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~~May 31, ~~2017~~2018

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 Ortoli Rosenstadt LLP 501 Madison ~~Ave.~~Avenue, 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 registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically 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 (§232.405 of this chapter) 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, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☐	(Do not check if smaller reporting company)	Smaller reporting company	☒
			Emerging growth company	☐

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

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

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

Common Stock, $0.001 par value	~~11,695,472~~13,987,130 shares
(Class)	(Outstanding as at ~~October 17, 2017)~~July 16, 2018)

Q BIOMED INC.

Table of Contents

~~PRINTER PLEASE UPDATE PAGE #~~


	Page
PART I – FINANCIAL INFORMATION		2
Item 1. Condensed Consolidated Financial Statements		2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16	10
Item 3. Quantitative and Qualitative Disclosure About Market Risk		23	14
Item 4. Controls and Procedures		23	14
PART II – OTHER INFORMATION		24	15
Item 1. Legal Proceedings		24	15
Item 1A. Risk Factors		24	15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		24	15
Item 3. Defaults Upon Senior Securities		24	15
Item 4. Mine Safety Disclosures		24	15
Item 5. Other Information		24	15
Item 6. Exhibits		24	15
SIGNATURES		25	16

PART I – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Q BIOMED INC.

Condensed Consolidated Balance Sheets

August 31, 2017 November 30, 2016
(Unaudited)
ASSETS
Current assets:
Cash $ 2,499,169 $ 1,468,724
Prepaid expenses 5,000 -
Total current assets 2,504,169 1,468,724
Total Assets $ 2,504,169 $ 1,468,724

LIABILITIES AND STOCKHOLDERS' EQUITY DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 382,055 $ 497,936
Accrued expenses - related party 17,500 70,502
Accrued interest payable 33,299 48,813
Convertible notes payable (See Note 5) 1,922,474 2,394,849
Note payable 138,856 100,152
Warrant liability - 168,070
Total current liabilities 2,494,184 3,280,322

Long-term liabilities:
Convertible notes payable (See Note 5) - 231,517
Total long term liabilities - 231,517
Total Liabilities 2,494,184 3,511,839

Commitments and Contingencies (Note 6)

Stockholders' Equity Deficit:
Preferred stock, $0.001 par value; 100,000,000 shares authorized; no shares issued and outstanding as of August 31, 2017 and November 30, 2016 - -
Common stock, $0.001 par value; 250,000,000 shares authorized; 11,496,169 and 9,231,560 shares issued and outstanding as of August 31, 2017 and November 30, 2016, respectively 11,496 9,231
Additional paid-in capital 18,667,736 6,249,357
Accumulated deficit (18,669,247 ) (8,301,703 )
Total Stockholders' Equity Deficit 9,985 (2,043,115 )
Total Liabilities and Stockholders' Equity Deficit $ 2,504,169 $ 1,468,724
The accompanying notes are an integral part of these condensed consolidated financial statements

	May 31, 2018	November 30, 2017
	(Unaudited)
ASSETS
Current assets:
Cash	$2,324,171	$824,783
Prepaid expenses	2,500	2,500
Total current assets	2,326,671	827,283
Total Assets	$2,326,671	$827,283

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$432,792	$463,539
Accrued expenses - related party	7,500	7,500
Total current liabilities	440,292	471,039
Total Liabilities	440,292	471,039

Commitments and Contingencies (Note 5)

Stockholders' Equity:
Preferred stock, $0.001 par value; 100,000,000 shares authorized; no shares issued and outstanding as of May 31, 2018 and November 30, 2017	-	-
Common stock, $0.001 par value; 250,000,000 shares authorized; 13,987,130 and 12,206,409 shares issued and outstanding as of May 31, 2018 and November 30, 2017, respectively	13,987	12,206
Additional paid-in capital	28,902,745	23,187,408
Accumulated deficit	(27,030,353)	(22,843,370)
Total Stockholders' Equity	1,886,379	356,244
Total Liabilities and Stockholders' Equity	$2,326,671	$827,283

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

Q BioMed Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

	For the three months ended August 31,						For the nine months ended August 31,						For the three months ended May 31,		For the six months ended May 31,
	2017			2016			2017			2016			2018	2017	2018	2017
Operating expenses:
General and administrative expenses	$	3,038,018		$	1,150,964		$	6,122,565		$	3,637,868		$1,230,616	$1,676,961	$2,551,370	$3,084,439
Research and development expenses		697,966			443,222			2,296,324			663,500		782,188	1,013,420	1,635,613	1,598,358
Total operating expenses		3,735,984			1,594,186			8,418,889			4,301,368		2,012,804	2,690,381	4,186,983	4,682,797

Other income (expenses):
Interest expense		(202,160	)		(114,847	)		(635,267	)		(304,596	)	-	(216,600)	-	(433,107)
Interest income		15			-			123			-
Loss on conversion of debt		-			(29,032	)		(365,373	)		(89,210	)	-	(2,442)	-	(365,373)
Loss on extinguishment of debt		(76,251	)		-			(76,251	)		-
Loss on issuance of convertible notes		-			(28,000	)		-			(481,000	)
Change in fair value of embedded conversion option		32,983			50,000			(812,017	)		362,000		-	60,000	-	(845,000)
Change in fair value of warrant liability		-			-			(59,870	)		-		-			(59,870)
Total other expenses		(245,413	)		(121,879	)		(1,948,655	)		(512,806	)
Total other income (expenses)													-	(159,042)	-	(1,703,350)

Net loss	$	(3,981,397	)	$	(1,716,065	)	$	(10,367,544	)	$	(4,814,174	)	$(2,012,804)	$(2,849,423)	$(4,186,983)	$(6,386,147)

Net loss per share - basic and diluted	$	(0.37	)	$	(0.19	)	$	(1.03	)	$	(0.55	)	$(0.14)	$(0.29)	$(0.31)	$(0.66)

Weighted average shares outstanding, basic and diluted		10,816,282			8,909,414			10,074,766			8,784,373		13,982,627	9,920,456	13,358,654	9,698,816

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

Q BIOMED INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	For the nine months ended August 31,						For the six months ended May 31,
	2017			2016			2018	2017
Cash flows from operating activities:
Net loss	$	(10,367,544	)	$	(4,814,174	)	$(4,186,983)	$(6,386,147)
Adjustments to reconcile net loss to net cash used in operating activities
Issuance of common stock, warrants and options for services		4,181,693			3,039,277		771,867	1,849,149
Issuance of common stock for acquired in-process research and development		487,500			-		-	487,500
Change in fair value of embedded conversion option		812,017			(362,000	)	-	845,000
Change in fair value of warrant liability		59,870			-		-	59,870
Accretion of debt discount		525,864			261,672		-	354,766
Loss on conversion of debt		365,373			89,210		-	365,373
Loss on extinguishment of debt		76,251			-
Loss on issuance of convertible debt		-			481,000
Changes in operating assets and liabilities:
Prepaid expenses		(5,000	)		(10,000	)	-	(20,000)
Accounts payable and accrued expenses		(115,881	)		363,593		(30,747)	(202,171)
Accrued expenses - related party		(53,002	)		40,000		-	(63,002)
Accrued interest payable		109,404			42,925		-	78,341
Net cash used in operating activities		(3,923,455	)		(868,497	)	(3,445,863)	(2,631,321)

Cash flows from financing activities:
Proceeds received from issuance of convertible notes		2,500,000			815,000
Proceeds from issuance of convertible notes							-	2,500,000
Proceeds received from exercise of warrants		70,000			-		-	70,000
Proceeds received for issuance of common stock and warrants , net of offering costs		2,383,900			60,075
Proceeds received for issuance of common stock and warrants, net of offering costs							4,945,251	-
Net cash provided by financing activities		4,953,900			875,075		4,945,251	2,570,000

Net increase in cash		1,030,445			6,578
Net increase (decrease) in cash							1,499,388	(61,321)

Cash at beginning of period		1,468,724			131,408		824,783	1,468,724
Cash at end of period	$	2,499,169		$	137,986		$2,324,171	$1,407,403

Non-cash financing activities:
Issuance of common stock upon conversion of convertible notes payable	$	3,540,838		$	244,897		$-	$2,879,273
Issuance of common stock and warrants in exchange for extinguishment of convertible notes payable	$	442,149		$	-
Issuance of warrants to settle accounts payable to related party	$	-		$	30,000
Reclassification of warrant liability to equity	$	227,940		$	-		$-	$227,940

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

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

Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

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

Q BioMed Inc. (“Q BioMed” or “the Company”), incorporated in the State of Nevada on November 22, 2013, is a biomedical acceleration and development company focused on licensing, acquiring and providing strategic resources to life sciences and healthcare companies. Q BioMed intends to mitigate risk by acquiring multiple assets over time and across a broad spectrum of healthcare related products, companies and sectors. The Company intends to develop these assets to provide returns via organic growth, revenue production, out-licensing, ~~sale~~sell or spinoff new public companies.

On December 7, 2016, the Company formed its wholly-owned subsidiary in Cayman Islands, “Q BioMed Cayman SEZC” (the “Subsidiary”). The accompanying condensed consolidated financial statements include the accounts of the Company’s wholly-owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation.

Note 2 - Basis of Presentation

The accompanying interim period unaudited condensed consolidated 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 Consolidated Balance Sheet as of ~~August~~May 31, ~~2017,~~2018, the Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~August~~May 31, ~~2017~~2018 and ~~2016,~~2017, and the Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~August~~May 31, ~~2017~~2018 and ~~2016,~~2017, 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 Consolidated Balance Sheet at November 30, ~~2016~~2017 has been derived from audited financial statements included in the Company's Form 10-K, most recently filed with the SEC on February 28, ~~2017.~~2018. The results for the three and ~~nine~~six months ended ~~August~~May 31, ~~2017~~2018 and ~~2016~~2017 are not necessarily indicative of the results expected for the full fiscal year or any other period.

The accompanying interim period unaudited condensed consolidated 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.

Going Concern

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

The Company ~~is pre-revenue,~~ had a net loss and net cash used in operating activities of approximately ~~$2.5~~$4.2 million ~~in cash as of August~~and $3.4 million, respectively, during the six months ended May 31, ~~2017. The~~2018. These matters, amongst others, raise doubt about the Company’s ability ~~of the Company~~ to continue as a going ~~concern depends on~~concern.

