Q BioMed Inc. - Quarter Report: 2022 February (Form 10-Q)

For the three months ended

February 28, 2022

February 28, 2021

Consulting and legal expenses

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: February 28, 2022

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

For the transition period from ____________ to _____________

Commission File Number: 000-55535

Q BIOMED INC.

(Exact name of registrant as specified in its charter)

Nevada	30-0967746
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

c/o Ortoli Rosenstadt LLP 366 Madison Avenue, 3rd Floor New York, NY 10017
(Address of principal executive offices)

(212) 588-0022
(Registrant’s telephone number, including area code)

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


Title of each class	Symbol	Name of each exchange on which registered
None	None	None

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

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


Common Stock, $0.001 par value	31,427,428 shares
(Class)	(Outstanding at April 11, 2022)

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Q BIOMED INC.

Table of Contents


		Page
PART I - FINANCIAL INFORMATION		3
Item 1. Condensed Consolidated Financial Statements (Unaudited)		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3. Quantitative and Qualitative Disclosure About Market Risk		21
Item 4. Controls and Procedures		21
PART II - OTHER INFORMATION		22
Item 1. Legal Proceedings		22
Item 1A. Risk Factors		22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		22
Item 3. Defaults Upon Senior Securities		22
Item 4. Mine Safety Disclosures		22
Item 5. Other Information		23
Item 6. Exhibits		23
SIGNATURES		24

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PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Q BIOMED INC.

Condensed Consolidated Balance Sheets


	As of February 28,		As of November 30,
	2022		2021
	(Unaudited)
ASSETS
Current assets:
Cash	$	137,183	$	344,009
Accounts receivable		27,708		80,097
Prepaid expenses and other current assets		36,035		35,374
Total current assets		200,926		459,480
Intangible assets, net		337,500		350,000
Total Assets	$	538,426	$	809,480

LIABILITIES AND STOCKHOLDERS‘ DEFICIT
Current liabilities:
Accounts payable	$	1,804,650	$	1,345,319
Accrued expenses		1,041,653		954,309
Accrued expenses - related party		71,500		71,500
Accrued interest payable		104,111		70,677
Debt		3,346,245		3,053,037
Total current liabilities		6,368,159		5,494,842
Total Liabilities		6,368,159		5,494,842

Commitments and Contingencies (Note 6)

Stockholders' Deficit:
Preferred stock, $0.001 par value; 100,000,000 shares authorized as of February 28, 2022 and November 30, 2021		—		—
Convertible Series A, 500,000 shares designated - 227,998 shares issued and outstanding at February 28, 2022 and November 30, 2021, respectively		2,160,181		2,161,195
Convertible Series B, 1,000,000 shares designated - 400,000 shares issued and outstanding at February 28, 2022 and November 30, 2021, respectively		3,913,734		3,915,512
Common stock, $0.001 par value; 250,000,000 shares authorized; 31,024,865 and 28,647,788 shares issued and outstanding as of February 28, 2022 and November 30, 2021, respectively		31,025		28,648
Additional paid-in capital		54,397,659		53,335,901
Accumulated deficit		(66,332,332)		(64,126,618)
Total Stockholders' Deficit		(5,829,733)		(4,685,362)
Total Liabilities and Stockholders' Deficit	$	538,426	$	809,480

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

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Q BioMed Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


	For the three months ended
	February 28, 2022		February 28, 2021
Net Sales	$	75,059	$	—
Cost of sales		73,945		40,593
Gross income (loss)		1,114		(40,593)
Operating expenses:
General and administrative expenses		1,096,300		2,137,332
Research and development expenses		69,268		173,430
Total operating expenses		1,165,568		2,310,762
Loss from operations		(1,164,454)		(2,351,355)
Other expenses:
Interest expense		414,377		50,125
Change in fair value of embedded derivatives		235,817		17,401
Loss on debt extinguishment		232,100		56,122
Settlement of registration liability		241,875		—
Total other expenses		1,124,169		123,648
Net loss		(2,288,623)		(2,475,003)
Accumulated dividend on convertible preferred stock		(122,808)		(136,393)
Net loss attributable to common stockholders	$	(2,411,431)	$	(2,611,396)

Net loss per share - basic and diluted	$	(0.08)	$	(0.11)

Weighted average shares outstanding, basic and diluted		29,594,999		24,644,761

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

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Q BIOMED INC.

Condensed Consolidated Statements of Changes in Shareholders’ Deficit

(Unaudited)



														Total
	Series A Preferred Stock			Series B Preferred Stock			Common Stock			Additional Paid		Accumulated		Stockholders‘
	Shares	Amount		Shares	Amount		Shares	Amount		in Capital		Deficit		Deficit
Balance as of December 1, 2021	227,998	$	2,161,195	400,000	$	3,915,512	28,647,788	$	28,648	$	53,335,901	$	(64,126,618)	$	(4,685,362)
Issuance of common stock and warrants for cash	—		—	—		—	400,000		400		99,630		—		100,030
Cash proceeds from warrants modification	—		—	—		—	—		—		20,000		—		20,000
Issuance common stock for dividend payment on preferred stock	—		(45,600)	—		(80,000)	277,877		278		125,322		—		—
Issuance of common stock to convert notes payable	—		—	—		—	1,577,648		1,578		1,052,369		—		1,053,947
Issuance of common stock to convert accrued liabilities	—		—	—		—	26,627		26		9,773		—		9,799
Accumulated dividend on preferred stock	—		44,586	—		78,222	—		—		(122,808)		—		—
Share based compensation for services	—		—	—		—	94,925		95		151,420		—		151,515
Share based compensation for warrants modification	—		—	—		—	—		—		17,019		—		17,019
Adoption of ASU 2020-06	—		—	—		—	—		—		(290,967)		82,909		(208,058)
Net loss	—		—	—		—	—		—		—		(2,288,623)		(2,288,623)
Balance as of February 28, 2022	227,998	$	2,160,181	400,000	$	3,913,734	31,024,865	$	31,025	$	54,397,659	$	(66,332,332)	$	(5,829,733)



