|
|
|
Other
income (expenses):
|
|
|
Interest
expense
|
(760,314)
|
(480,285)
|
Interest
income
|
138
|
-
|
Loss on conversion
of debt
|
(463,578)
|
(85,123)
|
Gain (loss) on
extinguishment of debt
|
(76,251)
|
134,085
|
Loss on issuance of
convertible notes
|
-
|
(481,000)
|
Change in fair
value of embedded conversion option
|
(810,017)
|
121,000
|
Change in fair
value of warrant liability
|
(59,870)
|
7,587
|
Loss on
modification of Private Placement Units
|
-
|
(41,268)
|
Total other
expenses
|
(2,169,892)
|
(825,004)
|
|
|
|
Net
loss
|
$(14,541,667)
|
$(7,171,511)
|
|
|
|
Net loss per share - basic and diluted
|
$(1.39)
|
$(0.81)
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
10,466,648
|
8,861,212
|
|
|
For the years ended November 30,
|
|
|||||
|
|
2017
|
|
|
2016
|
|
||
Net cash provided by (used in):
|
|
|
|
|
|
|
||
Operating
activities
|
|
$
|
(5,584,451
|
)
|
|
$
|
(1,545,259
|
)
|
Financing
activities
|
|
|
4,940,510
|
|
|
|
2,882,575
|
|
Net increase (decrease) in cash
|
|
$
|
(643,941)
|
|
|
$
|
1,337,316
|
|
|
PAGE
|
Report
of Independent Registered Public Accounting Firm (fiscal year ended
in 2017)
|
F-2
|
Consolidated
Balance Sheets
|
F-3
|
Consolidated
Statements of Operations
|
F-4
|
Consolidated
Statement of Changes in Stockholders’ Equity
(Deficit)
|
F-5
|
Consolidated
Statements of Cash Flows
|
F-6
|
Notes
to Consolidated Financial Statements
|
F-7
|
|
|
|
Held
|
|
|
|
Position
|
Name
|
Age
|
Positions
|
Since
|
|
|
|
|
Denis
Corin
|
44
|
Chief
Executive Officer and Director (Chairman)
|
2015
|
|
|
|
|
William
Rosenstadt
|
49
|
General
Counsel and Director
|
2015
|
|
|
|
|
Rick
Panicucci
|
57
|
Director
|
2018
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards ($)
|
Option
Awards ($) (4)
|
Non-Equity
Incentive Plan Compensation ($)
|
Non-qualified
Deferred Compensation Earnings ($)
|
All
Other Compensations ($) (1)
|
Total
($)
|
Denis
Corin (2)
|
2017
|
$45,000.00
|
$-
|
$-
|
$1,545,000
|
$-
|
$-
|
$175,000
|
$1,765,000
|
Chief
Executive Officer
|
2016
|
$-
|
$-
|
$-
|
$195,000
|
$-
|
$-
|
$63,655
|
$258,655
|
William
Rosenstadt (3)
|
2017
|
$-
|
$-
|
$-
|
$1,545,000
|
$-
|
$-
|
$280,248
|
$1,825,248
|
General
Counsel and Director
|
2016
|
$-
|
$-
|
$-
|
$1,055,000
|
$-
|
$-
|
$112,147
|
$1,167,147
|
(1)
|
The amounts represent fees paid or accrued by us to the executive
officers during the past year pursuant to various employment and
consulting services agreements, as between us and the executive
officers, which are described below. Our executive officers are
also reimbursed for any out-of-pocket expenses incurred in
connection with corporate duties. We presently have no pension,
health, annuity, insurance, profit sharing or similar benefit
plans.
|
(3)
|
Mr. William Rosenstadt was appointed as General Counsel and
Director on June 5, 2015.
|
(4)
|
Represents the aggregate grant date fair value of warrants to
purchase 50,000 common stock issued on July 15, 2016 to Mr. Corin
and warrants to purchase 250,000 and 200,000 common stock issued on
January 4, 2016 and July 15, 2016 to Mr. Rosenstadt, respectively,
in accordance with FASB ASC.
|
Name and Address of Beneficial Owner
|
Amount and Nature of
Beneficial Owner (1)
|
Percent of Class (2)
|
Directors and Officers:
|
|
|
Denis
Corin (3)
|
3,112,500
|
21.4%
|
William
Rosenstadt (4)
|
1,502,500
|
10.1%
|
Rick
Panicucci
|
50,000
|
0.4%
|
|
|
|
Directors
and Officers as a Group (3)(4)
|
4,665,000
|
33.5%
|
|
|
|
Major Stockholders:
|
|
|
Ari
Jatwes
|
860,000
|
6.1%
|
Alan
Lindsay
|
1,136,000
|
8.2%
|
|
|
|
(1)
|
Under Rule 13d-3, a beneficial owner of a security includes any
person who, directly or indirectly, through any contract,
arrangement , understanding, relationship, or otherwise has or
shares: (1) voting power, which includes the power to vote, or to
direct the voting of shares; and (ii) investment power, which
includes the power to dispose or direct the disposition of shares.
Certain shares may be deemed to be beneficially owned by more than
one person (if, for example, persons share the power to vote or the
power to dispose of the shares. In addition, shares are deemed
to be beneficially owned by a person if the person has the right to
acquire the shares (for example, upon the exercise of an option)
within 60 days of the date as of which the information is provided.
In computing the percentage ownership of any person, the amount of
shares outstanding is deemed to include the amount of shares
beneficially owned by such person (and only such person) by reason
of these acquisition rights. As a result, the percentage of
outstanding shares of any person as shown in this table does not
necessarily reflect the person's actual ownership or voting power
with respect to the number of shares of common stock actually
outstanding as of February 26, 2018.
|
(2)
|
This percentage is based upon 13,918,284 shares of common stock
outstanding as of February 26, 2018 and any warrants exercisable by
such person within 60 days of the date as of which the information
is provided.
|
(3)
|
Includes (i) 150,000 five-year warrants exercisable at $1.45 which
expire on July 15, 2021 for director fees through June 1, 2017,
(ii) 350,000 five-year warrants exercisable at $4.00 which expire
on June 5, 2022 as a bonus for officer services through the date
thereof and (iii) 112,500 five-year options issued on June 5, 2017
for services as a director and officer through June 1, 2018, all of
which are exercisable within 60 days of the date as of which the
information is provided. This amount excludes those options that
have been granted but that have not vested and do not vest within
the next 60 days.
|
(4)
|
Includes (i) 250,000 five-year warrants exercisable at $4.15 which
expire on January 1, 2021 which were issued to the law firm at Mr.
Rosenstadt is a partner, (ii) 50,000 five-year warrants exercisable
at $1.45 which expire on July 15, 2021 which were issued to the law
firm at Mr. Rosenstadt is a partner, (iii) 150,000 five-year
warrants exercisable at $1.45 which expire on July 15, 2021 for
director fees through June 1, 2017, (iv) 350,000 five-year warrants
exercisable at $4.00 which expire on June 5, 2022 as a bonus for
officer services through the date thereof and (v) 112,500 five-year
options issued on June 5, 2017 for services as a director and
officer through June 1, 2018, all of which are exercisable within
60 days of the date as of which the information is provided.
An aggregate of 450,000 warrants are exercisable within 60 days of
the date as of which the information is provided.
|
SERVICES
|
2017
|
2016
|
Audit
fees
|
$85,000
|
$80,000
|
Audit-related
fees
|
10,000
|
-
|
Tax
fees
|
-
|
-
|
All
other fees
|
-
|
-
|
Total fees
|
$95,000
|
$80,000
|
Exhibit No.
|
Description
|
|
||
3.1
|
Articles
of Incorporation filed as Exhibit 3 (a) to Form S-1 filed on
January 13, 2014 and incorporated herein by
reference
|
|
||
3.2
|
Amendment
to Articles of Incorporation, dated July 20, 2015, filed as
Exhibit 3.1 to our periodic report filed on Form 8-K on August 3,
2015 and incorporated herein by reference
|
|
||
3.3
|
Amendment
to Articles of Incorporation, dated October 27, 2015, filed as
Exhibit 3.1 to our periodic report filed on Form 8-K on October 29,
2015 and incorporated herein by reference
|
|
||
3.4
|
Articles
of Incorporation filed as Exhibit 3 (b) to Form S-1 filed on
January 13, 2014 and incorporated herein by
reference
|
|
||
4.1
|
Form of
Warrant in connection with our February 1, 2018 offering filed as
Exhibit 4.1 to our registration statement on Form S-1 filed on
January 12, 2018
|
|
||
4.2
|
Form of
Warrant as filed as Exhibit 4.2 to our current report on Form 8-K
filed on June 9, 2017 and incorporated herein by
reference
|
|
||
4.3
|
Form of
Warrant as filed as Exhibit 10.3 to our current report on Form 8-K
filed on August 2, 2017 and incorporated herein by
reference
|
|
||
10.1
|
Form of
Non-Institutional Promissory Note filed as Exhibit 10.1 to our
current report on Form 8-K filed on January 13, 2016 and
incorporated herein by reference
|
|
||
10.2
|
Stock
Purchase Agreement for Institutional Promissory Note, dated January
8, 2016, with CMGT filed as Exhibit 10.2 to our current report on
Form 8-K filed on January 13, 2016 and incorporated herein by
reference
|
|
||
10.3
|
Form of
Institutional Promissory Note filed as Exhibit 10.4 to our current
report on Form 8-K filed on January 13, 2016 and incorporated
herein by reference
|
|
||
10.4
|
Advisory
Agreement, dated September 8, 2015, with Wombat Capital Ltd. filed
as Exhibit 10.5 to our current report on Form 8-K filed on January
13, 2016 and incorporated herein by reference
|
|
||
10.5
|
Advisory
Agreement, dated June 1, 2015, with Ari Jatwes filed as
Exhibit 10.6 to our current report on Form 8-K filed on January 13,
2016 and incorporated herein by reference
|
|
||
10.6
|
Consulting
Agreement, dated November 13, 2015, Pharmafor Ltd. filed as Exhibit
10.7 to our current report on Form 8-K filed on January 13, 2016
and incorporated herein by reference
|
|
||
10.7
|
Executive
Services Agreement, dates June 1, 2017, between Denis Corin and Q
BioMed Cayman SEZC filed as Exhibit 10.1 to our current report on
Form 8-K filed on June 9, 2017 and incorporated herein by
reference
|
|
||
10.9
|
Form of
Non-Qualified Stock Option Agreement filed as Exhibit 4.1 to our
current report on Form 8-K filed on June 9, 2017 and incorporated
herein by reference
|
|
||
10.10
|
Patent
and Technology License and Purchase Option Agreement, dated October
29, 2015, with Mannin Research Inc. filed as Exhibit 10.1 to
our annual report on Form 10-K filed on March 11, 2016 and
incorporated herein by reference +
|
|
||
10.11
|
Patent
and Technology License and Purchase Option Agreement, dated May 30,
2016, with Bio-Nucleonics Inc., filed as Exhibit 10.1 to our
quarterly report on Form 10-Q filed on October 17, 2016 and
incorporated herein by reference +
|
|
||
10.12
|
First
Amendment to Patent and Technology License and Purchase Option
Agreement, dated September 6, 2016, with Bio-Nucleonics Inc., filed
as Exhibit 10.2 to our quarterly report on Form 10-Q filed on
October 17, 2016 and incorporated herein by
reference +
|
|
||
10.13
|
License
Agreement on Patent & Know-How Technology, dated April 21,
2017, between Q BioMed Inc. and ASDERA LLC filed as Exhibit 10.1 to
our quarterly report on Form 10-Q filed on April 25, 2017 and
incorporated herein by reference +
|
|
||
10.14
|
Executive
Services Agreement, dated June 5, 2017, between Q BioMed Cayman
SEZC and Denis Corin filed as Exhibit 10.1 to our current report on
Form 8-K filed on June 9, 2017 and incorporated herein by
reference
|
|
||
10.15
|
Technology
License Agreement, dated June 15, 2017, among Q BioMed Inc.,
Oklahoma Medical Research Foundation and Rajiv Gandhi Centre for
BioTechnology filed as Exhibit 10.1 to our current report on Form
8-K filed on June 15, 2017 and incorporated herein by
reference +
|
|
||
10.16
|
Form of
Placement Agent Agreement in connection with our February 1, 2018
offering filed as Exhibit 10.15 to our registration statement on
Form S-1 filed on January 12, 2018
|
|
||
10.17
|
Form of
Securities Purchase Agreement in connection with our February 1,
2018 offering filed as Exhibit 10.16 to our registration statement
on Form S-1 filed on January 12, 2018
|
|
||
31
|
Certification of Principal Executive Officer and Acting Principal
Accounting Officer pursuant to Securities Exchange Act of 1934 Rule
13a-14(a) or 15d-14(a)*
|
|
||
32
|
Certification of Principal Executive Officer and Acting Principal
Accounting Officer pursuant to 18 U.S.C. Section 1350*
|
|
||
|
|
|||
101.INS
|
XBRL Instance Document*
|
|
||
101.SCH
|
XBRL Taxonomy Extension Schema Document*
|
|
||
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document*
|
|
||
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document*
|
|
||
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document*
|
|
||
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
Document*
|
|
|
Q BioMed Inc.