As of May 31, 2018, the Company ~~obtaining adequate capital to fund~~has raised operating ~~losses until it generates adequate cash flows~~funds through contacts, high net-worth individuals and strategic investors. The Company has not generated any revenue from operations since inception and has limited assets upon which to ~~fund~~commence its ~~operating costs~~business operations. At May 31, 2018, the Company had cash of approximately $2.3 million. On February 1, 2018, the Company received net proceeds of approximately $4,945,000 from the registered sale of common stock and ~~obligations.~~warrants to purchase common stock. The Company’s expected monthly burn rate is approximately $528,000. As such, management anticipates that the Company will have to raise additional funds and/or generate revenue from drug sales within twelve months to continue operations. Additional funding will be needed to implement the Company’s business plan that includes various expenses such as fulfilling our obligations under licensing agreements, legal, operational set-up, general and administrative, marketing, employee salaries and other related start-up expenses. Obtaining additional funding will be subject to a number of factors, including general market conditions, investor acceptance of our business plan and initial results from our business operations. These factors may impact the timing, amount, terms or conditions of additional financing available to us. If the Company is unable to ~~obtain adequate capital, it could~~raise sufficient funds, management we will be forced to scale back the Company’s operations or cease our 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 Company cannot be certain that additional funding will be available on acceptable terms, or at all. Management has determined that there is substantial doubt about the Company's ability to continue as a going concern within one year after the condensed consolidated financial statements are issued.

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

Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

Note 3 – Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended November 30, ~~2016~~2017 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.

~~Fair value of financial instruments~~Income Taxes

~~Fair value measurements discussed herein~~Deferred tax assets and liabilities are computed based upon ~~certain market assumptions~~the difference between the financial statement and ~~pertinent information available~~income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to ~~management as of August 31, 2017 and November 30, 2016. The respective carrying value of cash and accounts payable approximated their fair values as they~~be realized or settled. Deferred income tax expenses or benefits are ~~short term in nature.~~

~~As of August 31, 2017, the estimated aggregate fair value of all outstanding convertible notes payable is approximately $2.3 million. The fair value estimate is~~ based on the ~~estimated option value~~changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the ~~conversion terms, since~~deferred tax assets will not be realized, a valuation allowance is required to reduce the ~~strike price~~deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of ~~each note series~~change.

In its interim consolidated financial statements, the Company utilizes an expected annual effective tax rate in determining its income tax provisions for the interim periods. That rate differs from U.S. statutory rates primarily as a result of valuation allowance related to the Company’s net operating loss carryforward as a result of the historical losses of the Company.

On December 22, 2017, the United States enacted new tax legislation, the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant changes to corporate taxation, including reduction of the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018, limitation of the tax deduction for interest expense to 30% of earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks. The Tax Act states that the 21% U.S. federal corporate tax rate is ~~in-the-money at August~~effective for tax years beginning on or after January 1, 2018. However, existing tax law, which was not amended under the Tax Act, governs when a change in tax rate is effective. Existing tax law provides that if the taxable year includes the effective date of any rate change (unless the change is the first date of the taxable year), taxes should be calculated by applying a blended rate to the taxable income for the year. Management has not yet determined the impact the rate reduction will have on the Company's gross deferred tax asset and liabilities and offsetting valuation allowance. However, the Company has a full allowance against the deferred tax asset and as a result there was no impact to income tax expense for the six months ended May 31, ~~2017.~~2018.

In conjunction with the tax law changes, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The ~~estimated fair value represents~~ultimate impact, which is expected to be recorded by November 30, 2018, may differ from any provisional amounts, due to, among other things, additional analysis, changes in interpretations and assumptions we have made, additional regulatory guidance that may be issued, and actions we may take as a ~~Level 3 measurement.~~result of the tax Act, and the fact that we cannot definitively predict what our deferred tax balance will ultimately be as of November 30, 2018.

Recent accounting pronouncements

~~In March~~On February 2016, the FASB issued ASU No. ~~2016-06, Derivatives~~2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize all leases (with the exception of short-term leases) on the balance sheet as a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis and ~~Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments. This~~a right-of-use asset, which is an asset that represents the lessee¹s right to use, or control the use of, a specified asset for the lease term. The new standard ~~simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by removing the requirement to assess whether a contingent event~~ is ~~related to interest rates or credit risks. This new standard will be~~ effective for the Company on ~~January~~December 1, ~~2017.~~2019. The Company ~~adopted~~is currently evaluating the ~~provisions. Adoption did not~~effect the guidance will have ~~a material impact~~ on ~~the Company's financial position, results of operations, or cash flows.~~its Consolidated Financial Statements.

In August 2016, the FASB issued ASU No. 2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash ~~Payments.~~Payments. This new standard clarifies certain aspects of the statement of cash flows, including the classification of debt prepayment or debt extinguishment costs or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees and beneficial interests in securitization transactions. This new standard also clarifies that an entity should determine each separately identifiable source of use within the cash receipts and payments on the basis of the nature of the underlying cash flows. In situations in which cash receipts and payments have aspects of more than one class of cash flows and cannot be separated by source or use, the appropriate classification should depend on the activity that is likely to be the predominant source or use of cash flows for the item. This new standard will be effective for the Company on ~~January~~December 1, 2018. The Company is currently evaluating the impact of the new standard on its ~~condensed~~ consolidated financial statements.

In January 2017, the FASB issued an ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this Update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Update may be adopted early. The Company adopted the provisions of ASC 2017-01 effective December 1, 2016. Adoption did not have a material impact on the Company's financial position, results of operations, or cash flows.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260),; Distinguishing Liabilities from Equity (Topic 480),; Derivatives and Hedging (Topic 815). : (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments,ASU allows companies to exclude a down round feature ~~no longer precludes equity classification~~ when ~~assessing~~determining whether ~~the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As~~ a ~~result, a freestanding equity-linked~~ financial instrument (or embedded conversion ~~option)~~feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer ~~would~~be required to be accounted ~~for~~classified as ~~a derivative liability at fair~~liabilities. A company will recognize the value ~~as a result of the existence~~ of a down round ~~feature.~~feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding ~~equity classified~~ financial instruments, such as warrants, an entity will treat the ~~amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize~~value of the effect of the down round, ~~feature~~ when ~~it is triggered. That effect is treated~~triggered, as a dividend and as a reduction of income available to common shareholders in computing basic ~~EPS. Convertible~~earnings per share. For convertible instruments with embedded conversion ~~options that have~~features containing down round ~~features are now subject to~~provisions, entities will recognize the ~~specialized guidance for contingent~~value of the down round as a beneficial conversion ~~features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS~~discount to be amortized to earnings. The guidance ~~(in Topic 260). The amendments~~ in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update areASU 2017-11 is effective for ~~fiscal years, and interim periods within those fiscal years, beginning after~~the Company on December ~~15, 2018.~~1, 2019. Early adoption is permitted, and the guidance is to be applied using a full or modified retrospective approach. The Company is currently evaluating the impact of the new standard on its consolidated financial statements.

Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

In June 2018, the FASB issued ASU 2018-07,Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based PaymentAccounting. This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with the accounting for ~~all entities,~~employee share-based compensation. It is effective for the Company on December 1, 2019.

The Company is currently evaluating the impact of the new standard on its consolidated financial statements.

Recent adopted pronouncements

In May 2017, the FASB issued ASU 2017-09,Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. The new standard provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Early adoption is permitted, including adoption in anany interim period. ~~If an entity early adopts the amendments in an interim period, any adjustments should be reflected~~The Company adopted ASU 2017-09 as of ~~the beginning~~December 1, 2017. The adoption of ~~the fiscal year that includes that interim period. Management is currently assessing the~~this standard did not impact the ~~adoption of ASU 2017-11 will have on the~~ Company’s ~~Condensed Consolidated Financial Statements.~~consolidated financial statements.

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, 2017 August 31, 2016
Warrants (Note 10) 3,033,995 976,500
Convertible debt (Note 5) 567,407 506,757

~~Note 5 – Convertible Notes~~

August 31, 2017 November 30, 2016
Series A Notes:
Principal value of 10%, convertible at $2.00 at November 30, 2016. $ - $ 12,500
Fair value of bifurcated embedded conversion option of Series A Notes - 12,000
Debt discount - (2,194 )
Carrying value of Series A Notes - 22,306

Series B Notes:
Principal value of 10%, convertible at $2.00 at November 30, 2016. - 55,000
Fair value of bifurcated embedded conversion option of Series B Notes - 55,000
Debt discount - (19,229 )
Carrying value of Series B Notes - 90,771

Series C Notes:
Principal value of 10%, convertible at $1.55 at November 30, 2016. - 576,383
Fair value of bifurcated embedded conversion option of Series C Notes - 838,000
Debt discount - (250,969 )
Carrying value of Series C Notes - 1,163,414

Series D Notes:
Principal value of 10%, convertible at $1.85 at November 30, 2016. - 160,000
Debt discount - (140,961 )
Carrying value of Series D Notes - 19,039

Series E Notes:
Principal value of 10%, convertible at $2.50 at August 31, 2017 and November 30, 2016. 30,000 180,000
Debt discount (4,062 ) (124,164 )
Carrying value of Series E Notes 25,938 55,836

Convertible Debenture:
Principal value of 5%, convertible at $3.60 and $2.98 at August 31, 2017 and November 30, 2016, respectively. 2,000,000 1,500,000
Fair value of bifurcated contingent put option of Secured Convertible Debenture 2,000 72,000
Debt discount (105,464 ) (297,000 )
Carrying value of Secured Convertible Debenture Note 1,896,536 1,275,000
Total short-term carrying value of convertible notes $ 1,922,474 $ 2,394,849
Total long-term carrying value of convertible notes $ - $ 231,517

~~Series A Notes~~

	For the six months ended May 31,
Potentially dilutive securities	2018	2017
Warrants (Note 8)	4,877,558	1,111,500
Convertible debt	-	985,723
Options (Note 8)	500,000 -	-

The Series A convertible notes payable (the “Series A Notes”) are due and payable 18 months after issuance and bear interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the Series A Notes is convertible into shares of the Company’s common stock at any time prior to maturity at a conversion price per share equal to the higher of: (i) forty percent (40%) discount to the average closing price for the ten (10) consecutive trading days immediately preceding the notice of conversion or (ii) $1.25 per share. At maturity, any remaining outstanding principal and accrued but unpaid interest outstanding under the Series A Notes will automatically convert into shares of the Company’s common stock under the same terms. As of August 31, 2017, the Company has no Series A Notes outstanding.

