0001424884-16-000254.txt : 20161017 0001424884-16-000254.hdr.sgml : 20161017 20161017150058 ACCESSION NUMBER: 0001424884-16-000254 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 50 CONFORMED PERIOD OF REPORT: 20160831 FILED AS OF DATE: 20161017 DATE AS OF CHANGE: 20161017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Q BioMed Inc. CENTRAL INDEX KEY: 0001596062 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 464013793 FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55535 FILM NUMBER: 161938768 BUSINESS ADDRESS: STREET 1: 501 MADISON AVE. STREET 2: 14TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 212-588-0022 MAIL ADDRESS: STREET 1: 501 MADISON AVE. STREET 2: 14TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: ISMO Tech Solutions, Inc. DATE OF NAME CHANGE: 20140107 10-Q 1 form10-q.htm form10-q.htm
 
 



 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

 
 
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: August 31, 2016
 
Or
 
[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
 
Commission File Number: 000-55535
 
 Q BIOMED INC.
(Exact name of registrant as specified in its charter)
 
Nevada
46-4013793
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
   
c/o Sanders Ortoli Vaughn-Flam Rosenstadt LLP
501 Madison Ave. 14th Floor
New York, NY10022
(Address of principal executive offices)
   
(212) 588-0022
(Registrant's telephone number, including area code)
 
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes    No

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

Large accelerated filer  
Accelerated filer                   
Non-accelerated filer      (Do not check if a smaller reporting company)
Smaller reporting company  

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
9,084,253 shares
(Class)
(Outstanding as at [xx], 2016)

 
 

 

Q BIOMED INC.
Quarterly Report
 
Table of Contents


   
 
Page
PART I – FINANCIAL INFORMATION
2
Item 1. Financial Statements
2
    Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation
12
Item 3. Quantitative and Qualitative Disclosure About Market Risk
16
Item 4. Controls and Procedures
17
PART II – OTHER INFORMATION
17
Item 1. Legal Proceedings
17
Item 1A. Risk Factors
17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
17
Item 3. Defaults Upon Senior Securities
18
Item 4. Mine Safety Disclosures
18
Item 5. Other Information
18
Item 6. Exhibits
18
SIGNATURES
19

 
 


























 
1

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Q BIOMED INC.
Condensed Balance Sheets
(Unaudited)

             
   
August 31, 2016
   
November 30, 2015
 
ASSETS
           
Current assets:
           
Cash
  $ 137,986     $ 131,408  
Prepaid expenses
    10,000       -  
Total current assets
    147,986       131,408  
Total Assets
  $ 147,986     $ 131,408  
                 
 LIABILITIES AND STOCKHOLDERS' EQUITY DEFICIT
               
Current Liabilities:
               
Accounts payable and accrued expenses
  $ 422,395     $ 58,802  
Accrued expenses - related party
    40,000       30,000  
Accrued interest payable
    27,925       2,511  
Convertible notes payable (See Note 5)
    787,378       -  
Total current liabilities
    1,277,698       91,313  
                 
Long-term Liabilities:
               
Convertible notes payable (See Note 5)
    476,907       296,000  
Total long term liabilities
    476,907       296,000  
Total Liabilities
    1,754,605       387,313  
                 
Commitments and Contingencies (Note 6)
               
                 
Stockholders' Equity Deficit:
               
Preferred stock, $0.001 par value; 100,000,000 shares authorized; no shares issued and outstanding as of August 31, 2016 and November 30, 2015
    -       -  
Common stock, $0.001 par value; 250,000,000 shares authorized; 8,996,753 and 8,597,131 shares issued and outstanding as of August 31, 2016 and November 30, 2015, respectively
    8,997       8,597  
Additional paid-in capital
    4,328,750       865,690  
Accumulated deficit
    (5,944,366 )     (1,130,192 )
Total Stockholders' Equity Deficit
    (1,606,619 )     (255,905 )
Total Liabilities and Stockholders' Equity Deficit
  $ 147,986     $ 131,408  

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

  


 
2

 

Q BIOMED INC.
Condensed Statements of Operations
(Unaudited)
                         
                         
   
For the three months ended August 31,
   
For the nine months ended August 31,
 
   
2016
   
2015
   
2016
   
2015
 
Operating expenses:
                       
General and administrative expenses
  $ 1,150,964     $ 33,202     $ 3,637,868     $ 45,184  
Research and development expenses
    443,222       -       663,500       -  
Total operating expenses
    1,594,186       33,202       4,301,368       45,184  
                                 
Other (income) expense:
                               
Interest expense
    114,847       -       304,596       -  
Loss on conversion of debt
    29,032       -       89,210       -  
Loss on issuance of convertible debt
    28,000       -       481,000       -  
Change in fair value of embedded conversion option
    (50,000 )     -       (362,000 )     -  
Total other expenses
    121,879       -       512,806       -  
                                 
Net loss
  $ (1,716,065 )   $ (33,202 )   $ (4,814,174 )   $ (45,184 )
                                 
Net loss per share - basic and diluted
  $ (0.19 )   $ (0.00 )   $ (0.55 )   $ (0.00 )
                                 
Weighted average shares outstanding, basic and diluted
    8,909,414       9,801,630       8,784,373       9,062,044  


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


 

 
3

 

Q BIOMED INC.
Condensed Statements of Cash Flows
(Unaudited)

 
             
   
For the nine months ended August 31,
 
   
2016
   
2015
 
Cash flows from operating activities:
           
Net loss
  $ (4,814,174 )   $ (45,184 )
Adjustments to reconcile net loss to net cash used in operating activities
               
Issuance of common stock and warrants for services
    3,039,277       32,000  
Change in fair value of embedded conversion option
    (362,000 )     -  
Accretion of debt discount
    261,672       -  
Loss on conversion of debt
    89,210       -  
Loss on issuance of convertible debt
    481,000       -  
Changes in operating assets and liabilities:
               
Accounts payable and accrued expenses
    363,593       484  
Accrued expenses - related party
    40,000       -  
Accrued interest payable
    42,925       -  
Prepaid expenses
    (10,000 )     -  
Net cash used in operating activities
    (868,497 )     (12,700 )
                 
Cash flows from financing activities:
               
Contributed capital
    -       151  
Proceeds received from issuance of convertible notes
    815,000       -  
Proceeds received from issuance of common stock and warrants
    60,075       -  
Net cash provided by financing activities
    875,075       151  
                 
Net increase (decrease) in cash
    6,578       (12,549 )
                 
Cash at beginning of period
    131,408       12,649  
Cash at end of period
  $ 137,986     $ 100  
                 
Non-cash financing activities:
               
Issuance of common stock upon conversion of convertible notes payable
  $ 244,897     $ -  
Issuance of warrants to settle accounts payable to related party
  $ 30,000     $ -  
                 
Cash paid for interest
  $ -     $ -  
Cash paid for income taxes
  $ -     $ -  

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

 

 
4

 

Q BIOMED INC.
Notes to Financial Statements
(Unaudited)

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

Q BioMed Inc. (“Q BioMed” or “the Company”) (formerly ISMO Tech Solutions, Inc.), 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.

Note 2 - Basis of Presentation

The accompanying interim period unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles 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. The Condensed Balance Sheet as of August 31, 2016, the Condensed Statements of Operations for the three and nine months ended August 31, 2016 and 2015, and the Condensed Statements of Cash Flows for the nine months ended August 31, 2016 and 2015, are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of its financial position, operating results and cash flows for the periods presented. The Condensed Balance Sheet at November 30, 2015 has been derived from audited financial statements included in the Company's Form 10-K, most recently filed with the SEC on March 11, 2016 (as amended on March 15, 2016 solely to include interactive data files, the “Form 10-K”). The results for the three and nine months ended August 31, 2016 are not necessarily indicative of the results expected for the full fiscal year or any other period.

The accompanying interim period unaudited condensed financial statements and related financial information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K.

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 or separate business entities.

Going Concern

The Company had a working capital deficit of approximately $1.1 million as of August 31, 2016. The accompanying condensed financial statements are prepared using U.S. GAAP applicable to 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 $1.7 million and $4.8 million during the three and nine months ended August 31, 2016, respectively, and had net cash used in operating activities of approximately $870,000 during the nine months ended August 31, 2016.  These matters, among others, raise substantial doubts about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern depends on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

The Company depends upon its ability, and will continue to attempt, to secure equity and/or debt financing.  The Company might not be successful, and without sufficient financing it would be unlikely for the Company to continue as a going concern.  The accompanying 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.
 
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, 2015 included in the Company’s Form 10-K. Since the date of such financial statements, there have been no changes to the Company’s significant accounting policies.

Recent accounting pronouncements

Management does not believe that any recently issued, but not yet effective or adopted, accounting standards if currently adopted would have a material effect on the accompanying financial statements.


 
5

 


 
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.
 
Potentially dilutive securities
August 31, 2016
August 31, 2015
Warrants (Note 8)
                                 976,500
                                           -
Convertible debt (Note 4)
                                 506,757
                                           -


Note 5 – Convertible Notes
   
August 31, 2016
   
November 30, 2015
 
Series A Notes:
           
Principal value of 10%, convertible at $1.91 and $1.92 at August 31, 2016 and November 30, 2015, repectively.
  $ 37,500     $ 50,000  
Fair value of bifurcated embedded conversion option of Series A Notes
    30,000       64,000  
Debt discount
    (10,101 )     (28,832 )
Carrying value of Series A Notes
    57,399       85,168  
                 
Series B Notes:
               
Principal value of 10%, convertible at $1.91 and $1.92 at August 31, 2016 and November 30, 2015, repectively.
  $ 55,000     $ 50,000  
Fair value of bifurcated embedded conversion option of Series B Notes
    44,000       64,000  
Debt discount
    (28,362 )     (34,744 )
Carrying value of Series B Notes
    70,638       79,256  
                 
Series C Notes:
               
Principal value of 10%, convertible at $1.55 at August 31, 2016 and November 30, 2015.
    576,383     $ 85,000  
Fair value of bifurcated embedded conversion option of Series C Notes
    725,000       101,000  
Debt discount
    (343,447 )     (54,424 )
Carrying value of Series C Notes
    957,936       131,576  
                 
Series D Notes:
               
Principal value of 10%, convertible at $1.85 at August 31, 2016.
  $ 160,000     $ -  
Fair value of bifurcated embedded conversion option of Series D Notes
    177,000       -  
Debt discount
    (158,688 )     -  
Carrying value of Series D Notes
    178,312       -  
Total short-term carrying value of convertible notes
  $ 787,378     $ -  
Total long-term carrying value of convertible notes
  $ 476,907     $ 296,000  


 
6

 
 
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.

Series B Notes
 
The Series B convertible notes payable (the “Series B Notes”) have the same terms as the Series A Notes.  During the nine months ended August 31, 2016, the Company issued an additional of $105,000 in principal of Series B notes to third party investors.

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.  At no point since issuance has the conversion rate fallen below $1.25 per share.

During the nine months ended August 31, 2016, the Company issued an additional of $550,000 in principal of Series C notes to third party investors.

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.

The terms of the Series D Note 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 is more favorable to such investor in relation to the Series D note holders, unless, the Series D note holders has been provided with such rights and benefits.

On September 30, 2016, the Company amended the terms of the Series D Note agreement to restrict the Company from taking dilutive action without the Series D note holder’ consent.

During the nine months ended August 31, 2016, the Company issued $160,000 in principal of Series D notes to third party investors.

Debt Discount

Series A, B and C, D Notes

In connection with the issuance of the Series A, B, C and D Notes during the nine months ended August 31, 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 convertible note issued during the nine months ended August 31, 2016, with the following key inputs:

 
7

 

 
Embedded derivatives at inception
           
   
For the nine months ended August 31, 2016
   
For the year ended November 30, 2015
 
Stock price
  $ 2.60 - $3.26     $ 2.02 - $3.55  
Terms (years)
    1.5       1.25 - 1.5  
Volatility
    116.77 %     108.40% - 162.89 %
Risk-free rate
    0.51% - 0.76 %     0.66% - 0.85 %
Dividend yield
    0.00 %     0.00 %

 
During the nine months ended August 31, 2016, the Company recognized interest expense of approximately $262,000 resulting from amortization of the debt discount for Series A, B, C and D Notes. 

Embedded conversion options

As of August 31, 2016, the embedded conversion options have an aggregate fair value of approximately $976,000 and are presented on a combined basis with the related loan host in the Company’s Condensed Balance Sheets.  The table below presents changes in fair value for the embedded conversion options, which is a Level 3 fair value measurement:
Rollforward of Level 3 Fair Value Measurement for the Nine Months Ended August 31, 2016
   
                 
Balance at November 30, 2015
 
Issuance
 
Net unrealized gain/(loss)
 
Settlements
 
Balance at August 31, 2016
                                           229,000
 
            1,231,000
 
             (362,000)
 
             (122,000)
 
                                     976,000

Management used a binomial valuation model, with fourteen steps of the binomial tree, to estimate the fair value of the embedded conversion option at August 31, 2016, with the following key inputs:
 
Embedded derivatives at period end
           
   
As of
 
   
August 31, 2016
   
November 30, 2015
 
Stock price
  $ 3.15     $ 3.55  
Term (years)
    0.68 - 1.3       1.26 - 1.49  
Volatility
    115.76 %     108.4% - 121.62 %
Risk-free rate
    0.61% - 0.80 %     0.94 %
Dividend yield
    0.00 %     0.00 %
 
Conversions of debt
 
The following conversions of convertible notes occurred during the nine months ended August 31, 2106:

Conversion of debt
           
             
   
Principal
   
Shares
 
Series A conversions
  $ 12,500       5,734  
Series B conversions
    100,000       51,111  
Series C conversions
    58,617       44,869  
Series D conversions
    -       -  
Total
  $ 171,117       101,714  
 
As the embedded conversion option had been separately measured at fair value, the conversion of the loan host was recognized as an extinguishment of debt.  The Company recorded a loss on conversion of debt of approximately $89,000 as the difference between the carrying value of the debt and the bifurcated conversion option with the fair value of the common stock issued on each conversion date.


 
8

 
 
 
Events of default
 
The Company will be in default of the convertible notes payable, and all amounts outstanding will become immediately due and payable upon: (i) maturity, (ii) any bankruptcy, insolvency, reorganization, cessation of operation, or liquidation events, (iii) if any money judgement, writ or similar process filed against the Company for more than $150,000 remains unvacated, unbonded or unstayed for a period of twenty (20) days, (iv) the Company fails to maintain the listing of the common stock on at least one of the OTC markets or the equivalent replacement exchange, (v) the Company’s failure to maintain any material intellectual property rights, personal, real property or other assets that are necessary to conduct its business, (vi) the restatement of any financial statements filed with the U.S. Securities and Exchange Commission (“SEC”) for any period from two years prior to the notes issuance date and until the notes are no longer outstanding, if the restatement would have constituted a material adverse effect of the rights of the holders of the notes, (vii) the Company effectuates a reverse stock split of its common stock without twenty (20) days prior written notice to the notes’ holders, (viii) in the event that the Company replaces its transfer agent but fails to provide, prior to the effective date, a fully executed irrevocable transfer agent instructions signed by the successor transfer agent and the Company, (ix)  in the event that the Company depletes the share reserve and fails to increase the number of shares within three (3) business days, (x) if the Company fails to remain current in its filings with the SEC for more than 30 days after the filing deadline, (xi) after 12 months following the date the Company no longer deems itself a shell company as reflected in a ’34 Act filing, the Lenders are unable to convert the notes into free trading shares, and (xii) upon fundamental change of management.

The Company is currently not in default for any convertible notes issued.

Note 6 – Commitments and Contingencies

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 136,000 shares of common stock from September 1, 2016 through the term of arrangements.

License Agreement

Mannin

Pursuant to the license agreement with Mannin as disclosed in the Form 10-K, the Company has an option to purchase the 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 three and nine months ended August 31, 2016, the Company incurred approximately $443,000 and $664,000 in research and development expenses to fund the costs of development of the eye drop treatment for glaucoma pursuant to the Exclusive License.  As of August 31, 2016, the Company has funded an aggregate of approximately $1.26 million under the Exclusive License.

In the event that: (i) the Company does not exercise the option to purchase the 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 IP, all 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.

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.


 
9

 
 
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 approximately $200,000 and $27,000 for the nine months ended August 31, 2016 and 2015, respectively, and were included within general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations.
Note 8 - Stockholders’ Equity Deficit

As of August 31, 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.