|
|
|
|
|
Date: February 28, 2018
|
By:
|
/s/ Denis Corin
|
|
Name:
|
Denis Corin
|
|
Title:
|
President, Chief Executive Officer and Acting Principal Financial
and Accounting Officer
|
Signature
|
Title
|
Date
|
|
|
|
/s/ Denis Corin
|
President, Chief Executive Officer and Director
|
February 28, 2018
|
Denis Corin
|
(Principal Executive Officer and Acting Principal Financial and
Accounting Officer)
|
|
|
|
|
/s/ William Rosenstadt
|
General Counsel and Director
|
February 28, 2018
|
William Rosenstadt
|
|
|
|
Page No.
|
F-2
|
|
|
|
Consolidated
Financial Statements:
|
|
F-3
|
|
F-4
|
|
F-5
|
|
F-6
|
|
F-7
|
|
As
of November 30,
|
|
|
2017
|
2016
|
ASSETS
|
|
|
Current
assets:
|
|
|
Cash
|
$824,783
|
$1,468,724
|
Prepaid
expenses
|
2,500
|
-
|
Total current
assets
|
827,283
|
1,468,724
|
Total
Assets
|
$827,283
|
$1,468,724
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
Current
liabilities:
|
|
|
Accounts payable
and accrued expenses
|
$463,539
|
$497,936
|
Accrued expenses -
related party
|
7,500
|
70,502
|
Accrued interest
payable
|
-
|
48,813
|
Convertible notes
payable (See Note 5)
|
-
|
2,394,849
|
Note
payable
|
-
|
100,152
|
Warrant
liability
|
-
|
168,070
|
Total current
liabilities
|
471,039
|
3,280,322
|
|
|
|
Long-term
liabilities:
|
|
|
Convertible notes
payable (See Note 5)
|
-
|
231,517
|
Total long term
liabilities
|
-
|
231,517
|
Total
Liabilities
|
471,039
|
3,511,839
|
|
|
|
Commitments
and Contingencies (Note 6)
|
|
|
|
|
|
Stockholders' Equity (Deficit):
|
|
|
Preferred
stock, $0.001 par value; 100,000,000 shares authorized; no shares
issued and outstanding as of November 30, 2017 and
2016
|
-
|
-
|
Common
stock, $0.001 par value; 250,000,000 shares authorized; 12,206,409
and 9,231,560 shares issued and outstanding as of November 30, 2017
and 2016, respectively
|
12,206
|
9,231
|
Additional
paid-in capital
|
23,187,408
|
6,249,357
|
Accumulated
deficit
|
(22,843,370)
|
(8,301,703)
|
Total Stockholders' Equity (Deficit)
|
356,244
|
(2,043,115)
|
Total
Liabilities and Stockholders' Equity (Deficit)
|
$827,283
|
$1,468,724
|
|
For
the year ended November 30,
|
|
|
2017
|
2016
|
Operating
expenses:
|
|
|
General and
administrative expenses
|
$9,271,804
|
$5,032,257
|
Research and
development expenses
|
3,099,971
|
1,314,250
|
Total operating
expenses
|
12,371,775
|
6,346,507
|
|
|
|
Other
income (expenses):
|
|
|
Interest
expense
|
(760,314)
|
(480,285)
|
Interest
income
|
138
|
-
|
Loss on conversion
of debt
|
(463,578)
|
(85,123)
|
Gain (loss) on
extinguishment of debt
|
(76,251)
|
134,085
|
Loss on issuance of
convertible notes
|
-
|
(481,000)
|
Change in fair
value of embedded conversion option
|
(810,017)
|
121,000
|
Change in fair
value of warrant liability
|
(59,870)
|
7,587
|
Loss on
modification of Private Placement Units
|
-
|
(41,268)
|
Total other
expenses
|
(2,169,892)
|
(825,004)
|
|
|
|
Net
loss
|
$(14,541,667)
|
$(7,171,511)
|
|
|
|
Net loss per share - basic and diluted
|
$(1.39)
|
$(0.81)
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
10,466,648
|
8,861,212
|
|
Common
Stock
|
|
Accumulated
|
Total
Stockholders'
|
|
|
Shares
|
Amount
|
Additional
Paid in Capital
|
Deficit
|
Equity
(Deficit)
|
Balance
as of November 30, 2015
|
8,597,131
|
$8,597
|
$865,690
|
$(1,130,192)
|
$(255,905)
|
Issuance of common
stock and warrants for services
|
341,543
|
342
|
3,300,772
|
-
|
3,301,114
|
Issuance of common
stock for acquired in-process research and development
|
50,000
|
50
|
160,450
|
-
|
160,500
|
Issuance of common
stock and warrants in connection with Private Placement, net of
warrant liabilities
|
102,256
|
102
|
80,578
|
-
|
80,680
|
Modification of
Private Placement Units
|
7,502
|
7
|
22,499
|
|
22,506
|
Issuance of
warrants for services to related party
|
-
|
-
|
830,000
|
-
|
830,000
|
Issuance of
warrants to settle accounts payable to related party
|
-
|
-
|
30,000
|
-
|
30,000
|
Issuance of common
stock upon conversion of convertible notes payable
|
118,128
|
118
|
380,768
|
-
|
380,886
|
Beneficial
conversion feature in connection with issuance of convertible
notes
|
-
|
-
|
526,400
|
-
|
526,400
|
Issuance of common
stock in connection with OID Note
|
15,000
|
15
|
52,200
|
-
|
52,215
|
Net
loss
|
-
|
-
|
-
|
(7,171,511)
|
(7,171,511)
|
Balance
as of November 30, 2016
|
9,231,560
|
$9,231
|
$6,249,357
|
$(8,301,703)
|
$(2,043,115)
|
Issuance of
additional common stock to convertible notes holders
|
25,641
|
26
|
98,179
|
-
|
98,205
|
Issuance of common
stock, warrants and options for services
|
153,705
|
154
|
6,399,431
|
-
|
6,399,585
|
Issuance of common
stock for acquired in-process research and development
|
125,000
|
125
|
487,375
|
-
|
487,500
|
Beneficial
conversion feature in connection with issuance of convertible
notes
|
-
|
-
|
645,000
|
-
|
645,000
|
Issuance of common
stock upon conversion of convertible notes payable
|
1,650,379
|
1,650
|
5,972,236
|
-
|
5,973,886
|
Issuance of common
stock and warrants in exchange for extinguishment of convertible
notes payable
|
162,000
|
162
|
518,238
|
-
|
518,400
|
Issuance of common
stock in exchange for extinguishment of OID Note
|
46,875
|
47
|
149,953
|
-
|
150,000
|
Issuance of common
stock and warrants for cash, net of offering costs
|
791,249
|
791
|
2,369,719
|
-
|
2,370,510
|
Reclassification of
warrant liability to equity
|
-
|
-
|
227,940
|
-
|
227,940
|
Exercise of
warrants
|
20,000
|
20
|
69,980
|
-
|
70,000
|
Net
loss
|
-
|
-
|
-
|
(14,541,667)
|
(14,541,667)
|
Balance
as of November 30, 2017
|
12,206,409
|
$12,206
|
$23,187,408
|
$(22,843,370)
|
$356,244
|
|
For
the year ended November 30,
|
|
|
2017
|
2016
|
Cash
flows from operating activities:
|
|
|
Net
loss
|
$(14,541,667)
|
$(7,171,511)
|
Adjustments to
reconcile net loss to net cash used in operating
activities
|
|
|
Issuance of common
stock, warrants and options for services
|
6,399,585
|
4,131,114
|
Issuance of common
stock for acquired in-process research and development
|
487,500
|
160,500
|
Change in fair
value of embedded conversion option
|
810,017
|
(121,000)
|
Change in fair
value of warrant liability
|
59,870
|
(7,587)
|
Loss on
modification of Private Placement Units
|
-
|
41,268
|
Accretion of debt
discount
|
628,026
|
413,894
|
Loss on conversion
of debt
|
463,578
|
85,123
|
(Gain) loss on
extinguishment of debt
|
76,251
|
(134,085)
|
Loss on issuance of
convertible debt
|
-
|
481,000
|
Changes in
operating assets and liabilities:
|
|
|
Prepaid
expenses
|
(2,500)
|
-
|
Accounts payable
and accrued expenses
|
(34,397)
|
439,134
|
Accrued expenses -
related party
|
(63,002)
|
70,502
|
Accrued interest
payable
|
132,288
|
66,389
|
Net
cash used in operating activities
|
(5,584,451)
|
(1,545,259)
|
|
|
|
Cash
flows from financing activities:
|
|
|
Proceeds
received from issuance of convertible notes
|
2,500,000
|
2,495,000
|
Proceeds
received from exercise of warrants
|
70,000
|
-
|
Proceeds
received from issuance of note payable
|
-
|
150,000
|
Proceeds
received for issuance of common stock and warrants , net of
offering costs
|
2,370,510
|
237,575
|
Net
cash provided by financing activities
|
4,940,510
|
2,882,575
|
|
|
|
Net increase (decrease) in cash
|
(643,941)
|
1,337,316
|
|
|
|
Cash at beginning of period
|
1,468,724
|
131,408
|
Cash at end of period
|
824,783
|
$1,468,724
|
|
|
|
Non-cash financing activities:
|
|
|
Issuance
of common stock upon conversion of convertible notes
payable
|
$5,608,514
|
$295,764
|
Issuance
of common stock and warrants in exchange for extinguishment of
convertible notes payable
|
$442,149
|
$-
|
Issuance
of common stock in exchange for extinguishment of OID
Note
|
$150,000
|
$-
|
Issuance
of warrants to settle accounts payable to related
party
|
$-
|
$30,000
|
Modification
of Series D convertible note recognized as
extinguishment
|
$-
|
$294,085
|
Reclassification
of warrant liability to equity
|
$227,940
|
$-
|
|
|
|
Cash paid for
interest
|
$-
|
$-
|
Cash paid for
income taxes
|
$-
|
$-
|
●
|
Level 1, defined as observable inputs such as quoted prices for
identical instruments in active markets;
|
●
|
Level 2, defined as inputs other than quoted prices in active
markets that are either directly or indirectly observable such as
quoted prices for similar instruments in active markets or quoted
prices for identical or similar instruments in markets that are not
active; and
|
●
|
Level 3, defined as unobservable inputs in which little or no
market data exists, therefore requiring an entity to develop its
own assumptions, such as valuations derived from valuation
techniques in which one or more significant inputs or significant
value drivers are unobservable.