~~Series B Notes~~

~~The Series B convertible notes payable (the “Series B Notes”) have the same terms as the Series A Notes. As of August 31, 2017, the Company has no Series B Notes outstanding.~~

~~Series C Notes~~

The Series C convertible notes payable (the “Series C Notes”) are due and payable 18 months after issuance and bear interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the Series C Notes is convertible into shares of the Company’s common stock at a conversion price per share equal to the lesser of a 40% discount to the average closing price for the 10 consecutive trading days immediately preceding the notice of conversion or $1.55, but in no event shall the conversion price be lower than $1.25 per share. If the average VWAP, as defined in the agreement, for the ten trading days immediately preceding the maturity date $5.00 or more, any remaining outstanding principal and accrued but unpaid interest outstanding under the Series C Notes will automatically convert into shares of the Company’s common stock under the same terms.

The terms of the Series C Notes also provided that up until maturity date, the Company cannot enter into any additional, or modify any existing, agreements with any existing or future investors that are more favorable to such investor in relation to the Series D Note holders, unless, the Series C Note holders are provided with such rights and benefits (“Most Favored Nations Clause”). As of August 31, 2017, the Company has no Series C Notes outstanding.

~~Series D Notes~~

The Series D convertible notes payable (the “Series D Notes”) are due and payable 18 months after issuance and bear interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the Series D Notes is convertible into shares of the Company’s common stock at a fixed conversion price per share equal to $1.85. The Series D Notes automatically convert upon maturity at $1.85 per share if the ten trading days VWAP immediately preceding maturity is $5.00 or greater. Additionally, if the Company’s common shares are up-listed to a senior exchange such as the AMEX or NASDAQ, all monies due under the Series D Notes will automatically convert at $1.85 per share.

The terms of the Series D Notes also included the Most Favored Nations Clause. The Most Favored Nations Clause was viewed as providing the Series D Note holder with down-round price protection. As such, the embedded conversion option in the Series D Note was separately measured at fair value upon issuance, with subsequent changes in fair value recognized in current earnings.

On September 30, 2016, the Company amended the Most Favored Nations Clause of the Series D Notes to restrict the Company from taking dilutive action without the Series D note holders’ consent, effectively removing the down-round price protection.

At the amendment date, the conversion price of the amended Series D Notes was below the quoted market price of the Company’s common stock. As such, the Company recognized a beneficial conversion feature equal to the intrinsic value of the conversion price on the amendment date, resulting in a discount to the amended Series D Notes of $160,000 with a corresponding credit to additional paid-in capital. The resulting debt discount is presented net of the related convertible note balance in the accompanying Condensed Consolidated Balance Sheets and is amortized to interest expense over the note’s term. As of August 31, 2017, the Company has no Series D Notes outstanding.

~~Series E Notes~~

The Series E convertible notes payable (the “Series E Notes”) are due and payable 18 months after issuance and bear interest at 10% per annum. At the election of the holder, outstanding principal and accrued but unpaid interest under the Series E Notes is convertible into shares of the Company’s common stock at a fixed conversion price per share equal to $2.50. The Series E Notes automatically convert upon maturity at $2.50 per share if the ten trading days VWAP immediately preceding maturity is $5.00 or greater. Additionally, if the Company’s common shares are up-listed to a senior exchange such as the AMEX or NASDAQ, all monies due under the Series E Notes will automatically convert at $2.50 per share.

At the issuance date, the conversion price of the Series E Notes was below the quoted market price of the Company’s common stock. As such, the Company recognized a beneficial conversion feature equal to the intrinsic value of the conversion price on the amendment date, resulting in a discount to the Series E Notes of approximately $141,000 with a corresponding credit to additional paid-in capital. The resulting debt discount is presented net of the related convertible note balance in the accompanying Condensed Consolidated Balance Sheets and is amortized to interest expense over the note’s term.

~~Secured Convertible Debentures~~

On November 29, 2016, the Company entered into a securities purchase agreement with an accredited investor to place Convertible Debentures (the “Debentures”), which was later amended on March 7, 2017, with a one-year term in the aggregate principal amount of up to $4,000,000. On October 3, 2017, the Company amended the Debentures to extend the maturity date from November 30, 2017 to November 30, 2018 (see Note 11). The initial closing occurred on November 30, 2016 when the Company issued a Debenture for $1,500,000 (“Initial Debenture Note”). The second closing of $1 million was on March 10, 2017 (“Second Debenture Note”), when the registration statement to register for resale all of the shares of common stock into which the Debentures may be converted (the “Conversion Shares”) was filed with the SEC. The remaining balance of $1.5 million was received on April 6, 2017 (“Third Debenture Note”), the date the registration statement was declared effective by the SEC. The Debentures bear interest at the rate of 5% per annum. In addition, the Company must pay to an affiliate of the holder a fee equal to 5% of the amount of the Debenture at each closing.

The Debenture may be converted at any time on or prior to maturity at the lower of $4.00 or 93% of the average of the four lowest daily VWAP of the Company’s common stock during the ten consecutive trading days immediately preceding the conversion date, provided that as long as the Company is not in default under the Debenture, the conversion price may never be less than $2.00. The Company may not convert any portion of the Debenture if such conversion would result in the holder beneficially owning more than 4.99% of the Company’s then issued common stock, provided that such limitation may be waived by the holder.

Any time after the six-month anniversary of the issuance of the Debenture, if the daily VWAP of the Company’s common stock is less than $2.00 for a period of twenty consecutive trading days (the “Triggering Date”) and only for so long as such conditions exist after a Triggering Date, the Company shall make monthly payments beginning on the last calendar day of the month when the Triggering Date occurred. Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of the Triggering Date divided by the number of such monthly payments until maturity, (ii) a redemption premium of 20% in respect of such principal amount being paid (up to a maximum of $300,000 in redemption premium) and (iii) accrued and unpaid interest as of each payment date. The Company may, no more than twice, obtain a thirty-day deferral of a monthly payment due as a result of a Triggering Date through the payment of a deferral fee in the amount equal to 10% of the total amount of such monthly payment. Each deferral payment may be paid by the issuance of such number of shares as is equal to the applicable deferral payment divided by a price per share equal to 93% of the average of the four lowest daily VWAP of the Company’s common stock during the ten consecutive Trading Days immediately preceding the due date in respect of such monthly payment begin deferred, provided that such shares issued will be immediately freely tradable shares in the hands of the holder.

The Company also entered into a Security Agreement to secure payment and performance of its obligations under the Debenture and related agreements pursuant to which the Company granted the investor a security interest in all of its assets. The security interest granted pursuant to the Security Agreement terminated on the effectiveness of the Registration Statement on April 6, 2017.

Upon issuance of the Second and Third Debenture Notes, the Company recognized a debt discount of $731,000, resulting from the recognition of a beneficial conversion feature of $645,000 and a bifurcated embedded derivative of $86,000. The beneficial conversion feature was recognized as the intrinsic value of the conversion option on issuance of the Debentures. The monthly payment provision within the Debentures is a contingent put option that is required to be separately measured at fair value, with subsequent changes in fair value recognized in the Condensed Consolidated Statement of Operations during the nine months ended August 31, 2017. The Company estimated the fair value of the monthly payment provision, as of August 31, 2017 and November 30, 2016, using probability analysis of the occurrence of a Triggering Date applied to the discounted maximum redemption premium for any given payment. The probability analysis utilized the following inputs:

~~Volatility~~			~~101.58% - 146.26~~	%
~~Risk-free rate~~			~~0.53% - 1.08~~	%

~~The maximum redemption was discounted at 20%, the calculated effective rate of the Debenture before measurement of the contingent put option. The fair value estimate is a Level 3 measurement.~~

~~Embedded Conversion Options~~

The embedded conversion feature is separately measured at fair value, with changes in fair value recognized in current operations. Management used a binomial valuation model, with fourteen steps of the binomial tree, to estimate the fair value of the embedded conversion option at issuance of the Series A, B, C and D Notes with the following key inputs:

Embedded derivatives at inception and upon conversion
For the nine months ended August 31,
2017 2016
Stock price $ 4.93 - $7.05 $ 2.60 - $3.26
Terms (years) 0.11 - 0.85 1.5
Volatility 144.26% - 157.35 % 116.77 %
Risk-free rate 0.53% - 0.76 % 0.51% - 0.76 %
Dividend yield 0.00 % 0.00 %

Embedded derivatives at period end
August 31, 2017 November 30, 2016
Stock price - $ 3.43
Term (years) - 0.25 - 1.05
Volatility - 156.74% - 163.49 %
Risk-free rate - 0.48% - 0.80 %
Dividend yield - 0.00 %

During the three months ended August 31, 2017 and 2016, the Company recognized interest expense of approximately $171,000 and $97,000, respectively, resulting from amortization of the debt discount for the outstanding convertible notes. During the nine months ended August 31, 2017 and 2016, the Company recognized interest expense of approximately $526,000 and $262,000, respectively, resulting from amortization of the debt discount for the outstanding convertible notes.

As of August 31, 2017, the embedded conversion options have an aggregate fair value of $2,000 and are presented on a combined basis with the related loan host in the Company’s Condensed Consolidated 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, 2017

Balance at November 30, 2016 Issuance Net unrealized gain/(loss) Conversion Balance at August 31, 2017
$ 977,000 86,000 812,017 (1,873,017 ) $ 2,000

~~Conversions of debt~~

~~The following conversions of the convertible notes occurred during the nine months ended August 31, 2017:~~

Principal Shares
Series A conversions 12,500 5,936
Series B conversions 55,000 27,995
Series C conversions 576,383 407,484
Series D conversions 160,000 91,782
Series E conversions 150,000 63,255
Secured Debenture conversions 2,000,000 461,203
Total $ 2,953,883 1,057,655

As the embedded conversion option in each note series had been separately measured at fair value, the conversion of each note was recognized as an extinguishment of debt. The Company recognized a loss on conversion of debt of approximately $365,000 as the difference between the fair value of common stock issued to the holders of approximately $2.7 million and the aggregate net carrying value of the convertible notes, including the bifurcated conversion options, of approximately $2.3 million.

~~Extinguishment of debt~~

On August 1, 2017, the holder of the Debentures retired an aggregate of $250,000 each in principal of the Second and Third Debenture Notes along with its accrued interest, for a total amount of approximately $0.5 million, to reinvest and purchase an aggregate of 162,000 Units in the August Private Placement (see Note 9). As the embedded conversion option in the Debentures had been separately measured at fair value, the cancellation of debt was recognized as an extinguishment of debt. The Company recognized a loss on extinguishment of debt of approximately $76,000 as the difference between the fair value of Units issued to the holders of approximately $0.5 million and the aggregate net carrying value of the convertible notes, including the bifurcated conversion options, of approximately $442,000.