Issued for services

During the nine months ended August 31, 2016, the Company issued an aggregate of 259,150 shares of common stock in connection with the advisory agreements as described in Note 6, and five-year warrants to purchase 550,000 shares of common stock at exercise prices ranging from of $1.45 to $3.00 per share for other services. The warrants vest 25% per quarter over the next year and were valued at $650,000 using the Black-Scholes option-valuation model with 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 director and general counsel of the Company to purchase an aggregate of 300,000 shares of common stock at strike prices ranging from $1.45 to $4.15 per share.  The warrants were valued at $860,000 using the Black-Scholes option-valuation model with inputs described in Note 9.  The warrants were issued for services and settlement of a $30,000 in accounts payable.  

The Company recognized general and administrative expenses of approximately $3 million and $32,000, as a result of these transactions, of which approximately $860,000 and $29,000 resulted from related party transactions, during the nine months ended August 31, 2016 and 2015, respectively.

The estimated unrecognized stock-based compensation associated with these agreements is approximately $994,000 and will be recognized over the next 0.3 year.

Private Placement

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 such investor (“May 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 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 investor an additional 12,258 shares of common stock according to the agreement.


 
10

 
 
Note 9 - Warrants

The following represents a summary of outstanding warrants to purchase the Company’s common stock at August 31, 2016 and changes during the period then ended:

               
Weighted Average
 
         
Weighted Average
   
Remaning Contractual
 
   
Warrants
   
Exercise Price
   
Life (years)
 
Outstanding at November 30, 2015
    100,000     $ 2.18       4.80  
Issued
    876,500       2.46       4.56  
Expired
    -       -       -  
Outstanding at August 31, 2016
    976,500     $ 2.43       4.51  
Exercisable at August 31, 2016
    564,000     $ 2.98       4.33  
 
 Fair value of the warrants was calculated using the Black-Scholes option-valuation model, with the following key inputs:
 
       
   
For the nine months ended August 31, 2016
 
Stock price
    $1.60 - $4.15  
Term (years)
    2 - 5  
Volatility
    101.13% - 147.36 %
Risk-free rate
    0.76% - 1.76 %
Dividend yield
    0.00 %

Note 10 – Subsequent Events

Bio-Nucleonics

On September 6, 2016, the Company entered into the Patent and Technology License and Purchase Option Agreement (“Patent and Technology License and Purchase Option Agreement”) 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 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 pay to BNI the total cash payment of $850,000, of which the Company has paid $10,000 as of August 31, 2016.  Once the Company has paid the aggregate cash payment, the Company may exercise its option to acquire the BNI IP at no additional charge.  The Company issued 50,000 shares of common stock to BNI pursuant to the Patent and Technology License and Purchase Option Agreement in September 2016.

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 we 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.

Series E Notes
 
The Series E convertible notes payable (the “Series E Notes”) have the same terms as the Series D Notes, except that 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.  Subsequent to August 31, 2016, the Company issued $150,000 in principal of Series E notes to third party investors.

Private Placement

In September 2016, the Company entered into a subscription agreement with certain investors in connection with the Company’s private placement (“September Private Placement”), generating gross proceeds of $112,500 by selling 37,500 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.
 
Finder’s Agreement

In October 2016, the Company entered into two agreements to engage two financial advisors to assist the Company on its search for potential investors, vendors or partners to engage in a license, merger, joint venture or other business arrangement. As a compensation for their efforts, the Company agreed to pay the financial advisors a fee equal to 7% and 8% in cash, and to pay one of the financial advisors an additional fee equal to 7% in warrants of all consideration received by the Company.  The Company has not incurred any finders’ fees pursuant to the agreement to-date.

 
11

 

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 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”) (formerly ISMO Tech Solutions, Inc.) was incorporated in the State of Nevada on November 22, 2013 and is a 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.

Recent Developments

Acquisition of license right

On September 6, 2016, we announced the closing of a definitive agreement to exclusively license worldwide and ultimately acquire all the assets from a private company related to an FDA approved generic drug for the treatment of pain associated with metastatic bone cancer, Strontium Chloride (“SR89”).

This licensed radiopharmaceutical agent is indicated for the treatment of pain associated with metastatic bone cancer. SR89 provides long lasting relief for patients suffering from bone pain due to metastatic cancer, typically caused by advanced-stage breast, prostate or lung cancer. The drug is preferentially absorbed in bone metastases, it has been proven to provide a long-term effect resulting in non-­narcotic cancer pain relief and enhanced quality of life.  

Our immediate efforts and resources will focus on the material procurement and manufacturing process as well as preparing the marketing plan and distribution strategy. This drug is expected to be revenue ready within a short time frame and we aim to generate sales within the first year.

We will make every effort to make this drug as widely available as possible and ensure that the drug will be priced competitively at a cost to patients that is lower than what they are currently paying. In the current environment of skyrocketing drug and medical costs, we believe this is a welcome deviation from the recent headlines.

There are approximately 300,000 new cases of bone metastases in patients with breast and lung cancer per year in the U.S. alone.  Approximately 80% of patients using SR89 have reported experiencing a substantial decrease in pain, an increase in physical activity and a reduction in the need for opiate analgesics, such as morphine.

Further, we believe there is an opportunity to invest additional resources into the program to grow the revenue potential significantly. We look forward to making additional details available as soon as practical.

Mannin License Update

Additionally, Mannin Research Inc. our technology partner company focused on drug candidate MAN-01 for treatment of Primary Open Angle Glaucoma (POAG), has initiated pre-clinical lead candidate optimization of a small molecule for topical application. Lead candidate selection is progressing on-time and on-budget. The topical application in the form of an easy to administer eye drop is a key differentiator for Mannin and aims to solve the compliance problems and invasive procedures currently available to patients suffering from glaucoma.


 
12

 
 
 
Mannin is continuing its focus on research and discovery on the biology of Tie2/TEK signaling and its relationship with Schlemm’s Canal function and regulation of intra-ocular pressure. Additional data sets and IP have been developed around this novel mechanism of action.  Mannin is evaluating strategic partnerships opportunities to grow its intellectual property portfolio within the Tie2/TEK signaling market, and is seeking complementary technologies to strengthen its product pipeline. We are pleased with the progress Mannin research teams have achieved over the past three months. Recent work in the lab underscores the essential role of the Mannin platform in the development of the anterior chamber of the eye – which contain the structures needed to maintain safe levels of intraocular pressure.

Mannin and Q BioMed executives attended the BIO International Convention (BIO 2016) in June 2016. BIO 2016 attracts over 15,000 biotechnology and pharma leaders where we explored co-development opportunities and promising partnerships with prominent players in the ophthalmology space as well as new technology and product opportunities that may fit within the Q BioMed pipeline.

Over the past 12 months and into this quarter, we have been conducting due diligence on several potential assets that we feel will potentially deliver significant value to our pipeline and ultimately benefit the patients we aim to treat.
 
Financial Overview

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

This management’s discussion and analysis of our financial condition and results of operations is based on our 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 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 in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments, research and development costs, accrued expenses and stock-based compensation. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Other than as set out in Note 3 to our accompanying unaudited condensed financial statements 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 August 31, 2016 and 2015:
 
   
For the three months ended August 31,
 
   
2016
   
2015
 
Operating expenses:
           
General and administrative expenses
  $ 1,150,964     $ 33,202  
Research and development expenses
    443,222       -  
Total operating expenses
    1,594,186       33,202  
                 
Other (income) expense:
               
Interest expense
    114,847       -  
Loss on conversion of debt
    29,032       -  
Loss on issuance of convertible debt
    28,000       -  
Change in fair value of embedded conversion option
    (50,000 )     -  
Total other expenses
    121,879       -  
                 
Net loss
  $ (1,716,065 )   $ (33,202 )


 
13

 
 
Operating expenses

We incur various costs and expenses in the execution of our business. During the three months ended August 31, 2016, we incurred approximately $1.6 million in total operating expenses, including approximately $1.2 million in general and administrative expenses and approximately $443,000 in research and development expenses.  During the three months ended August 31, 2015, we were still a shell company and had minimal operating activities, and thus incurred approximately $33,000 in total operating expenses all of which were general and administrative.

Other expenses

During the three months ended August 31, 2016, other expenses included approximately $115,000 in interest expense, a gain of $50,000 for the change in fair value of embedded conversion options, approximately $29,000 in loss on the conversion of debt, and $28,000 in loss on the issuance of convertible debts. 
 
We had no other expenses during the three months ended August 31, 2015.

Net loss

In the three months ended August 31, 2016 and 2015, we incurred net losses of approximately $1.7 million and $33,000, respectively.  Our management expects to continue to incur net losses for the foreseeable future, due to our need to continue to establish a broader pipeline of assets, expenditure on R&D and implement other aspects of our business plan.

Unaudited Results of Operations for the nine months ended August 31, 2016 and 2015:
   
For the nine months ended August 31,
 
   
2016
   
2015
 
Operating expenses:
           
General and administrative expenses
  $ 3,637,868     $ 45,184  
Research and development expenses
    663,500       -  
Total operating expenses
    4,301,368       45,184  
                 
Other (income) expense:
               
Interest expense
    304,596       -  
Loss on conversion of debt
    89,210       -  
Loss on issuance of convertible debt
    481,000       -  
Change in fair value of embedded conversion option
    (362,000 )     -  
Total other expenses
    512,806       -  
                 
Net loss
  $ (4,814,174 )   $ (45,184 )

Operating expenses

We incur various costs and expenses in the execution of our business. During the nine months ended August 31, 2016, we incurred approximately $4.3 million in total operating expenses, including approximately $3.6 million in general and administrative expenses and approximately $664,000 in research and development expenses.  During the nine months ended August 31, 2015, we were still a shell company and had minimal operating activities, and thus incurred approximately $45,000 in total operating expenses all of which were general and administrative.

Other expenses

During the nine months ended August 31, 2016, other expenses included approximately $305,000 in interest expense, a gain of $362,000 for the change in fair value of embedded conversion options, $481,000 in loss on the issuance of convertible debts, and approximately $89,000 in loss on conversion of debt. 
 
We had no other expenses during the nine months ended August 31, 2015.

Net loss

In the nine months ended August 31, 2016 and 2015, we incurred net losses of approximately $4.8 million and $45,000, respectively.  Our management expects to continue to incur net losses for the foreseeable future, due to our need to continue to fund our R&D, manufacturing and implement other aspects of our business plan.


 
14

 

 
Liquidity and Capital Resources

We have not yet established an ongoing source of revenues sufficient to cover our operating costs and allow us to continue as a going concern. We had a working capital deficit of approximately $1.1 million as of August 31, 2016.  During the three and nine months ended August 31, 2016, we had a net loss of approximately $1.7 million and $4.8 million, respectively, and had net cash used in operating activities of approximately $868,000 during the nine months ended August 31, 2016.  The report of our independent registered public accounting firm, on our financial statements, included in the Form 10-K, raised substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern depends on our ability to raise additional capital. If we are unable to obtain necessary financing, we will likely be required to curtail our development plans which could cause us to become dormant. Any additional equity financing may involve substantial dilution to our then existing stockholders.

Since inception, operations have been funded through the sale of common stock, warrants, and the issuance of convertible notes.  As of November 30, 2015, we had an aggregate of $185,000 outstanding in principal of Series A, B, and C Notes.  During the nine months ended August 31, 2016, we issued an additional of $105,000, $550,000, and $160,000 in principal of Series B, C and D Notes, respectively.  Subsequent to August 31, 2016, we issued $150,000 in principal of Series E notes to third party investors.

In addition, in May and August 2016, we entered into subscription agreements with two investors in connection with our private placement, generating gross proceeds of $50,000 and approximately $10,000 by selling 20,000 and 6,500 Units at a price per unit of $2.50 and $1.55, respectively.  Each Unit consists of one share of common stock and a two-year warrant to purchase one share of our common stock at an exercise price of $3.50 per share (See Note 8 in our unaudited condensed financial statements).  In September 2016, we entered into another subscription agreement with certain investors in connection with our September Private Placement, generating gross proceeds of $112,500 by selling 37,500 Units 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 common stock at an exercise price of $5.00 per share.

Our primary uses of cash are to fund our operations and research and development activities as we continue to grow our business. We expect to continue to incur operating losses in the near term as we expect to increase our operating expenses as well as research and development expenses to support the growth of our business.  To continue as a going concern, we will need, among other things, additional capital resources. We depend upon our ability to secure equity and/or debt financing.  We might not be successful, and without sufficient financing it would be unlikely for us to continue as a going concern.

Our ability to continue as a going concern depends upon our ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. These 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 nine months ended August 31,
 
   
2016
   
2015
 
             
Net cash provided by (used in):
           
Operating activities
  $ (868,497 )   $ (12,700 )
Financing acitivities
    875,075       151  
Net increase (decrease) in cash
  $ 6,578     $ (12,549 )

Net cash used in operating activities was approximately $869,000 for the nine months ended August 31, 2016 as compared to approximately $13,000 for the nine months ended August 31, 2015.  The increase in net cash used in operating activities results from the net loss of approximately $4.8 million for the nine months ended August 31, 2016, partially offset by aggregate non-cash expenses of approximately $3.5 million.  The net cash used in operating activities for the nine months ended August 31, 2015 results primarily from to the net loss of approximately $45,000, partially offset by a non-cash expense of $32,000.

Net cash provided by financing activities was approximately $875,000 for the nine months ended August 31, 2016, resulting mainly from proceeds received from the issuance of convertible notes payable and issuance of common stock and warrants through the private placement.  We had minimal cash provided by financing activities for the nine months ended August 31, 2015.
 

 
15

 

 
Commitments and Contingencies

Advisory Agreement

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.   We expect to issue an aggregate of approximately 136,000 shares of common stock from September 1, 2016 through the term of arrangements.

License Agreement

Mannin

Pursuant to the license agreement with Mannin as disclosed in our Annual Form 10-K, most recently filed with the SEC on March 11, 2016 (as amended on March 15, 2016 solely to include interactive data files, the “Form 10-K”), we have an option to purchase the 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 our 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 us for development and the value of the common stock issued to the vendor.  During the three and nine months ended August 31, 2016, we incurred approximately $443,000 and $664,000 in research and development expenses to fund the costs of development of the eye drop treatment for glaucoma pursuant to the Exclusive License.  As of August 31, 2016, we have funded an aggregate of approximately $1.26 million under the Exclusive License.

In the event that: (i) we do not exercise the option to purchase the IP; (ii) we fail to invest the $4,000,000 within four years from the date of the Exclusive License; or (iii) we fail to make a diligent, good faith and commercially reasonable effort to progress the IP, all IP shall revert to the vendor and we 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, we entered into the Patent and Technology License and Purchase Option Agreement with Bio-Nucleonics Inc. (“BNI”) whereby we were granted a worldwide, exclusive, perpetual, license on, and option to, acquire certain BNI intellectual property (“BNI IP”) within the three-year term of the Exclusive License.

In exchange for the consideration, we 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 pay to BNI the total cash payment of $850,000.  Once we have paid the aggregate cash payment, we may exercise our option to acquire the BNI IP at no additional charge.  We issued 50,000 shares of common stock to BNI pursuant to the Exclusion License in September 2016.

In the event that: (i) we do not exercise the option to purchase the BNI IP; (ii) we fail to make the aggregate cash payment within three years from the date of the Exclusive License; or (iii) we fail to make a diligent, good faith and commercially reasonable effort to progress the BNI IP, all BNI IP shall revert to BNI and we 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.

Finder’s Agreement

In October 2016, we entered into two agreements to engage two financial advisors to assist us on our search for potential investors, vendors or partners to engage in a license, merger, joint venture or other business arrangement. As a compensation for their efforts, we agreed to pay the financial advisors a fee equal to 7% and 8% in cash, and to pay one of the financial advisors an additional fee equals to 7% in warrants of all consideration received by us.  We have not incurred any finders’ fees pursuant to the agreement to-date.

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 approximately $200,000 and $27,000 for the nine months ended August 31, 2016 and 2015, respectively, and were included within general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

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


 
16

 

 
Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Principal Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the period covered by this Report. Based on that evaluation, it was concluded that our disclosure controls and procedures are not effective to reasonably assure that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure

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

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.

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

We are not a party to any material legal proceedings.

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

Since we filed our last Quarterly Report on Form 10-Q, we have issued 214,268 shares of common stock as set out below:

 
·
In June 2016, we issued an aggregate of 38,710 common shares upon receipt of conversion notices from Series C holders.
 