|
Potentially dilutive securities
|
November 30, 2017
|
November 30, 2016
|
Warrants (Note
10)
|
3,083,995
|
1,047,500
|
Convertible debt
(Note 5)
|
-
|
1,067,105
|
Options (Note
10)
|
450,000
|
-
|
|
November
30, 2017
|
November
30, 2016
|
Series
A Notes:
|
|
|
Principal value of
10%, convertible at $2.00 at November 30, 2016.
|
$-
|
$12,500
|
Fair value of
bifurcated embedded conversion option of Series A
Notes
|
-
|
12,000
|
Debt
discount
|
-
|
(2,194)
|
Carrying value of
Series A Notes
|
-
|
22,306
|
|
|
|
Series
B Notes:
|
|
|
Principal value of
10%, convertible at $2.00 at November 30, 2016.
|
-
|
55,000
|
Fair value of
bifurcated embedded conversion option of Series B
Notes
|
-
|
55,000
|
Debt
discount
|
-
|
(19,229)
|
Carrying value of
Series B Notes
|
-
|
90,771
|
|
|
|
Series
C Notes:
|
|
|
Principal value of
10%, convertible at $1.55 at November 30, 2016.
|
-
|
576,383
|
Fair value of
bifurcated embedded conversion option of Series C
Notes
|
-
|
838,000
|
Debt
discount
|
-
|
(250,969)
|
Carrying value of
Series C Notes
|
-
|
1,163,414
|
|
|
|
Series
D Notes:
|
|
|
Principal value of
10%, convertible at $1.85 at November 30, 2016.
|
-
|
160,000
|
Debt
discount
|
-
|
(140,961)
|
Carrying value of
Series D Notes
|
-
|
19,039
|
|
|
|
Series
E Notes:
|
|
|
Principal value of
10%, convertible at $2.50 at November 30, 2016.
|
-
|
180,000
|
Debt
discount
|
-
|
(124,164)
|
Carrying value of
Series E Notes
|
-
|
55,836
|
|
|
|
Secured
Convertible Debenture:
|
|
|
Principal value of
5%, convertible at $2.98 at November 30, 2016.
|
-
|
1,500,000
|
Fair value of
bifurcated contingent put option of Secured Convertible
Debenture
|
-
|
72,000
|
Debt
discount
|
-
|
(297,000)
|
Carrying value of
Secured Convertible Debenture Note
|
-
|
1,275,000
|
Total
short-term carrying value of convertible notes
|
$-
|
$2,394,849
|
Total
long-term carrying value of convertible notes
|
$-
|
$231,517
|
Embedded derivatives in Convertible Notes at inception
|
|
|
|
|
||||||
|
For the years ended
November 30,
|
|
||||||||
|
2017
|
|
2016
|
|
||||||
Stock price
|
|
$
|
-
|
|
|
$
|
2.60 - $3.26
|
|
||
Terms (years)
|
|
|
-
|
|
|
|
1.5
|
|
||
Volatility
|
|
|
-
|
|
|
|
116.77
|
%
|
||
Risk-free rate
|
|
|
-
|
|
|
|
0.51% - 0.76
|
%
|
||
Dividend yield
|
|
|
-
|
|
|
|
0.00
|
%
|
||
|
|
|
|
|
|
|
|
|
Embedded derivatives in Convertible Notes at period
end
|
|
|
|
|
||||||
|
As of November 30,
|
|
||||||||
|
2017
|
|
2016
|
|
||||||
Stock price
|
|
$
|
-
|
|
|
$
|
3.43
|
|
||
Term (years)
|
|
|
-
|
|
|
|
0.25 - 1.05
|
|
||
Volatility
|
|
|
-
|
|
|
|
156.74% - 163.49
|
%
|
||
Risk-free rate
|
|
|
-
|
|
|
|
0.48% - 0.80
|
%
|
||
Dividend yield
|
|
|
-
|
|
|
|
0.00
|
%
|
||
|
|
|
|
|
|
|
|
|
Rollforward of Level 3 Fair Value Measurement for the Year Ended
November 30, 2017
|
|
|||
|
|
|
|
|
Balance at November 30, 2016
|
Issuance
|
Net unrealized gain/(loss)
|
Conversion
|
Balance at November 30, 2017
|
$977,000
|
86,000
|
810,017
|
(1,873,017)
|
$-
|
Rollforward of Level 3 Fair Value Measurement for the Year Ended
November 30, 2016
|
|
|||
|
|
|
|
|
Balance at November 30, 2015
|
Issuance
|
Net unrealized gain/(loss)
|
Settlements
|
Balance at November 30, 2016
|
$229,000
|
1,303,000
|
(121,000)
|
(434,000)
|
$977,000
|
|
Principal
|
Shares
|
Series
A conversions
|
$12,500
|
5,936
|
Series
B conversions
|
55,000
|
27,995
|
Series
C conversions
|
576,383
|
407,484
|
Series
D conversions
|
160,000
|
91,782
|
Series
E conversions
|
180,000
|
76,455
|
Secured
Debenture conversions
|
4,000,000
|
1,040,727
|
Total
|
$4,983,883
|
1,650,379
|
|
|
|
|
Principal
|
Shares
|
Series
A conversions
|
$37,500
|
22,148
|
Series
B conversions
|
100,000
|
51,111
|
Series
C conversions
|
58,617
|
44,869
|
Total
|
$196,117
|
118,128
|
|
|
|
●
|
the filing of an investigational new drug application (the
“IND”) with the US Food and Drug Administration
(“FDA”);
|
●
|
successful interim results of Phase II/III clinical trial of the
product candidate;
|
●
|
FDA acceptance of a new drug application;
|
●
|
FDA approval of the product candidate; and
|
●
|
achieving certain worldwide net sales.
|
●
|
the completion of certain preclinical studies (the
“Pre-Clinical Trials”);
|
●
|
the filing of an investigational new drug application (the
“IND”) with the US Food and Drug Administration
(“FDA”) or the filing of the equivalent of an IND with
the foreign equivalent of the FDA;
|
●
|
successful completion of each of Phase I, Phase II and Phase III
clinical trials;
|
●
|
FDA approval of the product candidate;
|
●
|
approval by the foreign equivalent of the FDA of the product
candidate;
|
●
|
achieving certain worldwide net sales; and
|
●
|
a change of control of QBIO.
|
Fair value of warrant liability at November 30, 2016
|
$168,070
|
Issuance
of new warrant liability
|
-
|
Change
in fair value of warrant liability
|
59,870
|
Reclassification
of warrant liability to equity
|
(227,940)
|
Fair value of warrant liability at November 30, 2017
|
$-
|
|
Warrants
|
Weighted Average Exercise Price
|
Intrinsic Value
|
Weighted Average Remaining Contractual Life (years)
|
Outstanding
at November 30, 2015
|
100,000
|
$2.18
|
$1,370,000
|
4.80
|
Issued
|
984,998
|
$2.67
|
$1,033,000
|
3.97
|
Expired
|
(37,498)
|
$5.00
|
$-
|
-
|
Outstanding
at November 30, 2016
|
1,047,500
|
$2.54
|
$1,158,000
|
4.10
|
Issued
|
2,056,495
|
$4.25
|
$512,960
|
4.46
|
Exercised
|
(20,000)
|
$3.50
|
$19,800
|
-
|
Outstanding
at November 30, 2017
|
3,083,995
|
$3.67
|
$2,539,185
|
4.02
|
Exercisable
at November 30, 2017
|
2,323,245
|
$3.56
|
$2,170,618
|
3.90
|
|
|
|
|
|
|
For
the year ended November 30, 2017
|
For
the year ended November 30, 2016
|
Stock
price
|
$3.40 - $5.60
|
$1.60 - $4.15
|
Term
(years)
|
1.75 - 5.0
|
2.0 - 5.0
|
Volatility
|
129.64% - 143.47%
|
101.13% - 138.69%
|
Risk-free
rate
|
1.42% - 2.14%
|
0.76% - 1.83%
|
Dividend
yield
|
0.00%
|
0.00%
|
|
Options
|
Weighted
Average Exercise Price
|
Intrinsic
Value
|
Weighted
Averegae Remaining Contractual Life (years)
|
Outstanding at
November 30, 2016
|
-
|
$-
|
$-
|
-
|
Issued
|
450,000
|
$4.00
|
$220,500
|
4.51
|
Exercised
|
-
|
$-
|
$-
|
-
|
Outstanding at
November 30, 2017
|
450,000
|
$4.00
|
$220,500
|
4.51
|
Exercisable at
November 30, 2017
|
112,500
|
$4.00
|
$55,125
|
4.51
|
|
|
|
|
|
|
As of November 30,
|
|
|
2017
|
2016
|
Deferred tax
assets:
|
|
|
Net-operating loss
carryforward
|
$3,810,498
|
$885,120
|
Stock-based
compensation
|
4,466,254
|
1,685,262
|
License
agreement
|
595,780
|
293,433
|
Tax amortization
for license agreement
|
(102,747)
|
-
|
Charitable
contributions
|
387
|
-
|
Total Deferred Tax
Assets
|
8,770,172
|
2,863,815
|
Valuation
allowance
|
(8,770,172)
|
(2,863,815)
|
Deferred Tax Asset,
Net of Allowance
|
$-
|
$-
|
|
For the year ended November 30,
|
|
|
2017
|
2016
|
Statutory Federal
Income Tax Rate
|
(34.0)%
|
(34.0)%
|
State and Local
Taxes, Net of Federal Tax Benefit
|
(10.3)%
|
(4.7)%
|
Loss on conversion
of debt
|
1.4%
|
0.5%
|
Gain/ loss on
extinguishment of convertible note
|
0.2%
|
(0.7)%
|
Change in fair
value of embedded conversion option and related accretion of
interest expense
|
4.4%
|
1.6%
|
Change in fair
value of warrant liability
|
0.2%
|
0.0%
|
Loss on
modification of Private Placement Units
|
0.0%
|
0.2%
|
Loss on issuance of
convertible debt
|
0.0%
|
2.6%
|
Non-U.S.