														Total
	Series A Preferred Stock			Series B Preferred Stock			Common Stock			Additional Paid		Accumulated		Stockholders‘
	Shares	Amount		Shares	Amount		Shares	Amount		in Capital		Deficit		Deficit
Balance as of December 1, 2020	227,998	$	2,161,980	503,134	$	4,968,368	23,816,489	$	23,816	$	47,656,423	$	(55,886,068)	$	(1,075,481)
Issuance of common stock for cash	—		—	—		—	100,000		100		99,900		—		100,000
Issuance common stock for dividend payment on preferred stock	—		(45,600)	—		(100,627)	135,394		135		146,092		—		—
Issuance of common stock to convert notes payable	—		—	—		—	167,780		168		202,846		—		203,014
Issuance of common stock to convert Series B preferred stock	—		—	(103,134)		(1,031,340)	1,245,089		1,245		1,030,095		—		—
Issuance cost related to issuance of convertible notes	—		—	—		—	35,000		35		34,790		—		34,825
Beneficial conversion feature related to convertible notes	—		—	—		—	—		—		65,217		—		65,217
Accumulated dividend on preferred stock	—		44,586	—		91,807	—		—		(136,393)		—		—
Share based compensation for services	—		—	—		—	502,976		503		1,360,591		—		1,361,094
Net loss	—		—	—		—	—		—		—		(2,475,003)		(2,475,003)
Balance as of February 28, 2021	227,998	$	2,160,966	400,000	$	3,928,208	26,002,728	$	26,002	$	50,459,561	$	(58,361,071)	$	(1,786,334)

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

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Q BIOMED INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	For the three months ended
	February 28, 2022		February 28, 2021
Cash flows from operating activities:
Net loss	$	(2,288,623)	$	(2,475,003)
Adjustments to reconcile net loss to net cash used in operating activities
Share based compensation for services		151,515		1,361,094
Share based compensation related to warrants modification		17,019		—
Change in fair value of embedded conversion option		235,817		17,401
Accretion of debt discount		351,805		39,632
Amortization expense		12,500		12,500
Settlement on registration liability		241,875		—
Loss on debt extinguishment		232,100		56,122
Inventory write-off		—		33,093
Changes in operating assets and liabilities:
Accounts receivable		52,389		—
Prepaid expenses and other current assets		(661)		6,625
Inventory		—		(33,093)
Accounts payable and accrued expenses		583,974		201,880
Accrued interest payable		33,434		(37,272)
Net cash used in operating activities		(376,856)		(817,021)

Cash flows from financing activities:
Proceeds received from issuance of convertible notes, net		—		975,000
Proceeds received for issuance of common stock and warrants		100,030		100,000
Cash advances		50,000		—
Proceeds received for warrants modification		20,000		—
Net cash provided by financing activities		170,030		1,075,000

Net (decrease) increase in cash		(206,826)		257,979

Cash at beginning of the year		344,009		177,145
Cash at end of the year	$	137,183	$	435,124

Supplemental disclosures:
Cash paid for interest	$	—	$	—
Cash paid for income taxes	$	—	$	—

Supplemental disclosures for noncash investing and financing activities:
Issuance of common stock to convert notes payable and accrued interest	$	1,053,947	$	203,014
Issuance of common stock to convert Series B preferred stock	$	—	$	1,031,340
Accumulated dividend on convertible preferred stock	$	122,808	$	136,393
Issuance of common stock for dividend payment on preferred stock	$	125,600	$	146,226
Issuance of common stock to convert accrued liabilities	$	9,799	$	—
Adoption of ASU 2020-06	$	208,058
Beneficial conversion feature related to convertible notes	$	—	$	65,217

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

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

Note 1 - Organization of the Company and Description of the Business

Q BioMed Inc. (“Q BioMed”), and its wholly owned subsidiaries Q BioMed Cayman SEZC and QBMG Q BioMed Germany UG (collectively, “the Company”), is a biomedical acceleration and development company focused on licensing, acquiring and providing strategic resources to life sciences and healthcare companies. Q BioMed intends to mitigate risk by acquiring multiple assets over time and across a broad spectrum of healthcare related products, companies and sectors. The Company intends to develop these assets to provide returns via organic growth, revenue production, out-licensing, sale or the spinoff of new public companies.

The accompanying condensed consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Note 2 - Basis of Presentation and Going Concern

Basis of Presentation

The accompanying interim period unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. These condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended November 30, 2021 that was filed with SEC on February 28, 2022. Certain disclosures included in the annual financial statements have been condensed or omitted from these financial statements as they are not required for interim financial statements under U.S. GAAP and the rules of the SEC. These unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative of the operating results for a full year.

Going Concern

The accompanying condensed consolidated financial statements are prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has and is expected to incur net losses and cash outflows from operations in pursuit of extracting value from its acquired intellectual property. These matters, amongst others, raise doubt about the Company’s ability to continue as a going concern.