~~Events of default~~

The Company will be in default of the Series E Notes, 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 – Note Payable~~

~~As of August 31, 2017 and November 30, 2017, the Company had an outstanding promissory note of $150,000 (“OID Note”). The OID Note does not pay interest and matures on November 3, 2017.~~

At the issuance date, the $150,000 OID Note was issued together with 15,000 restricted shares of the Company’s common stock for cash proceeds of $150,000. As such, the Company recognized a beneficial conversion feature, resulting in a discount to the OID Note of approximately $52,000 with a corresponding credit to additional paid-in capital. The resulting debt discount is presented net of the related convertible note balance in the accompanying Condensed Consolidated Balance Sheets and is amortized to interest expense over the note’s term.

Note 75 – 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 issued an aggregate of approximately 17,000 shares of common stock during the six months ended May 31, 2018.

Master Service Agreement

On March 1, 2018, the Company entered into the master service agreement (“Master Service Agreement”) with Chedwick Marketing Group to have it perform the consulting services for a maximum period of six months, which may be renewed after term at the sole option of the Company. On March 1, 2018, the Company entered into the Statement of Work No. 1 (“Statement of Work”) with Chedwick Marketing Group. The Company agreed to issue Chedwick Marketing Group 20,000 fully paid restricted common shares on signing. The Company agreed to pay additional cash for media spend as invoiced by Chedwick or other service providers. The company agreed to issue 7,000 shares to Chedwick on execution of the agreement and on the first day of each month until the termination or renewal of the contract.

Lease Agreement

In December 2016, the Subsidiary entered into a lease agreement for its office space located in Cayman Islands for $30,000 per annum. The initial term of the agreement ends in December 2019 and can be renewed for another three years.

Rent ~~expenses was~~expense is classified within general and administrative expenses on a straight-line basis and ~~was approximately $7,500 and $18,000 for~~included in the ~~three and nine months ended August 31, 2017.~~accompanying Condensed Consolidated Statements of Operations as follows:

	For the three months ended May 31,		For the six months ended May 31,
	2018	2017	2018	2017
Rent expense	$7,500	$7,500	$15,000	$12,500

Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

License Agreement

Mannin

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

During the ~~three and nine~~six months ended ~~August~~May 31, 2018 and 2017, the Company incurred approximately ~~$525,000~~$1,220,000 and ~~$1.4 million,~~$852,000, respectively, in research and development expenses to fund the costs of development of the eye drop treatment for glaucoma pursuant to the Exclusive License. Pursuant to the exclusive license from Mannin, we may purchase the Mannin IP within the next four years in exchange for investing a minimum of $4,000,000 into the development of the Mannin IP. Through ~~August~~May 31, ~~2017,~~2018, the Company ~~had~~has funded an aggregate of ~~$2.15~~$4.0 million to Mannin under the Exclusive ~~License.~~License and has not purchased the Mannin IP. The purchase price for the Mannin 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.

Bio-Nucleonics

On September 6, 2016, the Company entered into the Patent and Technology License and Purchase Option Agreement (the “BNI Exclusive License”) with Bio-Nucleonics Inc. (“BNI”) whereby the Company was granted a worldwide, exclusive, perpetual, license on, and option to, acquire certain BNI intellectual property (“BNI IP”) within the three-year term of the BNI Exclusive License.

During the ~~three and nine~~six months ended ~~August~~May 31, 2018 and 2017, the Company incurred approximately ~~$144,000~~$283,000 and ~~$352,500,~~$208,000, respectively, in research and development expenses pursuant to the BNI Exclusive License. As of ~~August~~May 31, ~~2017,~~2018, the Company ~~had paid~~has funded approximately ~~$351,700~~$699,000 to BNI out of the maximum $850,000 cash funding requirement. The Company is not obligated to provide further funding to BNI until BNI satisfies all of its pre-existing obligations totaling $163,500. To this end, the Company had provided an aggregate of approximately $59,000 through August 31, 2017 to BNI to help settle its obligations, which the Company recognized as research and development expenses in the accompanying Statements of Operations. As of August 31, 2017, this condition was met.

~~Asdera~~

On April 21, 2017, the Company entered into a License Agreement on Patent & Know-How Technology (“Asdera License”) with Asdera LLC (“Asdera”) whereby the Company was granted a worldwide, exclusive, license on certain Asdera intellectual property (“Asdera IP”). The initial cost to acquire the Asdera License is $50,000 and the issuance of 125,000 shares of the Company’s common stock, with a fair value of $487,500, of which the Company had fully paid and issued as of August 31, 2017, and recorded in research and development expenses in the accompanying Condensed Consolidated Statements of Operations. In addition to royalties based upon net sales of the product candidate, if any, the Company is required to make certain additional payments upon the following milestones:

-	~~the filing of an investigational new drug application (the “IND”) with the US Food and Drug Administration (“FDA”);~~

-	~~successful interim results of Phase II/III clinical trial of the product candidate;~~

-	~~FDA acceptance of a new drug application;~~

-	~~FDA approval of the product candidate; and~~

-	~~achieving certain worldwide net sales.~~

Subject to the terms of the Agreement, the Company will be in control of the development and commercialization of the product candidate and are responsible for the costs of such development and commercialization. The Company has undertaken a good-faith commitment to (i) initiate a Phase II/III clinical trial at the earlier of the two-year anniversary of the agreement or one year from the FDA’s approval of the IND and (ii) to make the first commercial sale by the fifth-anniversary of the agreement. Failure to show a good-faith effort to meet those goals would mean that the Asdera IP would revert to Asdera. Upon such reversion, Asdera would be obligated to pay the Company royalties on any sales of products derived from the Asdera IP until such time that Asdera has paid the Company twice the sum that the Company had provided Asdera prior to the reversion.

~~OMRF~~

~~OMRF License Agreement~~

On June 15, 2017, the Company entered into a Technology License Agreement (“OMRF License Agreement”) with the Rajiv Gandhi Centre for Biotechnology, an autonomous research institute under the Government of India (“RGCB”), and the Oklahoma Medical Research Foundation (“OMRF” and together with RGCB, the “Licensors”), whereby the Licensors granted the Company a worldwide, exclusive, license on intellectual property related to Uttroside B (the “Uttroside B IP”). Uttroside B is a chemical compound derived from the plant ~~Solanum nigrum Linn, also known as Black Nightshade or Makoi. The Company seeks to use the Uttroside B IP to create a~~ ~~chemotherapeutic agent against liver cancer.~~

The initial cost to acquire the OMRF License Agreement is $10,000, which will be payable upon reaching certain agreed conditions. The Company is expecting to pay this initial cost in the next quarter. In addition to royalties based upon net sales of the product candidate, if any, the Company is required to make additional payments upon the following milestones:

	~~the completion of certain preclinical studies (the “Pre-Clinical Trials”);~~

	the filing of an investigational new drug application (the “IND”) with the US Food and Drug Administration (“FDA”) or the filing of the equivalent of an IND with the foreign equivalent of the FDA;

	~~successful completion of each of Phase I, Phase II and Phase III clinical trials;~~

	~~FDA approval of the product candidate;~~

	~~approval by the foreign equivalent of the FDA of the product candidate;~~

	~~achieving certain worldwide net sales; and~~

	~~a change of control of QBIO.~~

~~Milestones~~

~~No milestones have been reached to date on these license agreements.~~

Note 86 - Related Party Transactions

The Company entered into consulting agreements with certain management personnel and stockholders for consulting and legal services. Consulting and legal expenses ~~associated with related parties~~resulting from such agreements were ~~incurred as follow, and were~~ included within general and administrative expenses in the accompanying Condensed Consolidated Statements of ~~Operations.~~Operations as follows:

For the three months ended August 31, For the nine months ended August 31,
2017 2016 2017 2016
Related parties $ 102,500 $ 104,632 $ 322,500 $ 207,875

	For the three months ended May 31,		For the six months ended May 31,
	2018	2017	2018	2017
Consulting and legal expenses	$60,000	$130,000	$120,000	$243,000

Note 97 - Stockholders’ Equity Deficit

As of ~~August~~May 31, ~~2017,~~2018, the Company is authorized to issue up to 250,000,000 shares of its $0.001 par value common stock and up to 100,000,000 shares of its $0.001 par value preferred stock.

~~Private Placement~~Registered public financing

On ~~August~~February 1, ~~2017,~~2018, the Company ~~closed its private placement (“August Private Placement”), selling~~sold an aggregate of ~~953,249 units (“Units”) at~~1,711,875 shares of common stock, and 1,711,875 warrants to purchase shares of common stock, in a ~~price of $3.20 per Unit,~~registered public offering for ~~an aggregate cash~~gross proceeds of approximately ~~$2.4 million, net of offering costs, and the retirement of $0.5 million in principal and accrued interest of the Debentures.~~ ~~A Unit consists of one common stock and one warrant~~$5,478,000. The warrants are exercisable for five years ~~from~~at $3.20 per share. The Company paid placement agent commissions of approximately $438,000 and issued the ~~date~~placement agent five-year warrants to purchase 81,688 shares of ~~issuance into a share of the Company’s~~ common stock at ~~an exercise price of $4.50.~~

~~In connection with~~$3.84 per share. After the ~~August Private Placement,~~placement agents’ commissions and other offering expenses, the Company ~~issued an aggregate~~netted approximately $4,945,000 of ~~39,246 warrants~~proceeds.

The Company intends to use the ~~placement agent as consideration. These warrants have~~net proceeds from the ~~same terms~~offering to: i) complete FDA manufacturing approval and launch our non-opioid FDA approved Strontium Chloride 89 USP Injection (SR89), a therapeutic drug for the treatment of skeletal pain associated with metastatic cancers; ii) focus on the ~~warrants issued in~~clinical planning and IND filing for a Phase 4 post-marketing study to expand the ~~August Private Placement.~~

~~In January 2017, the Company issued 20,000 shares~~indication of the ~~Company’s common stock upon receiving~~approved SR89; iii) complete pre-IND studies and the ~~notice~~filing of an IND for a phase II/III clinical program to ~~exercise~~test the ~~warrants at an exercise price~~efficacy of ~~$3.50 included in Unit A sold in the private placement held in May 2017, for an aggregate purchase price of $70,000.~~

~~Issuance of Shares for Services~~

~~The Company entered into customary consulting arrangements with various counterparties to provide consulting services, business development and investor relations services.~~ During the nine months ended August 31, 2017, the Company issued an aggregate of 108,705 shares of the Company common stock to various vendors for investor relation and introductory services, valued at approximately $0.5 million based on the estimated fair market value of the stock on the date of grant and was recognized within general and administrative expenses in the accompanying Condensed Consolidated Statements of OperationsQBM-001, our product candidate for the ~~three~~treatment of young children with a rare autistic spectrum disorder that severely inhibits their ability to communicate; iv) continue development work on our novel chemotherapeutic drug for liver cancer; and ~~nine months ended August 31, 2017.~~v) further the optimization and pre-clinical testing of our glaucoma drug Man-01 for the treatment of open angle glaucoma.