operations
|
0.3%
|
0.0%
|
Change in Valuation
Allowance
|
37.8%
|
34.5%
|
|
|
|
Income Taxes
Provision (Benefit)
|
0.0%
|
0.0%
|
|
(1)
|
I have reviewed this annual report on Form 10-K for the year ended
November 30, 2017 of Q BioMed Inc.;
|
|
(2)
|
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
|
|
(3)
|
Based on my knowledge, the consolidated financial statements, and
other financial information included in this report, fairly present
in all material respects, the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
|
|
(4)
|
The registrant’s other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
consolidated financial statements for external purposes in
accordance with generally accepted accounting
principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report
based on such evaluation; and
|
|
(d)
|
Disclosed in the report any change in the registrant’s
internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of the annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
|
|
(5)
|
The registrant’s other certifying officer and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and
the audit committee of registrant’s board of directors (or
persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or
other employees who have a significant role in the
registrant’s internal control over financial
reporting.
|
|
Dated: February 27, 2018
|
|
|
/s/ Denis Corin
|
|
|
|
|
|
Denis Corin
|
|
|
Chief Executive Officer (Principal Executive Officer
and
Acting Principal Financial and Accounting Officer)
|
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
|
Dated: February 27, 2018
|
/s/ Denis Corin
|
|
Denis Corin
|
Chief Executive Officer (Principal Executive Officer
and
Acting Principal Financial and Accounting Officer)
|
Document and Entity Information - USD ($) |
12 Months Ended | |
---|---|---|
Nov. 30, 2017 |
Feb. 27, 2018 |
|
Document and Entity Information | ||
Entity Registrant Name | Q BIOMED INC. | |
Document Type | 10-K | |
Document Period End Date | Nov. 30, 2017 | |
Amendment Flag | false | |
Entity Central Index Key | 0001596062 | |
Current Fiscal Year End Date | --11-30 | |
Entity Common Stock, Shares Outstanding | 13,918,284 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | FY | |
Entity Public Float | $ 0 | |
Trading Symbol | QBIO |
Condensed Balance Sheets (Parenthetical) - $ / shares |
Nov. 30, 2017 |
Nov. 30, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 100,000,000 | 100,000,000 |
Preferred stock, issued | ||
Preferred stock, outstanding | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 250,000,000 | 250,000,000 |
Common stock, shares issued | 12,206,409 | 9,231,560 |
Common stock, shares outstanding | 12,206,409 | 9,231,560 |
Condensed Statements of Operations - USD ($) |
12 Months Ended | |
---|---|---|
Nov. 30, 2017 |
Nov. 30, 2016 |
|
Operating expenses: | ||
General and administrative expenses | $ 9,271,804 | $ 5,032,257 |
Research and development expenses | 3,099,971 | 1,314,250 |
Total operating expenses | 12,371,775 | 6,346,507 |
Other (income) expense: | ||
Interest expense | (760,314) | (480,285) |
Interest income | 138 | |
Loss on conversion of debt | 463,578 | 85,123 |
Loss on extinguishment of debt | 76,251 | (134,085) |
Loss on issuance of convertible notes | (481,000) | |
Change in fair value of embedded conversion option | (810,017) | 121,000 |
Change in fair value of warrant liability | $ (59,870) | $ 7,587 |
Loss on modification of Private Placement Units | (22,506) | |
Total other expenses | $ (2,169,892) | $ (825,004) |
Net loss | $ (14,541,667) | $ (7,171,511) |
Long-term Liabilities: | ||
Net loss per share - basic and diluted | $ (1.39) | $ (0.81) |
Weighted average shares outstanding, basic and diluted | 10,466,648 | 8,861,212 |
Organization of the Company and Description of the Business |
12 Months Ended |
---|---|
Nov. 30, 2017 | |
Accounting Policies [Abstract] | |
Organization of the Company and Description of the Business |
Note 1 - Organization of the Company and Description of the Business
Q BioMed Inc. (“Q BioMed” or “the Company”), incorporated in the State of Nevada on November 22, 2013, 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 spinoff new public companies.
On December 7, 2016, the Company formed its wholly-owned subsidiary in Cayman Islands, “Q BioMed Cayman SEZC” (the “Subsidiary”).
|
Basis of Presentation |
12 Months Ended |
---|---|
Nov. 30, 2017 | |
Notes to Financial Statements | |
Basis of Presentation |
Note 2 - Basis of Presentation and Going Concern
The accompanying consolidated financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).
The Company currently operates in one business segment focusing on licensing, acquiring and providing strategic resources to life sciences and healthcare companies. The Company is not organized by market and is managed and operated as one business. A single management team reports to the chief operating decision maker, the Chief Executive Officer, who comprehensively manages the entire business. The Company does not currently operate any separate lines of business.
Going Concern
The accompanying 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 had a net loss of approximately $14.5 million and $7.2 million during the years ended November 30, 2017 and 2016, respectively, and had net cash used in operating activities of approximately $5.6 million and $1.5 million during years ended November 30, 2017 and 2016, respectively. These matter, amongst others, raise doubt about the Company’s ability to continue as a going concern.
As of November 30, 2017, the Company has raised operating funds through contacts, high net-worth individuals and strategic investors. The Company has not generated any revenue from operations since inception and has limited assets upon which to commence its business operations. At November 30, 2017, the Company had cash and cash equivalents of approximately $825,000. On February 2, 2018, the Company netted approximately $4,915,000 from the registered sale of common stock and warrants to purchase common stock. The Company’s expected monthly burn rate is approximately $600,000. As such, 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 we will be forced to scale back the Company’s operations or cease our 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 consolidated financial statements are issued. The accompanying 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.
|
Summary of Significant Accounting Policies |
12 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Nov. 30, 2017 | |||||||
Accounting Policies [Abstract] | |||||||
Summary of Significant Accounting Policies |
Note 3 – Summary of Significant Accounting Policies
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates, and such differences may be material to the consolidated financial statements. The more significant estimates and assumptions by management include among others: the valuation allowance of deferred tax assets resulting from net operating losses, the valuation of warrants on the Company’s stock and the valuation of embedded conversion options within the Company’s convertible notes payable.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times may exceed the Federal depository insurance coverage ("FDIC") of $250,000. At November 30, 2017, the Company had a cash balance on deposit that exceeded the balance insured by the FDIC limit by approximately $471,000 with one bank and was exposed to credit risk for amounts held in excess of the FDIC limit. The Company does not anticipate nonperformance by these institutions. The Company had not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair value of financial instruments
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the years ended November 30, 2017 and 2016. The respective carrying value of cash and accounts payable approximated their fair values as they are short term in nature.
Embedded Conversion Features
The Company evaluates embedded conversion features within convertible debt to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in the Statement of Operations. If the conversion feature does not require recognition of a bifurcated derivative, the convertible debt instrument is evaluated for consideration of any beneficial conversion feature (“BCF”) requiring separate recognition. When the Company records a BCF, the intrinsic value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid-in capital) and amortized to interest expense over the life of the debt.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the Statement of Operations. Depending on the features of the derivative financial instrument, the Company uses either the Black-Scholes option-pricing model or a binomial model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
Stock Based Compensation Issued to Nonemployees
Common stock issued to non-employees for acquiring goods or providing services is recognized at fair value when the goods are obtained or over the service period. If the award contains performance conditions, the measurement date of the award is the earlier of the date at which a commitment for performance by the non-employee is reached or the date at which performance is reached. A performance commitment is reached when performance by the non-employee is probable because of sufficiently large disincentives for nonperformance.
General and administrative expenses
The significant components of general and administrative expenses consist of interest expense, bank fees, printing, filing fees, other office expenses, and business license and permit fees.
Research and development
The Company expenses the cost of research and development as incurred. Research and development expenses include costs incurred in funding research and development activities, license fees, and other external costs. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity is performed or when the goods have been received, rather than when payment is made.
Income Taxes
Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.
Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties, which only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of November 30, 2017, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company.
The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense. There were no amounts accrued for penalties or interest during the years ended November 30, 2017. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.
Recent accounting pronouncements In March 2016, the FASB issued ASU No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments. This new standard simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by removing the requirement to assess whether a contingent event is related to interest rates or credit risks. The Company adopted ASU No. 2016-06 in the fiscal year ended November 30, 2017 and its adoption did not have a material impact on the Company's consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This new standard clarifies certain aspects of the statement of cash flows, including the classification of debt prepayment or debt extinguishment costs or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees and beneficial interests in securitization transactions. This new standard also clarifies that an entity should determine each separately identifiable source of use within the cash receipts and payments on the basis of the nature of the underlying cash flows. In situations in which cash receipts and payments have aspects of more than one class of cash flows and cannot be separated by source or use, the appropriate classification should depend on the activity that is likely to be the predominant source or use of cash flows for the item. This new standard will be effective for the Company on December 1, 2018. The Company is currently evaluating the impact of the new standard on its consolidated financial statements.
In January 2017, the FASB issued an ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this Update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Update may be adopted early. The Company adopted the provisions of ASC 2017-01 effective December 1, 2016. Adoption did not have a material impact on the Company's financial position, results of operations, or cash flows.
In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. The new standard provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The Company adopted ASU 2017-09 as of December 1, 2017. The adoption of this standard did not impact the Company’s consolidated financial statements. In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. The ASU allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted classified as liabilities. A company will recognize the value of a down round feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, such as warrants, an entity will treat the value of the effect of the down round, when triggered, as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. The guidance in ASU 2017-11 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, and the guidance is to be applied using a full or modified retrospective approach. Management is currently assessing the impact the adoption of ASU 2017-11 will have on the Company’s consolidated financial statements.
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Note 4 – Loss per share
Basic net loss per share was calculated by dividing net loss by the weighted-average common shares outstanding during the period. Diluted net loss per share was calculated by dividing net loss by the weighted-average common shares 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.
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Convertible Notes |
Note 5 – Convertible Notes
During the year ended November 30, 2017, all outstanding convertible notes and secured convertible debentures were converted by the holders or extinguished. See discussion below.