Management anticipates that the Company will have to raise additional funds and/or generate revenue from drug sales within twelve months to continue operations. Additional funding will be needed to implement the Company’s business plan that includes various expenses such as fulfilling our obligations under licensing agreements, legal, operational set-up, general and administrative, marketing, employee salaries and other related start-up expenses. Obtaining additional funding will be subject to a number of factors, including general market conditions, investor acceptance of our business plan and initial results from our business operations. These factors may impact the timing, amount, terms or conditions of additional financing available to us. If the Company is unable to raise sufficient funds, management will be forced to scale back the Company’s operations or cease its operations.

Management has determined that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the condensed consolidated financial statements are issued. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

COVID 19

The impact of the worldwide spread of a novel strain of coronavirus (“COVID-19”) has been unprecedented and unpredictable, but based on the Company’s current assessment, the Company does not expect any material impact on its long-term strategic plans, operations and its liquidity due to the worldwide spread of COVID-19. However, the Company is continuing to assess the effect on its

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

operations by monitoring the spread of COVID-19 and the actions implemented to combat the virus throughout the world and its assessment of the impact of COVID-19 may change.

The Impact of Russian Military Action in Ukraine

On February 24, 2022, Russian forces launched significant military action against Ukraine, which has resulted in conflict and disruption in the region. The Company is monitoring the conflict in Ukraine and any broader economic effects from the crisis. To date, the conflict between Russia and Ukraine has not had a material impact on the Company's business, financial condition, or result of operations.

Note 3 - Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended November 30, 2021 included in the Company’s Form 10-K.

Recent Accounting Standards

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

Recently Adopted Accounting Standards

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

Note 4 - Loss per share

Basic net loss per share was calculated by dividing net loss by the weighted-average shares of common stock outstanding during the period. Diluted net loss per share was calculated by dividing net loss by the weighted-average shares of common stock outstanding during the period using the treasury stock method or the two-class method, whichever is more dilutive. The table below

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

summarizes potentially dilutive securities that were not considered in the computation of diluted net loss per share because they would be anti-dilutive (amounts are rounded to nearest thousand).


Potentially dilutive securities	February 28, 2022	November 30, 2021
Series A convertible preferred stock	2,280,000	2,280,000
Series B convertible preferred stock	11,429,000	11,429,000
Common stock purchase warrants	12,152,000	11,752,000
Stock Options	4,450,000	4,450,000
Convertible Notes	4,659,000	4,898,000
Potentially dilutive securities	34,970,000	34,809,000

Note 5 - Debt

The table below summarizes outstanding debt as of February 28, 2022 and November 30, 2021 (amounts are rounded to nearest thousand):


	February 28, 2022		November 30, 2021
Convertible Notes Payable:
Principal value of 2021 Debentures	$	3,053,000	$	3,506,000
Fair value of bifurcated contingent put option		941,000		867,000
Debt discount		(698,000)		(1,320,000)
Convertible notes payable, net		3,296,000		3,053,000
Cash advances		50,000		—
Total debt	$	3,346,000	$	3,053,000

Convertible Notes Payable

February Debenture

On February 12, 2021, the Company issued a debenture for $0.5 million (the “February Debenture”) pursuant to a securities purchase agreement with an accredited investor dated February 12, 2021. The February Debenture may be converted at any time on or prior to maturity at the lower of $1.15 or 93% of the average of the four lowest daily VWAPs during the 10 consecutive trading days immediately preceding the conversion date, provided that as long as we are not in default under the 2020 Debenture, the conversion price may never be less than $1.00. The debenture has a maturity date of February 12, 2022, provided that in case of an event of default, the debenture may become at the holder’s election immediately due and payable. The debenture bears interest at the rate of 5.5% per annum, and on issuance, the Company paid to the holder a commitment fee equal to 2% of the amount of the debenture.

On January 21, 2022, the Company issued 1,055,000 shares of common stock to convert $0.5 million of outstanding debt and interest. The conversion price was reduced to $0.50. The Company recognized a loss on debt extinguishment of approximately $0.2 million as a result of the reduction of conversion price for the three months ended February 28, 2022.

July Debenture

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

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

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

issuance and at 130% of the sum of the outstanding principal amount, the accrued and unpaid interest on the unpaid principal amount and any Default Interest from 61 to 180 days after issuance.

The holder may convert the July Debenture in its sole discretion at any time on or prior to maturity at the lower of $1.00 or 85% of the average of the four (4) lowest VWAPs during the 20 Trading Days prior to the date of such calculation.

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

On February 9, 2022, the Company issued 522,648 shares of common stock to convert $0.2 million of outstanding debt.

September Debenture

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

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

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

However, in the event the Company’s Common Stock trades below $0.50 per share for more than ten (10) consecutive trading days, the Lender is entitled to convert all or any amount of the outstanding aggregate principal amount into shares of the Company’s Common Stock at a Conversion Price for each share of Common Stock equal to 85% of the average of the 4 lowest VWAP’s in the prior 20 trading days.