Note 108 – Warrants and Options

~~Warrant Liability~~

As of November 30, 2016, the Company had outstanding warrants issued as part of the private placement units initially classified as liabilities because the exercise price may be adjusted downward, in certain circumstances, for a ninety-day period following their initial issuance. Warrant liabilities are measured at fair value, with changes in fair value recognized each reporting period in the Statement of Operations. The warrants ceased being liability classified at the conclusion of the ninetieth day from issuance. As a result, an aggregate of approximately $228,000 in warrant liability was reclassified to equity during the nine months ended August 31, 2017. All other warrants are equity classified.

The warrant liability is a Level 3 fair value measurement, recognized on a recurring basis. Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized gains and losses for liabilities within the Level 3 category may include changes in fair value that were attributable to both observable inputs (e.g., changes in market interest rates) and unobservable inputs (e.g., probabilities of the occurrence of an early termination event).

Fair value of warrant liability at November 30, 2016 $ 168,070
Issuance of new warrant liability -
Change in fair value of warrant liability 59,870
Reclassification of warrant liability to equity (227,940 )
Fair value of warrant liability at August 31, 2017 $ -

Summary of warrants

The following represents a summary of all outstanding warrants to purchase the Company’s common stock, including warrants issued to vendors for services and warrants issued as part of the units sold in the private placements, at ~~August~~May 31, ~~2017~~2018 and changes during the period then ended:

Weighted Average
Weighted Average Remaining Contractual
Warrants Exercise Price Intrinsic Value Life (years)
Outstanding at November 30, 2016 1,047,500 $ 2.54 $ 1,158,000 4.10
Issued 2,006,495 - - -
Exercised (20,000 ) 3.50 - -
Outstanding at August 31, 2017 3,033,995 $ 3.66 $ 1,659,285 4.29
Exercisable at August 31, 2017 2,245,995 $ 3.54 $ 1,617,235 4.19

	Warrants	Weighted Average Exercise Price	Weighted Average Remaining ContractualLife (years)	Intrinsic Value
Outstanding at November 30, 2017	3,083,995	$3.67	4.02	$2,539,185
Issued	1,793,563	$3.23	4.67
Outstanding at May 31, 2018	4,877,558	$3.51	3.95	$1,479,375
Exercisable at May 31, 2018	4,871,308	$3.51	3.95	$1,479,375

Fair value of all outstanding warrants issued to non-employees for services was calculated with the following key inputs:

	~~For the nine months ended August 31, 2017~~
~~Stock price~~	$	~~3.50 - $7.87~~
~~Term (years)~~		~~1.75 – 5.0~~
~~Volatility~~		~~129.81% - 142.93~~	%
~~Risk-free rate~~		~~1.17% - 1.74~~	%
~~Dividend yield~~		~~0.00~~	%

	For the six months ended May 31,
	2018	2017
Stock price	$2.92 - $3.40	$3.81 - $7.87
Term (years)	2.0 - 4.3	1.75 - 4.5
Volatility	124.88% - 130.31%	132.15% - 140.64%
Risk-free rate	2.25% - 2.68%	1.17% - 1.45%
Dividend yield	0.00%	0.00%

Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

Options issued for services

The following represents a summary of all outstanding options to purchase the Company’s common stock at ~~August~~May 31, ~~2017~~2018 and changes during the six-month period then ended:

Weighted Average
Weighted Average Remaining Contractual
Options Exercise Price Intrinsic Value Life (years)
Outstanding at November 30, 2016 - $ - $ - -
Issued 450,000 4.00 26,100 4.76
Exercised - - - -
Outstanding at August 31, 2017 450,000 $ 4.00 $ 26,100 4.76
Exercisable at August 31, 2017 - $ - $ - -

			Weighted Average
		Weighted Average	Remaining Contractual
	Options	Exercise Price	Life (years)	Intrinsic Value
Outstanding at November 30, 2017	450,000	$4.00	4.51	$220,500
Issued	50,000	$3.00	4.70	$20,000
Outstanding at May 31, 2018	500,000	$3.90	4.08	$20,000
Exercisable at May 31, 2018	350,000	$3.96	4.04	$5,000

Fair value of all outstanding options was calculated with the following key inputs:

	For the six months ended May 31,
	2018
Exercise price	$3.00
Expected term (years)	5.0
Volatility	127.70%
Risk-free rate	2.52%
Dividend yield	0.00%

Stock-based Compensation

The Company recognized general and administrative expenses of approximately ~~$4.2 million~~$164,000 and ~~$3.0 million,~~$684,000 as a result of the shares, outstanding warrants and options issued to consultants and employees during the ~~nine~~three months ended ~~August~~May 31, 2018 and 2017, respectively. The Company recognized general and ~~2016,~~administrative expenses of approximately $567,000 and $1,356,000 as a result of the shares, outstanding warrants and options issued to consultants and employees during the six months ended May 31, 2018 and 2017, respectively.

As of ~~August~~May 31, ~~2017,~~2018, the estimated unrecognized stock-based compensation ~~associated~~associate with these agreements is approximately ~~$3.5 million~~$61,000 and will be recognized over the next ~~0.32~~0.1 year.

Note 11 – Subsequent Events

~~Research Agreement #1~~

On June 1, 2018, we issued 50,000 options to each of Denis Corin and William Rosenstadt for their continued services as directors of our company. Each option is to purchase a share of our common stock for $3.61 per share. The options vest in quarterly amounts on May 31, 2018, September 1, ~~2017, the Company~~2018, December 1, 2018 and March 1, 2019.

On June 1, 2018, we issued 100,000 options to each of Denis Corin and William Rosenstadt for their continued services as officers of our company. Each option is to purchase a share of our common stock for $3.61 per share. The options vest in quarterly amounts on May 31, 2018, September 1, 2018, December 1, 2018 and March 1, 2019.

On June 1, 2018, we entered into a new agreement with a consultant to provide expertise in the ~~research agreement (“Research Agreement #1) with OMRF to have OMRF perform~~areas of technology assessment and product development. In exchange for such services, the ~~research program for a maximum period of six months. The Company agreed to pay OMRF a total cost of approximately $100,000 for the performance of the research program.~~

~~Conversion of debt~~

On October 16, 2017, the Company received the conversion notice from the holder of the Debentures to convert an aggregate of $500,000 in principal of the Second Debenture Note, along with its accrued interest, into an aggregate of 142,662 shares of the Company’s common stock. The Company has not issued these shares yet.

~~Issuance of securities~~

On October 3, 2017, the Company amended the Debentures to extend the maturity date from November 30, 2017 to November 30, 2018, and issued 25,641 restricted shares of its common stock to the holder of the Debentures as consideration.

~~In September 2017, the Company issued~~consultant will receive 84,000 warrants to purchase upa share of our common stock exercisable at $3.61 per share.

In June 2018, we entered into an agreement with a consultant to provide expertise in the areas of commercial marketing. In exchange for such services, each month for the twelve months of the agreement the consultant will receive shares of our common stock equal to $22,000 divided by the market price of our common stock on the first day of such month.

On June 1, 2018, we issued options to purchase 50,000 shares of ~~the Company’s~~our common stock at $3.61 per option to each of two ~~vendors~~advisors in exchange for consulting services. The ~~warrants are exercisable for~~options vest in quarterly amounts every three ~~years at a per share price of $4.00.~~months.

~~Subsequent to August 31, 2017, the Company issued an aggregate of 31,000 shares of its common stock to its vendors for services.~~9

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

Forward-Looking Statements

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

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

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

Overview

Q BioMed Inc. (or “the Company”) was incorporated in the State of Nevada on November 22, 2013 and is a 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.

~~On December 7, 2016, the Company formed its wholly-owned subsidiary in Cayman Islands, “Q BioMed Cayman SEZC”.~~

Recent Developments

Capital Raising

On ~~August~~February 1, ~~2017~~2018, we ~~closed~~sold an aggregate of 1,711,875 shares of common stock, and 1,711,875 warrants to purchase shares of common stock, in a ~~$3,050,390 equity financing.~~registered public offering for gross proceeds of approximately $5,478,000. The ~~financing with a small group~~warrants are exercisable for five years at $3.20 per share. We paid placement agent commissions of ~~accredited investors provides~~approximately $438,000 and issued the ~~necessary capital~~placement agent five-year warrants to ~~meet near term milestones~~purchase 81,688 shares of common stock at $3.84 per share. After the placement agents’ commissions and ~~catalysts in its most advanced product portfolio assets, including~~other offering expenses, we netted approximately $4,945,000 of proceeds. We intend to use the ~~commercialization of~~net proceeds from the offering to: i) launch our non-opioid FDA approved Strontium Chloride 89 ~~multiple~~USP Injection (SR89), a therapeutic drug for the treatment of skeletal pain associated with metastatic cancers; ii) focus on the clinical planning and IND ~~enabling~~filing for a Phase 4 post-marketing study to expand the indication of the approved SR89; iii) complete pre-IND studies ~~CMC manufacturing~~ and ~~at least one~~the filing of an IND ~~filing.~~for a phase II/III clinical program to test the efficacy of QBM-001, our product candidate for the treatment of young children with a rare autistic spectrum disorder that severely inhibits their ability to communicate; iv) continue development work on our novel chemotherapeutic drug for liver cancer; and v) further the optimization and pre-clinical testing of our glaucoma drug Man-01 for the treatment of open angle glaucoma.

Strontium 89 Chloride commercialization

On September 6, 2016, we ~~announced the closing of~~entered into 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, Generic Strontium Chloride Sr-89 Injection USP (“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.