During the year ended November 30, 2017 and 2016, the Company recognized interest expense of approximately $628,000 and $414,000, respectively, resulting from amortization of the debt discount for Series A, B, C, D and E Notes.
Series A Notes
The Series A convertible notes payable (the “Series A Notes”) are due and payable 18 months after issuance and bear interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the Series A Notes is convertible into shares of the Company’s common stock at any time prior to maturity at a conversion price per share equal to the higher of: (i) forty percent (40%) discount to the average closing price for the ten (10) consecutive trading days immediately preceding the notice of conversion or (ii) $1.25 per share. At maturity, any remaining outstanding principal and accrued but unpaid interest outstanding under the Series A Notes will automatically convert into shares of the Company’s common stock under the same terms. As of November 30, 2017, the Company has no Series A Notes outstanding.
Series B Notes
The Series B convertible notes payable (the “Series B Notes”) have the same terms as the Series A Notes. During the year ended November 30, 2016, the Company issued an additional of $105,000 in principal of Series B notes to third party investors. As of November 30, 2017, the Company has no Series B Notes outstanding.
Series C Notes
The Series C convertible notes payable (the “Series C Notes”) are due and payable 18 months after issuance and bear interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the Series C Notes is convertible into shares of the Company’s common stock at a conversion price per share equal to the lesser of a 40% discount to the average closing price for the 10 consecutive trading days immediately preceding the notice of conversion or $1.55, but in no event shall the conversion price be lower than $1.25 per share. If the average VWAP, as defined in the agreement, for the ten trading days immediately preceding the maturity date $5.00 or more, any remaining outstanding principal and accrued but unpaid interest outstanding under the Series C Notes will automatically convert into shares of the Company’s common stock under the same terms.
The terms of the Series C Notes also provided that up until maturity date, the Company cannot enter into any additional, or modify any existing, agreements with any existing or future investors that are more favorable to such investor in relation to the Series D Note holders, unless, the Series C Note holders are provided with such rights and benefits (“Most Favored Nations Clause”).
During the year ended November 30, 2016, the Company issued an additional of $550,000 in principal of Series C notes to third party investors.As of November 30, 2017, the Company has no Series C Notes outstanding.
Series D Notes
The Series D convertible notes payable (the “Series D Notes”) are due and payable 18 months after issuance and bear interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the Series D Notes is convertible into shares of the Company’s common stock at a fixed conversion price per share equal to $1.85. The Series D Notes automatically convert upon maturity at $1.85 per share if the ten trading days VWAP immediately preceding maturity is $5.00 or greater. Additionally, if the Company’s common shares are up-listed to a senior exchange such as the AMEX or NASDAQ, all monies due under the Series D Notes will automatically convert at $1.85 per share. During the year ended November 30, 2016, the Company issued $160,000 in principal of Series D notes to third party investors.
The terms of the Series D Notes also included the Most Favored Nations Clause. The Most Favored Nations Clause was viewed as providing the Series D Note holder with down-round price protection. As such, the embedded conversion option in the Series D Note was separately measured at fair value upon issuance, with subsequent changes in fair value recognized in current earnings.
On September 30, 2016, the Company amended the Most Favored Nations Clause of the Series D Notes to restrict the Company from taking dilutive action without the Series D note holders’ consent, effectively removing the down-round price protection. The amendment of the Series D Notes was recognized as an extinguishment of the originally issued Series D Notes, resulting in a gain on extinguishment of approximately $134,000.
At the amendment date, the conversion price of the amended Series D Notes was below the quoted market price of the Company’s common stock. As such, the Company recognized a beneficial conversion feature equal to the intrinsic value of the conversion price on the amendment date, resulting in a discount to the amended Series D Notes of $160,000 with a corresponding credit to additional paid-in capital. The resulting debt discount is presented net of the related convertible note balance in the accompanying Consolidated Balance Sheets and is amortized to interest expense over the note’s term.
As of November 30, 2017, the Company has no Series D Notes outstanding.
Series E Notes
The Series E convertible notes payable (the “Series E Notes”) are due and payable 18 months after issuance and bear interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the Series E Notes is convertible into shares of the Company’s common stock at a fixed conversion price per share equal to $2.50. The Series E Notes automatically convert upon maturity at $2.50 per share if the ten trading days VWAP immediately preceding maturity is $5.00 or greater. Additionally, if the Company’s common shares are up-listed to a senior exchange such as the AMEX or NASDAQ, all monies due under the Series E Notes will automatically convert at $2.50 per share. During the year ended November 30, 2016, the Company issued $180,000 in principal of Series E Notes to third party investors.
At the issuance date, the conversion price of the Series E Notes was below the quoted market price of the Company’s common stock. As such, the Company recognized a beneficial conversion feature equal to the intrinsic value of the conversion price on the amendment date, resulting in a discount to the Series E Notes of approximately $141,000 with a corresponding credit to additional paid-in capital. The resulting debt discount is presented net of the related convertible note balance in the accompanying Consolidated Balance Sheets and is amortized to interest expense over the note’s term. As of November 30, 2017, the Company has no Series E Notes outstanding.
Secured Convertible Debentures
On November 29, 2016, the Company entered into a securities purchase agreement with an accredited investor to place Convertible Debentures (the “Debentures”) with a one-year term in the aggregate principal amount of up to $4,000,000. The initial closing occurred on November 30, 2016 when the Company issued a Debenture for $1,500,000. The second closing is scheduled for within three days of the date on which the Company registers for resale all of the shares of common stock into which the Debentures may be converted (the “Conversion Shares”). The Debentures bear interest at the rate of 5% per annum. In addition, the Company must pay to an affiliate of the holder a fee equal to 5% of the amount of the Debenture at each closing.
The Debenture may be converted at any time on or prior to maturity at the lower of $4.00 or 93% of the average of the four lowest daily VWAP of the Company’s common stock during the ten consecutive trading days immediately preceding the conversion date, provided that as long as the Company is not in default under the Debenture, the conversion price may never be less than $2.00. The Company may not convert any portion of the Debenture if such conversion would result in the holder beneficially owning more than 4.99% of the Company’s then issued common stock, provided that such limitation may be waived by the holder.
Any time after the six-month anniversary of the issuance of the Debenture, if the daily VWAP of the Company’s common stock is less than $2.00 for a period of twenty consecutive trading days (the “Triggering Date”) and only for so long as such conditions exist after a Triggering Date, the Company shall make monthly payments beginning on the last calendar day of the month when the Triggering Date occurred. Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of the Triggering Date divided by the number of such monthly payments until maturity, (ii) a redemption premium of 20% in respect of such principal amount being paid (up to a maximum of $300,000 in redemption premium) and (iii) accrued and unpaid interest as of each payment date. The Company may, no more than twice, obtain a thirty-day deferral of a monthly payment due as a result of a Triggering Date through the payment of a deferral fee in the amount equal to 10% of the total amount of such monthly payment. Each deferral payment may be paid by the issuance of such number of shares as is equal to the applicable deferral payment divided by a price per share equal to 93% of the average of the four lowest daily VWAP of the Company’s common stock during the ten consecutive Trading Days immediately preceding the due date in respect of such monthly payment begin deferred, provided that such shares issued will be immediately freely tradable shares in the hands of the holder.
The Company also executed a Registration Rights Agreement pursuant to which it is required to file a registration statement for the resale of the shares of common stock into which the Debenture may be converted within 30 days of the initial closing. The Company is required to use its best efforts to cause such registration statement to be declared effective within 90 days of the initial closing.
The Company also entered into a Security Agreement to secure payment and performance of its obligations under the Debenture and related agreements pursuant to which the Company granted the investor a security interest in all of its assets. The security interest granted pursuant to the Security Agreement terminates on (i) the effectiveness of the Registration Statement if the Company’s common stock closing price is greater than $2.00 for the twenty consecutive trading days prior to effectiveness or (ii) any time after the effectiveness of the registration statement that the Company’s common stock closing price is greater than $2.00 for the twenty consecutive trading days.
Upon issuance of the Debentures, the Company recognized an aggregate debt discount of approximately $1.028 million, resulting from the recognition of beneficial conversion featuresaggregating $870,000 and bifurcated embedded derivatives aggregating $158,000. The beneficial conversion features were recognized as the intrinsic value of the conversion option on issuance of each Debentures. The monthly payment provision within the Debentures is a contingent put option that is required to be separately measured at fair value, with subsequent changes in fair value recognized in the Statement of Operations. The Company estimated the fair value of the monthly payment provision, at issuance and at each reporting period, using probability analysis of the occurrence of a Triggering Date applied to the discounted maximum redemption premium for any given payment. The probability analysis utilized an expected volatility for the Company's common stock ranging from 101.58% to 146.26% and a risk free rates from 0.53% to 1.08%. The maximum redemption was discounted at 20%-22%, the calculated effective rate of the Debentures before measurement of the contingent put option. The fair value estimate is a Level 3 measurement.
On October 3, 2017, the Company amended the Debentures to extend the maturity date from November 30, 2017 to November 30, 2018, and issued 25,641 restricted shares of its common stock to the holder of the Debentures as consideration for conversion. The fair value of the restricted shares was recognized as a loss on conversion. As of November 30, 2017, no Debentures were outstanding.
Embedded Conversion Options
In connection with the issuance of the Series A, B, C and the original issuance of the Series D Notes during the year ended November 30, 2016, the Company recognized a debt discount of approximately $750,000, and a loss on issuance of $481,000, which represents the excess of the fair value of the embedded conversion at initial issuance of $1.2 million over the principal amount of convertible debt issued. The embedded conversion feature is separately measured at fair value, with changes in fair value recognized in current operations. Management used a binomial valuation model, with fourteen steps of the binomial tree, to estimate the fair value of the embedded conversion option at issuance of the Series A, B, C and the original issuance of the Series D Notes issued during the year ended November 30, 2017 and 2016, with the following key inputs:
As of November 30, 2017 and 2016, the embedded conversion options have an aggregate fair value of $0 and $977,000, respectively, and are presented on a combined basis with the related loan host in the Company’s Consolidated Balance Sheets. The tables below presents changes in fair value for the embedded conversion options, which is a Level 3 fair value measurement:
Conversions of debt
The following conversions of occurred during the year ended November 30, 2017:
The following conversions debt occurred during the year ended November 30, 2016:
As the embedded conversion option in each convertible note and in each Debenture had been separately measured at fair value or separately recognized as a beneficial conversion feature, the conversion of each instrument was recognized as an extinguishment of debt. The Company recognized an aggregate loss on conversion of debt of approximately $464,000 as the difference between the aggregate fair value of common stock issued to the holders of approximately $6.6 million and the aggregate net carrying value of the convertible notes and debentures, including the bifurcated conversion options.
