SUNSHINE BIOPHARMA, INC
10-Ks and 10-Qs
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-K
__________________
(Mark
one)
☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31,
2016
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF1934 for the transition period from ________________
to________________________.
Commission
File Number
000-52898
SUNSHINE BIOPHARMA, INC.
(Exact
name of registrant as specified in its charter)
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Colorado
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20-5566275
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(State
or other jurisdiction of Incorporation or
organization)
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(I.R.S.
Employer Identification No.)
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469 Jean-Talon West
3rd Floor
Montreal, Quebec, Canada H3N 1R4
(Address
of principal executive offices)
(514) 764-9698
(Issuer’s
Telephone Number)
Securities
registered pursuant to Section 12(b) of the Act:
None
Securities
registered pursuant to Section 12(g) of the Act:
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Title
of each class
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Name of
each exchange on which registered
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Common Stock, par value $0.001 per share
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OTCQB
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes
☐ No ☑
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Securities Act. Yes
☐ No ☑
Indicate
by check mark whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the 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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ☑
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definition of “large accelerated
filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
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Large
accelerated filer
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☐
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Accelerated
filer
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☐
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Non-accelerated
filer
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☐
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Smaller
reporting company
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☑
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(Do not
check if a smaller reporting company)
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Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act). Yes ☐ No
☑
State
the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked
price of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal quarter on
June 30, 2016 was $1,161,885.
As of
April 12, 2017, the Registrant had 851,927,983 shares of Common
Stock issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE - None
TABLE OF CONTENTS
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Facing
Page
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Page
No.
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Index
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PART
I
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Item
1.
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Business
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3
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Item
1A.
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Risk
Factors
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9
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Item
1B.
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Unresolved
Staff Comments
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10
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Item
2
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Properties
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10
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Item
3.
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Legal
Proceedings
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10
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Item
4.
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Mine
Safety Disclosures
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10
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PART
II
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Item
5.
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Market
for the Registrant’s Common Equity and Related Stockholder
Matters and Issuer Purchases of Equity Securities
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10
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Item
6.
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Selected
Financial Data
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12
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Item
7.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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12
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Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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18
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Item
8.
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Financial
Statements and Supplementary Data
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18
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Item
9.
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Changes
in and Disagreements on Accounting and Financial
Disclosure
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21
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Item
9A.
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Controls
and Procedures
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21
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Item
9B.
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Other
Information
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22
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PART
III
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Item
10.
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Directors,
Executive Officers and Corporate Governance
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22
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Item
11.
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Executive
Compensation
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24
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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25
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Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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26
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Item
14.
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Principal
Accounting Fees and Services
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27
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PART
IV
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Item
15.
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Exhibits,
Financial Statement Schedules
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29
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Signatures
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30
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2
FORWARD LOOKING STATEMENTS
This
Annual Report on Form 10-K contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Act of 1934. The statements regarding
Sunshine Biopharma Inc. contained in this Report that are not
historical in nature, particularly those that utilize terminology
such as “may,” “will,”
“should,” “likely,” “expects,”
“anticipates,” “estimates,”
“believes” or “plans,” or comparable
terminology, are forward-looking statements based on current
expectations and assumptions, and entail various risks and
uncertainties that could cause actual results to differ materially
from those expressed in such forward-looking
statements.
Important factors
known to us that could cause such material differences are
identified in this Report. We undertake no obligation to correct or
update any forward-looking statements, whether as a result of new
information, future events or otherwise. You are advised, however,
to consult any future disclosures we make on related subjects in
future reports to the SEC.
History
We were
incorporated in the State of Colorado on August 31, 2006 under the
name “Mountain West Business Solutions, Inc.” Until
October 2009, our business was to provide management consulting
with regard to accounting, computer and general business issues for
small and home-office based companies. Effective October 15, 2009,
we executed an agreement to acquire Sunshine Biopharma, Inc., a
Colorado corporation (subsequently renamed Sunshine Etopo, Inc.),
in exchange for the issuance of 21,962,000 shares of our Common
Stock and 850,000 shares of Convertible Preferred Stock, each
convertible into twenty (20) shares of our Common Stock. As a
result of this transaction we changed our name to “Sunshine
Biopharma, Inc. and our officers and directors resigned their
positions with us and were replaced by our current management. The
majority of the Common Shares and all of the Convertible Preferred
Shares we issued for this transaction were issued to Advanomics
Corporation, a privately held Canadian company
(“Advanomics”). As a result of the issuance of this
stock, Advanomics became a related party. Advanomics had previously
granted Sunshine Biopharma, Inc. an exclusive license for an
anticancer drug in development called Adva-27a. On December 21,
2011, Advanomics exercised its right to convert the 850,000 shares
of Series “A” Preferred Stock it held in our Company
into 17,000,000 shares of Common Stock. There are currently no
issued and outstanding shares of the Series “A”
Preferred Stock of our company.
Following the above
detailed transactions, we began to operate as a pharmaceutical
company focusing on development of the Adva-27a anticancer
compound. We operated under a the exclusive technology license
agreement with Advanomics until December 2015, at which time we
acquired all of the worldwide right to the technology and became
direct owner of all issued and pending patents pertaining to the
Adva-27a technology. Following acquisition of the Adva-27a patents,
the exclusive license agreement with Advanomics was terminated and
Sunshine Etopo, Inc., Sunshine Biopharma Inc.’s subsidiary
holding the exclusive license with Advanomics, was dissolved. See
“Part I, Item 1 – Business - Intellectual
Property,” below.
In July
2014, we formed a wholly owned Canadian subsidiary, Sunshine
Biopharma Canada Inc. (“Sunshine Canada”), for the
purposes of offering generic pharmaceutical products in Canada and
elsewhere around the globe. Sunshine Canada has recently signed
licensing agreements for four (4) generic prescription drugs for
the treatment of cancer and BPH (Benign Prostatic
Hyperplasia).
With
our entry into the generic pharmaceuticals business, we have become
a fully integrated pharmaceutical company offering generic and
proprietary drugs for the treatment of cancer and other acute and
chronic indications.
Our
principal place of business is located at 469 Jean-Talon West, 3rd
Floor, Montreal, Quebec, Canada H3N 1R4. Our phone number is (514)
764-9698 and our website address is
www.sunshinebiopharma.com.
We have
not been subject to any bankruptcy, receivership or similar
proceeding.
3
Business Operations
Since
inception, we have been operating as a pharmaceutical company
focused on the research, development and commercialization of
proprietary drugs for the treatment of various forms of
cancer. In July 2014, we formed Sunshine Biopharma
Canada Inc., a Canadian wholly owned subsidiary, for the purposes
of conducting generic pharmaceuticals business in Canada and
elsewhere around the world. During 2016, we intensified activities
in the generic pharmaceuticals area and as a result, in addition to
our continued efforts to develop our anti-cancer drug, we also
intend to become a fully integrated pharmaceutical company offering
generic and proprietary drugs for the treatment of cancer and other
acute and chronic indications. Below we describe our Generic
Pharmaceuticals Operations followed by our Proprietary Drug
Development Program.
Generic Pharmaceuticals Operations
In
2016, our Canadian wholly owned subsidiary, Sunshine Biopharma
Canada Inc. (“Sunshine Canada”), signed Cross
Referencing Agreements with a major pharmaceutical company for four
prescription generic drugs for the treatment of Breast Cancer,
Prostate Cancer and Enlarged Prostate. We will market and sell
these new pharmaceutical products under our own Sunshine Biopharma
label. These four generic products are as follows:
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Anastrozole (brand
name Arimidex® by AstraZeneca) for treatment of Breast
Cancer;
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Letrozole (brand
name Femara® by Novartis) for treatment of Breast
Cancer;
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Bicalutamide (brand
name Casodex® by AstraZenica) for treatment of Prostate
Cancer;
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Finasteride (brand
name Propecia® by Merck) for treatment of BPH (Benign
Prostatic Hyperplasia)
Worldwide sales of
the brand name version of these products as reported in the SEC
filing of the respective owner of the registered trademark are as
follows:
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Arimidex®
$232M in 2016
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Femara® $380M
in 2014
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Casodex® $247M
in 2016
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Propecia®
$183M in 2015
Sunshine Canada is
currently in the process of securing a Drug Identification Number
(“DIN”) for each of these products from Health Canada.
We are also working on finding an appropriate facility and
obtaining a Drug Establishment License (“DEL”) from
Health Canada. Upon receipt of the DEL and DIN’s, we will be
able to accept orders for our own label SBI-Anastrozole,
SBI-Letrozole, SBI-Bicalutamide and SBI-Finasteride. We cannot
estimate the timing in our obtaining either the DIN or DEL due to
variables involved that are out of our control. The Figure below
shows our 30-Pill blister pack of Anastrozole.
We
currently have twenty three (23) additional Generic Pharmaceuticals
under review for in-licensing. While no assurances can be provided,
when completed, this will bring our Generic Products portfolio to a
total of twenty seven (27). We believe that a larger product
portfolio provides us with more opportunities and a greater reach
into the marketplace. We hope to further build our generics
portfolio of “SBI” label Generic Pharmaceuticals over
time.
4
Various
publicly available sources indicate that the worldwide sales of
generic pharmaceuticals are approximately $200 billion per year. In
the United States and Canada, the sales of generic pharmaceuticals
are approximately $50 billion and $5 billion, respectively. The
generic pharmaceuticals business is fairly competitive and there
are several multinational players in the field including Teva
(Israel), Novartis - Sandoz (Switzerland), Hospira (USA), Mylan
(Netherlands), Sanofi (France), Fresenius Kabi (Germany) and Apotex
(Canada). While no assurances can be provided, with our offering of
Canadian approved products we believe that we will be able to
access at least a small percentage of the generic pharmaceuticals
marketplace.
As
part of a subscription agreement, we have an obligation to pay a
royalty of 5% of net sales on one of our generic products
(Anastrozole)
for a period of
three (3) years from the date of the first sale of that
product.
While
no assurances can be provided and subject to the availability of
adequate financing, of which there is no assurance, we anticipate
that profits from the sales of Generic Products will be used to
finance our proprietary drug development program, including
Adva-27a, our flagship anticancer compound. In addition to
near-term revenue generation, building the generics business
infrastructure and securing the proper permits will render us
appropriately positioned for the marketing and distribution of our
proprietary Adva-27a drug candidate, provided that Adva-27a is
approved for such marketing and distribution, of which there can be
no assurance.
Proprietary Drug Development Operations
Since
inception, our proprietary drug development activities have been
focused on the development of a small molecule called Adva-27a for
the treatment of aggressive cancers. A Topoisomerase II inhibitor,
Adva-27a has been shown to be effective at destroying Multidrug
Resistant cancer cells including Pancreatic Cancer cells, Breast
Cancer cells, Small-Cell Lung Cancer cells and Uterine Sarcoma
cells (Published in ANTICANCER RESEARCH, Volume 32, Pages
4423-4432, October 2012). Sunshine Biopharma is direct owner of all
issued and pending worldwide patents pertaining to Adva-27a
including U.S. Patent Number 8,236,935. See “Part I, Item 1
– Business - Intellectual Property.”
Summary of Adva-27a Preclinical Studies
Adva-27a is a
GEM-difluorinated C-glycoside derivative of Podophyllotoxin.
Another derivative of Podophyllotoxin called Etoposide is currently
on the market and is used to treat various types of cancer
including leukemia, lymphoma, testicular cancer, lung cancer, brain
cancer, prostate cancer, bladder cancer, colon cancer, ovarian
cancer, liver cancer and several other forms of cancer. Etoposide
is one of the most widely used anticancer drugs. Adva-27a and
Etoposide are similar in that they both attack the same target in
cancer cells, namely the DNA unwinding enzyme, Topoisomerase II.
Unlike Etoposide, and other anti-tumor drugs currently in use,
Adva-27a is able to destroy Multidrug Resistant Cancer cells.
Adva-27a is the only compound known today that is capable of
destroying Multidrug Resistant Cancer. In addition, Adva-27a has
been shown to have distinct and more desirable biological and
pharmacological properties compared to Etoposide. In side-by-side
studies using Multidrug Resistant Breast Cancer cells and Etoposide
as a reference, Adva-27a showed markedly improved cell killing
activity (see Figure below). Our preclinical studies to date have
shown that:
●
Adva-27a is
effective at killing different types of Multidrug Resistant cancer
cells, including Pancreatic Cancer Cells (Panc-1), Breast Cancer
Cells (MCF-7/MDR), Small-Cell Lung Cancer Cells (H69AR), and
Uterine Sarcoma Cells (MES-SA/Dx5).
●
Adva-27a is
unaffected by P-Glycoprotein, the enzyme responsible for making
cancer cells resistant to anti-tumor drugs.
5
●
Adva-27a has
excellent clearance time (half-life = 54 minutes) as indicated by
human microsomes stability studies and pharmacokinetics data in
rats.
●
Adva-27a clearance
is independent of Cytochrome P450, a mechanism that is less likely
to produce toxic intermediates.
●
Adva-27a is an
excellent inhibitor of Topoisomerase II with an IC50 of only 13.7
micromolar (this number has recently been reduce to 1.44 micromolar
as a result of resolving the two isomeric forms of
Adva-27a).
●
Adva-27a has shown
excellent pharmacokinetics profile as indicated by studies done in
rats.
●
Adva-27a does not
inhibit tubulin assembly.
These
and other preclinical data have been published in ANTICANCER
RESEARCH, a peer-reviewed International Journal of Cancer Research
and Treatment. The publication which is entitled “Adva-27a, a
Novel Podophyllotoxin Derivative Found to Be Effective Against
Multidrug Resistant Human Cancer Cells” [ANTICANCER RESEARCH
32: 4423-4432 (2012)] is available on our website at
www.sunshinebiopharma.com
.
Clinical Development Path
The
early stage preclinical studies for our lead compound, Adva-27a,
were successfully completed and the results have been published in
ANTICANCER RESEARCH 32: 4423-4432 (2012). We have been delayed in
our implementation of our clinical development program due to lack
of funding. Our fund raising efforts are continuing and as soon as
adequate financing is in place we will continue our clinical
development program of Adva-27a by conducting the next sequence of
steps comprised of the following:
●
GMP Manufacturing
of 2 kilogram for use in IND-Enabling Studies and Phase I Clinical
Trials
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IND-Enabling
Studies
●
Regulatory Filing
(Fast-Track Status Anticipated)
●
Phase I Clinical
Trials (Pancreatic Cancer and in parallel Multidrug Resistant
Breast Cancer)
6
GMP
Manufacturing
On
November 14, 2014, we entered into a Manufacturing Services
Agreement with Lonza Ltd. and Lonza Sales Ltd. (hereinafter jointly
referred to as “Lonza”), whereby we engaged Lonza to be
the manufacturer of our Adva-27a anticancer drug. In June 2015 we
received a sample of the pilot manufacturing run for evaluation.