·
In August 2016, we issued an aggregate of 53,000 common shares to two vendors for introductory, and media and investor relations services;
 
·
On August 9, 2016, we issued 16,300 common shares upon receipt of conversion notices from Series B holders.
 
·
On August 10, 2016, we issued (i) 6,500 units, with each unit consisting of a share of common stock and a warrant to purchase a share of common stock at $3.50 for aggregate consideration of approximately $10,000, and (ii) 12,258 common shares to an investor to compensate for the difference in purchase prices pursuant to an anti-dilution right;
 
·
On September 7, 2016, we issued 50,000 common shares to BNI pursuant to the Patent and Technology License and Purchase Option Agreement.
 
·
In September and October 2016, we issued (i) 37,500 units, with each unit consisting of a share of common stock and a warrant to purchase a share of common stock at $5.00 for aggregate consideration of approximately $112,500.

We have made the issuances of unregistered securities discussed above in reliance on the registration exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended.
 

 
17

 

 
Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number
Name and/or Identification of Exhibit
   
   
31
Rule 13a-14(a)/15d-14(a) Certifications
   
32
Certification under Section 906 of the Sarbanes-Oxley Act (18 U.S.C. Section 1350)
   
101
Interactive Data File
   
 
(INS) XBRL Instance Document
 
(SCH) XBRL Taxonomy Extension Schema Document
 
(CAL) XBRL Taxonomy Extension Calculation Linkbase Document
 
(DEF) XBRL Taxonomy Extension Definition Linkbase Document
 
(LAB) XBRL Taxonomy Extension Label Linkbase Document
 
(PRE) XBRL Taxonomy Extension Presentation Linkbase Document
   
 
 
 
18

 

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.
(Registrant)
 
Signature
Title
Date
     
     
/s/ Denis Corin
President, Chief Executive Officer, Acting Principal Accounting Officer,
October 17, 2016
Denis Corin
Principal Financial Officer
 








 
 
 
 
 
 
 
 
 
 
 

19


EX-10.1 2 exhibit10-1.htm exhibit10-1.htm
 
 



EXHIBIT 10.1

PATENT AND TECHNOLOGY LICENSE AND
PURCHASE OPTION AGREEMENT

This Patent and Technology License and Purchase Option Agreement is entered into on June 20, 2016 (“Signing Date”) by and between (i) Q BioMed Inc. (“Q Bio”) and (ii) Bio-Nucleonics Inc. (“BNI”): BNI and Q Bio are hereinafter also referred to individually as a “Party” and collectively as the “Parties.”
 
WHEREAS, BNI owns the BNI Assets (as defined herein);
 
WHEREAS, Q Bio wishes to exclusively license the BNI Assets, and BNI is willing to grant such license to Q Bio on the conditions set forth herein; and
 
WHEREAS, Q Bio wishes to acquire an option to purchase the BNI Assets, and BNI is willing to sell such an option to Q Bio on the conditions set forth herein;
 
NOW, THEREFORE, in consideration of the mutual obligations and covenants contained herein, the Parties have agreed as follows:
 
1.           Definitions.
 
The following capitalized terms when used in this Agreement shall have the respective meanings ascribed thereto below. Other capitalized terms are defined elsewhere in this Agreement.
 
1.1        “Affiliate(s)” shall mean, with respect to a Party, any one or more legal entities (i) owned or controlled by the Party, or (ii) owning or controlling the Party, or (iii) owned or controlled by the legal entity owning or controlling the Party, but any such legal entity shall only be considered an Affiliate of a Party for as long as such direct or indirect ownership or control exists. For the purposes of this definition a legal entity shall be deemed to own or control another legal entity if more than 50% (fifty percent) of the voting stock of the latter legal entity, ordinarily entitled to vote in the meetings of shareholders of that entity (or, if there is no such stock, more than 50% (fifty percent) of the ownership of or control in the latter legal entity), is held, directly or indirectly, by the owning or controlling legal entity, or if a legal entity has the ability to appoint a majority of the board of directors of another legal entity or to hire and/or replace another legal entity’s upper management.
 
1.2           “Agreement” shall mean this Patent and Technology License and Purchase Option Agreement, including all its exhibits and annexes.
 
1.3           “Authorization” means any consent, approval, order, license, permit and other similar authorization of or from (including any applications to), any Governmental Entity, together with any renewals, extensions, or modifications thereof and additions thereto.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 1

 


 
1.4           “BNI Assets” shall mean
 
(i)           BNI IP;
 
(ii)           BNI Patents, if any;
 
(iii)           BNI Products; and
 
(iv)           all licenses, market authorizations granted to BNI by a governmental agency (including -an abbreviated new drug application (ANDA) under the U.S. Federal Food, Drug, and Cosmetic Act or other governmental approvals (as may be subsequently amended and/or approved) relating to BNI IP, BNI Patents and BNI Products (a “Market Authorization License”).
 
1.5           “BNI IP” shall mean all IP (including the BNI Patents, if any, and know how) owned by BNI that is related to Strontium-Chloride 89 (“SR89”), including methods and licenses for procurement, transport, end-product manufacturing, distribution, sales and marketing and all improvements to “BNI IP” made after the Closing, including those related to any and all therapeutic, diagnostic, pain relief or other uses of “BNI IP” for any matter (including, but not limited to, prostate cancer, breast cancer, bone cancer, palliation or therapeutic use).
 
1.6      “BNI Patents” shall mean all BNI Patents and patent applications related to SR89 (including those listed on Exhibit 1.6) and any new patent application encompassing an invention comprising BNI IP; and any patent that issues therefrom together with any renewal, division, continuation, continued prosecution application or continuation-in-part of any of such patents, certificates, and applications, any and all patents or certificates of invention issuing thereon, and any and all reissues, reexaminations, extensions, divisions, provisional filings, parent applications, renewals, substitutions, confirmations, registrations and revalidations of or to any of the foregoing, and any foreign counterparts of any of the foregoing.
 
1.7           “BNI Product” shall mean any Product related to BNI IP, made or commercialized by, for or on behalf of BNI or its Affiliates in any country or territory in the world (or any component or subsystem thereof).
 
1.8           “Business Day” means any day other than a Saturday, Sunday or statutory holiday in the city of New York, United States.
 
1.9           “First Sale” means the first commercial sale of a BNI Product to an arms-length third party, of an aggregate of more than $****.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 2

 


 
1.10           “Environmental Laws” means all federal, state or local laws (including any statute, rule, regulation, ordinance, code or rule of common law), and all judicial or administrative interpretations thereof, and all decrees, judgments, policies, written guidance or judicial or administrative orders relating to the environment, health, safety or Hazardous Substances, including the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9901 et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq., the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Toxic Substance Control Act, 15 U.S.C. § 2601 et seq., the Safe Drinking Water Act, U.S.C. § 300f et seq., the Occupational Safety and Health Act, 42 U.S.C. § 1801 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq., and their state counterparts or equivalents, all as amended, and any regulations or rules adopted or promulgated pursuant thereto.
 
1.11           “Governmental Entity” means any federal, state, provincial, local, foreign or supranational (a) government; (b) court of competent jurisdiction; (c) governmental official agency, arbitrator, authority or instrumentality; (d) department, commission, board or bureau; or (e) regulatory body, including the U.S. Food & Drug Administration (the “FDA”), and the United States Drug Enforcement Administration.
 
1.12           “Gross Profits” shall mean Q Bio’s gross revenue derived from the sales of a BNI Product less the direct cost of goods sold which shall only include the costs directly associated with (i) the acquisition of raw materials, (ii) direct manufacturing cost, (iii) logistics and delivery and (iv) contract sales and marketing organizations but which shall not exceed 50% of the net profits to Q Bio from the sales of BNI Products.
 
1.13           “Hazardous Substance” means any: contaminant or pollutant; toxic, radioactive or hazardous waste, chemical, substance, material or constituent; asbestos; polychlorinated byphenyls (PCBs); paint containing lead or mercury; fixtures containing mercury or urea formaldehyde; natural or liquefied gas; flammable, explosive, corrosive, radioactive, medical and infectious waste; and oil or other petroleum product, all as defined in Environmental Laws.
 
1.14      “Intellectual Property” or “IP” shall mean:
 
(i)           inventions and discoveries, whether patentable or not, all patents, registrations, invention disclosures and applications therefor, including divisions, continuations, continuations-in-part and renewal applications, and including renewals, extensions and reissues;
 
(ii)           Trade Secrets;
 
(iii)           to the extent not meeting the definition of Trade Secrets, other confidential information, know-how, processes, schematics, business methods, formulae, drawings, prototypes, models, designs, customer lists and supplier lists;
 
(iv)           published and unpublished works of authorship, whether copyrightable or not, including, without limitation, databases or other compilations of information), copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof; and
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 3

 


 
(v)           all other generally recognized intellectual property or proprietary rights (including trademarks, service marks and similar rights in marks, names and logos).
 
1.15           “Knowledge” shall mean actual knowledge and any knowledge that would have been acquired upon reasonable inquiry and investigation; as applies to BNI Assets, such knowledge shall be limited to Dr. Stanley Satz and Ms. Rose Satz, except where otherwise stated.
 
1.16           “Legal Requirement” means any constitution, act, statute, law (including common law), ordinance, treaty, rule or regulation of any Governmental Entity.
 
1.17           “Principal Market” means (i) any national exchange on which the Common Stock is traded, and if none then (ii) the NASDAQ, and if not then (iii) the OTCQB of the OTC Markets Group Inc., and if not then (iv) the Over-the-Counter Bulletin Board of the Financial Industry Regulatory Authority, Inc.
 
1.18           “Royalty Reporting Form” shall mean a written statement in the form as attached hereto as Exhibit 1.18 signed by a duly authorized officer on behalf of Q Bio.
 
1.19           “Technology” shall mean any technical information, clinical trial data, know-how, processes, procedures, methods, formulae, protocols, techniques documentation, works of authorship, data, designations, substances, components, inventions (whether or not patentable)ideas, trade secrets and other information or materials, in tangible or intangible form, as it relates to discoveries, inventions, and indications that are related to BNI Assets.
 
1.20           “Third Party” shall mean any entity, person or government entity other than a Party or an Affiliate of a Party.
 
1.21           “Trade Secret” shall mean information and know-how to the extent that such information or know-how (a) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Trade Secrets may include, but are not limited to confidential information, know-how, processes, schematics, business methods, formulae, customer lists, and supplier lists that meet the foregoing definition.
 
1.22           “Trading Day” means, as applicable, (x) with respect to all price determinations relating to the Common Stock, any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) or (y) with respect to all determinations other than price determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 4

 


 
1.23           “VWAP” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder.
 
2.           License and Option
 
2.1             License of BNI IP. Subject to the terms and conditions of this Agreement and in exchange for Q Bio’s payment of the Initial Cash Payment and Initial Stock Payment (each, as defined herein), BNI hereby grants to Q Bio and its present and future Affiliates, effective as of the Closing, a worldwide, exclusive, perpetual (subject to Section 2.4 of this Agreement) and transferable (subject to Section 12 of this Agreement) license (with the right to sublicense through one or multiple tiers solely as set forth in this Agreement) under the BNI Assets to research, develop, make, have made, use, have used, import, sell, have sold and otherwise commercialize and exploit any BNI Assets.
 
2.2            Transfers of BNI Assets. Without the prior written consent of Q Bio, BNI shall not sell, assign or otherwise transfer ownership or any rights in any of the BNI Assets to an Affiliate or a Third Party. In the event that Q Bio provides such consent and BNI sells, assigns or otherwise transfers ownership or rights in any of the BNI Assets to an Affiliate or a Third Party, such transfer shall only be valid if (i) BNI explicitly stipulates that the rights and licenses granted to Q Bio and its present and future Affiliates pursuant to this Agreement shall remain in force and (ii) such Affiliate or a Third Party assumes in writing addressed to Q Bio all of BNI’s obligations under this Agreement in connection with such transferred BNI Assets. Any transfer or assignment not so construed shall be null and void. An identical obligation shall be imposed by BNI on the acquirer, including the obligation to impose the same on every subsequent acquirer or assignee.
 
2.3       Option to Purchase BNI Assets. At the Closing, BNI grants Q Bio an option to purchase the BNI Assets (the “Option”) for the Total Cash Investment (as defined in Section 3.2(b)). Upon full payment of the Total Cash Investment, Q Bio may exercise the Option by providing written notice of its decision to exercise the Option to BNI. Promptly, but no more than 10 Trading Days after it has provided such notice to BNI, BNI shall deliver to Q Bio all documents reasonably required by Q Bio to assign and transfer the BNI Assets and, for any Technology that is not BNI IP and is instead licensed to BNI, BNI shall, assign such licenses to Q Bio where the foregoing is permitted under the terms of such license. This exclusive option will expire three (3) years after the date of Closing, at which point the BNI Assets would automatically revert back to BNI under the terms described in 2.4 below. In the event that BNI abandons BNI IP pursuant to Section 6.1 hereof, Q Bio may elect at its sole discretion to exercise its Option with respect to such BNI IP but only after Total Cash Investment has been transferred to BNI in full.  Such an exercise of the Option shall not prejudice the Option as it relates to any BNI Assets that are not Abandoned IP.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 5

 


 
2.4            Reversion of License/Ownership. Subject to the continuing royalty payments found in Section 3.4 of this Agreement, all rights, title and interest in the BNI Asset-shall automatically revert to BNI (and Q Bio shall take all steps and measures to give effect to the foregoing) in the event that: (i) Q Bio fails to exercise the option found in Section 2.3 hereof within 3 years of the Closing, as described in 2.3 above; or (ii) Q Bio materially breaches any payment obligation in Section 3.2 of this Agreement. Q Bio’s Total Cash Investment at the point of reversion, shall be repaid by way of the royalty found in section 3.4 or, at Q Bio’s discretion, converted into BNI common stock using a valuation based on the price of the common stock in terms of the last subscription of BNI common stock or, if no subscription has taken place in the prior 12 months, then using a valuation established by an independent third party that is acceptable to both BNI and Q Bio.
 
3.        Closing and Consideration Items
 
3.1        Closing. Subject to the terms and conditions hereof, the closing of the transactions contemplated herein (“Closing”) will take place on or before June 20, 2016 (the “Closing Date”). The Closing shall be held at the offices of Sanders Ortoli Vaughn-Flam Rosenstadt LLP at 501 Madison Avenue, New York, NY, USA, or another place as mutually agreed to by the Parties.
 
3.2       License Purchase Price. In exchange for the license granted in Section 2.1 hereof and the Option, Q Bio shall:
 
(a)         issue to BNI - 110,000 shares of its common stock (the “Stock Payment”) pursuant to the following schedule:
 
(i)  
50,000 shares of Q Bio common stock upon Closing (the “Initial Stock Payment”);
 
(ii)  
**** shares of Q Bio common stock upon successful amendment of ANDA 75-941Market Authorization License granted to BNI on January 6, 2003 by the FDA (a copy of which license is attached hereto as Exhibit 3.2(a)(ii) to allow Isotex or another properly licensed entity to manufacture Strontium Chloride Sr89 Injection, USP (the “Amended FDA Market Authorization License”), provided that if such  amendment occurs after the Amended Market Authorization Deadline such amount shall be reduced to **** shares (“Market Authorization Stock Payment”); and
 
(iii)  
**** shares of Q Bio common stock upon the First Sale, provided that if the Amended FDA Market Authorization License is approved by the U.S. FDA after the Amended Market Authorization Deadline such amount shall be reduced to **** shares (“First Sale Payment”).
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 6

 


 
From the time each of the Initial Stock Payment, Market Authorization Stock Payment and First Sale Payment are issued, the shares of common stock underlying each issuance shall be held in escrow at SOVR Law and restricted from transfer pursuant to the terms of a lock-up agreement, the form of which shall be delivered within ten business (10) days of Closing (the “Lock-Up Agreement”).
 