The fair value of the contingent put option in all outstanding debentures with the feature are revalued as of February 28, 2022 and November 30, 2021 based on the following weighted average key inputs:


	February 28, 2022			November 30, 2021
Strike price	$	0.64		$	0.71
Terms (years)		0.6			0.8
Volatility	$	0.86		$	0.71
Risk-free rate		0.7	%		0.2	%
Dividend yield		0	%		0	%

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

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements


Balance – December 1, 2021	$	867,000
Debt extinguishment		(162,000)
Change in fair value		236,000
Balance – February 28, 2022	$	941,000

Interest expense

Interest expense, included in the accompanying Condensed Consolidated Statements of Operations, is comprised of the following for each period presented (amounts are rounded to nearest thousand):


	For the three months ended
	February 28, 2022		February 28, 2021
Interest expense based on the coupon interest rate of the outstanding debt	$	61,000	$	10,000
Accretion of debt discount		352,000		40,000
Other		1,000		—
Total interest expense	$	414,000	$	50,000

Cash Advances

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

Note 6 - Commitments and Contingencies

Legal

Periodically, the Company reviews the status of significant matters, if any exist, and assesses its potential financial exposure. If the potential loss from any claim or legal claim is considered probable and the amount can be estimated, the Company accrues a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation.

On March 31, 2022, the Company received a complaint filed in the Court of Common Pleas in Buck County, Pennsylvania claiming that the Company had failed to pay approximately $106,000 in fees for services provided under two master services agreements that the Company entered into with the plaintiff. Under those agreements, the plaintiff was to have provided services in connection with the promotion of the Company's Strontium-89 product. The Company is analyzing how to respond to this recently received complaint.

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.

Lease Agreement

In December 2016, one of our subsidiaries entered into a lease agreement for its office space located in Cayman Islands for $30,000 per annum. The initial term of the agreement ended in December 2019, and the Company has renewed its office lease agreement for another three years with the same terms. This agreement does not identify a specific asset and does not convey the use of substantially all of the shared office capacity. As such, this agreement does not contain a lease under ASC 842. The Company recognizes monthly license payments as incurred over the term of the arrangement.

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

Rent expense is classified within general and administrative expenses on a straight-line basis.

Note 7 - Related Party Transactions

The Company entered into consulting agreements with certain management personnel and stockholders for consulting and legal services. Consulting and legal expenses resulting from such agreements were included within general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations as follows (amounts are rounded to nearest thousand):

Note 8 - Stockholders’ Deficit

As of February 28, 2022 and November 30, 2021, the Company is authorized to issue up to 250,000,000 shares of its $0.001 par value common stock and up to 100,000,000 shares of its $0.001 par value preferred stock.

Preferred Shares

The original issue price and the liquidation value per share, as of February 28, 2022, of each class of preferred stock is as follows:


	Original Issue Price		Liquidation Value
	Per Share		Per Share
Series A Preferred Share	$	10.00	$	10.20
Series B Preferred Share	$	10.00	$	10.20

During the three months ended February 28, 2022, the Company issued total 227,877 shares of common stock as dividend payment on Series A and Series B preferred stock.

The Company had accumulated dividends payable on the Preferred Shares of approximately $0.1 million as of February 28, 2022.

Common Shares

On February 14, 2022, the Company entered into a series of securities purchase agreements for the sale of 400,000 units at a $0.25 per unit sales price. The Company raised $100,000 in cash. Each unit consisted of one common share and one warrant to purchase one share of common stock at an exercise price of $0.50. The common warrants issued on February 22, 2022 have a fair value of $0.28 per share, see Note 9.

During the three months ended February 28, 2022, the Company issued 1,577,648 shares of common stock to convert $0.7 million of outstanding debt and interest.

During the three months ended February 28, 2022, the Company issued 26,627 shares of common stock to convert approximately $10,000 of accrued expenses.

During the three months ended February 28, 2022, the Company issued an aggregate of 94,925 shares of the Company’s common stock to various vendors for advisory services, valued at approximately $43,000 based on the estimated fair market value of the stock on the date of grant and was recognized within general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations.

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

Note 9 - Warrants and Options

Summary of warrants

The following represents a summary of all outstanding warrants to purchase the Company’s common stock, including warrants issued to vendors for services and warrants issued as part of the units sold in the private placements, at February 28, 2022 and December 1, 2021 and the changes during the period then ended (warrants amount and intrinsic value are rounded to nearest thousand):


				Weighted Average
				Remaining
		Weighted Average		Contractual
	Warrants	Exercise Price		Life (years)	Intrinsic Value
Outstanding at November 30, 2021	11,752,000		1.97	2.60	$	—
Issued	400,000		0.50	2.98		—
Forfeited/expired	—		—	—		—
Outstanding at February 28, 2022	12,152,000	$	1.89	2.4	$	—
Exercisable at February 28, 2022	12,152,000	$	1.89	2.4	$	—

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




	February 22, 2022
Strike price	$	0.50
Terms (years)		3.0
Volatility		126	%
Risk-free rate		1.7	%
Dividend yield		0.0	%

Modification of Warrants

On February 1, 2022, the Company modified an aggregated of 245,625 warrants (the “Warrants”) that were originally granted to certain investors and consultants. The exercise price of the Warrants was reduced to $0.65 per share and the maturity date of the Warrants were extended until August 1, 2024.