Our laboratory analyses showed that, while the sample meets all of
the required chemical, physical and biological specifications, the
amount of material generated (the “Yield”) by the pilot
run was found to be significantly lower than anticipated. We are
currently working towards finding possible solutions to increase
the Yield and define a path forward. During the course of our
discussions concerning the problem of the low Yield, Lonza informed
us that they required us to pay them $687,818 prior to moving
forward with any activity pertaining to the manufacturing agreement
we have with them. We have repeatedly indicated to Lonza that a
clear path defining exactly how the extremely low Yield issue would
be addressed is imperative prior to us making any payments. As of
the date of this report, neither party has changed its position.
See “Part I, Item 3 – Legal
Proceedings.”
Clinical Trials
Adva-27a’s
initial indication will be pancreatic cancer and multidrug
resistant breast cancer for which there are currently little or no
treatment options available. We have concluded an agreement with
McGill University’s Jewish General Hospital in Montreal,
Canada to conduct Phase I clinical trials for these two
indications. All aspects of the planned clinical trials in Canada
will employ FDA standards at all levels. Subject to obtaining the
necessary financing, we now anticipate that Phase I clinical trials
will commence in mid-2018 and we estimate that it will take 18
months to complete, at which time we expect to receive limited
marketing approval for “compassionate-use” under the
FDA and similar guidelines in Canada. See “Potential
Near-Term Opportunities” below.
Potential Near-Term Opportunities
According to the
American Cancer Society, nearly 1.5 million new cases of cancer are
diagnosed in the U.S. each year. Given the terminal and
limited treatment options available for the pancreatic cancer and
multidrug resistant breast cancer indications we are planning to
study, we anticipate being granted limited marketing approval
(“compassionate-use”) for our Adva-27a following
receipt of funding and a successful Phase I clinical
trial. There are no assurances that either will
occur. Such limited approval will allow us to make the
drug available to various hospitals and health care centers for
experimental therapy and/or “compassionate-use”,
thereby generating some revenues in the near-term.
We
believe that upon successful completion of Phase I Clinical Trials
we may receive one or more offers from large pharmaceutical
companies to buyout or license our drug. However, there
are no assurances that our Phase I Trials will be successful, or if
successful, that any pharmaceutical companies will make an
acceptable offer to us. In the event we do not
consummate such a transaction, we will require significant capital
in order to manufacture and market our new drug.
7
Our Lead Anti-Cancer Compound, Adva-27a, in 3D
Intellectual Property
Effective October
8, 2015, we executed a Patent Purchase Agreement (the
“October Purchase Agreement”), with Advanomics, a
related party, pursuant to which we acquired all of the right,
title and interest in and to U.S. Patent Number 8,236,935 (the
“US Patent”) for our anticancer compound,
Adva-27a. On December 28, 2015, we executed a second
Patent Purchase Agreement (the “December Purchase
Agreement”), with Advanomics, pursuant to which we acquired
all of the right, title and interest in and to all of the remaining
worldwide rights covered by issued and pending patents under
PCT/FR2007/000697 and PCT/CA2014/000029 (the “Worldwide
Patents”) for our anticancer compound, Adva-27a.
Effective December
28, 2015, we entered into amendments (the “Amendments”)
of these Purchase Agreements pursuant to which the total purchase
price was reduced from $17,142,499 to $618,810, the book value of
this intellectual property on the financial statements of
Advanomics. Further, the Amendments provided for
automatic conversion of the promissory notes representing the new
purchase price into an aggregate of 321,305,415 shares of our
Common Stock once we increase our authorized capital such that
these shares can be issued. In July 2016 we increased
our authorized capital and issued the 321,305,415 Common shares to
Advanomics thereby completing all aspects of the patent purchase
arrangements and securing direct ownership of all worldwide patents
and rights pertaining to Adva-27a.
In
addition, in 2016 we signed Cross Referencing Agreements with a
major pharmaceutical company for four (4) prescription generic
drugs for the treatment of Breast Cancer, Prostate Cancer and
Enlarged Prostate. These agreements give us the right to register
the four (4) generic products, Anastrozole, Letrozole, Bicalutamide
and Finasteride in Canada under our own label and obtain a DIN for
each in order to be able to place them on the market.
Government Regulations
Our
business operations, including both the generic drugs operations
and proprietary drug development operations are subject to
extensive and frequently changing federal, state, provincial and
local laws and regulations.
In the
U.S, the Federal Government agency responsible for regulating drugs
is the U.S. Food and Drug Administration (“FDA”). The
Canadian counterpart to the FDA is the Health Products and Food
Branch (“HPFB”) of Health Canada. Both the FDA and HPFB
have similar requirements for a drug to be approved for marketing.
In addition, the quality standards for brand name drugs and generic
drugs are the same. The ingredients, manufacturing processes and
facilities for all drugs must meet the guidelines for Good
Manufacturing Practices (“GMP”). Moreover, all drug
manufacturers must perform a series of tests, both during and after
production, to show that every drug batch made meets the regulatory
agency’s requirements for that product.
8
In
connection with our development of the new chemical entity,
Adva-27a, we will be subject to significant regulations in the U.S.
in order to obtain the approval of the FDA to offer our product on
the market. The approximate procedure for obtaining
FDA approval involves an initial filing of an IND application
following which the FDA would review the application and if all the
data are in order and acceptable would give the go ahead for the
drug sponsor to proceed with Phase I clinical (human)
trials. Following completion of Phase I, the results are
filed with the FDA and a request is made to proceed to Phase
II. Similarly, following completion of Phase II the data are
filed with the FDA and a request is made to proceed to Phase
III. Following completion of Phase III, a request is made for
marketing approval. Depending on various issues and
considerations, the FDA could provide limited marketing approval on
a humanitarian basis if the drug treats terminally ill patients
with limited treatment options available. As of the date
of this Report we have not made any filings with the FDA or other
regulatory bodies in other jurisdictions. We have however had
extensive discussions with clinicians at the McGill
University’s Jewish General Hospital in Montreal where we
plan to undertake our Phase I study for pancreatic cancer and
multidrug resistant breast cancer they believe that Health
Canada is likely to grant us a so-called fast-track process on
the basis of the terminal nature of the cancer types which we will
be treating. There are no assurances this will
occur.
Employees
As of
the date of this Report we have three (3) employees, our
management. We anticipate that if we receive financing
we will need additional employees in both our generic
pharmaceutical and proprietary drug development operations
including accounting, regulatory affairs, marketing, sales and
laboratory personnel.
Competition
In the
area of proprietary anticancer drug development, we will be
competing with large publicly and privately held companies engaged
in developing new cancer therapies. There are numerous other
entities engaged in this business that have greater resources, both
financial and otherwise, than the resources presently available to
us. Nearly all major pharmaceutical companies including
Amgen, Roche, Pfizer, Bristol-Myers Squibb and Novartis, to name
just a few, have on-going anti-cancer drug development programs and
some of the drug they may develop could be in direct competition
with our drug. Also, a number of small companies are
also working in the area of cancer and could develop drugs that may
be in competition with ours. However, none of these
competitor companies can use molecules similar to ours as they
would be infringing our patents.
The
generic pharmaceuticals business is fairly competitive and there
are many players in the field including several multinationals such
as Teva (Israel), Novartis - Sandoz (Switzerland), Hospira (USA),
Mylan (Netherlands), Sanofi (France), Fresenius Kabi (Germany) and
Apotex (Canada)with annual sales in the range of approximately $2
billion to over $10. With our offering of Canadian approved generic
products, we believe that we will be able to access at least a
small percentage of the generic pharmaceuticals
market.
Trademarks-Tradenames
We are
the exclusive owner of all worldwide rights pertaining to Adva-27a
covered by PCT/FR2007/000697 and PCT/CA2014/000029. The
patent applications filed under PCT/FR2007/000697 have been issued
in Europe, Canada, the United States (8,236,935) and elsewhere
around the world. The patent applications recently filed
internationally under PCT/CA2014/000029 are still
pending.
We are
the owner of Cross Referencing Agreements for four (4) generic
drugs which we will market and sell under the tradenames
SBI-Anastrozole, SBI-Letrozole, SBI-Bicalutamide and
SBI-Finasteride.
We are
a smaller reporting company and not required to include this
disclosure in our Form 10-K annual report.
9
Not
applicable.
Our
principal place of business is located at 469 Jean-Talon West, 3rd
Floor, Montreal, Quebec, Canada, H3N 1R4. This is also
the location of our former licensor, Advanomics Corporation, who
provided this space to us on a rent free basis in 2015 and
2016. Dr. Steve N. Slilaty, our Chief Executive Officer
and a Director, is an Officer, Director and principal shareholder
of Advanomics. Effective January 1, 2017 we took over
the lease from Advanomics and this space is now exclusively our
own.
In
February 2015 we filed an action in the Circuit Court of the
11
th
Judicial Circuit for
Miami-Date County, Florida against Justin Keener, d/b/a JMJ
Financial, arising out of a convertible note that we issued to the
defendant. The complaint alleged among other things,
claims of usury, fraudulent inducement, breach of contract, and
injunctive and declaratory relief. This matter was
settled during the first calendar quarter of 2016. We
received a one-time payment of $25,000 as part of the terms of
settlement.
Other
than the matter discussed above under “Item 1 – GMP
Manufacturing,” to the best of our management’s
knowledge and belief, there are no material claims that have been
brought against us nor have there been any claims
threatened.
Not
applicable.
Market Information
Trading
of our Common Stock commenced on the OTCBB in September 2007 under
the symbol “MWBN.” Effective November 30,
2009, the trading symbol for our Common Stock was changed to
“SBFM” as a result of our name change discussed above.
Our Common Stock currently trades on the OTCQB.
The
table below sets forth the reported high and low bid prices for the
periods indicated. The bid prices shown reflect
quotations between dealers, without adjustment for markups,
markdowns or commissions, and may not represent actual transactions
in our Common Stock.
|
Quarter
Ended
|
High
|
Low
|
|
|
|
|
|
March 31,
2015
|
$
0.0441
|
$
0.0121
|
|
June 30,
2015
|
$
0.0400
|
$
0.0120
|
|
September 31,
2015
|
$
0.0181
|
$
0.0061
|
|
December 31,
2015
|
$
0.0141
|
$
0.0023
|
|
March 31,
2016
|
$
0.0088
|
$
0.0052
|
|
June 30,
2016
|
$
0.0110
|
$
0.0061
|
|
September 30,
2016
|
$
0.0039
|
$
0.0030
|
|
December 31,
2016
|
$
0.0040
|
$
0.0032
|
10
As of
April 12, 2017, the closing bid price of our Common Stock was
$0.007 per share.
Trading
volume in our Common Stock varies between a few hundred thousand
shares to several million shares per day. As a result,
the trading price of our Common Stock is subject to significant
fluctuations.
The Securities Enforcement and Penny Stock Reform Act of
1990
The
Securities and Exchange Commission has also adopted rules that
regulate broker-dealer practices in connection with transactions in
penny stocks. Penny stocks are generally equity
securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume
information with respect to transactions in such securities is
provided by the exchange or system).
As of
the date of this Report, our Common Stock is defined as a
“penny stock” under the Securities and Exchange
Act. It is anticipated that our Common Stock will remain
a penny stock for the foreseeable future. The
classification of penny stock makes it more difficult for a
broker-dealer to sell the stock into a secondary market, which
makes it more difficult for a purchaser to liquidate his/her
investment. Any broker-dealer engaged by the purchaser
for the purpose of selling his or her shares in us will be subject
to Rules 15g-1 through 15g-10 of the Securities and Exchange
Act. Rather than creating a need to comply with those
rules, some broker-dealers will refuse to attempt to sell penny
stock.
The
penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from those rules, to deliver
a standardized risk disclosure document prepared by the Commission,
which:
|
|
●
|
contains
a description of the nature and level of risk in the market for
penny stocks in both public offerings and secondary
trading;
|
|
|
|
|
|
|
●
|
contains
a description of the broker's or dealer's duties to the customer
and of the rights and remedies available to the customer with
respect to a violation to such duties or other requirements of the
Securities Act of 1934, as amended;
|
|
|
|
|
|
|
●
|
contains
a brief, clear, narrative description of a dealer market, including
"bid" and "ask" prices for penny stocks and the significance of the
spread between the bid and ask price;
|
|
|
|
|
|
|
●
|
contains
a toll-free telephone number for inquiries on disciplinary
actions;
|
|
|
|
|
|
|
●
|
defines
significant terms in the disclosure document or in the conduct of
trading penny stocks; and
|
|
|
|
|
|
|
●
|
contains
such other information and is in such form (including language,
type, size and format) as the Securities and Exchange Commission
shall require by rule or regulation;
|
The
broker-dealer also must provide, prior to effecting any transaction
in a penny stock, to the customer:
|
|
●
|
the bid
and offer quotations for the penny stock;
|
|
|
|
|
|
|
●
|
the
compensation of the broker-dealer and its salesperson in the
transaction;
|
|
|
|
|
|
|
●
|
the
number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock; and
|
|
|
|
|
|
|
●
|
monthly
account statements showing the market value of each penny stock
held in the customer's account.
|
11
In
addition, the penny stock rules require that prior to a transaction
in a penny stock not otherwise exempt from those rules; the
broker-dealer must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive
the purchaser's written acknowledgment of the receipt of a risk
disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability
statement. These disclosure requirements will have the
effect of reducing the trading activity in the secondary market for
our stock because it will be subject to these penny stock
rules. Therefore, stockholders may have difficulty
selling their securities.
Holders
We had
149 holders of record of our Common Stock as of the date of this
Report, not including those persons who hold their shares in
“street name.”
Stock Transfer Agent
The
stock transfer agent for our securities is Corporate Stock
Transfer, Inc., of Denver, Colorado. Their address is
3200 Cherry Creek South Drive, Suite 430, Denver, Colorado,
80209. Their phone number is (303)
282-4800.
Dividends
We have
not paid any dividends since our incorporation and do not
anticipate the payment of dividends in the foreseeable future. At
present, our policy is to retain earnings, if any, to develop and
market our products. The payment of dividends in the
future will depend upon, among other factors, our earnings, capital
requirements, and operating financial conditions.
Reports
We are
subject to certain reporting requirements and furnish annual
financial reports to our stockholders, certified by our independent
accountants, and furnish unaudited quarterly financial reports in
our quarterly reports filed electronically with the
SEC. All reports and information filed by us can be
found at the SEC website,
www.sec.gov
.
Not
applicable.