(b)           subject to the terms ultimately agreed to between BNI and the holders of the liens found in Exhibit 7.3 hereto, pay $850,000 to be used in the final steps to acquire BNI Asset and commercialize a BNI Product in accordance with the use of proceeds found in Schedule 3.2(b) (“Total Cash Investment”). Of the Total Cash Investment Q Bio shall transfer:
 
(i)           $**** to BNI at Closing directly to BNI (the “Initial Cash Payment”) (ii) $**** to BNI no later than 30 days from Closing to third parties approved in writing by BNI that are preparing or supporting the preparation of the Amended FDA Market Authorization License and/or to undertaking studies or other actions necessary to complete such Amended FDA Market Authorization License; and
 
(iii)           the remaining $****  Total Cash Investment in accordance with a timeline to be mutually agreed upon between the Parties, but in no event longer than 12 months from the Closing; provided that prior to the approval of the Amended FDA Market Authorization License by the FDA such payments shall be made either directly to BNI or to third parties approved in writing by BNI, as agreed to by the Parties, for activities that include preparing the Amended FDA Market Authorization License, undertaking studies or other actions necessary to complete such Amended FDA Market Authorization License
 
3.3       Royalty.
 
(a) Subject to subsection (c) of this section 3.3, Q Bio agrees to pay to BNI a: (i) **** % royalty on Gross Profits until BNI has been paid a total of $**** , (ii) **** % royalty on Gross Profits until BNI has been paid a total of an additional $****  and (iii) after BNI has received a total of $****  from (i) and (ii) above, it shall receive a perpetual royalty of **** % on Gross Profits.
 
(b) Within thirty (30) calendar days following the end of each calendar quarter after the Closing, Q BIO shall submit to BNI (even in the event that no royalties are due) a royalty reporting form, duly completed by an authorized officer of Q Bio, together with any payments due under this Section.
 
(c)  First Sale, as defined herein, shall take place no later than ****  months after BNI has completed all regulatory and manufacturing tasks associated with the Product so that it can be commercialized.  Subject to the Parties having made a good faith and commercially reasonable effort, Q Bio shall pay the following minimal royalty guarantee in cash: (1) Year 1 following First Sale: $****; (2) Year 2 following First Sale: $****  and (3) Year 3 following First Sale: $****.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 7

 


 
3.4           Royalty in the event of Reversion.
 
(a) If a reversion occurs pursuant to Section 2.4(a), in exchange for all Stock Payments and all cash invested to the date of such reversion, BNI shall pay to Q Bio a royalty in all income derived from BNI Products or BNI Assets equal to (i) **** % until such time that the aggregate of royalties paid to Q Bio exceeds twice the aggregate of all Total Cash Investment paid by Q Bio and (ii) in the event that the aggregate of the Total Cash Investment paid to BNI, any royalties paid under Section 3.3 hereof and any other amounts advanced to or on behalf of BNI by Q Bio equals or exceeds $****  as of the date of reversion, **** % thereafter in perpetuity.
 
(b) Within thirty (30) calendar days following the end of each calendar quarter after the Closing, BNI shall submit to Q Bio (even in the event that no royalties are due) a royalty reporting form, duly completed by an authorized officer of BNI, together with any payments due under this Section.
 
3.5           Wiring Instructions. All payments by Q Bio directly to BNI under this Agreement shall be made by wire to the account designated by BNI in writing. All payments by Q Bio to third parties on behalf of BNI shall be made pursuant to the preferences of the respective third party.
 
3.6           Sale of Certain BNI Assets.
 
(i) If Q Bio sells BNI Assets or the rights to commercialize a BNI Product, in each case, that is not in existence on the date of the Closing, to an unrelated third party (a “Non-Royalty Based Economic Event”) within the first twelve ****  months following the Closing, Q Bio shall deliver to BNI within five (5) Business Days of the closing of such sale, **** percent (**** %) of the value received by Q Bio attributable to the BNI Assets.
 
(ii) If Q Bio engages in a Non-Royalty Based Economic Event between ****  and ****  months after the Closing, Q Bio shall deliver to BNI within five (5) Business Days of closing of such sale, **** % of the value received by Q Bio attributable to the BNI Assets.
 
(iii) If Q Bio engages in a Non-Royalty Based Economic Event after the ****  month anniversary of the Closing, Q Bio shall deliver to BNI within five (5) Business Days of closing of such sale, **** % of the value received by Q Bio attributable to the BNI Assets. For point of clarification a “sale” does not include a royalty and or license arrangement with a third party.
 
(iv) If Q Bio sells BNI Assets or the rights to commercialize a BNI Product, in each case, that is not in existence on the date of the Closing to a third party introduced to Q Bio by BNI at any time during the Term, Q Bio shall deliver to BNI, within five (5) Business Days of the closing of such sale, an additional **** % of the value received by Q Bio attributable to the BNI Assets.
 
(v) If Q Bio sublicenses the rights under this Agreement to a Third Party, Q Bio shall remain the responsible party with regard to honoring all obligations to BNI under this Agreement.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 8

 


 
3.7           Late Payments. Any cash amounts not paid when due under this Agreement shall automatically accrue interest from the date when due until actually paid at a rate equal to the sum of **** percent (%) plus the prime rate of interest quoted in the Wall Street Journal (West Coast edition) per annum calculated daily on the basis of a 365-day year, or if such edition is unavailable, a similar reputable data source; provided, however, that in no event shall such rate exceed the maximum annual interest rate permitted under applicable law. For clarity, accrual of interest on late payments will be in addition to any other remedy available in regards to the party in breach of its payment obligation.
 
3.8           Taxes. In the event that the governmental authorities of any country imposes any withholding taxes on payments made hereunder and requires the payor to withhold such tax from such payments, the payor may reduce the payment due by the amount of such tax. In such event, the payor shall promptly provide the payee with tax receipts issued by the relevant tax authorities and with reasonable assistance in obtaining any credits for, and reductions to or exemptions from, such amounts.
 
3.9            Records. Each Party shall (and shall ensure that its Affiliates and their respective licensees and sub-licensees, as applicable) maintain complete, true and accurate books of accounts and records reasonably sufficient for the purpose of determining the payments to be made to the other Party under this Agreement for at least three (3) years following the end of the calendar quarter to which they pertain. Each Party shall provide the other Party or its respective agents access to such documents upon at least ten (10) Business Days’ prior written notice during normal business hours and in such a manner as not to interfere unduly with normal business activities and provided further that any such agent first executes a confidentiality agreement in favor of the Party providing the documents which includes obligations, restrictions and other requirements comparable to those of this Agreement.
 
4.           Representation, Warranties and Covenants

4.1           BNI. Unless stated to the contrary, BNI and any Affiliates, each hereby represents and warrants or covenants (as the case may be) as follows:

(i)           Ownership of BNI Assets.  BNI (A) is the owner of all of the BNI Assets and it has good and valid title to the BNI IP; (B) owns the BNI Assets free and clear of any liens, security interests, licenses, charges, encumbrances, equities, claims or similar restrictions; and (C) is not a party to and is not bound by any agreement or understanding (whether written, oral, express or implied) relating to any of the BNI Assets, and there is no agreement, understanding, order or decree to which any of the BNI Assets is subject.
 
(ii)           Compliance with all necessary legal requirements.
 
(a)           Since January 1, 2012, it has been in compliance in all material respects with all legal requirements relating to the BNI Assets. Since January 1, 2012, it has not received any notice, claim, request for information, complaint or administrative or judicial order from any governmental entity or any written notice, claim, request for information or complaint from any other person alleging any failure to comply with or any liability under any legal requirement relating to BNI Assets, and to the knowledge of BNI, none is pending or threatened, or have been received by BNI prior to January 1, 2012, except for any such notice relating to an immaterial failure to comply that has since been cured.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 9

 


 
(b)           There has not been any action, operating practice or failure to act by BNI that would reasonably be expected to give rise to a liability on the part of Q Bio as a result of:
 
(1) the generation, handling, storage, use, presence, transportation, treatment or disposal or arranging for transportation or disposal of any Hazardous Substance in connection with its intended use;
 
(2) any emission, discharge or release of any hazardous substance into or upon the air, surface water, ground water, drinking water, sediments or land in connection with its intended use;
 
(3) any disposal, handling, manufacturing, processing, distribution, use, treatment or transport of any Hazardous Substances in connection with the intended use;
 
(4) the presence of any Hazardous Substances (including asbestos, urea formaldehyde foam installation or similar substances contained in building materials) in the operation of the intended use; or
 
(5) sending or disposing of, otherwise taking or transporting, arranging for the taking or disposal of or release of a Hazardous Substance to or at a site that is contaminated by any Hazardous Substance or that, pursuant to any Environmental Law: (A) has been placed on the “National Priorities List,” the “CERCLIS” list, or any similar state or federal list; or (B) is subject to or the source of a claim, an administrative order or other request to take removal, remedial, corrective or any other response action under any Environmental Law or to pay for the costs of any such action at the site.
 
(6) BNI holds all Authorizations issued by or on behalf of any Governmental Entity that are required to develop the BNI Assets or pursuant to any Environmental Laws for the conduct by BNI and its Affiliates of the intended use and the possible ownership of BNI Assets (“Environmental Permits”), except where the failure to hold such Environmental Permits would not have a material adverse effect on the value of BNI Assets taken as a whole. Any such Environmental Permits held by BNI are currently in full force and effect. BNI and its Affiliates are and for the past five years have been in compliance in all material respects with all terms and conditions of such Environmental Permits, and with all other applicable limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in Environmental Laws.
 
(c)           BNI has not, either expressly or by operation of law, assumed or undertaken, or agreed to indemnify, any liability or corrective, investigatory or remedial obligation of any other Person, relating to any Environmental Laws.
 
(d)           BNI has made available to Q Bio copies of all environmental reports, audits, permits, licenses, registrations and other environmental, health or safety documents relating to the BNI Assets that are in BNI’s possession or control.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 10

 


 
(iii)           Regulatory Matters.
 
(a)           Except as set out in Schedule 4.1(iii)(a), BNI Product are being or have been developed, manufactured, tested, packaged, distributed, and sold in substantial compliance with all applicable requirements under the Federal Food, Drug and Cosmetic Act (“FDCA”), the Public Health Service Act (“PHSA”) and the regulations of the Food and Drug Administration (“FDA”) promulgated thereunder and similar applicable foreign Legal Requirements, including those relating to investigational use, good manufacturing practices, good clinical practices, good laboratory practices, registration and listing, record keeping, adverse event reporting, and submission of other required reports. The required licenses and authorizations are current and in full force and effect and include all necessary and relevant regulatory filings and governmental registrations made by or issued to BNI or any of its Affiliates that relate specifically to BNI Products. BNI has made available to Q Bio true and complete copies of all governmental correspondence (including copies of official notices, citations or decisions) in the files of BNI or its Affiliates relating to the Specified Authorizations.
 
(b)           Except as set out in Schedule 4.1(iii)(b), BNI or its Affiliates have obtained all necessary licenses, permits and registrations required by FDA, any other applicable Governmental Entity, and any applicable foreign regulatory authority to permit the operation of the intended use by BNI and the Affiliates as presently conducted and all such licenses, permits and registrations are included in the Specified Authorizations. Neither BNI nor any of its Affiliates have received any communication from any Governmental Entity threatening to withdraw or suspend any such license, permit, or registration. BNI or its Affiliates have filed with the applicable regulatory authorities all required filings, declarations, listings, registrations, reports or submissions, including adverse event reports. All relevant filings, declarations, listings, registrations, reports or submissions were in compliance with all applicable Legal Requirements when filed, and no deficiencies have been asserted by any applicable regulatory authority with respect to any such filings, declarations, listing, registrations, reports or submissions.
 
(c)           Neither BNI nor any of its Affiliates nor, to the Knowledge of BNI, any of the officers, key employees, agents or clinical investigators acting for BNI or any of its Affiliates has received any communication from FDA or any other Governmental Entity, including without limitation any warning letter or untitled letter that alleges or suggests that the intended use is not in compliance with any applicable requirements under the FDCA, the PHSA, FDA regulations promulgated thereunder, or similar applicable foreign Legal Requirements.
 
(d)           Neither BNI nor any of its Affiliates nor, to the Knowledge of BNI, any of the officers, key employees, agents or clinical investigators acting for BNI or its Affiliates, has committed any act, made any statement or failed to make any statement or commit any act that would reasonably be expected to provide a basis for the FDA to invoke its policy with respect to “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities” set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto. Additionally, neither BNI or its Affiliates, nor to the Knowledge of BNI, any officer, employee or agent of BNI or its Affiliates has been convicted of any crime or engaged in any conduct that would reasonably be expected to result, or has resulted, in (i) debarment under 21 U.S.C. Section 335a or any similar state Legal Requirement; or (ii) exclusion under 42 U.S.C. Section 1320a-7 or any similar state Legal Requirement.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 11

 


 
(e)           To the Knowledge of BNI, there are no investigations, suits, claims, actions or proceedings against or affecting BNI or any Affiliate relating to BNI  Assets, including those relating to or arising under applicable Legal Requirements relating to government health care programs, private health care plans, or the privacy and confidentiality of patient health information.
 
(f)           BNI and the Affiliates are in compliance in all material respects with all healthcare Legal Requirements to the extent applicable to the operation of the intended use and the sale of BNI Products, as currently conducted, including any and all federal, state and local fraud and abuse laws, including the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7(b)), the civil False Claims Act (31 U.S.C. § 3729 et seq.) and the regulations promulgated pursuant to such statutes. Neither BNI nor any Affiliate is subject to any enforcement, regulatory or administrative proceedings against or affecting BNI relating to or arising under the FDCA or similar Legal Requirement, and to the Knowledge of BNI no such enforcement, regulatory or administrative proceeding has been threatened.
 
(iv)           No Infringement.  BNI represents and warrants, that to its Knowledge: (A) none of the BNI Assets infringes or conflicts with any proprietary right or other right of any person, and neither the use of any of the BNI Assets; (B) the manufacture, use or sale of any of Technology will not infringe or conflict with any proprietary right or other right of any person; (C) there is no claim pending or threatened against BNI or any other person alleging that any of the BNI Assets, or the use of any of the BNI Assets or the manufacture, use or sale of any of Technology, infringes or conflicts with, or will infringe or conflict with, any proprietary right or other right of any person, and there is no basis for the assertion of any such claim; (D). there is no existing or potential infringement of any of the BNI Assets; or (E) no application for a potentially interfering patent has been filed, and no potentially interfering patent has been issued.
 
(v)           Trade Secrets.  BNI represents and warrants that, to its Knowledge: (A) no part of the Trade Secrets is part of the public knowledge or literature; and (B) BNI has taken all measures and precautions necessary to protect the secrecy, confidentiality and value of the Trade Secrets.
 
(vi)           Non-Contravention.  BNI represents and warrants that (A) neither the execution and delivery of this Agreement nor the performance of this Agreement will result (with or without notice or lapse of time) in (i) a violation of any judgment, order or decree to which BNI is subject; (ii) a breach or violation of any agreement or understanding (whether oral, written, express or implied) to which BNI is a party or by which BNI is bound; or (iii) the termination of, or the imposition of any lien, security interest, license, charge, encumbrance, equity, claim, restriction, tax or assessment on or with respect to, any of the BNI Assets; and (B) no consents of, or notice to, any third party is required for BNI to execute and deliver this Agreement.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 12

 


 
(vii)           No Bankruptcy Proceedings.  BNI represents and warrants that it has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by any creditor, (iii) suffered the appointment of a receiver to take possession of all or any portion of its assets, (iv) suffered the attachment or judicial seizure of all or any portion of its assets, (v) admitted in writing to any one or more of its lenders or trade creditors its inability to pay its debts as they come due, (vi) made an offer of settlement, extension or composition to its creditors generally nor (vii) does it have any current intention to undertake such actions or Knowledge that such actions are being taken against it.
 
(viii)           IP protection.  Between the Closing and the actual transfer of the files related to the BNI Assets, BNI shall use commercially reasonable efforts to preserve its ownership of the BNI IP and shall not, directly or indirectly, sell, transfer, lease, license, sublicense, mortgage, pledge, encumber, grant or otherwise dispose of or grant a lien on any BNI IP, or amend or modify any existing agreements with respect to any BNI IP. Upon payment of Total Cash Investment and subsequent exercise by Q Bio of the Option, BNI shall take all actions reasonably requested of it to transfer the BNI Assets .
 
(ix)           Securities Regulation Matters.  BNI understands that the shares of common stock that it is to receive under this Agreement have not been registered under the US Securities Act of 1933 (the “US Securities Act”), as amended, and may not be resold unless an exemption from resale is available thereunder.  Any shares issued hereunder will bear a restrictive legend (i) to that effect (which legend will not be removed until Q Bio has received an opinion from legal counsel that it reasonably approves that such shares may be resold without violating the US Securities Act) and (ii) and setting out that such shares are subject to the Lock-Up Agreement.  BNI understands that it may now, or in the future, be deemed to be an “affiliate” of Q Bio (as such term is defined under the US Securities Act) and the consequences of being deemed an affiliate of Q Bio.
 
(x)           Validity; Enforcement
 
. BNI represents and warrants that this Agreement has been duly and validly authorized, executed and delivered on behalf of BNI and constitutes the legal, valid and binding obligations of BNI enforceable against BNI in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.
 