The Company received $20,000 cash from one of the investors as consideration for this modification. The Company immediately recognized approximately $17,000 incremental stock-based compensation on February 1, 2022 based on the following weighted average assumptions:


	After Modification			Before Modification
Strike price	$	0.65		$	2.33
Term (years)		2.5			2.1
Volatility		135	%		127	%
Risk-free rate		1.0	%		1.0	%
Dividend yield		0.0	%		0.0	%

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

Options Issued for Services

The following represents a summary of all outstanding options to purchase the Company’s common stock at February 28, 2022:


				Weighted Average
		Weighted Average		Remaining Contractual
	Options	Exercise Price		Life (years)	Intrinsic Value
Outstanding at November 30, 2021	4,450,000	$	1.13	4.0	$	1,000
Issued	—		—	—		—
Outstanding at February 28, 2022	4,450,000	$	1.13	3.1	$	—
Exercisable at February 28, 2022	4,000,000	$	1.21	2.9	$	—

Stock-based Compensation

The Company recognized general and administrative expenses of approximately $0.2 million and $1.4 million as a result of the shares, outstanding warrants and options issued to consultants and employees during the three months ended February 28, 2022 and 2021, respectively.

As of February 28, 2022, the estimated unrecognized stock-based compensation associate with these agreements is approximately $101,000 and will be fully recognized by November 30, 2022.

Note 10 - Subsequent Events

On March 4, 2022, the Company issued total 402,563 shares of common stock as dividend payment on Series A and Series B preferred stock.

On April 5, 2022, the Company modified an aggregated of 266,666 warrants (the “Warrants”) that were originally granted to certain investors on May 20, 2021. The exercise price of the Warrants was reduced from $1.25 per share to $0.65 per share.

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

Forward-Looking Statements

This Quarterly Report contains forward-looking statements about our business, financial condition and prospects that reflect management’s assumptions and beliefs based on information currently available. The expectations indicated by such forward-looking statements might not be realized. If any of our management’s assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, our actual results may differ materially from those indicated by the forward-looking statements.

The key factors that are not within our control and that may have a direct bearing on operating results include, but are not limited to, acceptance of our services, our ability to create and expand our customer base, managements’ ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry.

There may be other risks and circumstances that management may be unable to predict. When used in this Quarterly Report, words such as, “believes,” “expects,” “intends,” “plans,” “anticipates,” “estimates” and similar expressions are intended to identify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions.

Overview

Q BioMed Inc. (or “the Company”) was incorporated in the State of Nevada on November 22, 2013 and is a commercial stage biomedical acceleration and development company focused on licensing, acquiring and providing strategic resources to life sciences and healthcare companies. We intend to mitigate risk by acquiring multiple assets over time and across a broad spectrum of healthcare related products, companies and sectors. We intend to develop these assets to provide returns via organic growth, revenue production, out-licensing, sale or spin out.Our mission is to solve problems by accelerating the development of important therapies and availability of those therapies to patients.

The focus for 2022 is to monetize the current pipeline and build a platform for future growth. There are 4 areas of focus: commercial product revenue growth, partnerships, joint venture equity value and future development platform.

Commercial Product

We believe that Strontium89 has great potential in the cancer palliation space. As a result of a world in which opioids were a treatment of choice for those patients unlucky enough to be diagnosed with painful metastatic cancers in the bone, we felt that Strontium89 had become a neglected and forgotten drug. We have stayed committed to our belief that Strontium89 was a valuable treatment and have focused on advancing that asset from concept, a neglected drug, to a fully approved, reimbursed commercial product. Since we acquired Strontium89, we have built an infrastructure to commercialize the product, including manufacturing, branding, pharmacovigilance, reporting, federal supply contract, and entering into distribution agreements in the United States and several other countries. We believe that our last remaining investment is now focused on a sales team to promote the drug both in federal and non-government institutions and clinics. Revenue has started to grow even without a sales force fully deployed. Our recent partnership with a sales organization is in place, and once funded we plan to capitalize on the groundwork in place. We expect revenues to grow steadily and over the next 12-18 months.

We are also assessing additional products in nuclear medicine that could complement our infrastructure and provide additional revenue opportunities.

Partnership Opportunities

UTTROSIDE B – Liver Cancer Chemotherapeutic

Along with our developmental partners, we are advancing an innovative treatment for liver cancer, a disease indication that currently has a high unmet need. This molecule was identified in India, traditionally used to treat liver ailments. Subsequent research on that isolated molecule showed promising data, indicating that the molecule was more cytotoxic, killing cancer cells more effectively, in liver cancer cells lines than the current first line liver cancer chemotherapeutic. We have advanced this from a naturally occurring

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unsustainable plant product to a commercially viable and scalable synthetic drug candidate. This provides an opportunity to partner this asset with a larger oncology focused institution. Currently, there are only two approved first-line liver cancer therapies. We have received Orphan Drug Designation, and we are now preparing to advance this toward clinical partnership.

Development Platform – Rare Disease Focus

During 2022 we will focus our future development platform on the Rare Disease Space. This focusses our resources on an area in which we already have a presence. Our liver cancer drug candidate, Uttroside B, has already received Orphan Drug Designation. We expect to partner this asset in mid-2022 and will grow our development platform through in-licensing or acquisition.

This rare disease platform will also complement our early-stage treatment for young minimally verbal children on the Autism Spectrum. While our immediate focus is on the above-mentioned assets, we are also developing a new drug candidate to treat young children with pediatric minimally verbal autism. The advancement of this program will depend on the availability of funds and resources as we prioritize our clinical development milestones. There is no effective treatment available to help an estimated 250,000 children born with the condition worldwide each year, 20,000 of them in the United States. We are working on a discovery and development program to address this highly unmet need.

Corporate Strategic Goals

Our mission is to solve problems by accelerating the development of important therapies and the availability of those therapies to patients. We have been busy building a portfolio that we believe has significant value ranging from blockbuster potential drugs to revenue-producing opportunities.