The
following discussion should be read in conjunction with our audited
financial statements and notes thereto included
herein. In connection with, and because we desire to
take advantage of, the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995, we caution
readers regarding certain forward looking statements in the
following discussion and elsewhere in this Report and in any other
statement made by, or on our behalf, whether or not in future
filings with the Securities and Exchange
Commission. Forward looking statements are statements
not based on historical information and which relate to future
operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and
assumptions that are inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of
which are beyond our control and many of which, with respect to
future business decisions, are subject to change. These
uncertainties and contingencies can affect actual results and could
cause actual results to differ materially from those expressed in
any forward looking statements made by, or on our
behalf. We disclaim any obligation to update forward
looking statements.
12
Overview and History
We were
incorporated in the State of Colorado on August 31, 2006 under the
name “Mountain West Business Solutions,
Inc.” During our fiscal year ended July 31, 2009
our business was to provide management consulting with regard to
accounting, computer and general business issues for small and
home-office based companies. Effective October 15, 2009,
we executed an agreement to acquire Sunshine Biopharma, Inc., a
Colorado corporation, and as a result we became a pharmaceutical
company now offering generic and proprietary drugs for the
treatment of cancer and other acute and chronic
indications. See “Part I, Item 1 –
Business.”
Our
principal place of business is located at 469 Jean-Talon West, 3rd
Floor, Montreal, Quebec, Canada H3N 1R4. Our phone
number is (514) 764-9698 and our website address is
www.sunshinebiopharma.com
.
We have
not been subject to any bankruptcy, receivership or similar
proceeding.
Going Concern
Our
financial statements accompanying this Report have been prepared
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. The financial
statements do not include any adjustment that might result from the
outcome of this uncertainty. We have a minimal operating history
and minimal revenues or earnings from operations. We have no
significant assets or financial resources. We will, in all
likelihood, sustain operating expenses without corresponding
revenues for the immediate future. See “Financial
Statements and Notes.”
Results Of Operations
Comparison of Results of Operations for the fiscal years ended
December 31, 2016 and 2015
During
our fiscal year ended December 31, 2016 and 2015, we did not
generate any significant revenues. The revenue amount of $1,708 in
2015 was received from scientific consulting services provided to a
company in Montreal (Canada).
Total
expenses, including general and administrative expenses and
research and development (R&D) expenses for our fiscal year
ended December 31, 2016 were $993,108, compared to $781,985 during
our fiscal year ended December 31, 2015, an increase of
$211,123. This increase is primarily attributable to (i)
an increase of $24,136 in R&D expenses, (ii) an increase of
$120,111 in consulting fees, and (iii) an increase of $429,397 in
officers and directors compensation. The increase in consulting
fees and officers and directors compensation was as a result of our
efforts and focus on advancing our generic pharmaceuticals
operations. The increases in these categories of
expenses were offset to some extent by decreases in other expense
areas including legal fees and licensing fees. In 2016, our legal
fees decreased by $72,370 as a result of us having settled a
litigation which we had initiated in January
2015. Similarly, our license fees decreased from
$384,581 in 2015 to $19,203 in 2016. The amount we paid in 2015 was
an obligation under a license agreement with Advanomics Corporation
for our Adva-27a anticancer drug. During 2015 we acquired the
patent rights to our Adva-27a drug and terminated the license
agreement with Advanomics. The license expense of $19,203 we paid
in 2016 was incurred in order to obtain the rights for our four (4)
generic products. See “Part I, Item 1 –
Business.”
We also
incurred $34,732 in interest expense and $1,945,898 in losses from
debt conversion during the year ended December 31, 2016, compared
to $307,211 in interest expense and $575,144 in losses from debt
conversion during the similar period in 2015. In addition, we
incurred a loss of $556,120 in 2016 as a result of impairment of
the patents we purchased in 2015. See “Part I, Item 1 –
Business.”
As
discussed elsewhere in this Report, including “Part I, Item 1
– Business” and “Part III, Item 13 –
Certain Relationships and Related Transactions and Director
Independence,” on October 8, 2015, we acquired U.S. Patent
Number 8,236,935 (the “US Patent”) for the anticancer
compound, Adva-27a from a related entity (Advanomics Corporation),
which includes all rights to this intellectual property within the
United States, in exchange for an interest-free note payable for
$4,320,000. On December 28, 2015, we acquired the
remaining worldwide issued and pending patents under
PCT/FR2007/000697 and PCT/CA2014/000029 (the “Worldwide
Patents”) for the Adva-27a anticancer compound from the same
related entity (Advanomics Corporation) in exchange for a note
payable for $12,822,499.
13
Effective December
28, 2015, the parties agreed to amend both of these Patent Purchase
Agreements. The relevant notes were cancelled and each
replaced with a new convertible note. The note
applicable to the October 8, 2015 transaction now has a face value
of $210,519, comprised of $155,940 in principal amount which is
Advanomics’ book value of the US Patent, plus $54,579 as an
adjustment for the currency exchange difference. The
note related to the December 28, 2015 transaction was also
cancelled and replaced with a new convertible note having a face
value of $624,875, comprised of $462,870 in principal amount, which
is Advanomics’ book value of the Worldwide Patents, plus
$162,005 as an adjustment for the currency exchange
difference. Advanomics has retained a security interest
in the Patents until such time as the automatic conversion of the
new notes into Common shares is completed.
We
believe that purchase of the Patents would facilitate our ability
to obtain the funding necessary to complete the development and FDA
approval process for Adva-27a. Entering into amendments
(“Amendments”) of the original Patent Purchase
Agreements was subsequently believed to be necessary as the
burdensome financial obligations imposed by the terms of the
original Patent Purchase Agreements were not conducive to obtaining
such financing, to the mutual detriment of both ourselves and
Advanomics. The Amendments amended the purchase price of
the Patents, eliminated all cash payments obligations and replaced
the non-convertible notes totaling $17,142,499 with two (2)
convertible notes totaling $835,394 that automatically converted
into an aggregate of 321,305,415 shares of our Common Stock when we
successfully amend our Articles of Incorporation to increase our
authorized capital of Common Stock to 3 billion.
In July
2016, having completed the increase of our authorized capital to 3
billion shares of Common Stock, we issued the 321,305,415 Common
Shares to Advanomics thereby completing all aspects of the patent
purchase arrangements and securing direct ownership of all
worldwide patents and rights pertaining to Adva-27a.
In
related party transactions, purchased patents are required to be
recorded at the purchase price or the book value on the
seller’s financial statements, whichever is
lower. Pursuant to the Amendments, the Patents have been
purchased from Advanomics, a related party, at Advanomics’
cost less the amortization through the date they were transferred
to us ($618,810). The R&D that was incurred by
Advanomics was expensed by Advanomics as incurred and is not
included in the book value of the Patents. Patents
expire 20 years from the priority date and are therefore amortized
over 20 years. The dominant patents of the Patents we
acquired expire on April 25, 2026 and therefore have approximately
9 years remaining on their useful life.
In
2016, following a review of the status of our intellectual
property, the remaining value of the Patents ($556,120) on our
Balance Sheet was impaired as required under applicable accounting
rules.
As a
result, we incurred a net loss of $3,496,687 (approximately $0.01
per share) for the year ended December 31, 2016, compared to a net
loss of $1,652,908 (approximately $0.01 per share) during the year
ended December 31, 2015.
Because
we have only generated nominal revenue, following is our Plan of
Operation.
Plan of Operation
As of
the date of this Report we are a pharmaceutical company offering
generic and proprietary drugs for the treatment of cancer and other
acute and chronic indications. We have also recently
signed Cross Referencing Agreements giving us the rights to market
and sell four (4) generic pharmaceutical products, Anastrozole,
Letrozole, Bicalutamide and Finasteride. In the area of our
proprietary drugs program, we continue to work on advancing the
development of our lead compound, Adva-27a, a multi-purpose
anti-tumor compound targeted for the treatment of multidrug
resistant cancer. In addition, we are planning to initiate our own
R&D program as soon as practicable, once financing is in
place. There are no assurances that we will obtain the
financing necessary to allow us to implement this or other aspects
of our business plan. More details about our Plan of
Operations are provided above under “Item 1 –
Business.”
Liquidity and Capital Resources
As of
December 31, 2016, we had cash or cash equivalents of
$57,453.
Net
cash used in operating activities was $314,182 during our fiscal
year ended December 31, 2016, compared to $867,644 during our
fiscal year ended December 31, 2015. We anticipate that
our cash requirements for our current operations will increase in
the future before we commence our generic products sales
operations..
14
Cash
flows used in investing activities were $3,439 during our fiscal
year ended December 31, 2016. For the fiscal year ended
December 31, 2015, cash flows used in investing activities were
$623,603 arising primarily out of the purchase of the Patents
pertaining to our Adva-27a anticancer drug. Net cash
flows provided by financing activities totaled $324,622 in 2016,
compared to $1,398,622 during our fiscal year ended December 31,
2015.
We have
issued convertible notes to both related and unaffiliated parties
in order to fund our operations. Following is a description of
these outstanding convertible notes:
●
In December 2016,
we received monies from our CEO in exchange for a note payable
having a principal of $90,000 Canadian 9$67,032 US) with interest
at 12% due March 31, 2017. The Note is convertible any time after
the date of issuance into $0.001 par value Common Stock at a price
35% below market value. We estimated that the fair value of the
convertible debt approximates the face value, so no value has been
assigned to the beneficial conversion feature. This Note is
collateralized by all our assets. On March 31, 2017, the note,
together with all accrued interest thereon and an additional
principal amount of $3,000 Canadian paid to us in March 2017, was
renewed for a 90-day period under the same terms and conditions as
the original note. In the event of default, the interest rate will
increase to 18% per annum and a penalty of $1,000 CAD per day will
accrue.
●
We issued a
convertible note in the original principal amount of $12,500 with
interest of 12%, which was renewed on December 31, 2015, with the
addition of accrued interest amounting to $6,642 (“2015
Note”). The 2015 Note has a Face Value of $19,142 and accrues
interest at 12%. We renewed the 2015 Note when it became due on
December 31, 2016 (“2016 Note”). The 2016 Note has a
Face Value of $21,439 and accrues interest at 12%. The Face Value
amount includes $2,297 in accrued interest. The 2016 Note is
convertible anytime from the date of issuance into shares of our
Common Stock at a 35% discount from market price.
●
On November 27,
2014, we issued a convertible note in the principal amount of
$128,000 to a principal shareholder, with interest accruing at the
rate of 10% per annum, which was due May 27, 2015. This Note was
convertible from issuance into shares of our Common Stock at
a price of $0.20 per share.
On
June 30, 2015, we renewed this note with the addition of accrued
interest amounting to $7,540 and an origination fee of $25,600. The
new Note has a Face Value of $161,140 and accrues interest at 12%.
The new Note, due December 31, 2015, was convertible any time from
the date of issuance into shares of our Common Stock at a 35%
discount from market price. On December 31, 2015, we renewed this
note with the addition of accrued interest amounting to $9,668 and
an origination fee of $32,228. The new Note has a Face Value of
$203,036 and accrues interest at 12%. The new Note is due June 30,
2016, and is convertible into shares of our Common Stock at a 35%
discount from market price. In January 2016, $38,036 of the
principal was converted, leaving a principal balance of $165,000.
In connection therewith, 7,705,186 shares of our Common Stock
valued $231,156 were issued generating a loss on conversion of
$193,120. We renewed this note with the addition of accrued
interest amounting to $9,852. The renewed note has a Face Value of
$174,852 and accrues interest at 12%. In October 2016, $74,852 of
the principal amount was converted, leaving a principal balance of
$100,000. In connection therewith, 40,374,475 shares of our Common
Stock valued $290,696 were issued, generating a loss of $215,844 on
conversion.
The
following convertible notes were fully converted as of the date of
this Report:
●
In August 2015, we
received monies in exchange for a convertible note having a Face
Value of $83,000, with interest accruing at 8% and a maturity date
of May 7, 2016. The Note is convertible after 180 days from
issuance into shares of our Common Stock at
a price 35% below market value. The Note,
including
$83,000 of principal
and $3,120 in interest, was fully converted
into
$0.001 par value Common Stock during the period ended
December 31, 2016. In connection therewith, 9,906,049 shares of our
Common Stock, valued at $146,658, were issued generating a loss of
$60,538 on the conversion.
●
In February 2016,
we received monies in exchange for a note having a Face Value of
$85,000 with interest at 8%, which was due November 18, 2016. The
Note is convertible after 180 days from issuance into shares of our
Common Stock at
a price 35% below
market value. The Note, including
$85,000 of principal
and $3,400 in interest, was fully
converted into
27,538,058 shares of our Common Stock valued
at $172,433 were issued generating a loss of $84,033 on the
conversion.
●
In June 2016, we
received monies in exchange for a note having a Face Value of
$55,000 with interest accruing at 10%, which was due April 1, 2017.
The Note is convertible after 180 days from issuance into shares of
our Common Stock at
a price 40% below
market value.
In December 2016, $6,500 of the principal was
converted
into 5,000,000 shares of
our
Common Stock valued at $20,000 and generating a loss of
$13,500 on conversion. In January 2017, the remaining principal
balance of $48,500 and $3,022 in accrued interest was converted
into 42,528,125 shares of $0.001 par value Common Stock, leaving a
principal balance of $-0-.
15
On
January 8, 2016, a principal shareholder of our Company holding a
convertible note having a principal balance of $203,036 on December
31, 2015, elected to convert $38,036 in principal amount into
7,705,186 shares of $0.001 par value Common Stock, leaving a
principal balance of $165,000.
On
February 24, 2016, we sold 7,000,000 shares of our Common Stock for
$105,000 Canadian (approximately $76,104 US) under Regulation S
exemption to fund the previously announced generic pharmaceuticals
operations.
On October 18,
2016, a principal shareholder of our Company holding a convertible
note having a principal balance of $174,852 on July 1, 2016,
elected to convert $74,852 in principal amount into 40,374,475
shares of $0.001 par value Common Stock, leaving a principal
balance of $100,000
In the
aggregate, during the year ended December 31, 2016, we issued
411,829,184 shares of our Common Stock for the conversion of
$1,122,782 in debt and interest of $9,270. We sold 12,555,556
shares of Common Stock for cash of $104,128 and issued 146,750,000
shares of Common Stock in exchange for services valued at
$702,300.
During
the year ended December 31, 2015, we issued 124,714,077 shares of
our Common Stock. Of these, 102,914,077 were issued for
the conversion of $501,624 in debt and $12,886 in
interest. In addition, we sold 20,000,000 shares of our
Common Stock for cash of $236,550 and issued 1,800,000 shares of
Common Stock in exchange for services valued at
$66,500.