(xi)           Good Standing. BNI represents and warrants that it is an entity duly organized, validly existing and in good standing under the state of Florida with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 13

 


 
(xii)           Cooperation. BNI agrees to use commercially reasonable efforts to provide Q Bio with access to all resources available to it, including any personnel related to the Technology and the BNI Assets and its development. BNI will use commercially reasonable efforts to procure the assistance of Dr. Stanley Satz, of BNI, and Ms. Rose Satz, CEO of BNI, to provide assistance as Q Bio may reasonably request in terms of the development of the assets contemplated herein and to raise the capital required via corporate presentations to investor and scientific meetings. Except where otherwise set out in this Agreement, BNI shall use commercially reasonable efforts to assist and cooperate with Q Bio in doing all things reasonably necessary, proper or advisable to consummate the transactions contemplated hereby, including but not limited to label expansion phase IV comparative study(s). Q Bio agrees to cover any expenses exceeding the G&A payments made to BNI
 
(xiii)           Use of Total Cash Investment.  BNI shall ensure that all funds provided in the Total Cash Investment are used for commercial development of BNI in accordance with Schedule 3.2(b) or as otherwise mutually agreed to by Q Bio and BNI.
 
(xiv)           Approval of Amended FDA Market Authorization License.  BNI shall use its best efforts to have the Amended FDA Market Authorization License (as defined herein) approved by the U.S. FD&A as soon as practicable. In all events such Amended FDA Market Authorization License approved by the U.S. FDA shall be approved prior to [date] (the “Amended Market Authorization Deadline”).
 
    4.2           Q Bio hereby represents and warrants, or covenants (as the case may be) as follows:

(i)           Non-Contravention.  Neither the execution and delivery of this Agreement nor the performance of this Agreement will result (with or without notice or lapse of time) in (i) a violation of any judgment, order or decree to which Q Bio is subject or (ii) a breach or violation of any agreement or understanding (whether oral, written, express or implied) to which Q Bio is a party.
 
(ii)           Validity; Enforcement
 
. This Agreement has been duly and validly authorized, executed and delivered on behalf of Q Bio and constitutes the legal, valid and binding obligations of BNI enforceable against Q Bio in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.
 
 (iii)           Good Standing. Q Bio is an entity duly organized, validly existing and in good standing under the laws of the State of Nevada with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 14

 


 
(iv)           Issuance of Securities
 
. The issuance of the Common Stock of Q Bio under this Agreement has been duly authorized and upon issuance of such Common Stock in accordance with the terms of the this Agreement, such Common Stock shall be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof, and is in compliance with all applicable United States securities laws and regulations.
 
(v)           Equity Capitalization
 
.  As of the date hereof, the authorized capital stock of Q Bio consists of (i) 250,000,000 shares of Common Stock, of which, 8,749,835 are issued and (ii) 100,000,000 shares of blank check preferred stock, of which, none are issued and outstanding.
 
(vi)           Cooperation. Except where otherwise set out in this Agreement, Q Bio shall use commercially reasonable efforts to take, or cause to be taken, all actions, and do, or cause to be done, and to assist and cooperate with BNI in doing, all things reasonably necessary, proper or advisable to consummate the transactions contemplated hereby.
 
(vii)           Bankruptcy. Q Bio represents and warrants that it has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by any creditor, (iii) suffered the appointment of a receiver to take possession of all or any portion of its assets, (iv) suffered the attachment or judicial seizure of all or any portion of its assets, (v) admitted in writing to one or more of its lenders or trade creditors its inability to pay its debts as they come due, (vi) made an offer of settlement, extension or composition to its creditors generally nor (vii) does it have any current intention to undertake such actions or Knowledge that such actions are being taken against it.
 
 (viii)        Arm’s Length Transaction. The terms and provisions of this Agreement were negotiated at arm’s length and are fair, reasonable and consistent with existing market conditions. The transactions contemplated by this Agreement are not being entered into by Q Bio with the intention of hindering, delaying or defrauding any of Q Bio’s current or future creditors.
 
(ix)           Management. Q Bio shall use commercially reasonable efforts to have each of Dr. Stanley Satz and/or Ms. Rose Satz appointed to its Advisory Board on the date of Closing or as soon as possible thereafter. Upon the exercise of the Option, each of Dr. and Ms. Satz shall be eligible to receive stock options to acquire shares of Q Bio common stock on terms consistent with other Advisory Board members at the discretion of the Q Bio compensation committee.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 15

 


 
5.           Non-Competition.
 
Unless there is reversion of rights, title and interest in BNI Assets and, if applicable, other Technology pursuant to Section 2.4 of this Agreement, BNI shall not directly or indirectly develop, manufacture, distribute, sell or market any BNI products that would compete with the BNI Assets licensed hereunder.
 
6.            Intellectual Property Management
 
6.1           Reimbursement and Control.  Upon exercise of the Option, Q Bio will have the first right to prepare, file, prosecute, or otherwise handle the rights to the BNI Assets with prior advice and comment from BNI. Q Bio shall pay all costs and expenses associated with the filing, prosecution and maintenance of the BNI Patents.  Prior to any transfer of the BNI Assets to Q Bio, BNI shall pay for any costs and expenses associated with the BNI Patent incurred by Q Bio. In the event that the BNI decides to abandon certain BNI IP or any Market Authorization License (“Abandoned IP”), BNI shall so inform Q Bio no less than sixty (60) days prior to knowingly taking the action or knowingly failing to act, which would cause such abandonment of rights. Should Q Bio choose to continue the prosecution or maintenance of all or a part of said Abandoned IP, Q Bio may choose to pay the cost of such activity and if so, BNI shall take all commercially reasonable steps to convey such Abandoned IP to Q Bio in the specific jurisdiction where Q Bio has secured or maintained the proprietary nature of such Abandoned IP.
 
6.2           Enforcement. If either Party becomes aware of a third party infringement of any unexpired claim within the BNI Assets, that Party will promptly notify the other Party with written notice. Q Bio shall have the first right, but not the obligation, to prosecute in its own name and at its own expense any infringement of the BNI Assets. If Q Bio elects to commence an infringement action, Q Bio shall bear all expenses related to such action and, BNI at its option, may join as a party to such action. Regardless of whether BNI joins as a party, Q Bio shall control such action, and BNI shall, within reason, cooperate fully with Q Bio in connection with any such action provided any reasonable out-of-pocket expense incurred by BNI in providing such cooperation will be paid by Q Bio. Recoveries or reimbursements from infringement actions commenced by Q Bio shall be distributed as follow: (i) the Parties shall be reimbursed litigation expenses, including but not limited to reasonable attorneys' fees; (ii) as to ordinary damages, Q Bio shall receive an amount equal to its lost profits or a reasonable royalty on the sales of the infringer's product (whichever measure of damages the court shall have applied) and shall be included towards calculations for royalty determination for payment to Q Bio; and (iii) any remaining recoveries or reimbursements shall be paid fifty (50%) to Q Bio and fifty percent (50%) to BNI. If Q Bio decides not to prosecute infringement of any BNI Assets, BNI reserves the right, without obligation, to prosecute such infringement, in which roles and returns stated above in this paragraph shall be reversed.

6.3           Patent Term Extension. Where a patent related to a Product is involved, BNI shall consult with Q Bio in selecting the patent covering each Product for patent term extension for or supplementary protection certificate under in accordance with the applicable laws of any country. Each Party agrees to execute any documents and to take any additional actions as the other Party may reasonably request in connection therewith.


* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 16

 


 
6.4           Patent Marking. Where a patent related to a Product is involved, to the extent commercially feasible, BNI will mark all products that are manufactured or sold under this Agreement with the number of each issued patent within the Patent Rights that cover such Product(s). Any such marking will be in conformance with the patent laws and other laws of the country of manufacture or sale.
 
6.5           Defense. Where a patent related to a Product is involved, Q Bio will have the first right, but not the obligation, to take any measures deemed appropriate by Q Bio, regarding (a) challenges to the BNI Patents (including interferences in the U.S. Patent and Trademark Office and oppositions in foreign jurisdictions) and (b) defense of the BNI Patent (including declaratory judgment actions) and/or other BNI Assets. BNI shall reasonably cooperate in any such measures if requested to do so by Q Bio, provided any reasonable out-of-pocket expense incurred by BNI in providing such cooperation will be paid by Q Bio.
d
6.6           Third Party Litigation. Where a patent related to a Product is involved, and a third party institutes a suit against BNI for patent infringement involving BNI Assets, BNI will promptly inform Q Bio and keep Q Bio regularly informed of the proceedings.

7.         Conditions to Closing
 
7.1           Closing Conditions. The obligation of Q Bio to effect the Closing shall be subject to the satisfaction at or prior to the Closing of the following conditions, unless waived in writing by Q Bio:
 
(i)                Representations and Warranties. Each of the representations and warranties of BNI set forth in this Agreement shall be true and correct in all material respects of the Closing Date as though made on and as of the Closing Date. Each of the representations and warranties of BNI set forth in this Agreement that is qualified by materiality shall be true and correct in all material respects as of the Closing Date as though made on and as of the Closing Date and each of the other representations and warranties of BNI set forth in this Agreement shall be true and correct in all material respects as of the Closing Date as though made on and as of the Closing Date, subject to the continued application of such other qualifications in terms of such representations and warranties.
 
(ii)           Agreements and Covenants. BNI shall have performed or complied in all material respects with each obligation, agreement and covenant to be performed or complied with by it under this Agreement on or prior to the Closing.
 
(iii)           No Injunctions or Restraints; Illegality. No temporary restraining order, preliminary or permanent injunction or other order (whether temporary, preliminary or permanent) issued by any court of competent jurisdiction or other legal restraint or prohibition shall be in effect which restrains, enjoins or otherwise prohibits the consummation of the transactions contemplated hereby, nor shall any proceeding brought by any person seeking any of the foregoing be pending, and there shall not be any action taken, or any law or order enacted, entered, enforced or deemed applicable to transactions contemplated hereby, which restrains, enjoins or otherwise prohibits the consummation of the transactions contemplated.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 17

 


 
(iv)           Officer’s Certificate. Within 10 business days of the Closing, BNI shall deliver to Q Bio a certificate of BNI executed by an executive officer of BNI, dated as of the Closing, the form of which is attached hereto as Exhibit 7.1(iv), (i) certifying that, to its Knowledge after having made reasonable inquiries of its directors and officers and key personnel, the conditions set forth in Sections 7.1(i), 7.1(ii), and 7.1(iii) have been satisfied, (ii) certifying a copy of the board of directors’ resolution of BNI approving this Agreement and the transactions herein, (iii) providing a copy of BNI’s Articles of Incorporation (as amended) time-stamped by the Department of State of Florida.
 
(v)           Cooperation Agreements. BNI shall provide Q Bio with the agreements from each of Dr. Stanley Satz and/or Ms. Rose Satz, the form of which are attached hereto as Exhibit 7.1(v) shall stating that for so long as such person is an officer, director, employee or consultant of BNI or its Affiliate that such person agrees to provide such assistance and cooperation, in its capacity as officer, director, employee or consultant of BNI or its Affiliate, as contemplated under this Agreement as well as assist wherever possible to raise the capital required via corporate presentations to investor and scientific meetings, provided any reasonable out-of-pocket expense incurred by BNI in providing such cooperation will be paid by Q Bio.
 
(vi)           Historic Sales Figures and Financial Statements. BNI shall provide Q Bio with: (A) historic sales figures related to BNI Products;
 
(vii)           Within 10 business days of Closing, Q Bio shall deliver to each of Dr. Stanley Satz and  Ms. Rose Satz the form of Lock-Up Agreement incorporating the “leak-out” provisions found in the Term Sheet dated March 23, 2016 and each of Dr. and Ms. Satz shall make a good faith effort to enter into each of such Agreement within 10 business days following receipt thereof.
 
7.2        Conditions to Closing by BNI. The obligation of BNI to effect the Closing shall be subject to the reasonable satisfaction at or prior to the Closing of the following conditions, unless waived in writing by BNI:
 
(i)            Representations and Warranties. Each of the representations and warranties of Q Bio set forth in this Agreement shall be true and correct in all material respects of the Closing Date as though made on and as of the Closing Date. Each of the representations and warranties of Q Bio set forth in this Agreement that is qualified by materiality shall be true and correct in all material respects as of the Closing Date as though made on and as of the Closing Date and each of the other representations and warranties of Q Bio set forth in this Agreement shall be true and correct in all material respects as of the Closing Date as though made on and as of the Closing Date, subject to the continued application of such other qualifications in terms of such representations and warranties.
 
 (ii)           Agreements and Covenants. Q Bio shall have performed or complied in all material respects with each obligation, agreement and covenant to be performed or complied with by it on or prior to the Closing Date under this Agreement on or prior to the Closing Date.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 18

 


 
 
(iii)           Officer’s Certificate. Q Bio shall have delivered to BNI a certificate of Q Bio executed by an officer of Q Bio, dated as of the Closing Date, the form of which is attached hereto as Exhibit 7.2(iii), (i) certifying that, to its Knowledge after having made reasonable inquiries of its directors and officers and key personnel, the conditions set forth in Sections 7.2(i) and 7.2(ii) have been satisfied, (ii) certifying a copy of the board of directors’ resolution of Q Bio approving this Agreement and the transactions herein, (iii) providing a copy of Q Bio’s Articles of Incorporation (as amended) time-stamped by the Department of State of Florida and (iv) providing a copy of Q Bio’s bylaws (as amended, if applicable).
 
(iv)           Delivery of Consideration. Q Bio shall have made, or shall make simultaneous with Closing, the Initial Cash Payment and the Initial Stock Payment to BNI.
 
7.3        Additional Conditions to Closing by BNI. Closing shall be conditioned on satisfaction by BNI of all pre-existing obligations including those listed in Exhibit 7.3.  Said satisfaction shall take place prior to or at Closing. Subject to the last sentence of this Section 7.3, if the aggregate settlement figure differs materially from the $****  found in the “Settlement” column of Exhibit 7.3, the Parties agree to work in good faith to adjust the consideration paid under this Agreement accordingly. Qbio has the unilateral right to terminate this Agreement and all obligations hereunder, if: (i) the “Settlement” Figure materially exceeds $****, or (ii) the terms of any settlement are unacceptable to Qbio, and BNI hereby waives any claim for damages in any form whatsoever as a result of such termination.
 
8.        Indemnification
 
8.1           Without in any way limiting any of the rights or remedies otherwise available to any of Q Bio, its Affiliates and their respective directors, officers, agents and employees (the “Q Bio Indemnitees”), BNI shall indemnify and hold harmless each Q Bio Indemnitee against and from any damages finally awarded against such Q Bio Indemnitee and any cost award made against such Q Bio Indemnity in regards to any legal proceeding relating to allegations that Q Bio’s use and/or commercialization of the BNI Assets as permitted under this Agreement constitutes willful infringement any third party rights in the United States, provided the foregoing will not apply where the freedom to operate opinion failed to disclose a third party patent that has been infringed or did in fact disclose such patent but the parties nevertheless agreed to move forward irrespective of same.
 
8.2           Without in any way limiting any of the rights or remedies otherwise available to any of BNI, its Affiliates and their respective directors, officers, agents and employees (the “BNI Indemnitees”), Q Bio shall indemnify and hold harmless each BNI Indemnitee against and from any damages finally awarded against such BNI Indemnitee and any cost award made against such BNI Indemnitee in regards to any unauthorized use or commercialization of the BNI Assets, any modification to and/or improvement of the BNI Assets by Bio Q, or any breach of Bio Q’s confidentiality obligations under this Agreement.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 19

 


 
8.3      Procedures. The Party requesting indemnification (“Indemnitee”) shall give prompt written notice to the Party required to provide indemnification (“Indemnifying Party”) of any Third Party Claim, with respect to which indemnification may be required under this Section 11, provided, however, that failure to give notice shall not impair the obligation of the Indemnifying Party to provide indemnification hereunder except if and to the extent that failure materially impairs the ability of the Indemnifying Party successfully to defend the Third Party Claim. The Indemnifying Party shall be entitled to assume the defense and control of any Third Party Claim at its own cost and expense, but the Indemnitees shall have the right to be represented by its own counsel at its own cost in such matters. The Indemnitees shall provide all reasonable assistance to the Indemnifying Party, at the Indemnifying Party’s expense, in connection with the defense of any Third Party Claim hereunder. Neither Party shall settle or dispose of any Third Party Claim in any manner which would adversely impact the rights or interests of the other Party under this Agreement without the other Party’s prior written consent, without limiting the application of the royalty-stacking provisions of Section 3.4.
 