Deeper Pipeline Review

Strontium-89 - FDA Approved Drug Launched

In January 2021, we announced that treatment with Strontium-89 in the hospital out-patient setting is fully reimbursed by Medicare. In March 2021, we were approved as a federal supplier which allows us to sell into federal hospital systems, notably the U.S. Department of Veteran Affairs and the U.S. Department of Defense. We have deployed a VA sales force, and we are preparing to launch an institutional contract sales force to increase our presence and uptake in non-government hospitals Revenue for our fiscal 2021, while still fairly low, is up by over 600% over our fiscal 2020. In January 2021, we received full reimbursement from Medicare and Medicaid, were approved as a federal supplier in March 2021, and engaged a federal sales team working mostly with the U.S Departments of Veterans’ Affairs, the Department of Defense and Indian Health Services. We have recently retained Eversana to partner on the institutional sales efforts and expect to deploy in field sales reps in 2022.

In mid-2020, we began the regulatory registration process for full commercial access in the European Union. These efforts have seen some delay due to Brexit related regulatory requirements. In parallel, we are midway through the registration process in many other countries. Due to some legacy data from previous owners not being available in current reporting standards to complete the filings, we have begun the process of creating our own source documents to complete the filings in non-US jurisdictions. We expect this to be complete in the first half of our fiscal 2022. We have already identified and contracted with a few international distribution partners in anticipation of approval in those countries.

Our sales for March, the start of our Q2, have already exceeded those of our Q2 revenue number and we recently received a $500,000 order from our distribution partner to supply the Chinese market, which we will begin fulfilling once all the required licenses and logistics are in place. We are encouraged by this growth in the absence of a field sales force, which we expect to deploy post funding.

We are assessing several potential clinical trial programs that may expand the indication beyond palliation into a therapeutic use that may increase utilization in years to come.

Mannin Platform Drugs for ARDS, Glaucoma, Kidney Diseases and others

In March 2021, our technology partner Mannin Research Inc. (Mannin) was granted an additional CAD$1.7 million from the Canadian governments COVID response budget, adding to the approximate $7.7 million granted in Europe, which together will fund 65-75 percent

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of every dollar incurred to advance the Acute Respiratory Distress Syndrome therapy for COVID patients as well as a portfolio of therapeutic assets for vascular diseases currently in development at Mannin, including: glaucoma, cardiovascular diseases, acute kidney disease, and other infectious diseases.

With the uptake of vaccines for COVID-19 growing, the infection numbers are still soaring around the world due to new variants and communities growing apathy and resistance to mandates and social restrictions. Together with Mannin Research Inc., our technology partner, we are pursuing a treatment for Acute Respiratory Distress Syndrome, the condition that causes the most severe symptoms in COVID patients usually resulting in hospitalization and death. The treatment is not dependent on targeting any specific viral variant but rather is virus agnostic, which we believe makes it an invaluable treatment for Corona viruses and other viral diseases like influenza, pneumonia and any future viral pandemic outbreaks.

The MAN-19 therapeutic is a recombinant fusion protein that treats the patient, instead of targeting the virus. It is not a cure for COVID-19, but it strengthens a patient’s blood vessels and protects them against ARDS, breathing problems, sepsis and other infections that may cause the body’s organs to begin shutting down. It is designed to keep COVID-19 or other ARDS patients out of the ICU and off a ventilator. Pending upcoming toxicology testing, we believe that clinical trials for the drug will start in 2022. If the drug proves both safe and effective, our goal is to have it available for use by patients by early 2023.

The market for this kind of treatment in the current pandemic climate is substantial and global. COVID-19 is not going away any time soon. As a result, there is a need to develop more effective treatments. We believe that this technology will play a role in the broader treatment landscape and not only for COVID-19, but also for other infectious diseases that cause ARDS.

GDF 15 Diagnostic for Glaucoma – In Clinical Trial and Product Development and FDA approval anticipated early 2022

In early 2019, we licensed a diagnostic biomarker known as GDF-15 for determining the severity of glaucoma from Washington University in St. Louis. . GDF15 is an attractive biomarker for glaucoma, with distinct advantages over conventional clinical tests and the potential to be a first-in-class diagnostic test. In collaboration with our development partners, we are developing a prototype for point of care In Vitro Diagnostic (IVD) device to detect GDF15 in clinical samples of aqueous humor. Our teams are generating, assessing, and applying DNA aptamers and DNAzymes to detect GDF15 in aqueous humor, to develop a prototype assay and diagnostic test strip for detection of GDF15 in clinical samples. This integrated and printable diagnostic will allow ophthalmologists to detect and monitor glaucoma progression in patients at their office without need for additional external or expensive equipment. In partnership with Mannin Research Inc. and McMaster University, we are nearing the completion of development of an IVD with both point-of-care (detection in a doctor’s office) as well as an external laboratory-based detection (i.e. for use in existing CLIA laboratories using existing diagnostic equipment). With appropriate funding, we anticipate completion of the IVD device and submission to the FDA (510K) for in vitro diagnostic approval in 2022.

UTTROSIDE B – Liver Cancer Chemotherapeutic

Along with our developmental partners, we are advancing an innovative treatment for liver cancer, a disease indication that currently has a high unmet need. Currently, there are only two approved first-line therapies. Uttroside-B was discovered in the leaf of the Black Nightshade plant in India. As it is not feasible to use the plant as the source for a drug, we successfully synthesized the molecule thereby creating an exact replica of the naturally occurring chemical compound. We have received Orphan Drug Designation and we are now preparing to advance this toward IND application with the FDA.