We are
not generating revenue from our operations, and our ability to
implement our business plan as set forth herein will depend on the
future availability of financing. Such financing will be
required to enable us to further develop our generic
pharmaceuticals business and proprietary drug development
program. We intend to raise funds through private
placements of our Common Stock and/or debt financing. We estimate
that we will require approximately $6 million ($1 million for the
generic pharmaceutical operations and $5 million for the
proprietary drug development program) to fully implement our
business plan in the future and there are no assurances that we
will be able to raise this capital. While we are engaged
in discussions with various investment banking firms and venture
capitalists to provide us these funds, as of the date of this
report we have not reached any agreement with any party that has
agreed to provide us with the capital necessary to effectuate our
business plan. Our inability to obtain sufficient funds
from external sources when needed will have a material adverse
effect on our plan of operation, results of operations and
financial condition.
Our
cost to continue operations as they are now conducted is nominal,
but these are expected to increase as we move forward with
implementation of our business plan. We do not have
sufficient funds to cover the anticipated increase in the relevant
expenses. We need to raise additional funds in order to
continue our existing operations, to initiate R&D activities,
and to finance our plans to expand our operations for the next
year. If we are successful in raising additional funds,
our operations and business efforts will continue and
expand.
Inflation
Although our
operations are influenced by general economic conditions, we do not
believe that inflation had a material effect on our results of
operations during our fiscal year ended December 31,
2016.
Critical Accounting Policies and Estimates
Critical Accounting Estimates
The
discussion and analysis of our financial condition and results of
operations are based upon our financial statements, which have been
prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these
financial statements requires us to make estimates and judgments
that affect the amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates based
on historical experience and on various other assumptions that are
believed 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.
16
Leases
We
follow the guidance in SFAS No. 13 “
Accounting for Leases
,” as
amended, which requires us to evaluate the lease agreements we
enter into to determine whether they represent operating or capital
leases at the inception of the lease.
Recently Adopted Accounting Standards
In
November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic
740): Balance Sheet Classification of Deferred Taxes. The standard
requires that deferred tax assets and liabilities be classified as
noncurrent on the balance sheet rather than being separated into
current and noncurrent. ASU 2015-17 is effective for fiscal years,
and interim periods within those years, beginning after December
15, 2016. Early adoption is permitted and the standard may be
applied either retrospectively or on a prospective basis to all
deferred tax assets and liabilities. We adopted ASU 2015-17 during
our first quarter of the year ended December 31, 2016, on a
retrospective basis. The adoption of 2015-17 had no impact on our
financial statements.
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842),
to provide guidance on recognizing lease assets and lease
liabilities on the balance sheet and disclosing key information
about leasing arrangements, specifically differentiating between
different types of leases. The core principle of Topic 842 is that
a lessee should recognize the assets and liabilities that arise
from all leases. The recognition, measurement, and presentation of
expenses and cash flows arising from a lease by a lessee have not
significantly changed from previous GAAP. There continues to be a
differentiation between finance leases and operating leases.
However, the principal difference from previous guidance is that
the lease assets and lease liabilities arising from operating
leases should be recognized in the balance sheet. The accounting
applied by a lessor is largely unchanged from that applied under
previous GAAP. The amendments will be effective for fiscal years
beginning after December 15, 2018, including interim periods within
those fiscal years, and early adoption is permitted. In transition,
lessees and lessors are required to recognize and measure leases at
the beginning of the earliest period presented using a modified
retrospective approach.
The
modified retrospective approach includes a number of optional
practical expedients that entities may elect to apply. These
practical expedients relate to the identification and
classification of leases that commenced before the effective date,
initial direct costs for leases that commenced before the effective
date, and the ability to use hindsight in evaluating lessee options
to extend or terminate a lease or to purchase the underlying
asset.
An
entity that elects to apply the practical expedients will, in
effect, continue to account for leases that commence before the
effective date in accordance with previous GAAP unless the lease is
modified, except that lessees are required to recognize a
right-of-use asset and a lease liability for all operating leases
at each reporting date based on the present value of the remaining
minimum rental payments that were tracked and disclosed under
previous GAAP. We are currently evaluating the impact of these
amendments on our financial statements.
In
March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts
with Customers (Topic 606): Principal versus Agent Considerations,
to clarify the implementation guidance on principal versus agent
considerations and address how an entity should assess whether it
is the principal or the agent in contracts that include three or
more parties. The effective date and transition requirements for
these amendments are the same as the effective date and transition
requirements of ASU 2014-09 (discussed above). We are currently
evaluating the impact of these amendments on our financial
statements.
17
In
March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock
Compensation (Topic 718): Improvements to Employee Share-Based
Payment Accounting, to reduce complexity in accounting standards
involving several aspects of the accounting for employee
share-based payment transactions, including (1) the income tax
consequences, (2) classification of awards as either equity or
liabilities, and (3) classification on the statement of cash flows.
The amendments will be effective for financial statements issued
for fiscal years beginning after December 15, 2016, including
interim periods within those fiscal years, and early adoption is
permitted. Amendments related to the timing of when excess tax
benefits are recognized, minimum statutory withholding
requirements, forfeitures, and intrinsic value should be applied
using a modified retrospective transition method, amendments
related to the presentation of employee taxes paid on the statement
of cash flows when an employer withholds shares to meet the minimum
statutory withholding requirement should be applied
retrospectively, amendments requiring recognition of excess tax
benefits and tax deficiencies in the income statement and the
practical expedient for estimating expected term should be applied
prospectively, and amendments related to the presentation of excess
tax benefits on the statement of cash flows can be applied using
either a prospective transition method or a retrospective
transition method. An entity that elects early adoption must adopt
all of the amendments in the same period. We are currently
evaluating the impact of these amendments on our financial
statements.
In
April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts
with Customers (Topic 606): Identifying Performance Obligations and
Licensing, to clarify the following two aspects of Topic 606: 1)
identifying performance obligations, and 2) the licensing
implementation guidance. The effective date and transition
requirements for these amendments are the same as the effective
date and transition requirements of ASU 2014-09 (discussed above).
We are currently evaluating the impact of these amendments on our
financial statements.
In May
2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with
Customers (Topic 606): Identifying Performance Obligations and
Licensing, to clarify certain core recognition principles including
collectability, sales tax presentation, noncash consideration,
contract modifications and completed contracts at transition and
disclosures no longer required if the full retrospective transition
method is adopted.
The
effective date and transition requirements for these amendments are
the same as the effective date and transition requirements of ASU
2014-09 (discussed above). We are currently evaluating the impact
of these amendments on our 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, to clarify how certain cash receipts and cash payments
are presented and classified in the statement of cash flows. The
amendments should be applied using a retrospective transition
method, and are effective for fiscal years beginning after December
15, 2017, including interim periods within those fiscal years. We
are currently evaluating the impact of these amendments on our
financial statements.
In
November 2016, the FASB issued ASU No. 2016-18, Statement of Cash
Flows (Topic 230): Restricted Cash (a consensus of the FASB
Emerging Issues Task Force), to provide guidance on the
presentation of restricted cash or restricted cash equivalents in
the statement of cash flow. The amendments should be applied using
a retrospective transition method, and are effective for fiscal
years beginning after December 15, 2017, including interim periods
within those fiscal years. We are currently evaluating the impact
of these amendments on our financial statements.
Off-Balance Sheet Arrangements
We have
not entered into any off-balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or
capital resources and would be considered material to
investors.
Not
applicable.
Reference is made
to the Financial Statements, the notes thereto, and the Report of
Independent Public Accountants thereon commencing at page F-1 of
this Report, which Financial Statements, notes and report are
incorporated herein by reference.
18
Sunshine Biopharma, Inc.
CONSOLIDATED
FINANCIAL STATEMENTS
With
Independent Accountant’s Audit Report
At
December 31, 2016 and 2015
19
TABLE
OF CONTENTS
|
|
Page
|
|
|
|
|
Independent
Accountant’s Audit Report
|
F-1
|
|
|
|
|
Consolidated
Balance Sheet
|
F-2
|
|
|
|
|
Consolidated
Statement of Operations
|
F-3
|
|
|
|
|
Consolidated
Statement of Cash Flows
|
F-4
|
|
|
|
|
Consolidated
Statement of Shareholders’ Equity
|
F-5
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
F-6
|
20
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and Stockholders of Sunshine Biopharma,
Inc.:
We have
audited the accompanying consolidated balance sheets of Sunshine
Biopharma, Inc. (“the Company”) as of December 31, 2016
and 2015 and the related statement of operations,
stockholders’ equity (deficit) and cash flows for the year
then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based on our
audit.
We
conducted our audit in accordance with standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our
audit provides a reasonable basis for our
opinion.
In our
opinion, the financial statement referred to above present fairly,
in all material respects, the financial position of Sunshine
Biopharma, Inc., as of December 31, 2016 and 2015, and the results
of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles in the
United States of America.
The
company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. Our
audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the Company's internal control over
financial reporting. Accordingly, we express no such
opinion.
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
2 to the financial statements, the Company has suffered recurring
losses from operations and has a significant accumulated deficit.
In addition, the Company continues to experience negative cash
flows from operations. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ B F
Borgers CPA PC
B F Borgers CPA PC
Lakewood,
CO
April
17, 2017
F-1
|
Sunshine
Biopharma, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
December
31,
|
|
|
2016
|
2015
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
57,453
|
$
50,798
|
|
Refundable taxes
and Prepaid expenses
|
1,007
|
3,111
|
|
|
|
|
|
Total Current
Assets
|
58,460
|
53,909
|
|
|
|
|
|
Equipment (net of
$2,228 and $479 depreciation)
|
5,944
|
4,314
|
|
Patents (net of
$58,918 amortization and $556,120 impairment, and $3,772
amortization)
|
-
|
615,038
|
|
|
|
|
|
TOTAL
ASSETS
|
$
64,404
|
$
673,261
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
Current portion of
notes payable
|
69,939
|
102,142
|
|
Current portion of
notes payable - related entity
|
167,032
|
1,038,430
|
|
Accounts
payable
|
28,122
|
46,591
|
|
Accounts payable -
related entity
|
-
|
80,487
|
|
Interest
payable
|
9,011
|
2,656
|
|
Total Current
Liabilities
|
274,104
|
1,270,306
|
|
Long-term
liabilities
|
-
|
-
|
|
|
|
|
|
TOTAL
LIABILITIES
|
274,104
|
1,270,306
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
Preferred Stock,
Series A, $0.10 par value per share; Authorized 850,000 Shares;
Issued and outstanding -0- shares at December 31, 2016 and
2015.
|
-
|
-
|
|
|
|
|
|
Preferred Stock,
Series B $0.10 par value per share; Authorized 500,000 Shares;
Issued and outstanding 500,000 and 500,000 shares at December 31,
2016 and 2015, respectively.
|
50,000
|
50,000
|
|
|
|
|
|
Common Stock,
$0.001 par value per share; Authorized 3,000,000,000 Shares; Issued
and outstanding 769,399,858 and 198,265,118 at December 31, 2016
and 2015, respectively
|
769,400
|
198,265
|
|
|
|
|
|
Capital paid in
excess of par value
|
11,548,460
|
8,235,217
|
|
|
|
|
|
Accumulated other
comprehensive (Loss)
|
394
|
740
|
|
|
|
|
|
Accumulated
(Deficit)
|
(12,577,954
)
|
(9,081,267
)
|
|
|
|
|
|
TOTAL SHAREHOLDERS'
EQUITY
|
(209,700
)
|
(597,045
)
|
|
|
|
|
|
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY
|
$
64,404
|
$
673,261
|
See
Accompanying Notes To These Financial Statements.
F-2
Sunshine
Biopharma, Inc.
|
|
December
31,
2016
|
December
31,
2015
|
|
|
|
|
|
Revenue:
|
$
-
|
1,708
|
|
|
|
|
|
General &
Administrative Expenses
|
|
|
|
|
|
|
|
Research and
Development
|
32,793
|
8,657
|
|
Accounting
|
70,413
|
70,972
|
|
Amortization
|
58,918
|
3,772
|
|
Consulting
|
207,401
|
87,290
|
|
Consulting –
officer
|
247,397
|
50,000
|
|
Depreciation
|
1,813
|
479
|
|
Director
fees
|
252,000
|
20,000
|
|
Legal
|
57,955
|
130,325
|
|
Licenses
|
19,203
|
384,581
|
|
Office
|
34,812
|
11,431
|
|
Stock Transfer
Fee
|
10,403
|
14,478
|
|
|
|
|
|
Total G &
A
|
993,108
|
781,985
|
|
|
|
|
|
(Loss) from
operations
|
(993,108
)
|
(780,277
)
|
|
|
|
|
|
Other
(expense):
|
|
|
|
Interest
expense
|
(34,732
)
|
(307,211
)
|
|
Loss on conversion
of notes payable
|
(1,945,898
)
|
(575,144
)
|
|
Loss on impairment
of patents
|
(556,120
)
|
-
|
|
Litigation
settlement proceeds
|
25,000
|
-
|
|
Gain from foreign
exchange transactions
|
-
|
204
|
|
Gain on interest
forgiveness
|
381
|
-
|
|
Debt
release
|
7,790
|
-
|
|
Gain on notes
payable interest write off
|
-
|
9,520
|
|
|
|
|
|
Total Other
(Expense)
|
(2,503,579
)
|
(872,631
)
|
|
|
|
|
|
Net
(loss)
|
$
(3,496,687
)
|
$
(1,652,908
)
|
|
|
|
|
|
Basic (Loss) per
common share
|
$
(0.01
)
|
$
(0.01
)
|
|
Weighted Average
Common Shares Outstanding
|
424,874,458
|
122,278,909
|
|
Net Income
(Loss)
|
$
(3,496,687
)
|
$
(1,652,908
)
|
|
Other comprehensive
income:
|
|
|
|
Unrealized foreign
currency gain (loss)
|
(346
)
|
740
|
|
Comprehensive
(Loss)
|
(3,497,033
)
|
(1,652,168
)
|
|
Basic (Loss) per
common share
|
(0.01
)
|
(0.01
)
|
|
Weighted Average
Common Shares Outstanding
|
424,874,458
|
122,278,909
|
See
Accompanying Notes To These Financial Statements.