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Note Payable |
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Nov. 30, 2017 | |
Debt Disclosure [Abstract] | |
Note Payable |
Note 6 – Note Payable
As of November 30, 2017, and 2016, the Company had an outstanding promissory note of $0 and $150,000 (“OID Note”), respectively. The OID Note does not pay interest and matured on November 3, 2017. At the issuance date, the $150,000 OID Note was issued together with 15,000 restricted shares of the Company’s common stock for cash proceeds of $150,000. As such, the Company recognized a beneficial conversion feature, resulting in a discount to the OID Note of approximately $52,000 with a corresponding credit to additional paid-in capital. The resulting debt discount is presented net of the related convertible note balance in the accompanying consolidated balance sheet as of November 30, 2016 and was amortized to interest expense over the note’s term.
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Commitments and Contingencies |
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Commitments and Contingencies |
Note 7 – Commitments and Contingencies
Legal
The Company is not currently involved in any legal matters arising in the normal course of business. From time to time, the Company could become involved in disputes and various litigation matters that arise in the normal course of business. These may include disputes and lawsuits related to intellectual property, licensing, contract law and employee relations matters. 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. The Company expects to issue an aggregate of approximately 27,000 shares of common stock subsequent to November 30, 2017 through the end term of arrangements, February 2018.
Lease Agreement
In December 2016, the Subsidiary entered into a lease agreement for its office space located in Cayman Islands for $30,000 per annum. The initial term of the agreement ends in December 2019 and can be renewed for another three years.
Rent expenses was classified within general and administrative expenses and was approximately $27,000 and $0 for the year ended November 30, 2017 and 2016.
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. The technology platform may be expanded in scope beyond ophthalmological uses and may include cystic kidney disease and others. Pursuant to the Executive License, the Company has an option to purchase the Mannin IP within the next four years upon: (i) investing a minimum of $4,000,000 into the development of the intellectual property and (ii) possibly issuing additional shares of the Company’s common stock based on meeting pre-determined valuation and market conditions. The purchase price for the IP is $30,000,000 less the amount of cash paid by the Company for development and the value of the common stock issued to the vendor.
During the years ended November 30, 2017 and 2016, the Company incurred approximately $1.9 million and $1.1 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, of which an aggregate of $2.0 million and $0.7 million was already paid as of November 30, 2017 and 2016, respectively. Through November 30, 2017, the Company has funded an aggregate of $2.7 million to Mannin under the Exclusive License.
In the event that: (i) the Company does not exercise the option to purchase the Mannin IP; (ii) the Company fails to invest the $4,000,000 within four years from the date of the Exclusive License; or (iii) the Company fails to make a diligent, good faith and commercially reasonable effort to progress the Mannin IP, all Mannin IP shall revert to the vendor and the Company will be granted the right to collect twice the monies invested through that date of reversion by way of a royalty along with other consideration which may be perpetual.
Bio-Nucleonics
On September 6, 2016, the Company entered into the Patent and Technology License and Purchase Option Agreement (the “BNI Exclusive License”). with Bio-Nucleonics Inc. (“BNI”) whereby the Company was granted a worldwide, exclusive, perpetual, license on, and option to, acquire certain BNI intellectual property (“BNI IP”) within the three-year term of the BNI Exclusive License.
In exchange for the consideration, the Company agreed to, upon reaching various milestones, issue to BNI an aggregate of 110,000 shares of common stock that are subject to restriction from trading until commercialization of the product (approximately 12 months) and subsequent leak-out conditions, and provide funding to BNI for an aggregate of $850,000 in cash, of which the Company had paid $466,000 as of November 30, 2017. Once the Company has funded up to $850,000 in cash, the Company may exercise its option to acquire the BNI IP at no additional charge. In September 2016, the Company issued 50,000 shares of common stock, with a fair value of $160,500, to BNI pursuant to the BNI Exclusive License.
During the years ended November 30, 2017 and 2016, the Company incurred approximately $467,000 and $219,000, respectively, in research and development expenses pursuant to the BNI Exclusive License.
In the event that: (i) the Company does not exercise the option to purchase the BNI IP; (ii) the Company fails to make the aggregate cash payment within three years from the date of the Exclusive License; or (iii) the Company fails to make a diligent, good faith and commercially reasonable effort to progress the BNI IP, all BNI IP shall revert to BNI and the Company shall be granted the right to collect twice the monies invested through that date of reversion by way of a royalty along with other consideration which may be perpetual.
Asdera
On April 21, 2017, the Company entered into a License Agreement on Patent & Know-How Technology (“Asdera License”) with Asdera LLC (“Asdera”) whereby the Company was granted a worldwide, exclusive, license on certain Asdera intellectual property (“Asdera IP”). The initial cost to acquire the Asdera License is $50,000 and the issuance of 125,000 shares of the Company’s common stock, with a fair value of $487,500, of which the Company had fully paid and issued as of November 30, 2017, and recorded in research and development expenses in the accompanying Consolidated Statements of Operations. In addition to royalties based upon net sales of the product candidate, if any, the Company is required to make certain additional payments upon the following milestones:
Subject to the terms of the Agreement, the Company will be in control of the development and commercialization of the product candidate and are responsible for the costs of such development and commercialization. The Company has undertaken a good-faith commitment to (i) initiate a Phase II/III clinical trial at the earlier of the two-year anniversary of the agreement or one year from the FDA’s approval of the IND and (ii) to make the first commercial sale by the fifth-anniversary of the agreement. Failure to show a good-faith effort to meet those goals would mean that the Asdera IP would revert to Asdera. Upon such reversion, Asdera would be obligated to pay the Company royalties on any sales of products derived from the Asdera IP until such time that Asdera has paid the Company twice the sum that the Company had provided Asdera prior to the reversion.
OMRF
OMRF License Agreement
On June 15, 2017, the Company entered into a Technology License Agreement (“OMRF License Agreement”) with the Rajiv Gandhi Centre for Biotechnology, an autonomous research institute under the Government of India (“RGCB”), and the Oklahoma Medical Research Foundation (“OMRF” and together with RGCB, the “Licensors”), whereby the Licensors granted the Company a worldwide, exclusive, license on intellectual property related to Uttroside B (the “Uttroside B IP”). Uttroside B is a chemical compound derived from the plant Solanum nigrum Linn, also known as Black Nightshade or Makoi. The Company seeks to use the Uttroside B IP to create a chemotherapeutic agent against liver cancer.
The initial cost to acquire the OMRF License Agreement is $10,000, which will be payable upon reaching certain agreed conditions. In addition to royalties based upon net sales of the product candidate, if any, the Company is required to make additional payments upon the following milestones:
Subject to the terms of the Agreement, the Company will be in control of the development and commercialization of the product candidate and are responsible for the costs of such development and commercialization. The Company has undertaken a good-faith commitment to (i) fund the Pre-Clinical Trials and (ii) to initiate a Phase II clinical trial within six years of the date of the Agreement. Failure to show a good-faith effort to meet those goals would mean that the RGCB License Agreement would revert to the Licensors.
No milestones have been reached to date on these license agreements.
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Related Party Transactions |
12 Months Ended |
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Nov. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions |
Note 8 - 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 approximately $420,000 and $300,000 for the year ended November 30, 2017 and 2016, respectively, and were included within general and administrative expenses in the accompanying Consolidated Statements of Operations.
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Stockholders’ Equity Deficit |
12 Months Ended |
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Nov. 30, 2017 | |
Disclosure Text Block [Abstract] | |
Stockholders' Equity (Deficit) |
Note 9 - Stockholders’ Equity (Deficit)
As of November 30, 2017, and 2016, 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.
Private Placement
2016 activity
In May 2016, the Company entered into a subscription agreement with an investor in connection with the Company’s private placement (“May Private Placement”), generating gross proceeds of $50,000 by selling 20,000 units (each, Unit A”) at a price per Unit A of $2.50, with each Unit A consisting of one share of common stock and a two-year warrant to purchase one share of the Company’s common stock at an exercise price of $3.50 per share.
The subscription agreement requires the Company to issue the May Private Placement investor additional common shares if the Company were to issue common stock or issue securities convertible or exercisable into shares of common stock at a price below $2.50 per share within 90 days from the closing of the May Private Placement. The additional shares are calculated as the difference between the common stock that would have been issued in the May Private Placement using the new price per unit less shares of common stock already issued pursuant to the May Private Placement.
In August 2016, the Company consummated another private placement, for gross proceeds of approximately $10,000 by selling 6,500 units at a purchase price of $1.55 per unit. As a result, the Company issued the May Private Placement investor an additional 12,258 shares of common stock according to the agreement.
In September 2016, the Company entered into a subscription agreement (the “Subscription Agreement”) with certain investors in connection with the Company’s private placement (“September Private Placement”), generating gross proceeds of $112,500 by selling 37,498 units (each, “Unit B”) at a price per Unit B of $3.00, with each Unit B consisting of one share of common stock and a two-year warrant to purchase one share of the Company’s common stock at an exercise price of $5.00 per share.
In November 2016, the Company entered into additional Subscription Agreements with certain investors, generating gross proceeds of $65,000 by selling 26,000 units (each, “Unit C”) at a price per Unit C of $2.50, with each Unit C consisting of one share of common stock and a two-year warrant to purchase one share of the Company’s common stock at an exercise price of $4.00 per share.
The Subscription Agreement requires the Company to issue the investor additional units if the Company were to issue common stock or issue securities convertible or exercisable into shares of common stock at a price below a specified price per share within 90 days from the closing of the private placement. The additional units are calculated as the difference between the common stock that would have been issued using the new price per unit less shares of common stock already issued pursuant to the private placement.
Pursuant to the Subscription Agreement, the Company issued an additional of 7,502 units to the September Private Placement investors or no additional consideration. In addition, the Company also modified the exercise price of the warrants issued in the Unit B to $4.00 per share, which in effect, made the Unit B equivalent to Unit C (together as “Private Placement Unit”). The Company recorded approximately $41,000 as loss in connection with the issuance of additional units and modification of the warrants in the accompanying consolidated statements of operations, resulted from the value of the additional shares issued of approximately $23,000 and the change in warrant liability of approximately $19,000.
2017 activity
On August 1, 2017, the Company closed its private placement (“August Private Placement”), selling an aggregate of 953,249 units (“Units”) at a price of $3.20 per Unit, for an aggregate cash proceeds of approximately $2.4 million, net of offering costs, and the retirement of $0.5 million in principal and accrued interest of the Debentures. A Unit consists of one common stock and one warrant exercisable for five years from the date of issuance into a share of the Company’s common stock at an exercise price of $4.50.
In connection with the August Private Placement, the Company issued an aggregate of 39,246 warrants to the placement agent as consideration. These warrants have the same terms with the warrants issued in the August Private Placement.
In January 2017, the Company issued 20,000 shares of the Company’s common stock upon receiving the notice to exercise the warrants at an exercise price of $3.50 included in Unit A sold in the private placement held in May 2017, for an aggregate purchase price of $70,000.