We have initiated final drug product manufacturing ~~however as~~at a ~~result of the 2 major hurricanes in both Texas and Florida and their impact on the logistics and in particular the~~new contract manufacturing ~~facilities in those states, we are taking additional steps to ensure that the manufacturing process meets~~site and through our ~~strict standards and safety is never compromised. We are building additional redundancies into our supply chain, including adding new manufacturing sites and securing~~licensor have filed for the required FDA approval for ~~those sites.~~that site and will make supplemental responses as required. We will work with the regulators to affect ~~those changes~~that approval as soon as possible. As a result, ~~of these measures~~ SR89 ~~may~~will not be commercially available until we have the ~~end of 2017. A new website, www.PainFreeCancer.com was recently announced in anticipation~~approval of the ~~commercial launch.~~

FDA to release drug from that site. We ~~intend to make~~anticipate that this ~~drug as widely available as possible and to ensure that the drug~~ will be priced competitively. In light of the current opiate overuse and abuse crisis, we are pleased to be offering this non-narcotic cancer pain palliation drug to patients suffering from this debilitating condition.

~~There are approximately 300,000 new cases of bone metastases in patients with breast and lung cancer per year~~occur in the ~~U.S. alone with 1 in 3~~fourth quarter of those being ideal candidates for SR89. 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. In the body, strontium acts similarly to calcium and is preferentially taken up in osteoblastic tissue while the unabsorbed isotope is excreted in the urine the first 2 to 3 days following injection, clearing rapidly from the blood and selectively localizing in bone mineral. Uptake of strontium by bone occurs preferentially in sites of active osteogenesis; thus primary bone tumors and areas of metastatic involvement (blastic lesions) can accumulate significantly greater concentrations of strontium than surrounding normal bone.2018, although it may occur later or never at all.

Generic Strontium Chloride Sr-89 Injection USP can be used in combination with (and reduce the dosage of) opiate based drugs like Oxycotin®, Morphine, Percocet® or replace them entirely. It can also be used in combination with cancer therapeutic drugs. Clinical studies have demonstrated that the combination of alternating weekly chemohormonal therapies with SR89 demonstrated a prolonged progression-free and overall survival with acceptable toxicity.

~~We believe there is an opportunity to invest additional resources into the program to grow the revenue potential significantly.~~

~~New~~ License Agreement in Rare Pediatric Autistic Spectrum Disorder

On April 25, 2017, we entered into a licensing agreement that provides us with the worldwide exclusive rights to ASDERA’s ASD-002 (now annotated as QBM-001). QBM-001 is being developed to treat a rare pediatric nonverbal disorder. Under the terms of the agreement, ~~the Company receives~~we receive global rights to develop and commercialize the drug in the rare pediatric disease market.

We recently announced a partnership with Sphaera Pharma to develop a new and proprietary analog of QBM-001 for pediatric developmental nonverbal disorder. Sphaera Pharma will employ its proprietary and patented platform to produce a novel analog that aims to reduce or eliminate potential side effects and can reduce the amount of product a toddler needs to take on a daily basis. Preclinical testing of the new analog is currently underway and a final product is scheduled to be ready by the middle of October, putting Q BioMed on a path to file an IND towards the end of 2017 or the beginning of 2018.

The proprietary analog will also allow Q BioMed to apply for a global composition of matter patent for QBM-001, while still ensuring Q BioMed can pursue the 505(b)2 regulatory pathway in the US to ensure toddlers can possibly benefit from QBM-001 as soon as possible.

Among the more than 60,000 US children who develop autism spectrum disorders (ASD) every year, 20,000 become nonverbal or lose the ability to speak. The numbers are similar in Europe and this nonverbal group will have to rely on assisted living for the rest of their life.

Given the severity of this disorder and the immense emotional toll on these children and their families, our goal is to move the product forward quickly by using all the regulatory tools available to us to expedite the advancement of this drug candidate.

The cost for treatment and assisted living in the US alone can equal or exceed ten million dollars per patient over a lifetime. The estimated cost to the US healthcare system and lost productivity is estimated at 200 billion dollars. Currently there is no treatment for this disorder. EEG, behavioral, and genetic testing can identify a targeted population of children in their second year of life that we believe would respond to this treatment.

Research published in 2014 by Wittkowski et al. in the Nature journal Translational Psychiatry and independently confirmed in 2015 by Guglielmi et al. indicated that certain ion channels were not active enough in this targeted population. Given that we are developing an analogue of a well-known approved drug that regulates these channels, we expect to advance this clinically through a 505(b)2 pathway expected to start in ~~2018 with a~~mid 2019. This single Phase 2/3 pivotal trial, which, if successful, could have the drug ready for market in less than ~~2 years.~~two years from trial initiation. We are now developing novel composition and formulations of QBM-001 and expect to initiate the IND required pre-clinical testing in the balance of 2018.

~~New~~ License Agreement in Liver Cancer Chemotherapeutic Drug Candidate

On June 15, 2017, we signed a final license agreement with The Oklahoma Medical Research Foundation (OMRF) and the Rajiv Gandhi Centre for Biotechnology (RGCB). Under the agreement Q BioMed has the global exclusive rights to develop and market a novel chemotherapeutic drug to treat liver cancer.

~~The compound was isolated and characterized from the leaves of~~ ~~Solanum nigrum~~ Linn, or black nightshade, a plant widely used in traditional medicine. In animal models, the compound, called uttrocide B, was shown to be 10 times more cytotoxic to HepG2 liver cancer cells than the only drug currently on the market for the condition and caused no noticeable side effects.

Liver cancer is the second most common cause of cancer deaths worldwide, according to the Centers for Disease Control and Prevention, and claims approximately 750,000 lives each year. The American Cancer Society estimates that 39,000 people in the U.S. will be diagnosed with primary liver cancer in 2017 and that 27,000 will die from the disease this year.

We are currently working on synthesizing the molecule chemically to ensure commercial availability and scalability. We anticipate that pre-IND work and evaluation will be done in the third quarter of this year, and if successful, the IND is expected to be filed in ~~the first half of 2018.~~early 2019.

1710

Mannin License Update

Additionally, Mannin Research Inc. (“Mannin”), 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.

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. The Ties/TEK platform is applicable to other indications and we have made progress in identifying potential treatments for cardiovascular diseases as well as kidney diseases using this innovative approach.

In February 2017, Mannin was accepted into Johnson & Johnson Innovation, JLABS @ Toronto. JLABS @ Toronto is a 40,000 square-foot life science innovation center. The labs provide a flexible environment for start-up companies pursuing new technologies and research platforms to advance medical care. Through a “no strings attached” model, Johnson & Johnson Innovation does not take an equity stake in the companies occupying JLABS @ Toronto and the companies are free to develop products – either on their own, or by initiating a separate external partnership with Johnson & Johnson Innovation or any other company.

Mannin will utilize JLABS @ Toronto as complementary lab space to conduct commercial research and development as it relates to its MAN-01 program for Glaucoma and to the greater Tie2 platform technology. As a resident, Mannin will have access to the development and commercialization expertise provided by JLABS @ Toronto. Mannin has been utilizing its presence in JLABS @Toronto to increase its visibility within the biotechnology community in Toronto. Since taking up residency in JLABS in January 2017, Mannin has participated in numerous events hosted at the JLABS @ Toronto site. These events have provided Mannin with one-on-one interactions with investors, media, government agencies, and industry executives. Being a JLABS resident company provides Mannin with access to a world class network of investors and industry partners. Mannin is establishing research and development partnerships with companies and organizations to provide direct support for the MAN-01 program and Mannin’s other research and development initiatives.

Mannin Research will be presenting at Spotlight on JLABS, at JLABS @ Toronto on Wednesday October 11th. Spotlight provides the opportunity to learn more about some of the exciting companies creating scientific breakthroughs at JLABS in Toronto. Mannin is one of four companies that will give candid, informative presentations detailing their executive teams, an overview of their company and highlighting their reasons for joining JLABS.

Mannin Research Inc. will also attend the JLABS CEO Summit on Wednesday October 18th and 19th in San Diego, California. The JLABS CEO Summit provides resident companies at any of the JLABS sites to come together for networking, workshops & seminars, and 1:1 meetings with investors, other JLABS residents, or their JPAL mentor. The goal of the program is to provide JLABS residents with a forum to explore potential areas of partnership with J&J.

We are pleased with the progress Mannin research teams have achieved over the past several ~~months.~~months and look forward to putting the final drug candidates into IND enabling studies this year.

We continue to advance all the assets in our pipeline. We have executed on our plan to build a pipeline of considerable inherent value with several catalysts expected for ~~the duration of 2017 and into~~ 2018. We aim to have a commercial drug on the market by the end of ~~2017and at least 2~~of 2018 and two new INDs filed in ~~2018~~early 2019 including a Phase 4 and a Phase 2/3 pivotal trial. We remain committed to advancing our assets towards the patients that need ~~them.~~them and driving value for our shareholders.

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 condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our condensed consolidated 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 consolidated 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~~May 31, ~~2017~~2018 and ~~2016:~~2017:

For the three months ended August 31,
2017 2016
Operating expenses:
General and administrative expenses $ 3,038,018 $ 1,150,964
Research and development expenses 697,966 443,222
Total operating expenses 3,735,984 1,594,186

Other income (expenses):
Interest expense (202,160 ) (114,847 )
Interest income 15 -
Loss on conversion of debt - (29,032 )
Loss on extinguishment of debt (76,251 ) -
Loss on issuance of convertible notes - (28,000 )
Change in fair value of embedded conversion option 32,983 50,000
Change in fair value of warrant liability - -
Total other expenses (245,413 ) (121,879 )

Net loss $ (3,981,397 ) $ (1,716,065 )

	For the three months ended May 31,
	2018	2017
Operating expenses:
General and administrative expenses	$1,230,616	$1,676,961
Research and development expenses	782,188	1,013,420
Total operating expenses	2,012,804	2,690,381

Other income (expenses):
Interest expense	-	(216,600)
Loss on conversion of debt	-	(2,442)
Change in fair value of embedded conversion option	-	60,000
Change in fair value of warrant liability	-	-
Total other income (expenses)	-	(159,042)

Net loss	$(2,012,804)	$(2,849,423)

Operating expenses

We incur various costs and expenses in the execution of our business. Our operating expenses decreased to $2.0 million for the three months ended May 31, 2018 from $2.7 million for the corresponding period in 2017. The ~~increase~~decrease in operating expenses was mainly due to ~~more professional~~less research & development fees incurred in connection with the license agreements with ~~Mannin, BNI and Asdera as well as the issuance and conversion of convertible notes.~~Asdera.