F-3
|
Sunshine
Biopharma, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
December
31,
|
|
|
2016
|
2015
|
|
Cash Flows From
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Loss)
|
$
(3,496,687
)
|
$
(1,652,168
)
|
|
|
|
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Amortization &
Depreciation
|
60,731
|
4,251
|
|
Stock issued for
services
|
702,300
|
116,500
|
|
Loss on impairment
of patents
|
556,120
|
|
|
Loss on conversion
of notes payable
|
1,945,898
|
575.144
|
|
Stock issued for
payment of interest
|
9,270
|
12,886
|
|
Debt
forgiveness
|
(1,313
)
|
|
|
Increase (Decrease)
in prepaid expenses
|
2,104
|
(3,111
)
|
|
Increase (Decrease)
in Accounts Payable
|
(18,960
)
|
11,824
|
|
Increase (Decrease)
in Accounts Payable – related entity
|
(80,487
)
|
80,487
|
|
Increase (decrease)
in interest payable
|
6,355
|
(13,457
)
|
|
|
|
|
|
Net Cash Flows
(used) in operations
|
(314,182
)
|
(867,644
)
|
|
|
|
|
|
Cash Flows From
Investing Activities:
|
|
|
|
Purchase
equipment
|
(3,439
)
|
(4,793
)
|
|
Purchase of
patents
|
-
|
(618,810
)
|
|
|
|
|
|
Net Cash Flows
(used) in Investing activities
|
(3,439
)
|
(623,303
)
|
|
|
|
|
|
Cash Flows From
Financing Activities:
|
|
|
|
|
|
|
|
Proceed from note
payable
|
131,150
|
232,840
|
|
Note payable used
to pay expenses
|
-
|
12,160
|
|
Note payable
– Related entity
|
67,032
|
|
|
Note payable used
to pay origination fees & interest
|
22,312
|
81,678
|
|
Note payable
related entity for patent purchase
|
-
|
835,394
|
|
Sale of common
stock
|
104,128
|
236,550
|
|
|
|
|
|
Net Cash Flows
provided by financing activities
|
324,622
|
1,398,622
|
|
|
|
|
|
|
|
|
|
Net Increase
(Decrease) In Cash and cash equivalents
|
7,001
|
(92,625
)
|
|
Foreign currency
translation adjustment
|
(346
)
|
|
|
Cash and cash
equivalents at beginning of period
|
$
50,798
|
$
143,423
|
|
|
|
|
|
|
$
57,453
|
$
50,798
|
|
Supplementary
Disclosure Of Cash Flow Information:
|
|
|
|
Cash paid for
interest
|
$
5,264
|
$
-
|
|
Cash paid for
income taxes
|
$
-
|
$
-
|
|
|
|
|
|
Stock issued for
services
|
$
702,300
|
$
116,500
|
|
Stock issued for
note conversions
|
$
3,077,950
|
$
977,485
|
|
Stock issued for
interest
|
$
-
|
$
19,528
|
|
Stock issued for
payment of expenses
|
$
-
|
$
-
|
|
Loan proceeds used
to pay expenses
|
$
-
|
$
57,828
|
See
Accompanying Notes To These Financial Statements.
F-4
Sunshine Biopharma, Inc.
Statement of Shareholders'
Equity
|
|
|
|
|
|
|
|
|
Deficit
accumulated
|
|
|
|
Number
Of
|
|
Capital
Paid
|
Number
Of
|
|
Stock
|
|
During
the
|
|
|
|
Common
|
Common
|
in
Excess
|
Preferred
|
Preferred
|
Subscription
|
Comprehensive
|
development
|
|
|
|
Shares Issued
|
Stock
|
of Par Value
|
Shares Issued
|
Stock
|
Receivable
|
Income
|
stage
|
Total
|
|
Balance at
December 31, 2014
|
73,551,041
|
$
73,551
|
$
6,967,228
|
-
|
$
-
|
$
-
|
$
-
|
$
(7,428,359
)
|
$
(387,580
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash
|
20,000,000
|
20,000
|
216,550
|
|
|
|
|
|
236,550
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for
services
|
1,800,000
|
1,800
|
64,700
|
|
|
|
|
|
66,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock series "B"
issued for services
|
|
|
|
500,000
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for the
reduction of note payable and payment of
interest
|
102,914,077
|
102,914
|
986,739
|
|
|
|
|
|
1,089,653
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
-
|
-
|
-
|
|
|
|
740
|
(1,652,908
)
|
(1,652,168
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2015
|
198,265,118
|
$
198,265
|
$
8,235,217
|
500,000
|
$
50,000
|
$
-
|
$
740
|
$
(9,081,267
)
|
$
(597,045
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for
cash
|
12,555,556
|
12,556
|
91,572
|
|
|
|
|
|
104,128
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for
services
|
146,750,000
|
146,750
|
555,550
|
|
|
|
|
|
702,300
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for the
reduction of note payable and payment of
interest
|
411,829,184
|
411,829
|
2,666,121
|
|
|
|
|
|
3,077,950
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss)
|
-
|
-
|
-
|
|
|
|
(346
)
|
(3,496,687
)
|
(3,497,033
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2016
|
769,399,858
|
$
769,400
|
$
11,548,460
|
500,000
|
$
50,000
|
$
-
|
$
394
|
$
(12,577,954
)
|
$
(209,700
)
|
See
Accompanying Notes To These Financial Statements.
F-5
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
Mountain
West Business Solutions, Inc. (“MWBS”) was incorporated
on August 31, 2006 in the State of Colorado. Sunshine Etopo, Inc.
(formerly Sunshine Biopharma, Inc.) was incorporated in the State
of Colorado on August 17, 2009. Effective October 15, 2009, MWBS
was acquired by Sunshine Etopo, Inc. in a transaction classified as
a reverse acquisition. MWBS concurrently changed its name to
Sunshine Biopharma, Inc. Sunshine Etopo, Inc. has been inactive and
was recently dissolved.
In July
2014, the Company formed a wholly owned Canadian subsidiary,
Sunshine Biopharma Canada Inc. The financial statements represent
the consolidated activity of Sunshine Biopharma, Inc. and Sunshine
Biopharma Canada Inc. (hereinafter together referred to as the
"Company"). The Company was formed for the purposes of conducting
research, development and commercialization of drugs for the
treatment of various forms of cancer. The Company may also engage
in any other business that is permitted by law, as designated by
the Board of Directors of the Company.
The
Company’s wholly owned Canadian subsidiary, Sunshine
Biopharma Canada Inc. (“Sunshine Canada”) was formed
for the purposes of offering generic pharmaceutical products in
Canada and elsewhere around the globe. Sunshine Canada has recently
signed licensing agreements for four (4) generic prescription drugs
for treatment of cancer and BPH (Benign Prostatic Hyperplasia). In
addition, Sunshine Canada is currently evaluating several other
generic products for in-licensing and is working on securing a Drug
Establishment License (“DEL”) and a Drug Identification
Number (“DIN”) per product from Health Canada. Once the
DEL and the DIN’s are secured, Sunshine Canada will begin its
generic pharmaceuticals marketing and sales program in Canada and
overseas.
During
the last three month period the Company has continued to raise
money through stock sales and borrowings.
The
Company’s activities are subject to significant risks and
uncertainties, including failing to secure additional funding to
operationalize the Company’s generics business and
proprietary drug development program.
This summary of significant accounting policies
is presented to assist the reader in understanding the
Company's financial statements. The consolidated
financial statements and notes are representations of the Company's
management, which is responsible for their integrity and
objectivity. These accounting policies conform to generally
accepted accounting principles and have
been consistently applied in the
preparation of the financial
statements.
F-6
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
PRINCIPLES OF CONSOLIDATION
The
accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiary. All intercompany
accounts and transactions have been eliminated in
consolidation.
USE OF ESTIMATES
The preparation of financial
statements in conformity with U.S. generally
accepted accounting principles requires
management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities and disclosure of
contingent assets and liabilities at the date of
the financial statements and the reported
amounts of revenues and expenses
during the reporting period. The more
significant estimates and assumptions made
by management are valuation of equity
instruments, depreciation of property and
equipment, and deferred tax asset valuation.
Actual results could differ from those estimates as the current
economic environment has increased the degree of uncertainty
inherent in these estimates and assumptions.
CASH AND CASH EQUIVALENTS
For
the Balance Sheets and Statements of
Cash Flows, all highly liquid investments with
maturity of 90 days or less are considered to be cash
equivalents. The Company had a cash balance of $57,453 and
$50,798 as of December 31, 2016 and December 31, 2015,
respectively. At times such cash balances may be in excess of the
FDIC limit of $250,000 or the equivalent in Canada.
PROPERTY AND EQUIPMENT
In 2016
and 2015, the Company purchased laboratory and office equipment
valued at $3,439 per Cash Flow and $4,793, respectively. Property
and equipment is reviewed for recoverability when events or changes
in circumstances indicate that its carrying value may exceed future
undiscounted cash inflows. As of December 31, 2015 and 2016, the
Company had not identified any such impairment for its equipment.
Repairs and maintenance are charged to operations when incurred and
improvements and renewals are capitalized.
Property
and equipment are stated at cost. Depreciation is calculated using
the straight-line method for financial reporting purposes and
accelerated methods for tax purposes. Their estimated useful lives
are as follows:
|
|
Office
Equipment:
|
5-7
Years
|
|
|
Laboratory
Equipment
|
5
Years
|
|
|
Vehicles
|
5
Years
|
INTELLECTUAL PROPERTY RIGHTS - PATENTS
The
cost of patents acquired is capitalized and will be amortized over
the shorter of the term of the patent life, 20 years, or the
remaining life of the underlying patents.
F-7
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
The
Company evaluates recoverability of identifiable intangible assets
whenever events or changes in circumstances indicate that
intangible assets carrying amount may not be recoverable. Such
circumstances include, but are not limited to: (1) a significant
decrease in the market value of an asset, (2) a significant adverse
change in the extent or manner in which an asset is used, or (3) an
accumulation of cost significantly in excess of the amount
originally expected for the acquisition of an asset. The Company
measures the carrying amount of the assets against the estimated
undiscounted future cash flows associated with it.
There
was an impairment loss of $556,120 for the year ended December 31,
2016. The Company’s management determined that the expected
cash flows would be less than the carrying amount of assets being
evaluated, therefore an impairment loss was recognized. The
impairment loss was calculated as the amount by which the carrying
amount of the assets, exceed fair value (see Note 4).
EARNINGS PER SHARE
The
Company has adopted the
Financial
Accounting Standards Board
(FASB) ASC Topic 260 regarding
earnings / loss per share, which provides for calculation of
“basic” and “diluted” earnings / loss per
share. Basic earnings / loss per share includes no dilution and is
computed by dividing net income / loss available to common
shareholders by the weighted average common shares outstanding for
the period. Diluted earnings / loss per share reflect the potential
dilution of securities that could share in the earnings of an
entity similar to fully diluted earnings / loss per
share.
There
were no potentially dilutive instruments outstanding during the
period ended December 31, 2016 or the year ended December 31,
2015.
INCOME TAXES
In accordance with ASC 740 - Income Taxes, the provision for income
taxes is computed using the asset and liability method. The
liability method measures deferred income taxes by
applying enacted statutory rates in effect at the
balance sheet date to the differences between the tax
basis of assets and liabilities and their
reported amounts on the financial
statements. The resulting deferred tax assets or
liabilities have been adjusted to reflect changes in tax laws as
they occur. A valuation allowance is provided when it is
more likely than not that a deferred tax asset will not be
realized.
The Company expects to recognize the financial statement benefit of
an uncertain tax position only after considering the probability
that a tax authority would sustain the position in an examination.
For tax positions meeting a "more-likely-than-not" threshold, the
amount to be recognized in the financial statements will be the
benefit expected to be realized upon settlement with the tax
authority. For tax positions not meeting the threshold, no
financial statement benefit is recognized. As of December 31, 2016,
the Company had no uncertain tax positions. The Company recognizes
interest and penalties, if any, related to uncertain tax positions
as general and administrative expenses. The Company currently has
no federal or state tax examinations nor has it had any federal or
state examinations since its inception. To date, the Company has
not incurred any interest or tax penalties.
For federal tax purposes, the Company’s 2013 through 2015 tax
years remain open for examination by the tax authorities under the
normal three-year statute of limitations.
F-8
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
FUNCTIONAL CURRENCY
The U.S. dollar is the
functional currency of the Company which is operating in the United
States. The functional currency for the Company's Canadian
subsidiary is the Canadian dollar. The Company translates its
Canadian subsidiary's financial statements into U.S. dollars as
follows:
●
Assets
and liabilities are translated at the exchange rate in effect as of
the financial statement date.
●
Income
statement accounts are translated using the weighted average
exchange rate for the period.
The
Company includes translation adjustments from currency exchange and
the effect of exchange rate changes on intercompany transactions of
a long-term investment nature as a separate component of
shareholders’ equity. There are currently no transactions of
a long-term
investment nature,
nor any gains or losses from non-U.S. currency
transactions.
CONCENTRATION OF CREDIT RISKS
Financial
instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash equivalents, notes
receivables, deposits, and trade receivables. The Company places
its cash equivalents with high credit quality financial
institutions. As of December 31, 2016 and 2015 there were no trade
receivables.
FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL
INSTRUMENTS
The
Company applies the provisions of accounting guidance, FASB Topic
ASC 825,
Financial
Instruments
. ASC 825 requires all entities to disclose the
fair value of financial instruments, both assets and liabilities
recognized and not recognized on the balance sheet, for which it is
practicable to estimate fair value, and defines fair value of a
financial instrument as the amount at which the instrument could be
exchanged in a current transaction between willing parties. As of
December 31, 2016 and 2015, the fair value of cash, accounts
receivable and notes receivable, accounts payable, accrued
expenses, and other payables approximated carrying value due to the
short maturity of the instruments, quoted market prices or interest
rates which fluctuate with market rates.
The
Company defines fair value as the price that would be received to
sell an asset or be paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The Company applies the following fair value hierarchy, which
prioritizes the inputs used to measure fair value into three levels
and bases the categorization within the hierarchy upon the lowest
level of input that is available and significant to the fair value
measurement. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities
(Level 1 measurements) and the lowest priority to unobservable
inputs (Level 3 measurements).
F-9
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
Level 1
— Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the reporting
entity has the ability to access at the measurement
date.
Level 2
— Level 2 inputs are inputs other than quoted prices included
within Level 1 that are observable for the asset or liability,
either directly or indirectly. If the asset or liability has a
specified (contractual) term, a Level 2 input must be observable
for substantially the full term of the asset or
liability.
Level 3
— Level 3 inputs are unobservable inputs for the asset or
liability in which there is little, if any, market activity for the
asset or liability at the measurement date.
The
carrying value of financial assets and liabilities recorded at fair
value is measured on a recurring or nonrecurring basis. Financial
assets and liabilities measured on a non-recurring basis are those
that are adjusted to fair value when a significant event occurs.
The Company had no financial assets or liabilities carried and
measured on a nonrecurring basis during the reporting periods.
Financial assets and liabilities measured on a recurring basis are
those that are adjusted to fair value each time a financial
statement is prepared.