9.           Term and Termination
 
9.1      Term. This Agreement shall be effective as of the Closing Date, and shall remain in force until the fifth anniversary from the Closing Date (the “Term”).
 
9.2      Termination by BNI. BNI shall have no right to terminate this Agreement under any circumstances, except in the event that Q Bio fails to exercise its option within three (3) years of the Closing of this Agreement or Q Bio fails to satisfy its payment, funding, share issuance and/or confidentiality obligations under this Agreement, Q Bio has received written notice of such failure to pay and Q Bio has not cured such failure to pay or contested the duty to pay within thirty (30) days of Q Bio’s receipt of such written notice (in which case BNI may terminate this Agreement upon written notice to Q Bio).
 
9.3      Termination by Q Bio.  Q Bio shall have no right to terminate this Agreement under any circumstances, except in the event that Q Bio elects not to exercise the Option within three (3) years of the Closing date of this Agreement and BNI breaches any material term of this Agreement that is not cured within thirty (30) days of such breach.
 
9.4           No Release from Payment or Obligation. Termination shall not release either Party from any payment or other obligation that has accrued as of the effective date of the termination. Without limiting the generality of the foregoing, each Party shall pay the other, within thirty (30) days after such termination, amounts equal to all reimbursable expenses, patent royalties, milestone payments and other payments of whatever nature which are then owed to such Party hereunder.
 
9.5      Survival. Sections 2.4 and 8 through 15 of this Agreement shall survive the termination or the expiration of this Agreement for any reason and in all circumstances. Without limitation to the foregoing, all licenses and sublicenses granted under this Agreement will forthwith terminate upon termination of this Agreement.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 20

 


 
10.        Confidentiality.
 
10.1    Definition“Confidential Information” shall mean all non-public written, visual, oral and electronic data and information disclosed by one Party (“Discloser”) to the other Party (“Recipient”) under this Agreement that relates to the Discloser’s business, technology, products, processes, techniques, research, development and marketing and is marked as confidential or proprietary or disclosed under circumstances reasonably indicating that it is confidential or proprietary. All Confidential Information (including without limitation all copies, extracts and portions thereof) shall remain the property of Discloser. Except as expressly agreed otherwise by the Parties, Recipient does not acquire any intellectual property rights under any disclosure hereunder except the limited right to use such Confidential Information in accordance with this Agreement.
 
10.2    Restrictions. Recipient shall hold all Confidential Information of Discloser in strict confidence and shall not disclose any such Confidential Information to any Third Party except as expressly provided in this Section. Recipient may disclose the Confidential Information of Discloser only to regulatory authorities and employees, agents, contractors, Affiliates and actual and potential licensees and sublicensees (solely to the extent, in the case of any such licensee or sublicensee, such Confidential Information to be disclosed is licenseable or sublicenseable to such licensee or sublicensee), in all such cases who have a reason to know such information for purposes of Recipient’s performance of its obligations or exercise of its rights under this Agreement and (except with respect to regulatory authorities) who are bound in writing by restrictions regarding disclosure and use at least as protective of Discloser as the terms and conditions in this Agreement. Recipient shall not use any Confidential Information of Discloser for the benefit of itself or any third party or for any purpose other than to perform its obligations and exercise its rights under this Agreement. Recipient shall take at least the same degree of care that it uses to protect its own confidential and proprietary information and materials of similar nature and importance (but in no event less than reasonable care) to protect the confidentiality and avoid the unauthorized use, disclosure, publication, or dissemination of the Confidential Information of Discloser.
 
10.3    Scope. The foregoing restrictions on disclosure and use shall not apply with respect to any Confidential Information of Discloser to the extent such Confidential Information: (a) was or becomes publicly known through no wrongful act or omission of the Recipient or its Affiliates and their respective employees, agents and representatives; (b) was rightfully known by Recipient before receipt from Discloser; (c) becomes rightfully known to Recipient from a source other than Discloser without breach of a duty of confidentiality to Discloser or its Affiliates or any Third Party having indirectly received or obtained such information from Recipient or its Affiliates; or (d) is independently developed by Recipient without the use of or access to the Confidential Information of Discloser. In addition, Recipient may use or disclose Confidential Information of Discloser to the extent (i) approved by Discloser in writing or (ii) Recipient is legally compelled to disclose such Confidential Information, provided, however, that prior to any such compelled disclosure, if possible, Recipient shall give Discloser reasonable advance notice of any such disclosure and shall cooperate with Discloser, at Discloser’s cost, in protecting against any such disclosure and/or obtaining a protective order narrowing the scope of such disclosure and/or use of such Confidential Information.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 21

 


 
            10.4    Terms of this Agreement. The Parties acknowledge the confidential nature of this Agreement and, except to the extent provided in this Agreement, neither Party shall disclose the existence or the contents of this Agreement without obtaining the prior approval of the other Party in writing, save as required by applicable law (including as required by the United States Securities and Exchange Commission) or by either Party in connection with the enforcement of its rights hereunder or on a confidential basis to actual and potential investors or acquirors and legal counsel who are bound by obligations of confidentiality at least as restrictive as those set forth in this Agreement. Any breach by either Party of any of its confidentiality obligations under this Section 10.4 shall not affect any right or remedy to which the non-breaching Party would be entitled at law absent this Agreement. BNI acknowledges that Q Bio will publicly file a copy of this Agreement with the U.S Securities and Exchange Commission. In such filing, Q Bio will use reasonable efforts to obtain confidential treatment of those portions of this Agreement that it deems as sensitive to BNI and Q Bio.
 
10.5    Press Releases. Notwithstanding any other provision of this Section, Q Bio and BNI may, with prior written consent of the other Party, issue press releases acknowledging that Q Bio and Q Bio Affiliates have licensed, with an option to acquire, the BNI Assets, provided that the terms of this Agreement are not disclosed. Each Party agrees to the issuance of the proposed press release attached as Exhibit 10.5. Each Party may disclose any information in such press release (or any subsequent mutually agreed press release or other public announcement) without the additional consent of the other Party.
 
10.6    Disclosures of Terms to Certain Third Parties. Notwithstanding any other provision of this Section 10.6, Q Bio shall be entitled to disclose the existence of this Agreement and the amount of the payment to be made to any Third Party with which Q Bio has (or in the future may have) an agreement, arrangement, understanding, or relationship which permits Q Bio or the Third Party to seek payment or reimbursement, in whole or in part, of any portion of any of the payments to be made. Before disclosing any information related to this Agreement to such a Third Party, including but not limited to Q Bio customers and suppliers meeting the foregoing description, Q Bio shall obtain agreement from the Third Party that the disclosure shall be on a confidential basis and that the disclosed information shall not be provided to anyone outside of the Third Party, other than its outside legal counsel. Q Bio is a company that has a class of securities registered under the Securities Exchange Act of 1934, and as such, it is required to file a copy of this contract with the U.S. Securities and Exchange Commission (although such copy may be in redacted for if confidential treatment is granted).
 
10.7    Limitation of Liability. Except for a breach of Section 10 (Confidentiality), neither Party shall be liable to the other Party, its employees, directors, shareholders, agents for any indirect or consequential, incidental, punitive or special, damages (including but not limited to damages for business interruption or for personal injury) arising out of or in connection with this Agreement, even if the other Party has been advised of the possibility of such damages. To the extent either Party is liable to the other Party for any claims arising out of or in connection with this Agreement, such liability shall be limited to the greater of (a) the amounts owed or paid by Q Bio pursuant to Sections 3.2, 3.3, and 3.5 and (b) $**** Million.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 22

 


 
11.        Notices. 
 
Any notice required under this Agreement to be sent by either Party shall be given in writing by means of a letter or facsimile directed:
 
If to Q Bio:

Q BioMed Inc.
c/o Sanders Ortoli Vaughn-Flam Rosenstadt LLP
501 Madison Ave.
New York, N.Y. 10022
Attn:           Denis Corin
Email: dcorin@qbiomed.com


With a copy to:

Sanders Ortoli Vaughn-Flam Rosenstadt LLP
501 Madison Ave.
New York, N.Y. 10022
Attn:           William Rosenstadt
Email: wsr@sovrlaw.com

If to BNI:

Bio-Nucleonics, Inc.
2295 NW Corporate Boulevard
Suite 131
Boca Raton, FL 33431
Attn: Mr. Colm King

With a copy to:

Jones Day LLP
World Brickell Plaza
600 Brickell Avenue
Suite 3300
Miami, Florida 33131
Attn: Mr. Edgar Asebey
Email: easebey@jonesday.com
 
or such other address as may have been specified in writing by either Party to the other. Notice shall be conclusively deemed to have been duly given (a) when hand delivered to another Party; (b) when sent by email, with receipt confirmation, to the address set forth above if sent between 8:00 a.m. and 5:00 p.m. recipient’s local time on a business day, or on the next business day if sent other than between 8:00 a.m. and 5:00 p.m. recipient’s local time on a business day; or (c) the next business day after deposit with an international overnight courier service, postage prepaid, addressed to the applicable Party as set forth above with next business day delivery guaranteed, provided that the sending Party receives a confirmation of delivery from the delivery service provider.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 23

 


 
12.        No Assignment
 
This Agreement shall be binding upon and inure to the benefit of the Parties and their respective Affiliates, successors and assigns. This Agreement shall not be assignable by either Party, in whole or in part to any Third Party (subject to Q Bio’s termination rights under Section 13), except that either Party may assign or transfer this Agreement, without consent, to (a) an Affiliate or subsidiary company of that Party or (b) a successor to such Party’s business to which this Agreement relates through any merger, consolidation or reorganization; provided in each case that the entity to whom this Agreement is assigned agrees in writing to be bound by the terms and conditions hereof and that the assignor remains liable for any breach of this Agreement by the assignee or any subsequent assignee.
 
13.        Independent Contractors.
 
The Parties are and intend to remain independent contractors. Nothing in this Agreement shall be construed as an agency, business combination, joint venture or partnership between the Parties.
 
14.        Applicable Law and Jurisdiction
 
This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard or reference to its conflicts of law rules or principles.  Any dispute between the Parties in connection with this Agreement (including any question regarding its existence, validity or termination) shall be submitted exclusively to the federal and state courts located in New York County, New York.  Each party hereto submits to the jurisdiction of the courts located in New York County, New York. In the event of litigation between the parties in regards to this Agreement, the successful party in terms of such litigation will be entitled to reimbursement of its reasonable legal fees and litigation specific disbursements.
 
15.        Miscellaneous
 
15.1    Force Majeure. If for reasons of Force Majeure, as hereinafter defined, any Party fails to comply with its obligations hereunder other than the payment of money, such failure shall not constitute breach of contract, provided, however, that such Party shall give the other Party prompt written notice of the failure to perform and the reason therefor and uses its reasonable efforts to limit the resulting delay in its performance. For the purpose of this Section, “Force Majeure” shall mean acts of God; war; civil commotion; destruction of production facilities or materials; fire, earthquake or storm; labor disturbances or strikes; failure of public utilities or common carriers and any other similar causes beyond the reasonable control of any party.
 
15.2    Severability. If any of the provisions of this Agreement is determined to be invalid or unenforceable by any court of competent jurisdiction, such finding shall not invalidate the remainder of this Agreement which shall remain in full force and effect as if the provision(s) determined to be invalid or unenforceable had not been a part of this Agreement. In the event of such finding of invalidity or unenforceability, the Parties will endeavor to substitute forthwith the invalid, or unenforceable provision(s) by such effective provision(s) as will most closely correspond with the original intention of the provision(s) so voided.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 24

 


 
15.3    Entire Understanding. This Agreement and any attachments hereto constitute a single, integrated written contract expressing the entire agreement of the Parties with respect to the subject matter hereof and shall not be modified, supplemented, or repealed except by a writing signed by each of the Parties. No covenants, agreements, representations, or warranties of any kind whatsoever have been made by any Party, except as specifically set forth in this Agreement. All prior discussions, written communications, agreements and negotiations with respect to the subject matter hereof have been merged and integrated into and are superseded by this Agreement. Specifically, with respect to the subject matter hereof, this Agreement supersedes that certain Letter Of Intent, dated September 15, 2016 between the Parties.
 
15.4    Waiver. No waiver by any of the Parties to this Agreement of any breach of any term, condition or obligation of this Agreement by any other Party shall be construed as a waiver of any subsequent or continuing breach of that term, condition or obligation or of any other term, condition or obligation of this Agreement of the same or of a different nature. Neither the failure nor the delay of either Party to enforce any provision of, or right or remedy under, this Agreement shall constitute a waiver of such provision, right or remedy or of the right of each Party to enforce each and every provision of this Agreement. Any waiver of this Agreement must be in writing.
 
15.5    Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each executed counterpart may be delivered by way of facsimile and e-mail communication.
 
15.6    Headings. The headings and captions used in this Agreement are for convenience only and shall not be considered in construing or interpreting this Agreement.
 
15.7           Dollars.  All references in this Agreement to “$” or “dollars” are to U.S. dollars.
 
16.        Specific Performance.
 
The rights and remedies of the parties hereto shall be cumulative. The transactions contemplated by this Agreement are unique transactions and any failure on the part of any party to complete the transactions contemplated by this Agreement on the terms of this Agreement will not be fully compensable in damages and the breach or threatened breach of the provisions of this Agreement would cause the other parties hereto irreparable harm. Accordingly, in addition to and not in limitation of any other remedies available to the parties hereto for a breach or threatened breach of this Agreement, the parties shall be entitled to seek specific performance of this Agreement and seek an injunction restraining any such party from such breach or threatened breach.
 

* Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.1, 25

 


 
AS WITNESS, the Parties have caused this Patent and Technology License and Purchase Option Agreement to be signed on the date first written above.
 
Q BIOMED INC.

______________________
Name:
Title:

BIO-NUCLEONICS INC.


______________________
Name:
Title:

 
 
 
 
 
 
 
 
 

Exhibit 10.1, 26


 
EX-10.2 3 exhibit10-2.htm exhibit10-2.htm
 
 


EXHIBIT 10.2
FIRST AMENDMENT TO PATENT AND TECHNOLOGY
LICENSE AND PURCHASE OPTION AGREEMENT

THIS AGREEMENT (the “Amended Agreement”), dated September __, 2015, amends the Patent and Technology License and Purchase Option Agreement (the “License Agreement”) entered into on May 30, 2016 by and between (i) Q BioMed Inc. (“Q Bio”) and (ii) Bio-Nucleonics Inc. (“BNI”) (together, the “Parties”)
 
W I T N E S S E T H:
 
WHEREAS, all capitalized terms used but not otherwise defined herein shall have the meaning given to them in the License Agreement; and
 
WHEREAS, as each of the Parties agree that the amendment to the License Agreement contained in this Agreement is in its best interest;
 
NOW, THEREFORE, in consideration of the covenants and mutual promises contained herein and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged and intending to be legally bound hereby, the parties agree as follows:
 
TERMS OF THE AGREEMENT
 
 
1.           The Parties agree that the first sentence of Section 3.1 of the License Agreement shall be amended in its entirety to read as follows:
 
Subject to the terms hereof and the completion of all the pre-closing conditions hereof (including those set out in Section 7.3), the closing of the transactions contemplated herein (“Closing”) will take place on the execution of this Agreement (such date, the “Closing Date”).
 
2.           The Parties agree that Section 3.2(b)(i) of the License Agreement shall be amended in its entirety to read as follows:
 
(i)            (I)           $**** to BNI on the date of the Closing Date; and
 
 
(II)
$****  to BNI within 30 days of the satisfaction of the conditions found in Section 7.3 (the “Initial Cash Payment”)
 
3.           The Parties agree that Section 3.2(b)(ii) of the License Agreement shall be amended in its entirety to read as follows:
 
(ii)           $****  no later than 60 days from the date on which the Initial Cash Payment is made to third parties approved in writing by BNI that are preparing or supporting the preparation of the Amended FDA Market Authorization License and/or to undertaking studies or other actions necessary to complete such Amended FDA Market Authorization License; and
 

*
Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.