Other expenses

During the three months ended ~~August~~May 31, 2017, other expenses included approximately ~~$202,000~~$217,000 in interest expense, a gain of ~~$33,000~~$60,000 for the change in fair value of embedded conversion options, and approximately ~~$76,000~~$2,000 in loss on the extinguishment of debt. 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, $28,000 in loss on the issuance of convertible debt, and $29,000 in loss on conversion of debt.

~~The increase in other expenses were mainly due to the loss in extinguishment of debt and less gain in change in fair value of embedded conversion option.~~

Net loss

In the three months ended ~~August~~May 31, ~~2017~~2018 and ~~2016,~~2017, we incurred net losses of approximately $4$2.0 million and ~~$1.7~~$2.8 million, respectively. Our management expects to continue to incur net losses for the foreseeable future, due to our need to continue to establish a broader pipeline of assets, expenditure on R&D and implement other aspects of our business plan.

Unaudited Results of Operations for the ~~nine~~six months ended ~~August~~May 31, ~~2017~~2018 and ~~2016:~~2017:

For the nine months ended August 31,
2017 2016
Operating expenses:
General and administrative expenses $ 6,122,565 $ 3,637,868
Research and development expenses 2,296,324 663,500
Total operating expenses 8,418,889 4,301,368

Other income (expenses):
Interest expense (635,267 ) (304,596 )
Interest income 123 -
Loss on conversion of debt (365,373 ) (89,210 )
Loss on extinguishment of debt (76,251 ) -
Loss on issuance of convertible notes - (481,000 )
Change in fair value of embedded conversion option (812,017 ) 362,000
Change in fair value of warrant liability (59,870 ) -
Total other expenses (1,948,655 ) (512,806 )

Net loss $ (10,367,544 ) $ (4,814,174 )

	For the six months ended May 31,
	2018	2017
Operating expenses:
General and administrative expenses	$2,551,370	$3,084,439
Research and development expenses	1,635,613	1,598,358
Total operating expenses	4,186,983	4,682,797

Other income (expenses):
Interest expense	-	(433,107)
Loss on conversion of debt	-	(365,373)
Change in fair value of embedded conversion option	-	(845,000)
Change in fair value of warrant liability	-	(59,870)
Total other income (expenses)	-	(1,703,350)

Net loss	$(4,186,983)	$(6,386,147)

Operating expenses

We incur various costs and expenses in the execution of our business. Our operating expenses decreased to $4.2 million for the six months ended May 31, 2018 from $4.7 million for the corresponding period in 2017. The ~~increase~~decrease in operating expenses was mainly due to ~~more professional fees incurred in connection with the license agreements with Mannin, BNI and Asdera as well as the issuance and conversion of convertible notes.~~less stock-based compensation.

Other expenses

During the ~~nine~~six months ended ~~August~~May 31, 2017, other expenses included approximately ~~$635,000~~$433,000 in interest expense, ~~$812,000~~approximately $365,000 in loss on the conversion of debt, a loss of $845,000 for the change in fair value of embedded conversion options, and approximately $60,000 for the change in fair value of warrant liability, $76,000 in loss on extinguishment of debt, and approximately $365,000 in loss on conversion of debt. 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 debt, and approximately $89,000 in loss on conversion of debt. liability.

~~The increase in other expenses were mainly due to interest expense and the change in fair value of embedded conversion option.~~

Net loss

In the ~~nine~~six months ended ~~August~~May 31, ~~2017~~2018 and ~~2016,~~2017, we incurred net losses of approximately ~~$10.4~~$4.2 million and ~~$4.8~~$6.4 million, respectively. Our management expects to continue to incur net losses for the foreseeable future, due to our need to continue to establish a ~~base~~broader pipeline of ~~operations~~assets, expenditure on R&D and implement other aspects of our business plan.

Liquidity and Capital Resources

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

We have not yet established an ongoing source of revenues sufficient to cover our operating costs and allow us to continue as a going concern. We had approximately ~~$2.5~~$2.3 million in cash as of ~~August~~May 31, ~~2017.~~2018. Our ability to continue as a going concern depends on the ability to obtain adequate capital to fund operating losses until we generate adequate cash flows from operations to fund ~~its~~our operating costs and obligations. If we are unable to obtain adequate capital, we could be forced to cease operations.

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

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,
2017 2016

Net cash (used in) provided by:
Operating activities $ (3,923,455 ) $ (868,497 )
Financing acitivities 4,953,900 875,075
Net (decrease) increase in cash $ 1,030,445 $ 6,578

	For the six months ended May 31,
	2018	2017

Net cash (used in) provided by:
Operating activities	$(3,445,863)	$(2,631,321)
Financing activities	4,945,251	2,570,000
Net (decrease) increase in cash	$1,499,388	$(61,321)

Net cash used in operating activities was approximately $4$3.4 million for the ~~nine~~six months ended ~~August~~May 31, ~~2017~~2018 as compared to approximately ~~$869,000~~$2.6 million for the ~~nine~~six months ended ~~August~~May 31, ~~2016.~~2017. The increase in net cash used in operating activities relates to the net loss of approximately ~~$10.4~~$3.9 million for the ~~nine~~six months ended ~~August~~May 31, ~~2017,~~2018, partially offset by aggregate non-cash expenses of approximately ~~$6.4 million.~~$772,000. The net cash used in operating activities of approximately $2.6 million for the ~~nine~~six months ended ~~August~~May 31, ~~2016 relates to~~2017 results from the net loss of approximately ~~$4.8~~$6.4 million, ~~for the nine months ended August 31, 2016,~~ partially offset by aggregate non-cash expenses of approximately ~~$3.5~~$4.0 million.

Net cash provided by financing activities was approximately $5$4.9 million for the ~~nine~~six months ended ~~August~~May 31, 2018, resulting from proceeds received from the issuance of common stock and warrants of approximately $5.4 million, offset by offering costs of approximately $0.5 million. Net cash provided by financing activities was $2.6 million for the six months ended May 31, 2017, resulting ~~mainly~~ from $2.5 million in proceeds received from the issuance of convertible notes ~~payable~~ and ~~private placement. Net cash provided by financing activities was $875,000 for the nine months ended August 31, 2016, resulting mainly from~~$70,000 in proceeds ~~received~~ from the ~~issuance~~exercise of ~~convertible notes payable.~~warrants.

Commitments and Contingencies

Legal

We are not currently involved in any legal matters arising in the normal course of business. From time to time, we 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, we review the status of significant matters, if any exist, and assesses its potential financial exposure. If the potential loss from any claim or legal claim is considered probable and the amount can be estimated, we accrue a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and litigation.

Advisory Agreements

We entered into customary consulting arrangements with various counterparties to provide consulting services, business development and investor relations services, pursuant to which we agreed to issue shares of common stock as services are received. We issued an aggregate of approximately 17,000 shares of common stock during the six months ended May 31, 2018.

Lease Agreement

In December 2016, we entered into a lease agreement for its office space located in Cayman Islands for $30,000 per annum. The initial term of the agreement ends in December 2019 and can be renewed for another three years.

Rent expense is classified within general and administrative expenses on a straight-line basis and included in the accompanying Condensed Consolidated Statements of Operations as follows:

	For the three months ended May 31,		For the six months ended May 31,
	2018	2017	2018	2017
Rent expense	$7,500	$7,500	$15,000	$12,500

License ~~Agreements~~Agreement

Mannin

~~Pursuant~~On October 29, 2015, we entered into a Patent and Technology License and Purchase Option Agreement (“Exclusive License”) with a vendor whereby we were granted a worldwide, exclusive, license on, and option to, acquire certain intellectual property (“Mannin IP”) which initially focused on developing a first-in-class eye drop treatment for glaucoma within the ~~license agreement with Mannin as disclosed in our Annual Form 10-K, filed with~~four-year term of the ~~SEC on February 28, 2017, during~~Exclusive License.

During the ~~three and nine~~six months ended ~~August~~May 31, 2018 and 2017, we incurred approximately ~~$525,000~~$1,220,000 and ~~$1.4 million,~~$852,000, respectively, in research and development expenses to fund the costs of development of the eye drop treatment for glaucoma pursuant to the ~~Patent and Technology License and Purchase Option Agreement (“~~Exclusive ~~License”).~~License. Pursuant to the exclusive license from Mannin, we may purchase the Mannin IP within the next four years in exchange for investing a minimum of $4,000,000 into the development of the Mannin IP. Through ~~August~~May 31, ~~2017,~~2018, we have funded an aggregate of ~~$2.15~~$4.0 million to Mannin under the Exclusive License.The purchase price for Mannin 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.

21Bio-Nucleonics

~~Bio-Nucleonics~~

On September 6, 2016, we entered into the Patent and Technology License and Purchase Option Agreement (the “BNI Exclusive License”) 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 BNI Exclusive License.

During the ~~three and nine~~six months ended ~~August~~May 31, 2018 and 2017, we incurred approximately ~~$144,000~~$283,000 and ~~$352,500,~~$208,000, respectively, in research and development expenses pursuant to the BNI Exclusive ~~License with BNI.~~License. As of ~~August~~May 31, ~~2017,~~2018, we ~~had paid~~has funded approximately ~~$351,700~~$699,000 to BNI out of the maximum $850,000 cash funding requirement. We are not obligated to provide further funding to BNI until BNI satisfies all of its pre-existing obligations totaling $163,500. To this end, we had provided an aggregate of approximately $59,000 through August 31, 2017 to BNI to help settle its obligations, which we recognized as research and development expenses in the accompanying Statements of Operations.

Asdera

On April 21, 2017, we entered into a License Agreement on Patent & Know-How Technology (“Asdera License”) with Asdera LLC (“Asdera”) whereby we were granted a worldwide, exclusive, license on certain Asdera intellectual property (“Asdera IP”). The initial cost to acquire the Asdera License is $50,000 and the issuance of 125,000 shares of our common stock, with a fair value of $487,500, of which we had fully paid and issued as of ~~August 31, 2017.~~November 30, 2017 and recorded in research and development expenses in the accompanying Consolidated Statements of Operations. In addition to royalties based upon net sales of the product candidate, if any, we are required to make certain additional payments upon ~~the following milestones:~~additional milestones.