NOTES PAYABLE
Borrowings
are recognized initially at fair value, net of transaction costs
incurred. Borrowings are subsequently carried at amortized cost;
any difference between the proceeds (net of transaction costs) and
the redemption value is recognized in the income statement over the
period of the borrowings using the effective interest
method.
ACCOUNTING FOR DERIVATIVES LIABILITIES
The
Company evaluates stock options, stock warrants or other contracts
to determine if those contracts or embedded components of those
contracts qualify as derivatives to be separately accounted for
under the relevant sections of ASC Topic 815-40,
Derivative Instruments and Hedging: Contracts
in Entity’s Own Equity
. The result of this accounting
treatment could be that the fair value of a financial instrument is
classified as a derivative instrument and is marked-to-market at
each balance sheet date and recorded as a liability. In the event
that the fair value is recorded as a liability, the change in fair
value is recorded in the statement of operations as other income or
other expense.
Upon
conversion or exercise of a derivative instrument, the instrument
is marked to fair value at the conversion date and then that fair
value is reclassified to equity. Financial instruments that are
initially classified as equity that become subject to
reclassification under ASC Topic 815-40 are reclassified to a
liability account at the fair value of the instrument on the
reclassification date. The Company determined that none of the
Company’s financial instruments meet the criteria for
derivative accounting as of December 31, 2016 and
2015.
F-10
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
EQUITY INSTRUMENTS ISSUED TO NON-EMPLOYEES FOR AQUIRING GOODS OR
SERVICES
Issuances of the Company’s common stock or warrants for
acquiring goods or services are measured at the fair value of the
consideration received or the fair value of the equity instruments
issued, whichever is more reliably measurable. The measurement date
for the fair value of the equity instruments issued to consultants
or vendors is determined at the earlier of (i) the date at which a
commitment for performance to earn the equity instruments is
reached (a “performance commitment” which would include
a penalty considered to be of a magnitude that is a sufficiently
large disincentive for nonperformance) or (ii) the date at which
performance is complete. When it is appropriate for the Company to
recognize the cost of a transaction during financial reporting
periods prior to the measurement date, for purposes of recognition
of costs during those periods, the equity instrument is measured at
the then-current fair values at each of those interim financial
reporting dates.
NONCASH EQUITY TRANSACTIONS
Shares of equity instruments issued for noncash consideration are
recorded at the estimated fair market value of the consideration
granted based on the estimated market value of the equity
instrument, or at the estimated value of the goods or services
received whichever is more readily determinable.
RELATED PARTIES
A party is considered to be related to the Company if the party
directly or indirectly or through one or more intermediaries,
controls, is controlled by, or is under common control with the
Company. Related parties also include principal owners of the
Company, its management, members of the immediate families of
principal owners of the Company and its management and other
parties with which the Company may deal if one party controls or
can significantly influence the management or operating policies of
the other to an extent that one of the transacting parties might be
prevented from fully pursuing its own separate interests. A party
which can significantly influence the management or operating
policies of the transacting parties or if it has an ownership
interest in one of the transacting parties and can significantly
influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own
separate interests is also a related party.
GENERAL AND ADMINISTRATIVE EXPENSES
General
and administrative expenses consisted of professional service fees,
rent and utility expenses, meals, travel and entertainment
expenses, and other general and administrative overhead costs.
Expenses are recognized when incurred.
F-11
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
BASIC AND DILUTED NET GAIN (LOSS) PER SHARE
The Company computes loss per share in accordance with ASC
260,
Earnings per Share.
ASC 260 requires presentation of both
basic and diluted earnings per share (“EPS”) on the
face of the income statement.
Basic
net income (loss) per share is calculated by dividing net (loss) by
the weighted-average common shares outstanding. Diluted net income
per share is calculated by dividing net income by the
weighted-average common shares outstanding during the period using
the treasury stock method or the two-class method, whichever is
more dilutive. As the Company incurred net losses for the year
ended December 31, 2016 no potentially dilutive securities were
included in the calculation of diluted earnings per share as the
impact would have been anti-dilutive.
Therefore,
basic and dilutive net (loss) per share were the same as of
December 31, 2016 and 2015.
REVENUE RECOGNITION
The
Company is focused on the research, development and
commercialization of drugs for the treatment of various forms of
cancer. The Company does not expect to generate revenues until
clinical trials of its proposed products are completed. Once
completed, revenues would be recognized as its technology is
licensed or sold or its products become marketable.
IMPACT OF NEW ACCOUNTING STANDARDS
In May
2014, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) No. 2014-09, Revenue from
Contracts with Customers, which will supersede nearly all existing
revenue recognition guidance under U.S. GAAP. The core principle of
ASU 2014-09 is to recognize revenues when promised goods or
services are transferred to customers in an amount that reflects
the consideration to which an entity expects to be entitled for
those goods or services. ASU 2014-09 defines a five-step process to
achieve this core principle and, in doing so, more judgment and
estimates may be required within the revenue recognition process
than are required under existing U.S. GAAP. As amended by the FASB
in July 2015, the standard is effective for annual periods
beginning after December 15, 2017, and interim periods therein,
using either of the following transition methods: (i) a full
retrospective approach reflecting the application of the standard
in each prior reporting period with the option to elect certain
practical expedients, or (ii) a retrospective approach with the
cumulative effect of initially adopting ASU 2014-09 recognized at
the date of adoption (which includes additional footnote
disclosures). We are currently evaluating the impact of our pending
adoption of ASU 2014-09 on our financial statements and have not
yet determined the method by which we will adopt the standard in
2018.
In
August 2014, the FASB issued guidance that requires management to
evaluate whether there are conditions or events that raise
substantial doubt about an entity's ability to continue as a going
concern. If such conditions or events exist, disclosures are
required that enable users of the financial statements to
understand the nature of the conditions or evens, management's
evaluation of the circumstances and management's plans to mitigate
the conditions or events that raise substantial doubt about the
entity's ability to continue as a going concern. We will be
required to perform an annual assessment of our ability to continue
as a going concern when this standard becomes effective on January
1, 2017; however, the adoption of this guidance is not expected to
impact our financial position, results of operations or cash
flows.
F-12
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
In
November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic
740): Balance Sheet Classification of Deferred Taxes. The standard
requires that deferred tax assets and liabilities be classified as
noncurrent on the balance sheet rather than being separated into
current and noncurrent. ASU 2015-17 is effective for fiscal years,
and interim periods within those years, beginning after December
15, 2016. Early adoption is permitted and the standard may be
applied either retrospectively or on a prospective basis to all
deferred tax assets and liabilities. The Company early adopted ASU
2015-17 during our first quarter of the year ended December 31,
2016 on a retrospective basis. The adoption of 2015-17 had no
impact on our financial statements.
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842),
to provide guidance on recognizing lease assets and lease
liabilities on the balance sheet and disclosing key information
about leasing arrangements, specifically differentiating between
different types of leases. The core principle of Topic 842 is that
a lessee should recognize the assets and liabilities that arise
from all leases. The recognition, measurement, and presentation of
expenses and cash flows arising from a lease by a lessee have not
significantly changed from previous GAAP. There continues to be a
differentiation between finance leases and operating leases.
However, the principal difference from previous guidance is that
the lease assets and lease liabilities arising from operating
leases should be recognized in the balance sheet. The accounting
applied by a lessor is largely unchanged from that applied under
previous GAAP. The amendments will be effective for fiscal years
beginning after December 15, 2018, including interim periods within
those fiscal years, and early adoption is permitted. In transition,
lessees and lessors are required to recognize and measure leases at
the beginning of the earliest period presented using a modified
retrospective approach.
The
modified retrospective approach includes a number of optional
practical expedients that entities may elect to apply. These
practical expedients relate to the identification and
classification of leases that commenced before the effective date,
initial direct costs for leases that commenced before the effective
date, and the ability to use hindsight in evaluating lessee options
to extend or terminate a lease or to purchase the underlying
asset.
An
entity that elects to apply the practical expedients will, in
effect, continue to account for leases that commence before the
effective date in accordance with previous GAAP unless the lease is
modified, except that lessees are required to recognize a
right-of-use asset and a lease liability for all operating leases
at each reporting date based on the present value of the remaining
minimum rental payments that were tracked and disclosed under
previous GAAP. The Company is currently evaluating the impact of
these amendments on its financial statements.
In
March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts
with Customers (Topic 606): Principal versus Agent Considerations,
to clarify the implementation guidance on principal versus agent
considerations and address how an entity should assess whether it
is the principal or the agent in contracts that include three or
more parties. The effective date and transition requirements for
these amendments are the same as the effective date and transition
requirements of ASU 2014-09 (discussed above). The Company is
currently evaluating the impact of these amendments on its
financial statements.
F-13
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
In
March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock
Compensation (Topic 718): Improvements to Employee Share-Based
Payment Accounting, to reduce complexity in accounting standards
involving several aspects of the accounting for employee
share-based payment transactions, including (1) the income tax
consequences, (2) classification of awards as either equity or
liabilities, and (3) classification on the statement of cash flows.
The amendments will be effective for financial statements issued
for fiscal years beginning after December 15, 2016, including
interim periods within those fiscal years, and early adoption is
permitted. Amendments related to the timing of when excess tax
benefits are recognized, minimum statutory withholding
requirements, forfeitures, and intrinsic value should be applied
using a modified retrospective transition method, amendments
related to the presentation of employee taxes paid on the statement
of cash flows when an employer withholds shares to meet the minimum
statutory withholding requirement should be applied
retrospectively, amendments requiring recognition of excess tax
benefits and tax deficiencies in the income statement and the
practical expedient for estimating expected term should be applied
prospectively, and amendments related to the presentation of excess
tax benefits on the statement of cash flows can be applied using
either a prospective transition method or a retrospective
transition method. An entity that elects early adoption must adopt
all of the amendments in the same period. The Company is currently
evaluating the impact of these amendments on its financial
statements.
In
April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts
with Customers (Topic 606): Identifying Performance Obligations and
Licensing, to clarify the following two aspects of Topic 606: 1)
identifying performance obligations, and 2) the licensing
implementation guidance. The effective date and transition
requirements for these amendments are the same as the effective
date and transition requirements of ASU 2014-09 (discussed above).
The Company is currently evaluating the impact of these amendments
on its financial statements.
In May
2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with
Customers (Topic 606): Identifying Performance Obligations and
Licensing, to clarify certain core recognition principles including
collectability, sales tax presentation, noncash consideration,
contract modifications and completed contracts at transition and
disclosures no longer required if the full retrospective transition
method is adopted.
The
effective date and transition requirements for these amendments are
the same as the effective date and transition requirements of ASU
2014-09 (discussed above). The Company is currently evaluating the
impact of these amendments on its 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, to clarify how certain cash receipts and cash payments
are presented and classified in the statement of cash flows. The
amendments should be applied using a retrospective transition
method, and are effective for fiscal years beginning after December
15, 2017, including interim periods within those fiscal years. The
Company is currently evaluating the impact of these amendments on
its financial statements.
F-14
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
In
November 2016, the FASB issued ASU No. 2016-18, Statement of Cash
Flows (Topic 230): Restricted Cash (a consensus of the FASB
Emerging Issues Task Force), to provide guidance on the
presentation of restricted cash or restricted cash equivalents in
the statement of cash flow. The amendments should be applied using
a retrospective transition method, and are effective for fiscal
years beginning after December 15, 2017, including interim periods
within those fiscal years. The Company is currently evaluating the
impact of these amendments on its financial
statements.
GOING CONCERN
The
accompanying financial statements have been prepared assuming the
Company will continue as a going concern, which contemplates, among
other things, the realization of assets and satisfaction of
liabilities in the normal course of business. The Company had an
accumulated deficit of approximately $12,577,954 and $9,081,267 at
December 31, 2016 and 2015, respectively, had a net loss of
approximately, $3,496,687 for the year ended December 31, 2016 and
a net loss of $1,652,908 for the fiscal year ended December 31,
2015, and Shareholders’ Equity of approximately $209,700 and
($597,045) at December 31, 2016 and 2015,
respectively.
These
matters, among others, raise substantial doubt about our ability to
continue as a going concern. While the Company’s cash
position may not be significant enough to support the
Company’s daily operations, Management intends to raise
additional funds by way of equity and/or debt financing to fund
operations.
Historically,
Management has not been successful in raising adequate financing
for
the Company and
therefore there is doubt about its potential success in the
future.
DIRECTOR AND OFFICER COMPENSATION
In
April 2016, the Company issued the three members of its Board of
Directors 36,000,000 shares of $0.001 Common Stock valued at
$252,000 or $0.0078 per share for services rendered to the Company
in 2015. In December 2016, the Company issued 78,000,000 of par
value $0.001 Common Stock to the three Company Officers valued at
$241,800 or $0.0031 per share for services rendered to the Company
in 2016.
These Officers and Directors shares are restricted and may not be
sold
without prior
written consent of the Board of Directors of the Company.
In
addition, the Company made cash payments of $1,000 to the CEO and
$4,597 to the CFO for services rendered to the Company in
2016.
Through
the period ended December 31, 2015, the Company issued 500,000
shares of Series “B” Preferred Stock to the CEO of the
Company valued at $50,000 or $0.10 per share and paid $20,000 in
cash to another Officer who resigned his position with the Company
in February 2015.
LEGAL FEES
During
the years ended December 31, 2016 and 2015, legal fees were
incurred largely as a result of services provided to the Company to
assist with its regulatory requirements with the Securities and
Exchange Commission and a litigation in which it was involved and
since been settled which settlement included a payment to the
Company of $25,000.
F-15
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
DATE OF MANAGEMENT’S REVIEW
Subsequent
events have been evaluated through April 12, 2017, which is the
date the Financial Statements were available to be
issued.
In the
course of its life the Company has had limited operations, and has
a Working Capital deficit. This raises substantial doubt about the
Company’s ability to continue as a going concern. The Company
believes it can raise capital through equity sales and borrowing to
fund its operations. Management believes this will contribute
toward its subsequent profitability.
Historically,
Management has not been successful in raising adequate financing
for
the Company and
therefore there is doubt about its potential success in the
future.
The accompanying
Financial Statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going
concern.
The
following is a summary of the Patents held by the Company at
December 31, 2016 and 2015:
On
October 8, 2015, the Company acquired U.S. Patent Number 8,236,935
(the “US Patent”) for the Adva-27a anticancer compound
from Advanomics Corporation (“Advanomics”), a related
party, in exchange for an interest-free note payable for
$4,320,000. Effective December 28, 2015, the parties executed an
amendment pursuant to which this note payable for $4,320,000 was
cancelled and replaced with a new interest-free convertible note
having a face value of $210,519, comprised of $155,940 in principal
amount which is the Advanomics book value of the US Patent, plus
$54,579 as an adjustment for the currency exchange difference. The
new note is automatically convertible into 80,968,965 shares of the
Company’s Common Stock upon the Company increasing its
authorized capital to a level that would permit the issuance of
such shares.