 
Exhibit 10.2, 1

 
 
 
4.           The Parties agree that Section 7.3 of the License Agreement shall be amended in its entirety to read as follows:
 
7.3           Additional Conditions to Closing by BNI. As a condition subsequent to the Closing, BNI shall satisfy all of its pre-existing obligations.  Said satisfaction shall consist of agreed upon payment having been made to satisfy obligations or agreed upon payment plan(s) in place to settle obligations that are acceptable to Q Bio. Subject to the last sentence of this Section 7.3, if the aggregate settlement figure differs materially from the $****  found in the “Settlement” column of Exhibit 7.3, the Parties agree to work in good faith to adjust the consideration paid under this Agreement accordingly. Q Bio has the unilateral right to terminate this Agreement and all obligations hereunder, if: (i) the “Settlement” Figure materially exceeds $****, or (ii) the terms of any settlement are unacceptable to Q Bio, and BNI hereby waives any claim for damages in any form whatsoever as a result of such termination.
 
5.           The Parties agree that Schedule 3.2(b) shall be amended in its entirety to be replaced with that form which is attached hereto as Exhibit A.
 
6.           The Parties agree that this Agreement does not affect any other provision of the SPA.
 
IN WITNESS WHEREOF, the parties hereto have executed this Amended Agreement to the License Agreement as of date first written above.
 
 
 
Q BIOMED INC.



 
By:_____________________________
Name:
 
Title:


 
BIO-NUCLEONICS INC.



 
By:_____________________________
Name:
 
Title:

 
 
 
 
 
 
 
 
 
 
 
 
*
Confidential treatment has been requested for certain portions of this Exhibit. The confidential portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission. Such portions have been marked with “****” at the exact place where material has been omitted.
 
Exhibit 10.2, 2


EX-31 4 exhibit31.htm exhibit31.htm
 
 


 
Exhibit 31
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO 
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Denis Corin, certify that:
 
 
(1)
I have reviewed this quarterly report on Form 10-Q for the quarterly period ended August 31, 2016 of Q BioMed Inc.;
 
 
(2)
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
 
(3)
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
 
(4)
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)
Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


 
(5)
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
 
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
   


 
Dated: October 17, 2016
 
 
/s/ Denis Corin
 
     
 
Denis Corin
 
 
Chief Executive Officer (Principal Executive Officer and
Acting Principal Financial and Accounting Officer)
 

 
 
 
 


EX-32.1 5 exhibit32-1.htm exhibit32-1.htm
 
 
 



  Exhibit 32.1
 
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S. C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the quarterly report on Form 10-Q of BioMed Inc. (the “Company”) for the quarterly period ended August 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Denis Corin, Chief Executive Officer (Principal Executive Officer and Acting Principal Financial and Accounting Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
 
 
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
   



Dated: October 17, 2016
/s/ Denis Corin
 
Denis Corin
Chief Executive Officer (Principal Executive Officer and
Acting Principal Financial and Accounting Officer)



 
 
 
 


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Aug. 31, 2016
Oct. 14, 2016
Document and Entity Information    
Entity Registrant Name Q BIOMED INC.  
Document Type 10-Q  
Document Period End Date Aug. 31, 2016  
Amendment Flag false  
Entity Central Index Key 0001596062  
Current Fiscal Year End Date --11-30  
Entity Common Stock, Shares Outstanding   9,084,253
Entity Filer Category Smaller Reporting Company  
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q3  
Trading Symbol QBIO  
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Condensed Balance Sheets (unaudited) - USD ($)
Aug. 31, 2016
Nov. 30, 2015
Current assets:    
Cash $ 137,986 $ 131,408
Prepaid expenses 10,000
Total current assets 147,986 131,408
Total assets 147,986 131,408
Current liabilities:    
Accounts payable and accrued expenses 422,395 58,802
Accounts payable - related party 40,000 30,000
Accrued interest payable 27,925 2,511
Convertible notes payable (See Note 5) 787,378
Total current liabilities 1,277,698 91,313
Long-term Liabilities:    
Convertible notes payable (See Note 5) 476,907 296,000
Total long term liabilities 476,907 296,000
Total liabilities 1,754,605 387,313
Stockholders' equity deficit:    
Preferred stock, $0.001 par value; 100,000,000 shares authorized; no shares issued and outstanding as of August 31, 2016 and November 30, 2015
Common stock, $0.001 par value; 250,000,000 shares authorized; 8,996,753 and 8,597,131 shares issued and outstanding as of August 31, 2016 and November 30, 2015, respectively 8,997 8,597
Additional paid-in capital 4,328,750 865,690
Accumulated deficit (5,944,366) (1,130,192)
Total stockholders' equity deficit (1,606,619) (255,905)
Total liabilities and stockholders’ Equity deficit $ 147,986 $ 131,408
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Condensed Balance Sheets (Parenthetical) - $ / shares
Aug. 31, 2016
Nov. 30, 2015
Statement of Financial Position [Abstract]    
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Preferred stock, shares authorized 100,000,000  
Preferred stock, issued
Preferred stock, outstanding
Common stock, par value $ 0.001  
Common stock, shares authorized 250,000,000  
Common stock, shares issued 8,996,753 8,597,131
Common stock, shares outstanding 8,996,753 8,597,131
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Condensed Statements of Operations - USD ($)
3 Months Ended 9 Months Ended
Aug. 31, 2016
Aug. 31, 2015
Aug. 31, 2016
Aug. 31, 2015
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Research and development expenses 443,222 663,500
Total operating expenses 1,594,186 33,202 4,301,368 45,184
Other (income) expense:        
Interest expense 114,847 304,596
Loss on conversion of debt 29,032 89,210
Loss on issuance of convertible debt 28,000 481,000
Change in fair value of embedded conversion option (50,000) 976,000
Total other expenses 121,879 512,806
Net loss $ (1,716,065) $ (33,202) $ (4,814,174) $ (45,184)
Net loss per share - basic and diluted $ (0.19) $ (0.00) $ (0.55) $ (0.00)
Weighted average shares outstanding, basic and diluted 8,909,414 9,801,630 8,784,373 9,062,044
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Condensed Statements of Cash Flows (unaudited) - USD ($)
9 Months Ended
Aug. 31, 2016
Aug. 31, 2015
Cash flows from operating activities:    
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Adjustments to reconcile net loss to net cash used in operating activities    
Issuance of common stock and warrant for services 3,039,277 32,000
Change in fair value of embedded conversion option (362,000)
Accretion of debt discount 261,672
Loss on conversion of debt 89,210
Loss on issuance of convertible debt 481,000
Changes in operating assets and liabilities:    
Accounts payable and accrued expenses 363,593 484
Accrued expenses - related party 40,000
Accrued interest payable 42,925
Prepaid expenses (10,000)
Net cash used by operating activities (868,497) (12,700)
Cash flows from financing activities:    
Contributed capital 151
Proceeds received from issuance of convertible notes 815,000
Proceeds received from issuance of common stock and warrants 60,075
Net cash provided by financing activities 875,075 151
Net increase (decrease) in cash 6,578 (12,549)
Cash at beginning of period 131,408 12,649
Cash at end of period 137,986 100
Non-cash financing activities:    
Issuance of common stock upon conversion of convertible notes payable 244,897
Issuance of warrants to settle accounts payable to related party 30,000
Cash paid for interest
Cash paid for income taxes
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.5.0.2
Organization of the Company and Description of the Business
9 Months Ended
Aug. 31, 2016
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”) (formerly ISMO Tech Solutions, Inc.), 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.

XML 18 R7.htm IDEA: XBRL DOCUMENT v3.5.0.2
Basis of Presentation
9 Months Ended
Aug. 31, 2016
Notes to Financial Statements  
Basis of Presentation

Note 2 - Basis of Presentation

 

The accompanying interim period unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles 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. The Condensed Balance Sheet as of August 31, 2016, the Condensed Statements of Operations for the three and nine months ended August 31, 2016 and 2015, and the Condensed Statements of Cash Flows for the nine months ended August 31, 2016 and 2015, are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of its financial position, operating results and cash flows for the periods presented. The Condensed Balance Sheet at November 30, 2015 has been derived from audited financial statements included in the Company's Form 10-K, most recently filed with the SEC on March 11, 2016 (as amended on March 15, 2016 solely to include interactive data files, the “Form 10-K”). The results for the three and nine months ended August 31, 2016 are not necessarily indicative of the results expected for the full fiscal year or any other period.

 

The accompanying interim period unaudited condensed financial statements and related financial information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K.

 

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 or separate business entities.

 

Going Concern

 

The Company had a working capital deficit of approximately $1.1 million as of August 31, 2016. The accompanying condensed financial statements are prepared using U.S. GAAP applicable to 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 $1.7 million and $4.8 million during the three and nine months ended August 31, 2016, respectively, and had net cash used in operating activities of approximately $870,000 during the nine months ended August 31, 2016.  These matters, among others, raise substantial doubts about the Company’s ability to continue as a going concern.

 

The ability of the Company to continue as a going concern depends on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

 

The Company depends upon its ability, and will continue to attempt, to secure equity and/or debt financing.  The Company might not be successful, and without sufficient financing it would be unlikely for the Company to continue as a going concern.  The accompanying 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.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.5.0.2
Summary of Significant Accounting Policies
9 Months Ended
Aug. 31, 2016
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

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, 2015 included in the Company’s Form 10-K. Since the date of such financial statements, there have been no changes to the Company’s significant accounting policies.

 

Recent accounting pronouncements

 

Management does not believe that any recently issued, but not yet effective or adopted, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.5.0.2
Loss per share
9 Months Ended
Aug. 31, 2016
Earnings Per Share [Abstract]  
Loss per share

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.

 

Potentially dilutive securities  August 31, 2016   August 31, 2015
Warrants (Note 8)                                      976,500                                               -   
Convertible debt (Note 4)                                      506,757                                               -   

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.5.0.2
Convertible Notes
9 Months Ended
Aug. 31, 2016
Notes to Financial Statements  
Convertible Notes

Note 4 – Convertible Notes

 

   August 31, 2016  November 30, 2015
Series A Notes:          
Principal value of 10%, convertible at $1.91 and $1.92 at August 31, 2016 and November 30, 2015, repectively.  $37,500   $50,000 
Fair value of bifurcated embedded conversion option of Series A Notes   30,000    64,000 
Debt discount   (10,101)   (28,832)
Carrying value of Series A Notess   57,399    85,168 
           
Series B Notes:          
Principal value of 10%, convertible at $1.91 and $1.92 at August 31, 2016 and November 30, 2015, repectively.  $55,000   $50,000 
Fair value of bifurcated embedded conversion option of Series B Notes   44,000    64,000 
Debt discount   (28,362)   (34,744)
Carrying value of Series B Notes   70,638    79,256 
           
Series C Notes:          
Principal value of 10%, convertible at $1.55 at August 31, 2016 and November 30, 2015.   576,383   $85,000 
Fair value of bifurcated embedded conversion option of Series C Notes   725,000    101,000 
Debt discount   (343,447)   (54,424)
Carrying value of Series C Notes   957,936    131,576 
           
Series D Notes:          
Principal value of 10%, convertible at $1.85 at August 31, 2016.  $160,000   $—   
Fair value of bifurcated embedded conversion option of Series D Notes   177,000    —   
Debt discount   (158,688)   —   
Carrying value of Series D Notes   178,312    —   
Total short-term carrying value of convertible notes  $787,378   $—   
Total long-term carrying value of convertible notes  $476,907   $296,000 

 

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.

 

Series B Notes

 

The Series B convertible notes payable (the “Series B Notes”) have the same terms as the Series A Notes. During the nine months ended August 31, 2016, the Company issued an additional of $105,000 in principal of Series B notes to third party investors.

 

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.  At no point since issuance has the conversion rate fallen below $1.25 per share.

 

During the nine months ended August 31, 2016, the Company issued an additional of $550,000 in principal of Series C notes to third party investors.

 

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.

 

The terms of the Series D Note 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 is more favorable to such investor in relation to the Series D note holders, unless, the Series D note holders has been provided with such rights and benefits.

 

On September 30, 2016, the Company amended the terms of the Series D Note agreement to restrict the Company from taking dilutive action without the Series D note holder’ consent.

 

During the nine months ended August 31, 2016, the Company issued $160,000 in principal of Series D notes to third party investors.

 

Debt Discount

 

Series A, B and C, D Notes

 

In connection with the issuance of the Series A, B, C and D Notes during the nine months ended August 31, 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 convertible note issued during the nine months ended August 31, 2016, with the following key inputs:

 

Embedded derivatives at inception      
  For the nine months ended August 31, 2016   For the year ended November 30, 2015
Stock price $2.60 - $3.26   $2.02 - $3.55
Terms (years) 1.5   1.25 - 1.5
Volatility 116.77%   108.40% - 162.89%
Risk-free rate 0.51% - 0.76%   0.66% - 0.85%
Dividend yield 0.00%   0.00%

 

During the nine months ended August 31, 2016, the Company recognized interest expense of approximately $262,000 resulting from amortization of the debt discount for Series A, B, C and D Notes. 

 

Embedded conversion options

 

As of August 31, 2016, the embedded conversion options have an aggregate fair value of approximately $976,000 and are presented on a combined basis with the related loan host in the Company’s Condensed Balance Sheets.  The table below presents changes in fair value for the embedded conversion options, which is a Level 3 fair value measurement:

 

Rollforward of Level 3 Fair Value Measurement for the Nine Months Ended August 31, 2016    
                 
Balance at November 30, 2015   Issuance   Net unrealized gain/(loss)   Settlements   Balance at August 31, 2016
                                               229,000                  1,231,000                   (362,000)                   (122,000)                                            976,000

 

 

Management used a binomial valuation model, with fourteen steps of the binomial tree, to estimate the fair value of the embedded conversion option at August 31, 2016, with the following key inputs:

 

Embedded derivatives at period end      
  As of
  August 31, 2016   November 30, 2015
Stock price $3.15   $3.55
Term (years) 0.68 - 1.3   1.26 - 1.49
Volatility 115.76%   108.4% - 121.62%
Risk-free rate 0.61% - 0.80%   0.94%
Dividend yield 0.00%   0.00%

 

Conversions of debt

 

The following conversions of convertible notes occurred during the nine months ended August 31, 2106:

 

  Principal   Shares
Series A conversions  $                            12,500                                    5,734
Series B conversions                              100,000                                  51,111
Series C conversions                                58,617                                  44,869
Series D conversions                                       -                                            -   
Total  $                       171,117                              101,714

 

As the embedded conversion option had been separately measured at fair value, the conversion of the loan host was recognized as an extinguishment of debt.  The Company recorded a loss on conversion of debt of approximately $89,000 as the difference between the carrying value of the debt and the bifurcated conversion option with the fair value of the common stock issued on each conversion date.

 

Events of default

 

The Company will be in default of the convertible notes payable, and all amounts outstanding will become immediately due and payable upon: (i) maturity, (ii) any bankruptcy, insolvency, reorganization, cessation of operation, or liquidation events, (iii) if any money judgement, writ or similar process filed against the Company for more than $150,000 remains unvacated, unbonded or unstayed for a period of twenty (20) days, (iv) the Company fails to maintain the listing of the common stock on at least one of the OTC markets or the equivalent replacement exchange, (v) the Company’s failure to maintain any material intellectual property rights, personal, real property or other assets that are necessary to conduct its business, (vi) the restatement of any financial statements filed with the U.S. Securities and Exchange Commission (“SEC”) for any period from two years prior to the notes issuance date and until the notes are no longer outstanding, if the restatement would have constituted a material adverse effect of the rights of the holders of the notes, (vii) the Company effectuates a reverse stock split of its common stock without twenty (20) days prior written notice to the notes’ holders, (viii) in the event that the Company replaces its transfer agent but fails to provide, prior to the effective date, a fully executed irrevocable transfer agent instructions signed by the successor transfer agent and the Company, (ix)  in the event that the Company depletes the share reserve and fails to increase the number of shares within three (3) business days, (x) if the Company fails to remain current in its filings with the SEC for more than 30 days after the filing deadline, (xi) after 12 months following the date the Company no longer deems itself a shell company as reflected in a ’34 Act filing, the Lenders are unable to convert the notes into free trading shares, and (xii) upon fundamental change of management.

 

The Company is currently not in default for any convertible notes issued.

 

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.5.0.2
Commitments and Contingencies
9 Months Ended
Aug. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 6 – Commitments and Contingencies

 

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 136,000 shares of common stock from September 1, 2016 through the term of arrangements.

 

License Agreement

 

Mannin

 

Pursuant to the license agreement with Mannin as disclosed in the Form 10-K, the Company has an option to purchase the 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 three and nine months ended August 31, 2016, the Company incurred approximately $443,000 and $664,000 in research and development expenses to fund the costs of development of the eye drop treatment for glaucoma pursuant to the Exclusive License. As of August 31, 2016, the Company has funded an aggregate of approximately $1.26 million under the Exclusive License.