QBM-001 – Early Stage Treatment for young minimally verbal children on the Autism Spectrum

While our immediate focus is on the above-mentioned assets, we are also developing a new drug candidate to treat young children with pediatric minimally verbal autism. The advancement of this program will depend on the availability of funds and resources as we prioritize our clinical development milestones. There is no effective treatment available to help an estimated 250,000 children born with the condition worldwide each year, 20,000 of them in the United States. We are working on a discovery and development program to address this highly unmet need.

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Financial Overview

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities at the date of our condensed consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Other than as set out in Note 3 to our accompanying unaudited condensed consolidated financial statements, if anything, we believe there have been no significant changes in our critical accounting policies as described in the Form 10-K.

Unaudited Results of Operations for the three months ended February 28, 2022 and 2021:


	For the three months ended
	February 28, 2022		February 28, 2021		Change
Net Sales	$	75,059	$	—	$	75,059
Cost of sales		73,945		40,593		33,352
Gross income (loss)		1,114		(40,593)		41,707
Operating expenses:
General and administrative expenses		1,096,300		2,137,332		(1,041,032)
Research and development expenses		69,268		173,430		(104,162)
Total operating expenses		1,165,568		2,310,762		(1,145,194)
Loss from operations		(1,164,454)		(2,351,355)		1,186,901
Other (income) expenses:
Interest expense		414,377		50,125		364,252
Change in fair value of embedded derivatives		235,817		17,401		218,416
Loss on debt extinguishment		232,100		56,122		175,978
Settlement of registration liability		241,875		—		241,875
Total other expenses		1,124,169		123,648		1,000,521
Net loss	$	(2,288,623)	$	(2,475,003)	$	186,380

Net Sales

During the three months ended February 28, 2022, we recognized approximately $75,000 of revenue from sales of Strontium89. We didn’t have any sales for the same period in the prior year.

Cost of Sales

During the three months ended February 28, 2022 and 2021, we recognized approximately $74,000 and $41,000, respectively, in cost of sales. These costs were related to raw materials cost, manufacturing cost, distribution cost and write-offs of expired inventory.

The increase in cost of sales was due to more production and sales during the three months ended February 28, 2022 compared to the same period in the prior year.

Operating expenses

We incur various costs and expenses in the execution of our business. The decrease in operating expenses was mainly due to significantly less stock-based compensation recognized in the three months ended February 28, 2022 compared to the same period in

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the prior year. We recognized approximately $0.2 million and $1.4 million of stock-based compensation in general and administrative expense during the three months ended February 28, 2022 and 2021, respectively.

Interest expense

The following table summarizes interest expense incurred during the three months ended February 28, 2022 and 2021, respectively (amounts are rounded to nearest thousand):


	For the three months ended
	February 28, 2022		February 28, 2021
Interest expense based on the coupon interest rate of the outstanding debt	$	61,000	$	10,000
Accretion of debt discount		352,000		40,000
Other		1,000		—
Total interest expense	$	414,000	$	50,000

Change in fair value of embedded derivatives

We recognized a loss of approximately $236,000 and $17,000, resulting from the change in fair value of embedded contingent put options in convertible notes during the three months ended February 28, 2022 and 2021, respectively. The fluctuation is mainly due to the increased amount of outstanding convertible notes in 2022 and change of our stock price during the reporting periods.

Loss on debt extinguishment

We recognized a loss of approximately $232,000 and $56,000 due to the exchange of outstanding debentures for shares of common stock during the three months ended February 28, 2022 and 2021, respectively.

Settlement of registration liability

During the three months ended February 28, 2022, we entered into a Mutual Release Agreement with a holder of our convertible note, pursuant to which, the holder agreed to add the $241,875 registration payment liability to the outstanding principal amount. We recognized $241,875 in settlement of registration liability for the three months ended February 28, 2022.

Net loss

During the three months ended February 28, 2022 and 2021, we incurred net losses of approximately $2.3 million and $2.5 million, respectively. Our management expects to continue to incur net losses for the foreseeable future, due to our need to continue to establish a broader pipeline of assets, expenditure on R&D and to implement other aspects of our business plan.

Liquidity and Capital Resources

We prepared the accompanying condensed consolidated financial statements assuming that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.

We have not yet established an ongoing source of significant revenues and must cover our operating costs through debt and equity financings to allow us to continue as a going concern. We had approximately $137,000 in cash as of February 28, 2022. Our ability to continue as a going concern depends on the ability to obtain adequate capital to fund operating losses until we generate adequate cash flows from operations to fund our operating costs and obligations. If we are unable to obtain adequate capital, we could be forced to cease operations.

Our primary requirements for liquidity are to fund our working capital needs, capital expenditures and general corporate needs. Our ongoing capital expenditures are principally related to expanding revenue generating sales efforts and ongoing research and development costs. We estimate our capital expenditures will be approximately $6.0 million for the next 18 months period.

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We depend upon our ability, and will continue to attempt, to secure equity and/or debt financing. We cannot be certain that additional funding will be available on acceptable terms, or at all. Our management determined that there was substantial doubt about our ability to continue as a going concern within one year after the condensed consolidated financial statements were issued, and management’s concerns about our ability to continue as a going concern within the year following this report persist.