On
December 28, 2015, the Company acquired the remaining worldwide
issued and pending patents under PCT/FR2007/000697 and
PCT/CA2014/000029 (the “Worldwide Patents”) for the
Adva-27a anticancer compound from Advanomics, a related party, in
exchange for a note payable for $12,822,499. Effective December 28,
2015, the parties executed an amendment pursuant to which this note
payable for $12,822,499 was cancelled and replaced with a new
interest-free convertible note having a face value of $624,875,
comprised of $462,870 in principal amount, which is the Advanomics
book value of the Worldwide Patents, plus $162,005 as an adjustment
for the currency exchange difference. The new note is automatically
convertible into 240,336,451 shares of the Company’s Common
Stock upon the Company increasing its authorized capital to a level
that would permit the issuance of such shares. The US Patent and
the Worldwide Patents are herein referred to as the
“Patents.”
The
Patents were therefore acquired from the related party (Advanomics)
for $618,810 which is the U.S. dollar equivalent of the related
party’s cost of $856,248 Canadian. Patents expire 20 years
from the priority date and are therefore amortized over 20 years.
The oldest of the Patents expires on April 25, 2026 and therefore
the Company has deemed that the Patents have approximately 10 years
remaining on their useful life.
F-16
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
In July
2016, the Company issued 321,305,416 shares of $0.001 par value
Common Stock in exchange for the Patents related notes payable
totaling $835,394 (See Note 10).
The
current carrying value of the Company’s Patents is $615,038.
Using applicable GAAP, the Company determined that the fair value
of the Patents is $-0- based on expected future cash flows using
Level 3 inputs under ASC 820. The cash flows are those expected to
be generated by the market participants, discounted at the
risk-free rate of interest. Therefore the Company reduced the
Patent to $-0- for GAAP purposes.
|
|
December
31,
|
December
31,
|
|
|
2016
|
2015
|
|
|
|
|
|
Adva-27a US
Patent*
|
$
155,940
|
$
155,940
|
|
Adva-27a Worldwide
Patents*
|
$
462,870
|
$
462,870
|
|
|
|
|
|
Total
|
$
618,810
|
$
618,810
|
|
|
|
|
|
Less accumulated
amortization (58,918 in 2016)
|
$
(62,690
)
|
$
(3,772
)
|
|
Net of
amortization
|
$
556,120
|
$
615,038
|
|
Less: impairment
loss
|
$
(556,120
)
|
$
-0-
|
|
|
|
|
|
Total at Year
End
|
$
-0-
|
$
615,038
|
*These patents are collateralized by a note payable held by the CEO
of the Company (See Note 10).
The
Company’s authorized capital is comprised of 3,000,000,000
shares of $0.001 par value Common Stock and 30,000,000 shares of
$0.10 par value Preferred Stock, to have such rights and
preferences as the Directors of the Company have or may assign from
time to time. Out of the authorized Preferred Stock, the Company
has designated 850,000 shares as Series “A” Preferred
Stock (“Series A”). The Series A is convertible at any
time after issuance into 20 shares of the Company's Common Stock
with no further consideration, has full voting rights at 20 votes
per share, and has superior liquidation rights to the Common Stock.
During the year ended December 31, 2015, the Company authorized
500,000 shares of $0.10 par value Series “B” Preferred
Stock (“Series B”). The Series B Preferred Stock is
non-convertible, non-redeemable and non-retractable. It has
superior liquidation rights to the Common Stock at $0.10 per share
and gives the holder the right to 1,000 votes per share. Through
December 31, 2016 and December 31, 2015, the Company has issued and
outstanding a total of 769,399,858 and 198,265,118 shares of Common
Stock, respectively. Through the same periods, the Company has
issued and outstanding a total of -0- and -0- shares of Series A
Preferred Stock and 500,000 and 500,000 shares of Series B
Preferred Stock, respectively.
F-17
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
During
the fiscal year ended December 31, 2016, the Company issued
411,829,184 shares of Common Stock for the conversion of $1,122,782
in debt and interest of $9,270, generating a loss of $1,945,898 on
conversion. The Company sold 12,555,556 shares of Common Stock for
cash of $104,128 and issued 146,750,000 shares of Common Stock in
exchange for services valued at $702,300. Of these, 114,000,000
shares valued at $493,800 were issued to the Directors and Officers
of the Company.
The Officers and Directors shares are restricted and may not be
sold without prior written consent of the Board of Directors of the
Company.
As part of a subscription agreement concluded in 2016, the Company
undertook an obligation to pay a royalty of 5% of net sales on one
of itsgeneric products (Anastrozole) for a period of three (3)
years from the date of the first sale of that
product.
During
the fiscal year ended December 31, 2015, the Company issued
124,714,077 shares of Common Stock. Of these, 102,914,077 were
issued for the conversion of $501,624 in debt and $12,886 in
interest, generating a loss of $575,144 on conversion. In addition,
the Company sold 20,000,000 shares of Common Stock for cash of
$236,550 and issued 1,800,000 shares of Common Stock in exchange
for services valued at $66,500. In 2015, the Company also issued
500,000 shares of Series “B” Preferred Stock to the CEO
of the Company in exchange for services valued at $50,000 (See Note
7).
The
Company has declared no dividends through December 31, 2016 and
2015.
The
following table sets forth the computation of basic and diluted net
income per share for the years ended December 31:
|
|
2016
|
2015
|
|
|
|
|
|
Net (loss)
attributable to Common Stock
|
$
(3,496,687
)
|
$
(1,652,908
)
|
|
Basic weighted
average outstanding shares of Common Stock
|
424,874,458
|
122,278,909
|
|
Dilutive effects of
common share equivalents
|
-0-
|
-0-
|
|
Dilutive weighted
average outstanding shares of common stock
|
424,874,458
|
122,278,909
|
|
|
|
|
|
Net loss per share
of Common Stock
|
|
|
|
Basic and
Diluted
|
$
(0.01
)
|
$
(0.01
)
|
During
the fiscal year ended December 31, 2015, the Company authorized
500,000 shares of $0.10 par value Series “B” Preferred
Stock. The stock is non-convertible, non-redeemable and
non-retractable. It gives the holder the right to 1,000 votes per
share. All 500,000 shares of Series “B” Preferred Stock
were issued to the CEO of the Company in exchange for services
valued at $50,000.
Deferred
income taxes arise from the temporary differences between financial
statement and income tax recognition of net operating losses. These
loss carryovers are limited under the Internal Revenue Code should
a significant change in ownership occur. The Company accounts for
income taxes pursuant to ASC 740.
F-18
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
Deferred
income taxes arise from the temporary differences between financial
statement and income tax recognition of net operating losses and
other items. Loss carryovers are limited under the Internal Revenue
Code should a significant change in ownership occur.
The
Company follows FASB Statement Accounting Standards Codification
No. 740, “Accounting for Income Taxes”, which requires,
among other things, an asset and liability approach to calculating
deferred income taxes. The components of the deferred income tax
assets and liabilities arising under ASC No. 740 were as
follows:
There
were no deferred income taxes at December 31, 2016 and
2015.
The
types of temporary differences between the tax basis of assets and
their financial reporting amounts that give rise to a significant
portion of the deferred assets and liabilities are as
follows:
|
|
December
31,
|
December
31,
|
||
|
|
2016
|
2015
|
||
|
|
Temporary
|
Tax
|
Temporary
|
Tax
|
|
|
Difference
|
Effect
|
Difference
|
Effect
|
|
Deferred
tax assets:
|
|
|
|
|
|
Net operating
loss
|
$
10,182,607
|
$
3,773,674
|
$
9,081,267
|
$
6,172,980
|
|
Valuation
allowance
|
(10,182,607
)
|
(3,773,674
)
|
(9,081,267
)
|
(6,172,980
)
|
|
|
|
|
|
|
|
Total
deferred tax asset
|
-0-
|
-0-
|
-0-
|
-0-
|
|
|
|
|
|
|
|
Net
deferred tax asset
|
$
-0-
|
$
-0-
|
$
-
|
$
-
|
Deferred
income taxes arise from the temporary differences between financial
statement and income tax recognition of net operating losses. These
loss carryovers are limited under the Internal Revenue Code should
a significant change in ownership occur.
At
December 31, 2016 and December 31, 2015, the Company had
approximately and $8,965,443, respectively, in unused federal net
operating loss carryforwards, which begin to expire principally in
the year 2029. A deferred tax asset at each date of approximately
$3,773,674 and $3,166,368 resulting from the loss carryforwards has
been offset by a 100% valuation allowance. The change in the
valuation allowance for the period ended December 31, 2016 and
December 31, 2015 was approximately and $607,306.
F-19
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
A
reconciliation of the U.S. statutory federal income tax rate to the
effective tax rate is as follows:
|
|
December 31,
|
|
|
|
2016
|
2015
|
|
U.S.
Federal statutory graduated rate …
|
34.00
%
|
34.00
%
|
|
State
income tax rate,
net
of federal benefit
|
3.06
%
|
4.63
%
|
|
Net
rate
|
37.06
%
|
38.63
%
|
|
Net
operating loss used
|
0.00
%
|
0.00
%
|
|
Net
operating loss for which no tax
benefit
is currently available
|
-37.06
%
|
-38.63
%
|
|
|
0.00
%
|
0.00
%
|
The
Company’s income tax filings are subject to audit by various
taxing authorities. The Company’s open audit periods are
2013, 2014, and 2015, although, the statute of limitations for the
2013 tax year will expire effective March 15, 2017. In evaluating
the Company’s provisions and accruals, future taxable income,
and reversal of temporary differences, interpretations and tax
planning strategies are considered. The Company believes its
estimates are appropriate based on current facts and
circumstances.
|
Notes payable
consist of the following:
|
2016
|
2015
|
|
|
|
|
|
Note Payable -
Original Face Value $12,500 with interest of 12% was renewed on
December 31, 2015 with the addition of accrued interest amounting
to $6,642 (“2015 Note”). The 2015 Note has a Face Value
of $19,142 and accrues interest at 12%. The Company renewed the
2015 Note when it became due on December 31, 2016 (“2016
Note”). The 2016 Note has a Face Value of $21,439 and accrues
interest at 12%. The Face Value amount includes $2,297 in accrued
interest. The 2016 Note is convertible anytime from the date of
issuance into $0.001 par value Common Stock at a 35% discount from
market price and is due December 31, 2017.
We estimate that the fair value of this
convertible debt approximates the face value, so no value has been
assigned to the beneficial conversion feature.
Any gain or
loss will be recognized at conversion.
|
$
21,439
|
$
19,142
|
|
|
|
|
|
In August 2015 the
Company received monies in exchange for a note having a Face Value
of $83,000 with interest at 8% is due May 7, 2016. The Note is
convertible after 180 days from issuance into $0.001 par value
Common Stock at
a price 35% below
market value. The Note, including
$83,000 of principal
and $3,120 in interest, was fully
converted into
$0.001 par value Common Stock during the
period ended December 31, 2016. In connection therewith, 9,906,049
shares of $0.001 par value Common Stock valued at $146,658 were
issued generating a loss of $60,538 on the conversion.
|
-0-
|
83,000
|
|
|
|
|
|
In February 2016,
the Company received monies in exchange for a note having a Face
Value of $85,000 with interest at 8% is due November 18, 2016. The
Note is convertible after 180 days from issuance into $0.001 par
value Common Stock at
a price 35%
below market value. The Note, including
$85,000 of principal
and $3,400 in interest, was fully
converted into
$0.001 par value Common Stock during the
period ended December 31, 2016. In connection therewith, 27,538,058
shares of $0.001 par value Common Stock valued at $172,433were
issued generating a loss of $84,033 on the conversion.
|
-0-
|
-0-
|
|
|
|
|
|
In June 2016 the
Company received monies in exchange for a note having a Face Value
of $55,000 with interest accruing at 10% is due April 1, 2017. The
Note is convertible after 180 days from issuance into $0.001 par
value Common Stock at
a price 40%
below market value.
In December 2016, $6,500 of the
principal was converted
into 5,000,000
shares of
$0.001 par value Common Stock valued at $20,000
and generating a loss of $13,500 on conversion. The Company
estimates that the fair value of the
convertible debt approximates the face value, so no value has been
assigned to the beneficial conversion feature
to be
recognized at conversion.
|
48,500
|
-0-
|
|
|
|
|
|
Total current
debt
|
$
69,939
|
$
102,142
|
F-20
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
Interest
expense for the years ended December 31, 2016 and 2015 was $34,732
and $307,211, respectively which includes origination fees of $-0-
and $2,656, respectively. The balance of interest payable and
origination fees at December 31, 2016 and 2015 was $9,011 and
$2,656, respectively. Loss on conversion of notes payable for the
years ended December 31, 2016 and 2015 was $1,945,898 and $575,144,
respectively.
|
Note Payable - Face
Value $128,000 with interest of 10% was due May 27, 2015. Issued on
November 27, 2014 at a premium and convertible from issuance into
$0.001 par value Common Stock at
a
price of $0.20 per share.
On June 30, 2015 the Company
renewed this note with the addition of accrued interest amounting
to $7,540 and an origination fee of $25,600. The new Note has a
Face Value of $161,140 and accrues interest at 12%. The new Note,
due December 31, 2015, is convertible any time from the date of
issuance into $0.001 par value Common Stock at a 35% discount from
market price. On December 31, 2015, the Company renewed this note
with the addition of accrued interest amounting to $9,668 and an
origination fee of $32,228. The new Note has a Face Value of
$203,036 and accrues interest at 12%. The new Note, due June 30,
2016, is convertible anytime from the date of issuance into $0.001
par value Common Stock at a 35% discount from market price. In
January 2016, $38,036 of the principal was converted, leaving a
principal balance of $165,000. In connection therewith, 7,705,186
shares of $0.001par value Common Stock valued $231,156 were issued
generating a loss on conversion of $193,120. The Company renewed
this note with the addition of accrued interest amounting to
$9,852. The renewed note has a Face Value of $174,852 and accrues
interest at 12%. It is due on March 31, 2017. In October 2016,
$74,852 of the principal amount was converted, leaving a principal
balance of $100,000, which was renewed with interest thereon for 90
days. In connection therewith, 40,374,475 shares of $0.001 par
value Common Stock valued $290,696 were issued generating a loss of
$215,844 on conversion.