Issued for services
2016 activity
During the year ended November 30, 2016, the Company issued an aggregate of 341,543 shares of common stock, valued at approximately $1.6 million, and five-year warrants to purchase 175,000 shares of common stock at exercise prices ranging from of $1.45 to $3.00 per share for advisory services. The warrants vest 25% per quarter over the next year and were valued at $377,500 using inputs described in Note 9. The Company recognized the value of the warrants over the vesting period.
In addition, the Company issued fully-vested five-year warrants to a stockholder, a director and general counsel of the Company to purchase an aggregate of 375,000 shares of common stock at strike prices ranging from $1.45 to $4.15 per share. The warrants were valued at $957,500 using inputs described in Note 9. The warrants were issued for services and settlement of a $30,000 in accounts payable.
In July 2016, the Company issued five-year warrants to purchase an aggregate of 300,000 shares of the Company’s common stock at $1.45 to two members of the Company’s Board of Director for their compensation for their board services. The warrants vest 25% per quarter starting on grant date and were valued at $390,000 using inputs described in Note 9. The Company recognized the value of the warrants over the vesting period.
The Company recognized general and administrative expenses of approximately $4.1 million, as a result of these transactions during the year ended November 30, 2016.
The estimated unrecognized stock-based compensation associated with these agreements is approximately $399,000 and will be recognized over the next 0.2 year.
2017 activity
The Company entered into customary consulting arrangements with various counterparties to provide consulting services, business development and investor relations services. During the year ended November 30, 2017, the Company issued an aggregate of 153,705 shares of the Company common stock to various vendors for investor relation and introductory services, valued at approximately $0.7 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 consolidated statements of operations for the year ended November 30, 2017.
In September 2017, the Company issued warrants to purchase up to 50,000 shares of the Company’s common stock to two vendors for services. The warrants are exercisable for three years at a per share price of $4.00.
On October 3, 2017, the Company amended the Debentures to extend the maturity date from November 30, 2017 to November 30, 2018, and issued 25,641 restricted shares of its common stock to the holder of the Debentures as consideration.
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Warrants |
Note 10 - Warrants and Options
Warrant Liability
As of November 30, 2016, the Company had outstanding warrants issued as part of the private placement units initially classified as liabilities because the exercise price may be adjusted downward, in certain circumstances, for a ninety-day period following their initial issuance. Warrant liabilities were measured at fair value, with changes in fair value recognized each reporting period in the Statement of Operations. The warrants ceased being liability classified at the conclusion of the ninetieth day from issuance. As a result, an aggregate of approximately $228,000 in warrant liability was reclassified to equity during the year ended November 30, 2017. All other warrants are equity classified.
In September 2017, the Company issued equity-classified warrants to purchase up to 50,000 shares of the Company’s common stock to two vendors for services. The warrants are exercisable for three years at a per share price of $4.00.
The warrant liability is a Level 3 fair value measurement, recognized on a recurring basis. Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized gains and losses for liabilities within the Level 3 category may include changes in fair value that were attributable to both observable inputs (e.g., changes in market interest rates) and unobservable inputs (e.g., probabilities of the occurrence of an early termination event).
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 November 30, 2017 and 2016 and the changes during the period then ended:
Fair value of all outstanding warrants was calculated with the following key inputs:
Options issued for services
The following represents a summary of all outstanding options to purchase the Company’s common stock at November 30, 2017 and changes during the period then ended:
Stock-based Compensation
The Company recognized general and administrative expenses of approximately $6.4 million and $4.1 million, as a result of the shares, outstanding warrants and options issued to consultants and employees during the year ended November 30, 2017 and 2016, respectively.
As of November 30, 2017, the estimated unrecognized stock-based compensation associated with these agreements is approximately $437,000 and will be recognized over the next 0.15 year.
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Income Taxes |
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Income Taxes |
Note 11 - Income Taxes
On December 22, 2017, the United States enacted new tax legislation, the Tax Cuts and Jobs Act. The Company is currently in the process of evaluating the impact this law will have on the consolidated financial statements and calculating the related impact to the Company’s tax expense. The Company expects the largest impact to the company from this legislation to be from the provisions that lower the corporate tax rate to 21% beginning on January 1, 2018, and impose tax on earnings outside the United States that have previously not been subject to United States tax, which must be paid beginning in fiscal 2019 through fiscal 2026. The adjustments to the Company’s tax expense for this legislation will be recorded beginning in the period of enactment and are not expected to materially affect the consolidated financial statements, given the Company’s net deferred tax asset position has a full valuation allowance.
At November 30, 2017, the Company has a net operating loss (“NOL”) carryforward for Federal and state income tax purposes totaling approximately $10.0 million available to reduce future taxable income which, if not utilized, will begin to expire in the year 2037. The NOL carry forward is subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Under the Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company’s net operating loss carryforwards to offset taxable income may be limited based on cumulative changes in ownership. The Company has not completed an analysis to determine whether any such limitations have been triggered as of November 30, 2017. The amount of the annual limitation, if any, will be determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years.
The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company’s history of operating losses since inception, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized. Accordingly, the Company has provided a full valuation allowance for deferred tax assets as of November 30, 2017 and 2016. The valuation allowance increased by approximately $5.9 million and $2.5 million for the fiscal years ended November 30, 2017 and 2016.
The tax effects of the temporary differences and carry forwards that give rise to deferred tax assets consist of the following:
A reconciliation of the statutory income tax rates and the Company’s effective tax rate is as follows:
The Company's major tax jurisdictions are the United States and New York. All of the Company's tax years will remain open starting 2013 for examination by the Federal and state tax authorities from the date of utilization of the net operating loss. The Company does not have any tax audits pending. |
Subsequent Events |
12 Months Ended |
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Nov. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events |
Note 12 - Subsequent Events
On February 1, 2018, the Company sold an aggregate of 1,711,875 shares of common stock, and 1,711,875 warrants to purchase shares of common stock, in a registered public offering for gross proceeds of approximately $5,478,000. The warrants are exercisable for five years at $3.20 per share. The Company paid placement agent commissions of approximately $418,000 and issued the placement agent five-year warrants to purchase 81,688 shares of common stock at $3.84 per share. After the placement agents’ commissions and other offering expenses, the Company netted approximately $4,915,000 of proceeds. The Company intends to use the net proceeds from the offering to: i) launch our non-opioid FDA approved Strontium Chloride 89 USP Injection (SR89), a therapeutic drug for the treatment of skeletal pain associated with metastatic cancers; ii) focus on the clinical planning and IND filing for a Phase 4 post-marketing study to expand the indication of the approved SR89; iii) complete pre-IND studies and the filing of an IND for a phase II/III clinical program to test the efficacy of QBM-001, our product candidate for the treatment of young children with a rare autistic spectrum disorder that severely inhibits their ability to communicate; iv) continue development work on our novel chemotherapeutic drug for liver cancer; and v) further the optimization and pre-clinical testing of our glaucoma drug Man-01 for the treatment of open angle glaucoma.
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Summary of Significant Accounting Policies (Policies) |
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Disclosure Text Block [Abstract] | |||||||
Use of estimates |
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates, and such differences may be material to the consolidated financial statements. The more significant estimates and assumptions by management include among others: the valuation allowance of deferred tax assets resulting from net operating losses, the valuation of warrants on the Company’s stock and the valuation of embedded conversion options within the Company’s convertible notes payable.
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Concentration of Credit Risk |
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times may exceed the Federal depository insurance coverage ("FDIC") of $250,000. At November 30, 2017, the Company had a cash balance on deposit that exceeded the balance insured by the FDIC limit by approximately $471,000 with one bank and was exposed to credit risk for amounts held in excess of the FDIC limit. The Company does not anticipate nonperformance by these institutions. The Company had not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
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Fair value of financial instruments | Fair value of financial instruments
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the years ended November 30, 2017 and 2016. The respective carrying value of cash and accounts payable approximated their fair values as they are short term in nature.
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Embedded Conversion Features |
Embedded Conversion Features
The Company evaluates embedded conversion features within convertible debt to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in the Statement of Operations. If the conversion feature does not require recognition of a bifurcated derivative, the convertible debt instrument is evaluated for consideration of any beneficial conversion feature (“BCF”) requiring separate recognition. When the Company records a BCF, the intrinsic value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid-in capital) and amortized to interest expense over the life of the debt.
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Derivative Financial Instruments |
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the Statement of Operations. Depending on the features of the derivative financial instrument, the Company uses either the Black-Scholes option-pricing model or a binomial model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
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Stock Based Compensation Issued to Nonemployees |
Stock Based Compensation Issued to Nonemployees
Common stock issued to non-employees for acquiring goods or providing services is recognized at fair value when the goods are obtained or over the service period. If the award contains performance conditions, the measurement date of the award is the earlier of the date at which a commitment for performance by the non-employee is reached or the date at which performance is reached. A performance commitment is reached when performance by the non-employee is probable because of sufficiently large disincentives for nonperformance.
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General and administrative expenses |
General and administrative expenses
The significant components of general and administrative expenses consist of interest expense, bank fees, printing, filing fees, other office expenses, and business license and permit fees.
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Research and development |
Research and development
The Company expenses the cost of research and development as incurred. Research and development expenses include costs incurred in funding research and development activities, license fees, and other external costs. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity is performed or when the goods have been received, rather than when payment is made.
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Income Taxes |
Income Taxes
Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.
Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties, which only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of November 30, 2017, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company.
The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense. There were no amounts accrued for penalties or interest during the years ended November 30, 2017. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.
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Recent accounting pronouncements |
Recent accounting pronouncements In March 2016, the FASB issued ASU No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments. This new standard simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by removing the requirement to assess whether a contingent event is related to interest rates or credit risks. The Company adopted ASU No. 2016-06 in the fiscal year ended November 30, 2017 and its adoption did not have a material impact on the Company's consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This new standard clarifies certain aspects of the statement of cash flows, including the classification of debt prepayment or debt extinguishment costs or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees and beneficial interests in securitization transactions. This new standard also clarifies that an entity should determine each separately identifiable source of use within the cash receipts and payments on the basis of the nature of the underlying cash flows. In situations in which cash receipts and payments have aspects of more than one class of cash flows and cannot be separated by source or use, the appropriate classification should depend on the activity that is likely to be the predominant source or use of cash flows for the item. This new standard will be effective for the Company on December 1, 2018. The Company is currently evaluating the impact of the new standard on its consolidated financial statements. In January 2017, the FASB issued an ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this Update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Update may be adopted early. The Company adopted the provisions of ASC 2017-01 effective December 1, 2016. Adoption did not have a material impact on the Company's financial position, results of operations, or cash flows.