The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

Cash Flows

The following table sets forth the significant sources and uses of cash for the periods addressed in this report:


	For the three months ended
	February 28, 2022		February 28, 2021
Net cash (used in) provided by:
Operating activities	$	(376,856)	$	(817,021)
Financing activities		170,030		1,075,000
Net (decrease) increase in cash	$	(206,826)	$	257,979

Net Cash Used in Operating Activities

During the three months ended February 28, 2022, operating activities used $0.4 million of cash, resulting from a net loss of $2.3 million, partially offset by $0.2 million of share-based compensation, change in fair value of embedded conversion options of $0.2 million, settlement on registration liability of approximately $0.2 million, loss on debt extinguishment of approximately $0.2 million, and non-cash interest expense resulting from accretion of debt discounts of $0.4 million and changes in our operating assets and liabilities of approximately $0.7 million.

During the three months ended February 28, 2021, operating activities used $0.8 million of cash, resulting from a net loss of $2.5 million, partially offset by $1.4 million of share-based compensation, change in fair value of embedded conversion options of $17,000, loss on debt extinguishment of $56,000, and non-cash interest expense resulting from accretion of debt discounts of $40,000 and changes in our operating assets and liabilities of approximately $0.1 million.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the three months ended February 28, 2022 and February 29, 2021 was $0.2 million and $1.1 million, respectively. The net cash provided in the 2022 period relates to proceeds received from the issuance of common stock and warrant, warrants modification and cash advances. The net cash provided in the 2021 period relates to proceeds received from the issuance of common stock and debentures.

Commitments and Contingencies

Legal

Periodically, we review the status of significant matters, if any exist, and assesses its potential financial exposure. If the potential loss from any claim or legal claim is considered probable and the amount can be estimated, we accrue a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and litigation.

On March 31, 2022, we received a complaint filed in the Court of Common Pleas in Buck County, Pennsylvania claiming that we had failed to pay approximately $106,000 in fees for services provided under two master services agreements that we entered into with the plaintiff. Under those agreements, the plaintiff was to have provided services in connection with the promotion of our Strontium-89 product. We are analyzing how to respond to this recently received complaint.

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Advisory Agreements

We entered into customary consulting arrangements with various counterparties to provide consulting services, business development and investor relations services, pursuant to which we agreed to issue shares of common stock as services are received.

Lease Agreement

In December 2016, we entered into a lease agreement for office space located in Cayman Islands for $30,000 per annum. The initial term of the agreement ended in December 2019 and has been further renewed for another three years. This agreement does not identify a specific asset and does not convey the use of substantially all of the shared office capacity. As such, this agreement does not contain a lease under ASC 842. We recognize monthly license payments as incurred over the term of the arrangement.

Rent expense is classified within general and administrative expenses on a straight-line basis.

Related Party Transactions

We entered into consulting agreements with certain management personnel and stockholders for consulting and legal services. Consulting and legal expenses resulting from such agreements were included within general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations as follows (amounts are rounded to nearest thousand):


	For the three months ended
	February 28, 2022		February 28, 2021
Consulting and legal expenses	$	105,000	$	105,000

Item 3. Quantitative and Qualitative Disclosure About Market Risk

This item is not applicable as we are currently considered a smaller reporting company.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended February 28, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer has concluded that during the period covered by this report, our disclosure controls and procedures were not effective as of February 28, 2022, because of material weaknesses in our internal control over financial reporting relating to segregation of duties, lack of in-house personnel with sufficient experience with US GAAP to address complex transactions and lack of oversight over our external financial reporting and internal control over financial reporting as we do not have an audit committee in place.

The material weaknesses described in our Form 10-K for the year ended November 30, 2021, filed on February 28, 2022, remain as of the filing of this Form 10-Q. In addition, during the quarter ended February 28, 2022, we did not properly account for the conversion of an outstanding debt, which resulted to a material weakness, because our control around the accounting for this type of complex financial instrument was not effectively designed or maintained. This material weakness could result in a misstatement of additional paid-in capital, the reported amount of loss on conversion and disclosures that would result in a material misstatement of the financial statements that would not be prevented or detected on a timely basis.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

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We do not have an Audit Committee; our board of directors currently acts as our Audit Committee. Only one of our three directors is an independent director, and none of our directors is considered a “Financial Expert,” within the meaning of Section 407 of the Sarbanes-Oxley Act. We have interviewed additional potential independent directors, but have not engaged any.

Changes in internal controls over financial reporting

There were no changes in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. We plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. We have engaged accounting and compliance consultants to review our internal controls over financial reporting and other compliance requirements.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

As a Smaller Reporting Company, we are not required to provide this information.

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

On December 2, 2021, we issued 277,877 shares of Common Stock for dividends payment on preferred stock.

Between January and February, 2022, we issued 1,577,648 shares of Common Stock upon the conversion of $0.7 million convertible notes and accrued interest.

On February 14, 2022, we issued 400,000 shares for $100,000 to accredited investors.

During February 2022, we issued 121,552 shares of Common Stock in exchange for services rendered by third parties.

The issuance of the Securities mentioned above, if any, qualified for the exemption from registration continued in section 4(a) of the securities act of 1933.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number		Name and/or Identification of Exhibit
31.1		Rule 13a-14(a)/15d-14(a) Certifications
32.1		Certification under Section 906 of the Sarbanes-Oxley Act (18 U.S.C. Section 1350)
101		Interactive Data File
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)

Table of Contents

SIGNATURES

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


	Q BIOMED INC.
Dated: April 14, 2022	By:	/s/ Denis Corin
		Denis Corin
		President, Chief Executive Officer, Acting Principal Accounting Officer, Principal Financial Officer