	~~the filing of an investigational new drug application (the “IND”) with the US Food and Drug Administration (“FDA”);~~

	~~successful interim results of Phase II/III clinical trial of the product candidate;~~

	~~FDA acceptance of a new drug application;~~

	~~FDA approval of the product candidate; and~~

	~~achieving certain worldwide net sales.~~

Subject to the terms of the Agreement, we will be in control of the development and commercialization of the product candidate and are responsible for the costs of such development and commercialization. We have undertaken a good-faith commitment to (i) initiate a Phase II/III clinical trial at the earlier of the two-year anniversary of the agreement or one year from the FDA’s approval of the IND and (ii) to make the first commercial sale by the fifth-anniversary of the agreement. Failure to show a good-faith effort to meet those goals would mean that the Asdera IP would revert to Asdera. Upon such reversion, Asdera would be obligated to pay us royalties on any sales of products derived from the Asdera IP until such time that Asdera has paid us twice the sum that we had provided Asdera prior to the reversion.

~~OMRF~~

OMRF

OMRF License Agreement

On June 15, 2017, we entered into a Technology License Agreement (“OMRF License Agreement”) with the Rajiv Gandhi Centre for Biotechnology, an autonomous research institute under the Government of India (“RGCB”), and the Oklahoma Medical Research Foundation (“OMRF” and together with RGCB, the “Licensors”), whereby the Licensors granted us a worldwide, exclusive, license on intellectual property related to Uttroside B (the “Uttroside B IP”). Uttroside B is a chemical compound derived from the plant Solanum nigrum Linn, also known as Black Nightshade or Makoi. We seek to use the Uttroside B IP to create a chemotherapeutic agent against liver cancer.

The initial cost to acquire the OMRF License Agreement is ~~$10,000.~~$10,000, which will be payable upon reaching certain agreed conditions. In addition to royalties based upon net sales of the product candidate, if any, we are required to make additional payments upon ~~the following milestones:~~additional milestones.

	~~the completion of certain preclinical studies (the “Pre-Clinical Trials”);~~

	the filing of an investigational new drug application (the “IND”) with the US Food and Drug Administration (“FDA”) or the filing of the equivalent of an IND with the foreign equivalent of the FDA;

	~~successful completion of each of Phase I, Phase II and Phase III clinical trials;~~

	~~FDA approval of the product candidate;~~

	~~approval by the foreign equivalent of the FDA of the product candidate;~~

	~~achieving certain worldwide net sales; and~~

	~~a change of control of QBIO.~~

~~Milestones~~

No milestones have been reached to date on these license agreements.

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 $102,500 and $104,000 for the three months ended August 31, 2017 and 2016, respectively, and were approximately $322,500 and $207,875 for the nine months ended August 31, 2017 and 2016, respectively, included within general and administrative expenses in the accompanying Condensed Consolidated Statements of ~~Operations.~~Operations as follows:

	For the three months ended May 31,		For the six months ended May 31,
	2018	2017	2018	2017
Consulting and legal expenses	$60,000	$130,000	$120,000	$243,000

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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~~Only one of our three directors is an independent director, and none of our directors is considered a “Financial Expert,” within the meaning of Section 407 of the Sarbanes-Oxley Act. We have interviewed ~~several~~additional potential independent directors, but have not engaged any.

Changes in internal controls over financial reporting

There were no changes in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. We have engaged accounting and compliance consultants to review our internal controls over financial reporting and other compliance requirements.

Limitations on Effectiveness of Controls and Procedures

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

2314

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

On ~~August~~June 1, ~~2017,~~2018, we issued ~~an aggregate~~50,000 options to each of ~~953,249 units~~Denis Corin and William Rosenstadt for their continued services as directors of our company. Each option is to ~~third-party investors in a private placement, with each unit consisting~~ ~~one common stock and one warrant exercisable for five years from the date of issuance into~~purchase a share of ~~the Company’s~~our common stock ~~at an exercise price of $4.50.~~for $3.61 per share. The options vest in quarterly amounts on May 31, 2018, September 1, 2018, December 1, 2018 and March 1, 2019.

On ~~October 3, 2017,~~June 1, 2018, we issued ~~25,641 restricted~~100,000 options to each of Denis Corin and William Rosenstadt for their continued services as officers of our company. Each option is to purchase a share of our common stock for $3.61 per share. The options vest in quarterly amounts on May 31, 2018, September 1, 2018, December 1, 2018 and March 1, 2019.

On June 1, 2018, we entered into a new agreement with a consultant to provide expertise in the areas of technology assessment and product development. In exchange for such services, the consultant will receive warrants to purchase a share of our common stock exercisable at $3.61 per share.

In June 2018, we entered into an agreement with a consultant to provide expertise in the areas of commercial marketing. In exchange for such services, each month for the twelve months of the agreement the consultant will receive shares of our common stock equal to $22,000 divided by the ~~holder~~market price of ~~the Debentures as consideration for extending the maturity date of the Debentures from November 30, 2017 to November 30, 2018.~~

~~In September and October 2017, we issued an aggregate of 31,000 shares of its~~our common stock ~~to our vendors for services.~~on the first day of such month.

On ~~October 16, 2017,~~June 1, 2018, we issued ~~146,662~~options to purchase 50,000 shares of our common stock at $3.61 per option to ~~the holder~~each of ~~a convertible notes issued on March 10, 2017 upon the conversion of $500,445.21 of principal and interest of such note.~~

two advisors in exchange for consulting services. The options vest in quarterly amounts every three months.

We issued these shares in reliance on exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended. We have previously reported all other sales of unregistered securities otherwise required to be included in this section.

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

31.1	Rule 13a-14(a)/15d-14(a) Certifications

32.1	Certification under Section 906 of the Sarbanes-Oxley Act (18 U.S.C. Section 1350)

101	Interactive Data File

101.INS	XBRL Instance ~~Document~~Document*
101.SCH	XBRL Taxonomy Extension Schema ~~Document~~Document*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document*
101.DEF	XBRL Taxonomy Extension Definition Linkbase ~~Document~~Document*
101.LAB	XBRL Taxonomy Extension Label Linkbase ~~Document~~Document*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase ~~Document~~
	Document*

* In accordance with the temporary hardship exemption provided by Rule 201 of Regulation S-T, the date by which the interactive data file is required to be submitted has been extended by six business days.

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.

~~October 18, 2017~~July 16, 2018	By:	/s/ Denis Corin
		Denis Corin
		President, Chief Executive Officer, Acting Principal Accounting Officer, Principal Financial Officer

	August 31, 2017			November 30, 2016
	(Unaudited)
ASSETS
Current assets:
Cash	$	2,499,169		$	1,468,724
Prepaid expenses		5,000			-
Total current assets		2,504,169			1,468,724
Total Assets	$	2,504,169		$	1,468,724

LIABILITIES AND STOCKHOLDERS' EQUITY DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	382,055		$	497,936
Accrued expenses - related party		17,500			70,502
Accrued interest payable		33,299			48,813
Convertible notes payable (See Note 5)		1,922,474			2,394,849
Note payable		138,856			100,152
Warrant liability		-			168,070
Total current liabilities		2,494,184			3,280,322

Long-term liabilities:
Convertible notes payable (See Note 5)		-			231,517
Total long term liabilities		-			231,517
Total Liabilities		2,494,184			3,511,839

Commitments and Contingencies (Note 6)

Stockholders' Equity Deficit:
Preferred stock, $0.001 par value; 100,000,000 shares authorized; no shares issued and outstanding as of August 31, 2017 and November 30, 2016		-			-
Common stock, $0.001 par value; 250,000,000 shares authorized; 11,496,169 and 9,231,560 shares issued and outstanding as of August 31, 2017 and November 30, 2016, respectively		11,496			9,231
Additional paid-in capital		18,667,736			6,249,357
Accumulated deficit		(18,669,247	)		(8,301,703	)
Total Stockholders' Equity Deficit		9,985			(2,043,115	)
Total Liabilities and Stockholders' Equity Deficit	$	2,504,169		$	1,468,724
The accompanying notes are an integral part of these condensed consolidated financial statements

Potentially dilutive securities	August 31, 2017		August 31, 2016
Warrants (Note 10)		3,033,995		976,500
Convertible debt (Note 5)		567,407		506,757

	August 31, 2017			November 30, 2016
Series A Notes:
Principal value of 10%, convertible at $2.00 at November 30, 2016.	$	-		$	12,500
Fair value of bifurcated embedded conversion option of Series A Notes		-			12,000
Debt discount		-			(2,194	)
Carrying value of Series A Notes		-			22,306

Series B Notes:
Principal value of 10%, convertible at $2.00 at November 30, 2016.		-			55,000
Fair value of bifurcated embedded conversion option of Series B Notes		-			55,000
Debt discount		-			(19,229	)
Carrying value of Series B Notes		-			90,771

Series C Notes:
Principal value of 10%, convertible at $1.55 at November 30, 2016.		-			576,383
Fair value of bifurcated embedded conversion option of Series C Notes		-			838,000
Debt discount		-			(250,969	)
Carrying value of Series C Notes		-			1,163,414

Series D Notes:
Principal value of 10%, convertible at $1.85 at November 30, 2016.		-			160,000
Debt discount		-			(140,961	)
Carrying value of Series D Notes		-			19,039

Series E Notes:
Principal value of 10%, convertible at $2.50 at August 31, 2017 and November 30, 2016.		30,000			180,000
Debt discount		(4,062	)		(124,164	)
Carrying value of Series E Notes		25,938			55,836

Convertible Debenture:
Principal value of 5%, convertible at $3.60 and $2.98 at August 31, 2017 and November 30, 2016, respectively.		2,000,000			1,500,000
Fair value of bifurcated contingent put option of Secured Convertible Debenture		2,000			72,000
Debt discount		(105,464	)		(297,000	)
Carrying value of Secured Convertible Debenture Note		1,896,536			1,275,000
Total short-term carrying value of convertible notes	$	1,922,474		$	2,394,849
Total long-term carrying value of convertible notes	$	-		$	231,517

Rollforward of Level 3 Fair Value Measurement for the Nine Months Ended August 31, 2017

Balance at November 30, 2016			Issuance		Net unrealized gain/(loss)		Conversion			Balance at August 31, 2017
	$	977,000		86,000		812,017		(1,873,017	)		$	2,000

	Principal		Shares
Series A conversions		12,500		5,936
Series B conversions		55,000		27,995
Series C conversions		576,383		407,484
Series D conversions		160,000		91,782
Series E conversions		150,000		63,255
Secured Debenture conversions		2,000,000		461,203
Total	$	2,953,883		1,057,655

Fair value of warrant liability at November 30, 2016	$	168,070
Issuance of new warrant liability		-
Change in fair value of warrant liability		59,870
Reclassification of warrant liability to equity		(227,940	)
Fair value of warrant liability at August 31, 2017	$	-