In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. The new standard provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The Company adopted ASU 2017-09 as of December 1, 2017. The adoption of this standard did not impact the Company’s consolidated financial statements. In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. The ASU allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted classified as liabilities. A company will recognize the value of a down round feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, such as warrants, an entity will treat the value of the effect of the down round, when triggered, as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. The guidance in ASU 2017-11 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, and the guidance is to be applied using a full or modified retrospective approach. Management is currently assessing the impact the adoption of ASU 2017-11 will have on the Company’s consolidated financial statements. |
Loss per share (Table) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||
Loss per share |
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Convertible Notes (Tables) |
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Convertible Notes |
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Schedule of Share-based Compensation, Activity |
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Fair value of the embedded conversion |
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Schedule of Stock Options Roll Forward |
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Conversions of convertible notes |
The following conversions of occurred during the year ended November 30, 2017:
The following conversions debt occurred during the year ended November 30, 2016:
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Warrants and Options (Tables) |
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Fair value of warrant liability |
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Summary of outstanding warrants |
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Fair value of the warrant |
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Fair value of warrant liability |
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Loss per share (Details) - USD ($) |
Nov. 30, 2017 |
Nov. 30, 2016 |
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Earnings Per Share [Abstract] | ||
Warrants | 3,083,995 | 1,047,500 |
Convertible Debt | $ 1,067,105 | |
Conversion option | 450,000 |
Basis of Presentation (Detail Narrative) - USD ($) |
12 Months Ended | ||
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Nov. 30, 2017 |
Nov. 30, 2016 |
Aug. 31, 2017 |
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Notes to Financial Statements | |||
Accumulated deficit | $ 1,400,000 | ||
Working capital deficit | $ 1,900,000 | ||
Net loss | $ 14,500,000 | $ 7,200,000 | |
Net cash used in operating activities | $ 5,600,000 | $ 1,500,000 |
Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
12 Months Ended | |
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Nov. 30, 2017 |
Nov. 30, 2016 |
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Accounting Policies [Abstract] | ||
Federal depository insurance coverage | $ 250,000 | |
Outstanding convertible notes payable | $ 2,300,000 |
Convertible Notes (Details 1) - $ / shares |
9 Months Ended | 12 Months Ended | |
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Aug. 31, 2016 |
Nov. 30, 2017 |
Nov. 30, 2016 |
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Stock price | $ 3.43 | ||
Terms (years) | 1 year 6 months | ||
Volatility | 116.77% | ||
Dividend yield | 0.00% | ||
Minimum [Member] | |||
Stock price | $ 2.60 | $ 4.93 | $ 2.60 |
Volatility | 11677.00% | 14426.00% | 11677.00% |
Risk-free rate | 0.51% | 53.00% | 48.00% |
Dividend yield | 0.00% | 0.00% | 0.00% |
Maximum [Member] | |||
Stock price | $ 3.26 | $ 7.05 | $ 3.26 |
Volatility | 15735.00% | 16349.00% | |
Risk-free rate | 76.00% | 76.00% | 80.00% |
Convertible Notes (Details 2) - USD ($) |
12 Months Ended | |
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Nov. 30, 2017 |
Nov. 30, 2016 |
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Notes to Financial Statements | ||
Balance, Beginning of year | $ 977,000 | $ 229,000 |
Issuance | 86,000 | 1,303,000 |
Net unrealized gain/(loss) | 812,017 | (121,000) |
Conversion | (1,873,017) | (434,000) |
Balance at May 31, 2017 | $ 977,000 |
Convertible Notes (Details 4) - USD ($) |
12 Months Ended | |
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Nov. 30, 2017 |
Nov. 30, 2016 |
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Principal of conversion of debts | $ 4,983,883 | $ 196,117 |
Shares of conversion of debts | 1,650,379 | 118,128 |
Series A [Member] | ||
Principal of conversion of debts | $ 12,500 | $ 37,500 |
Shares of conversion of debts | 5,936 | 22,148 |
Series B [Member] | ||
Principal of conversion of debts | $ 55,000 | $ 100,000 |
Shares of conversion of debts | 27,995 | 51,111 |
Series C [Member] | ||
Principal of conversion of debts | $ 576,383 | $ 58,617 |
Shares of conversion of debts | 407,484 | 44,869 |
Series D [Member] | ||
Principal of conversion of debts | $ 160,000 | |
Shares of conversion of debts | 91,782 | |
Series E [Member] | ||
Principal of conversion of debts | $ 180,000 | |
Shares of conversion of debts | 76,455 | |
Secured Convertible Debenture [Member] | ||
Principal of conversion of debts | $ 4,000,000 | |
Shares of conversion of debts | 1,040,727 |
Note Payable (Details Narrative) - USD ($) |
12 Months Ended | ||
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Nov. 30, 2017 |
Aug. 31, 2017 |
Nov. 30, 2016 |
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Debt Disclosure [Abstract] | |||
Aggregate principal balance | $ 2,000 | $ 150,000 | |
Restricted shares issued | 15,000 | ||
Common stock for cash proceeds | $ 150,000 | ||
Common stock issued fair value | $ 15,000 | ||
Additional paid in capital | $ 52,000 |
Commitments and Contingencies (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | |
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Aug. 31, 2017 |
May 31, 2015 |
Aug. 31, 2017 |
Nov. 30, 2017 |
Nov. 30, 2016 |
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Research and development expenses | $ 7,500 | $ 18,000 | |||
Warrant Purchased | 100,000 | ||||
Exercise price | $ 3 | ||||
Common stock to a related party for advisory services | 6,399,585 | 3,301,114 | |||
General and administrative expenses | $ 20,000 | $ 1,260,000 | |||
License Agreement Mannin [Member] | |||||
Research and development expenses | 525,000 | $ 1,400,000 | |||
License Agreement Bio Nucleonics [Member] | |||||
Research and development expenses | $ 144,000 | $ 352,500 |
Related Party Transactions (Details) - USD ($) |
3 Months Ended | 12 Months Ended | ||
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Aug. 31, 2017 |
Aug. 31, 2016 |
Nov. 30, 2017 |
Nov. 30, 2016 |
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Related Party Transactions [Abstract] | ||||
Related party transaction | $ 117,500 | $ 112,132 | $ 360,000 | $ 215,375 |
Stockholders' Equity (Deficit) (Details Narrative) - $ / shares |
Nov. 30, 2017 |
Aug. 31, 2017 |
Nov. 30, 2016 |
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Disclosure Text Block [Abstract] | |||
Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 250,000,000 | 250,000,000 | 250,000,000 |
Preferred stock, par value | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 100,000,000 | 100,000,000 | 100,000,000 |
Warrants (Details 2) |
12 Months Ended |
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Nov. 30, 2017
USD ($)
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Notes to Financial Statements | |
Fair value of warrant liability at November 30, 2016 | $ 168,070 |
Issuance of new warrant liability | |
Change in fair value of warrant liability | 59,870 |
Reclassification of warrant liability to equity | (227,940) |
Fair value of warrant liability at May 31, 2017 |
Warrants (Details) |
12 Months Ended |
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Nov. 30, 2017
USD ($)
$ / shares
shares
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Warrants | |
Outstanding at November 30, 2016 | shares | 1,047,500 |
Issued | shares | 2,056,495 |
Exercised | shares | (20,000) |
Outstanding at November 30, 2017 | shares | 3,083,995 |
Exercisable at November 30, 2017 | shares | 2,323,245 |
Weighted Average Exercise Price | |
Outstanding at November 30, 2016 | $ 2.54 |
Issued | 4.25 |
Exercised | 3.50 |
Outstanding at May 31, 2017 | 3.67 |
Exercisable at May 31, 2017 | 3.56 |
Intrinsic Value | |
Outstanding at November 30, 2016 | 1,158,000 |
Issued | $ 512,960 |
Exercised | $ | $ 19,800 |
Outstanding at May 31, 2017 | $ 2,539,185 |
Exercisable at May 31, 2017 | $ 2,170,618 |
Weighted Average Remaning Contractual Life (years) | |
Outstanding at November 30, 2016 | 4 years 1 month 6 days |
Issued | 4 years 5 months 6 days |
Outstanding at May 31, 2017 | 4 years 7 days |
Exercisable at May 31, 2017 | 3 years 10 months 8 days |
Warrants (Details 1) - $ / shares |
12 Months Ended | |
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Nov. 30, 2017 |
Nov. 30, 2016 |
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Dividend yield | 0.00% | 0.00% |
Minimum [Member] | ||
Stock price | $ 3.40 | $ 1.60 |
Terms (years) | 1 year 9 months | 2 years |
Volatility | 129.64% | 101.13% |
Risk-free rate | 1.42% | 0.76% |
Maximum [Member] | ||
Stock price | $ 5.60 | $ 4.15 |
Terms (years) | 5 years | 5 years |
Volatility | 143.47% | 138.69% |
Risk-free rate | 2.14% | 1.83% |
Warrants (Details Narrative) - USD ($) |
12 Months Ended | |
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Nov. 30, 2017 |
Nov. 30, 2016 |
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Notes to Financial Statements | ||
General and administrative expenses | $ 6,122,565 | $ 3,637,868 |
Income Taxes (Details) - USD ($) |
Nov. 30, 2017 |
Nov. 30, 2016 |
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Deferred tax assets: | ||
Net-operating loss carryforward | $ 885,120 | $ 3,810,498 |
Stock-based compensation | 1,685,262 | 4,466,254 |
License agreement | 293,433 | 595,780 |
Tax amortization for license agreement | (102,747) | |
Charitable contributions | 387 | |
Total Deferred Tax Assets | 2,863,815 | 8,770,172 |
Valuation allowance | (2,863,815) | (8,770,172) |
Deferred Tax Asset, Net of Allowance |
Income Taxes Details 1) |
12 Months Ended | |
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Nov. 30, 2017 |
Nov. 30, 2016 |
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Income Tax Disclosure [Abstract] | ||
Statutory Federal Income Tax Rate | (3400.00%) | (3400.00%) |
State and Local Taxes, Net of Federal Tax Benefit | (1030.00%) | (470.00%) |
Loss on conversion of debt | 1.4 | 0.5 |
Gain/ loss on extinguishment of convertible note | 20.00% | (70.00%) |
Change in value of embedded conversion option and related accetion of interest expense | 440.00% | 160.00% |
Change in fair value of warrant liability | 20.00% | 0.00% |
Loss on modification of Private Placement Units | 0.00% | 20.00% |
Loss on issuance of convertible debt | 0.00% | 260.00% |
Non-U.S. operations | 30.00% | 0.00% |
Change in Valuation Allowance | 3780.00% | 3450.00% |
Income Taxes Provision (Benefit) | 0.00% | 0.00% |
Subsequent Events (Detail Narrative) - USD ($) |
12 Months Ended | ||||
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Nov. 30, 2017 |
Feb. 01, 2018 |
Oct. 16, 2017 |
Sep. 01, 2017 |
Nov. 30, 2016 |
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Subsequent Events [Abstract] | |||||
Convertible note to a third party | $ 100,000 | ||||
Aggregate shares | 1,711,875 | 500,000 | 31,000 | ||
Technology License and Purchase Option Agreement | $ 50,000 | ||||
Principal of Series E notes issued | 150,000 | ||||
Private Placement gross proceeds | 142,662 | ||||
Total cash payment | $ 100,000 |