 

In the event that: (i) the Company does not exercise the option to purchase the 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 IP, all 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.

 

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.

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.5.0.2
Related Party Transactions
9 Months Ended
Aug. 31, 2016
Related Party Transactions [Abstract]  
Related Party Transactions

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 approximately $200,000 and $27,000 for the nine months ended August 31, 2016 and 2015, respectively, and were included within general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations. 

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.5.0.2
Stockholders’ Equity (Deficit)
9 Months Ended
Aug. 31, 2016
Disclosure Text Block [Abstract]  
Stockholders' Equity (Deficit)

Note 8 - Stockholders’ Equity Deficit

 

As of August 31, 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.

 

Issued for services

 

During the nine months ended August 31, 2016, the Company issued an aggregate of 259,150 shares of common stock in connection with the advisory agreements as described in Note 6, and five-year warrants to purchase 550,000 shares of common stock at exercise prices ranging from of $1.45 to $3.00 per share for other services. The warrants vest 25% per quarter over the next year and were valued at $650,000 using the Black-Scholes option-valuation model with 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 director and general counsel of the Company to purchase an aggregate of 300,000 shares of common stock at strike prices ranging from $1.45 to $4.15 per share. The warrants were valued at $860,000 using the Black-Scholes option-valuation model with inputs described in Note 9. The warrants were issued for services and settlement of a $30,000 in accounts payable.  

 

The Company recognized general and administrative expenses of approximately $3 million and $32,000, as a result of these transactions, of which approximately $860,000 and $29,000 resulted from related party transactions, during the nine months ended August 31, 2016 and 2015, respectively.

 

The estimated unrecognized stock-based compensation associated with these agreements is approximately $994,000 and will be recognized over the next 0.3 year.

 

Private Placement

 

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 such investor (“May 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 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 investor an additional 12,258 shares of common stock according to the agreement.

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.5.0.2
Warrants
9 Months Ended
Aug. 31, 2016
Notes to Financial Statements  
Warrants

Note 9 - Warrants

 

The following represents a summary of outstanding warrants to purchase the Company’s common stock at August 31, 2016 and changes during the period then ended:

 

          Weighted Average 
      Weighted Average    Remaning Contractual
  Warrants   Exercise Price   Life (years)
Outstanding at November 30, 2015                                      100,000    $                                        2.18   4.80
Issued                                      876,500                                              2.46   4.56
Expired                                                 -                                                   -   -
Outstanding at August 31, 2016                                      976,500    $                                        2.43   4.51
Exercisable at August 31, 2016                                      564,000    $                                        2.98   4.33

  

Fair value of the warrants was calculated using the Black-Scholes option-valuation model, with the following key inputs:

 

    For the nine months ended August 31, 2016
   
Stock price    $1.60 - $4.15 
Term (years)   2 - 5
Volatility    101.13% - 147.36% 
Risk-free rate   0.76% - 1.76%
Dividend yield   0.00%

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.5.0.2
Subsequent Events
9 Months Ended
Aug. 31, 2016
Subsequent Events [Abstract]  
Subsequent Events

Note 10 – Subsequent Events

 

Bio-Nucleonics

 

On September 6, 2016, the Company entered into the Patent and Technology License and Purchase Option Agreement (“Patent and Technology License and Purchase Option Agreement”) 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 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 pay to BNI the total cash payment of $850,000, of which the Company has paid $10,000 as of August 31, 2016. Once the Company has paid the aggregate cash payment, the Company may exercise its option to acquire the BNI IP at no additional charge.  The Company issued 50,000 shares of common stock to BNI pursuant to the Patent and Technology License and Purchase Option Agreement in September 2016.

 

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 we 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.

 

Series E Notes

 

The Series E convertible notes payable (the “Series E Notes”) have the same terms as the Series D Notes, except that 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. Subsequent to August 31, 2016, the Company issued $150,000 in principal of Series E notes to third party investors.

 

Private Placement

 

In September 2016, the Company entered into a subscription agreement with certain investors in connection with the Company’s private placement (“September Private Placement”), generating gross proceeds of $112,500 by selling 37,500 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.

 

Finder’s Agreement

 

In October 2016, the Company entered into two agreements to engage two financial advisors to assist the Company on its search for potential investors, vendors or partners to engage in a license, merger, joint venture or other business arrangement. As a compensation for their efforts, the Company agreed to pay the financial advisors a fee equal to 7% and 8% in cash, and to pay one of the financial advisors an additional fee equal to 7% in warrants of all consideration received by the Company.  The Company has not incurred any finders’ fees pursuant to the agreement to-date.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.5.0.2
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Aug. 31, 2016
Disclosure Text Block [Abstract]  
Recent accounting pronouncements

Recent accounting pronouncements

 

Management does not believe that any recently issued, but not yet effective or adopted, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.5.0.2
Summary of Significant Accounting Policies (Tables)
9 Months Ended
Aug. 31, 2016
Disclosure Text Block [Abstract]  
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share
Potentially dilutive securities at 5/31/16 Number of shares
Warrants (Note 8)                             470,000
Convertible debt (Note 4)                             401,280
XML 29 R18.htm IDEA: XBRL DOCUMENT v3.5.0.2
Loss per share (Table)
9 Months Ended
Aug. 31, 2016
Earnings Per Share [Abstract]  
Loss per share

Potentially dilutive securities  August 31, 2016   August 31, 2015
Warrants (Note 8)                                      976,500                                               -   
Convertible debt (Note 4)                                      506,757                                               -   

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.5.0.2
Convertible Notes (Tables)
9 Months Ended
Aug. 31, 2016
Notes to Financial Statements  
Convertible Notes

  August 31, 2016   November 30, 2015
Series A Notes:      
Principal value of 10%, convertible at $1.91 and $1.92 at August 31, 2016 and November 30, 2015, repectively.  $                            37,500    $                            50,000
Fair value of bifurcated embedded conversion option of Series A Notes                                30,000                                  64,000
Debt discount                              (10,101)                                (28,832)
Carrying value of Series A Notes                                57,399                                  85,168
       
Series B Notes:      
Principal value of 10%, convertible at $1.91 and $1.92 at August 31, 2016 and November 30, 2015, repectively.  $                            55,000    $                            50,000
Fair value of bifurcated embedded conversion option of Series B Notes                                44,000                                  64,000
Debt discount                              (28,362)                                (34,744)
Carrying value of Series B Notes                                70,638                                  79,256
       
Series C Notes:      
Principal value of 10%, convertible at $1.55 at August 31, 2016 and November 30, 2015.                              576,383    $                            85,000
Fair value of bifurcated embedded conversion option of Series C Notes                              725,000                                101,000
Debt discount                            (343,447)                                (54,424)
Carrying value of Series C Notes                              957,936                                131,576
       
Series D Notes:      
Principal value of 10%, convertible at $1.85 at August 31, 2016.  $                          160,000    $                                   -   
Fair value of bifurcated embedded conversion option of Series D Notes                              177,000                                         -   
Debt discount                            (158,688)                                         -   
Carrying value of Series D Notes                              178,312                                         -   
Total short-term carrying value of convertible notes  $                          787,378    $                                   -   
Total long-term carrying value of convertible notes  $                          476,907    $                          296,000

Schedule of Share-based Compensation, Activity

Embedded derivatives at inception      
  For the nine months ended August 31, 2016   For the year ended November 30, 2015
Stock price $2.60 - $3.26   $2.02 - $4.30
Terms (years) 1.5   1.25 - 1.5
Volatility 116.77%   108.40% - 162.89%
Risk-free rate 0.51% - 0.76%   0.66% - 0.85%
Dividend yield 0.00%   0.00%

Schedule of Stock Options Roll Forward

Rollforward of Level 3 Fair Value Measurement for the Nine Months Ended August 31, 2016    
                 
Balance at November 30, 2015   Issuance   Net unrealized gain/(loss)   Settlements   Balance at August 31, 2016
                                               229,000                  1,231,000                   (362,000)                   (122,000)                                            976,000

Fair value of the embedded conversion

Embedded derivatives at period end      
  As of
  August 31, 2016   November 30, 2015
Stock price $3.15   $3.55
Term (years) 0.68 - 1.3   1.26 - 1.49
Volatility 115.76%   108.4% - 121.62%
Risk-free rate 0.61% - 0.80%   0.94%
Dividend yield 0.00%   0.00%

Conversions of convertible notes

Conversion of debt      
       
  Principal   Shares
Series A conversions  $                            12,500                                    5,734
Series B conversions                              100,000                                  51,111
Series C conversions                                58,617                                  44,869
Series D conversions                                       -                                            -   
Total  $                       171,117                              101,714

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.5.0.2
Warrants (Tables)
9 Months Ended
Aug. 31, 2016
Notes to Financial Statements  
Summary of outstanding warrants

      Weighted Average 
  Warrants   Exercise Price
Outstanding at November 30, 2015                                      100,000    $                                        2.18
Issued                                      876,500                                              2.46
Expired                                                 -                                                   -
Outstanding at August 31, 2016                                      976,500    $                                        2.43
Exercisable at August 31, 2016                                      564,000    $                                        2.98

Fair value of the warrant

    For the nine months ended August 31, 2016
   
Stock price    $1.60 - $4.15 
Term (years)   2 - 5
Volatility    101.13% - 147.36% 
Risk-free rate   0.76% - 1.76%
Dividend yield   0.00%

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.5.0.2
Summary of Significant Accounting Policies (Details) - shares
Aug. 31, 2016
Aug. 31, 2015
Disclosure Text Block [Abstract]    
Warrants 976,500
Conversion option 506,757
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.5.0.2
Basis of Presentation (Detail Narrative) - USD ($)
3 Months Ended 9 Months Ended
Aug. 31, 2016
Aug. 31, 2016
Nov. 30, 2015
Notes to Financial Statements      
Accumulated deficit $ (5,944,366) $ (5,944,366) $ (1,130,192)
Working capital deficit 1,100,000 1,100,000  
Net loss $ 1,700,000 4,800,000  
Net cash used in operating activities   $ 870,000  
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.5.0.2
Convertible Notes (Details) - USD ($)
Aug. 31, 2016
Nov. 30, 2015
Total short-term carrying value of convertible notes $ 787,378
Total long-term carrying value of convertible notes 476,907 296,000
Series A [Member]    
Principal 37,500 50,000
Fair value embedded conversion 30,000 64,000
Debt discount (10,101) (28,832)
Carrying value of Series A Notes 57,399 85,168
Series B [Member]    
Principal 55,000 50,000
Fair value embedded conversion 44,000 64,000
Debt discount (28,362) (34,744)
Carrying value of Series A Notes 70,638 79,256
Series C [Member]    
Principal 576,383 85,000
Fair value embedded conversion 725,000 101,000
Debt discount (343,447) (54,424)
Carrying value of Series A Notes 957,936 131,576
Series D [Member]    
Principal 160,000
Fair value embedded conversion 177,000
Debt discount (158,688)
Carrying value of Series A Notes $ 178,312
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.5.0.2
Convertible Notes (Details 1) - $ / shares
9 Months Ended 12 Months Ended
Aug. 31, 2016
Nov. 30, 2015
Stock price $ 3.15  
Volatility 116.77% 162.89%
Risk-free rate   0.94%
Dividend yield 0.00% 0.00%
Minimum [Member]    
Stock price $ 2.60 $ 2.02
Terms (years)   1 year 3 months
Volatility   108.40%
Risk-free rate 0.51% 0.66%
Maximum [Member]    
Stock price $ 3.26 $ 3.55
Terms (years) 1 year 6 months 1 year 6 months
Volatility   162.89%
Risk-free rate 0.76% 0.85%
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.5.0.2
Convertible Notes (Details 2)
9 Months Ended
Aug. 31, 2016
USD ($)
Notes to Financial Statements  
Balance, Beginning of year $ 229,000
Issuance 1,231,000
Net unrealized gain/(loss) (362,000)
Settlements (122,000)
Balance, end of year $ 976,000
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.5.0.2
Convertible Notes (Details 3) - $ / shares
9 Months Ended 12 Months Ended
Aug. 31, 2016
Nov. 30, 2015
Stock price $ 3.15  
Volatility 115.76%  
Risk-free rate   0.94%
Dividend yield 0.00% 0.00%
Minimum [Member]    
Terms (years) 8 months 5 days 1 year 3 months 4 days
Volatility   108.40%
Risk-free rate 0.61%  
Maximum [Member]    
Terms (years) 1 year 3 months 18 days 1 year 5 months 27 days
Volatility   121.62%
Risk-free rate 0.80%  
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.5.0.2
Convertible Notes (Details 4)
9 Months Ended
Aug. 31, 2016
USD ($)
shares
Principal of conversion of debts | $ $ 171,117
Shares of conversion of debts | shares 101,714
Series A [Member]  
Principal of conversion of debts | $ $ 12,500
Shares of conversion of debts | shares 5,734
Series B [Member]  
Principal of conversion of debts | $ $ 100,000
Shares of conversion of debts | shares 51,111
Series C [Member]  
Principal of conversion of debts | $ $ 58,617
Shares of conversion of debts | shares 44,869
Series D [Member]  
Principal of conversion of debts | $
Shares of conversion of debts | shares
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.5.0.2
Convertible Notes (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Aug. 31, 2016
Aug. 31, 2015
Aug. 31, 2016
Aug. 31, 2015
Conversion price     1.25  
Debt discount $ 750,000   $ 750,000  
Interest expense     262,000  
Embedded conversion option has a fair value (50,000) 976,000
Conversion of note     89,000  
Loss on extinguishment of debt     481,000  
Series B [Member]        
Aggregate principal balance 105,000   105,000  
Series C [Member]        
Aggregate principal balance $ 550,000   $ 550,000  
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.5.0.2
Commitments and Contingencies (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended 9 Months Ended
Aug. 31, 2016
May 31, 2015
Aug. 31, 2016
Commitments and Contingencies Disclosure [Abstract]      
Research and development expenses $ 443,000   $ 664,000
Warrant Purchased     100,000
Exercise price     $ 3
Common stock to a related party for advisory services     136,000
General and administrative expenses   $ 20,000 $ 1,260,000
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.5.0.2
Related Party Transactions (Details Narrative) - USD ($)
9 Months Ended
Aug. 31, 2016
Aug. 31, 2015
Related Party Transactions [Abstract]    
Consulting and legal expenses $ 200,000 $ 27,000
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.5.0.2
Stockholders’ Equity (Deficit) (Details Narrative)
Aug. 31, 2016
$ / shares
shares
Disclosure Text Block [Abstract]  
Common stock, par value | $ / shares $ 0.001
Common stock, shares authorized | shares 250,000,000
Preferred stock, par value | $ / shares $ 0.001
Preferred stock, shares authorized | shares 100,000,000
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.5.0.2
Warrants (Details)
9 Months Ended
Aug. 31, 2016
$ / shares
shares
Warrants  
Outstanding at November 30, 2015 | shares 100,000
Issued | shares 876,500
Expired | shares
Outstanding at August 31, 2016 | shares 976,500
Exercisable at August 31, 2016 | shares 564,000
Weighted Average Exercise Price  
Outstanding at November 30, 2015 | $ / shares $ 2.18
Issued | $ / shares 2.46
Expired | $ / shares
Outstanding at August 31, 2016 | $ / shares 2.43
Exercisable at August 31, 2016 | $ / shares $ 2.98
Weighted Average Remaning Contractual Life (years)  
Outstanding at November 30, 2015 4 years 9 months 18 days
Issued 4 years 6 months 22 days
Outstanding at August 31, 2016 4 years 6 months 4 days
Exercisable at August 31, 2016 4 years 3 months 29 days
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.5.0.2
Warrants (Details 1)
9 Months Ended
Aug. 31, 2016
$ / shares
Dividend yield 0.00%
Minimum [Member]  
Stock price $ 1.60
Terms (years) 2 years
Volatility 101.13%
Risk-free rate 0.76%
Maximum [Member]  
Stock price $ 4.15
Terms (years) 5 years
Volatility 147.36%
Risk-free rate 1.76%
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.5.0.2
Subsequent Events (Detail Narrative)
9 Months Ended
Aug. 31, 2016
USD ($)
shares
Subsequent Events [Abstract]  
Convertible note to a third party $ 85,000
Aggregate shares | shares 110,000
Technology License and Purchase Option Agreement $ 50,000
Principal of Series E notes issued 150,000
Private Placement gross proceeds 112,500
Total cash payment $ 850,000
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