The Company
estimates that the fair value of this convertible debt approximates
the face value, so no value has been assigned to the beneficial
conversion feature
to be recognized at
conversion.
|
$
100,000
|
$
203,036
|
|
|
|
|
|
On October 8, 2015
the Company acquired U.S. Patent Number 8,236,935 (the “US
Patent”) for the anticancer compound, Adva-27a, from
Advanomics Corporation (a related party), which includes all rights
to this intellectual property within the United States in exchange
for an interest-free note payable for $4,320,000 with annual
payments of $360,000 due and payable on or before December 31,
commencing in 2016 and continuing until paid in full. The note is
collateralized by the US Patent. Pursuant to an amended agreement
effective December 28, 2015, this note was cancelled and replaced
with a new note having a face value of $210,519, comprised of
$155,940 in principal amount which is Advanomics’ book value
of the US Patent plus $54,579 as an adjustment for the currency
exchange difference. This interest-free new note is automatically
convertible into 80,968,965 shares of the Company’s $0.001
par value Common Stock upon the Company completing an increase in
its authorized capital such that a sufficient number of Common
shares is available for issuance. In July 2016 the Company issued
the requisite 80,968,965 shares of $0.001 par value Common Stock
and this note was therefore automatically cancelled.
|
$
-0-
|
$
210,519
|
|
|
|
|
|
On December 28,
2015 the Company acquired the worldwide issued and pending patents
under PCT/FR2007/000697 and PCT/CA2014/000029 (the “Worldwide
Patents”) for the anticancer compound, Adva-27a, from
Advanomics Corporation (a related party), which include all
worldwide rights to this intellectual property in exchange for a
note payable for $12,822,499, with interest accruing at 2% per year
beginning January 1, 2016 and quarterly payments of $70,000 plus
interest commencing the end of March 2016 and continuing until
December 2020 when the entire principal balance and all accrued
interest will be due. The note is collateralized by the Worldwide
Patents. Pursuant to an amended agreement, effective December 28,
2015, this note was cancelled and replaced with a new convertible
note having a face value of $624,875, comprised of $462,870 in
principal amount which is Advanomics’ book value of the
Patents, plus a $162,005 amount as an adjustment for the currency
exchange difference. This interest-free new note is automatically
convertible into 240,336,451 shares of $0.001 par value Common
Stock upon the Company completing an increase in its authorized
capital such that a sufficient number of Common shares is available
for issuance. In July 2016 the Company issued the requisite
240,336,451 shares of $0.001 par value Common Stock and this note
was therefore automatically cancelled.
|
$
-0-
|
$
624,875
|
|
|
|
|
|
In December 2016,
the Company received monies from the Company’s CEO in
exchange for a note payable having a Face Value of $90,000 Canadian
($67,032 US) with interest at 12% due March 31, 2017. The Note is
convertible any time after the date of issuance into $0.001 par
value Common Stock at
a price 35%
below market value. The Company estimated that the fair value of
the convertible debt approximates the face value, so no value has
been assigned to the beneficial conversion feature.
Any gain
or loss will be recognized at conversion. This Note is
collateralized by the assets of the Company.
|
67,032
|
-0-
|
|
|
|
|
|
Total related
entity current debt
|
$
167,032
|
$
1,038,430
|
Penalty Interest paid in cash to Advanomics Corporation (a related
party) on these Notes during 2016 was $5,264. The Notes,
totaling
$835,394 in principal
,
were fully converted into
$0.001 par value Common Stock
during the period ended December 31, 2016. In connection therewith,
321,305,416 shares of $0.001 par value Common Stock valued at
$2,217,007 were issued generating a loss of $1,381,613 on the
conversion.
Effective
October 8, 2015, we executed a Patent Purchase Agreement (the
“October Purchase Agreement”), with Advanomics, a
related party, pursuant to which we acquired all of the right,
title and interest in and to U.S. Patent Number 8,236,935 (the
“US Patent”) for our anticancer compound,
Adva-27a. The October Purchase Agreement provided us
with direct ownership of the US Patent, which includes all rights
to this intellectual property within the United
States. Prior, we had been licensing the right to use
the US Patent from Advanomics pursuant to the terms of an Exclusive
License Agreement, as amended (the “Exclusive License
Agreement”). In consideration for the assignment
of the US Patent, we agreed to make payments of twelve (12)
consecutive annual payments of $360,000 starting in
2016.
Effective
December 28, 2015, we executed a second Patent Purchase Agreement
(the “December Purchase Agreement”), with Advanomics
pursuant to which we acquired all of the right, title and interest
in and to all of the remaining worldwide patent rights for issued
and pending patents under PCT/FR2007/000697 and PCT/CA2014/000029
(the “Worldwide Patents”) for our anticancer compound,
Adva-27a. The purchase price paid by us for these patent
rights was $12,822,499, which is payable pursuant to the terms of a
secured promissory note, with quarterly payments of $70,000 in
principal and interest beginning in March 2016 and continuing each
consecutive calendar quarter thereafter through December
2020. Advanomics was granted a security interest in both
the US Patent and the Worldwide Patents until all payments due
under the both Patent Purchase Agreements have been
made.
Effective
December 28, 2015, the parties agreed to amend both of the
aforesaid Patent Purchase Agreements. The relevant notes
of the original Patent Purchase Agreements were cancelled and each
replaced with a new convertible note. The note
applicable to the October Purchase Agreement now has a face value
of $210,519, comprised of $155,940 in principal amount which is
Advanomics’ book value of the US Patent, plus $54,579 as an
adjustment for the currency exchange difference. The new
note pertaining to the December Purchase Agreement was replaced
with a convertible note having a face value of $624,875, comprised
of $462,870 in principal amount, which is Advanomics’ book
value of the Worldwide Patents, plus $162,005 as an adjustment for
the currency exchange difference. Advanomics has
retained a security interest in the Patents until such time as the
automatic conversion of the new notes into Common shares is
completed.
F-21
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
As a
result of the aforesaid two transactions the Company now own all of
the patents and rights throughout the world for
Adva-27a.
The
Company believes that purchase of the Patents would facilitate its
ability to obtain the funding necessary to complete the development
and FDA approval process for Adva-27a. Entering into
amendments (“Amendments”) of the original patent
purchase agreements was subsequently believed to be necessary as
the burdensome financial obligations imposed by the terms of the
original Patent Purchase Agreements were not conducive to obtaining
such financing, to the mutual detriment of both the Company and
Advanomics. The Amendments amended the purchase price of
the Patents, eliminated all cash payments obligations and replaced
the non-convertible notes totaling $17,142,499 with convertible
notes that will automatically convert into an aggregate of
321,305,415 shares of the Company’s Common Stock
(representing approximately 59% of the Company’s issued and
outstanding Common shares) once we successfully amend our Articles
of Incorporation to increase our authorized capital of Common Stock
to 3 billion.
In July 2016 the
Company increased its authorized capital to 3 billion shares of
Common Stock and issued the 321,305,415 Common shares
to
Advanomics thereby completing all aspects of the patent purchase
arrangements.
Prior
to the aforesaid patent purchase transactions the Company had been
licensing its technology on an exclusive basis (“Exclusive
License Agreement”) from Advanomics. On December
21, 2011, the Company’s executed an amendment to the
Exclusive License Agreement which waived a condition of termination
and revised the consideration payable to Advanomics. The
original Exclusive License Agreement required the Company’s
to exercise an option to purchase shares in Advanomics for
aggregate consideration of $9,700,000.00 ($5.00 per
share). This obligation was waived and replaced with an
annual licensing fee of $360,000.00 and reimbursement of R&D
expenses incurred by Advanomics in connection with Adva-27a, the
Licensed Material as defined in the original Exclusive License
Agreement.
The
Company believes the financial terms of the two aforesaid patents
purchase arrangements are more favorable to the Company than under
the Exclusive License Agreement. the Company’s
obligations under the Exclusive License Agreement required the
Company to pay Advanomics a perpetual annual license fee of
$360,000 and reimburse Advanomics for all R&D expenses incurred
by Advanomics in connection with Adva-27a, the Licensed Material
(as defined in the Exclusive License Agreement). The
October Purchase Agreement terminated the Exclusive License
Agreement and all obligations thereunder.
Certain
members of the Company’s management, including Dr. Steve N.
Slilaty, the Company’s President, CEO and a Director and
Camille Sebaaly, the Company’s Secretary, CFO and a Director,
hold similar positions with Advanomics. The Company
believes that the terms of the patent acquisitions are fair and
reasonable and will result in a greater opportunity for the Company
to obtain the funding necessary to complete the approval process of
the FDA for Adva-27a. However, there are no assurances
this will occur and as of the date of this Report, the Company has
no binding commitment from any financing source to provide it with
the funds necessary to complete the approval process.
F-22
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
During
the fiscal year ended December 31, 2015, the Company’s Board
of Directors authorized 500,000 shares of $0.10 par value Series
“B” Preferred Stock. The Series
“B” Preferred Stock is non-convertible, non-redeemable,
and non-retractable, has a superior liquidation value of $0.10 per
share and gives the holder the right to 1,000 votes per
share. All 500,000 shares of the Series “B”
Preferred Stock were issued to Dr. Slilaty, the Company’s
CEO, in exchange for services valued at $50,000.
In
February and April 2016, the Company paid $30,000 and $50,487 to
Advanomics for the balance of 2015 licensing fees.
During
the fiscal year ended December 31, 2016, Advanomics Corporation
paid on behalf of the Company $13,725 Canadian in patenting fees.
Advanomics was fully reimbursed by the Company in January
2017.
The
Company’s principal place of business is located at 469
Jean-Talon West, 3rd Floor, Montreal, Quebec, Canada, H3N
1R4. This is also the location of the Company’s
former licensor, Advanomics Corporation, who provided this space to
the Company on a rent free basis in 2015 and 2016. Dr.
Steve N. Slilaty, our Chief Executive Officer and a Director, is an
Officer, Director and principal shareholder of
Advanomics.
Each
member of the Company’s Board of Directors were issued
26,000,000 and 12,000,000 shares of the Company’s Common
Stock in 2016 for services rendered, which shares were valued at
$80,600 and $84,000, respectively.
These Officers and Directors shares are restricted and may not be
sold without prior written consent of the Board of Directors of the
Company.
In
December 2016, we received monies from the Company’s CEO in
exchange for a note payable having a principal of $90,000 Canadian
($67,032 US) with interest at 12% due March 31, 2017. The Note is
convertible any time after the date of issuance into $0.001 par
value Common Stock at
a price 35%
below market value. We estimated that the fair value of the
convertible debt approximates the face value, so no value has been
assigned to the beneficial conversion feature.
This Note is
collateralized by all the assets of the Company. On March 31, 2017,
the note, together with all accrued interest thereon and an
additional principal amount of $3,000 Canadian paid to the Company
in March 2017, was renewed for a 90-day period under the same terms
and conditions as the original note. In the event of default, the
interest rate will increased to 18% per annum and a penalty of
$1,000 CAD per day will accrue.
On
November 27, 2014, we issued a Note Payable in the principal amount
of $128,000 to an individual who is now a principal shareholder.
This Note accrues interest at 10% per annum and was originally due
May 27, 2015 and was originally convertible into shares of our
Common Stock at a price of $0.20 per share. On June 30, 2015, we
renewed this note with the addition of accrued interest amounting
to $7,540 and an origination fee of $25,600. The new Note has a
Face Value of $161,140 and accrues interest at 12%. The new Note
was due December 31, 2015, and was convertible any time from the
date of issuance into shares of our Common Stock at a 35% discount
from market price. On December 31, 2015, we again renewed this note
with the addition of accrued interest amounting to $9,668 and an
origination fee of $32,228. The new Note has a Face Value of
$203,036 and accrues interest at 12%. The new Note was due June 30,
2016, was convertible anytime from the date of issuance into shares
of our Common Stock at a 35% discount from market price. In January
2016, $38,036 of the principal was converted, leaving a principal
balance of $165,000. In connection therewith, 7,705,186 shares of
our Common Stock, valued $231,156 were issued generating a loss on
conversion of $193,120. We renewed this note again with the
addition of accrued interest amounting to $9,852. The renewed note
has a Face Value of $174,852 and accrues interest at 12%. It is due
on March 31, 2017. In October 2016, $74,852 of the principal amount
was converted, leaving a principal balance of $100,000, which was
renewed with interest thereon for 90 days. In connection therewith,
40,374,475 shares of our Common Stock valued $290,696 were issued
generating a loss of $215, 844 on conversion. As a result of this
conversion, the holder then held over 5% of our issued and
outstanding Common Shares. We estimate that the fair value of this
convertible debt approximates the face value, so no value has been
assigned to the beneficial conversion feature to be recognized at
conversion.
Other
than as described in Note 10, above, there are no other related
party transactions that are required to be disclosed pursuant to
Regulation S-K promulgated under the Securities Act of 1933, as
amended.
The Company's principal place of
business is located at 469 Jean-Talon West, 3rd Floor, Montreal,
Quebec, Canada, H3N 1R4. This is also the location
of the
Company's former licensor, Advanomics Corporation, who provided
this space to us on a rent free basis in 2015 and 2016. Dr. Steve
N. Slilaty,
our Chief
Executive Officer and a Director, is an Officer, Director and
principal shareholder of Advanomics. Effective January 1, 2017 the
Company took
over the lease
from Advanomics making this space exclusively its own.
As
part of a subscription agreement, the Company has an obligation to
pay a royalty of 5% of net sales on one of its generic products
(Anastrozole)
for a period of
three (3) years from the date of the first sale of that
product.
On
January 11, 13 and 24, 2017, the holder of a convertible note
having a principal balance of $48,500 on December 31, 2016, elected
to convert all of the principal amount of $48,500 and $3,022 in
accrued interest into 42,528,125 shares of $0.001 par value Common
Stock, leaving a principal balance of $-0-.
In
January 2017, the Company paid $48,000 Canadian (approximately
$36,900 US) to a company controlled by the CEO for services to be
rendered to the Company in 2017.
In
January, 2017, the Company paid $2,000 Canadian (approximately
$1,500 US) to its COO for consulting services to be rendered to the
Company in 2017.
During
the fiscal year ended December 31, 2016, Advanomics Corporation
paid on behalf of the Company $13,725 Canadian in patenting fees.
Advanomics was fully reimbursed by the Company in January
2017.
F-23
Sunshine Biopharma, Inc.
Notes
to Consolidated Financial Statements
December
31, 2016 and 2015
In
December 2016, the Company received monies from its CEO in exchange
for a note payable having a principal amount of $90,000 Canadian
($67,032 US) with interest at 12% due March 31, 2017. The note is
convertible any time after the date of issuance into $0.001 par
value Common Stock at
a price 35%
below market value. The Company estimated that the fair value of
the convertible debt approximates the face value, so no value has
been assigned to the beneficial conversion feature.
This
note is collateralized by all the assets of the Company. On March
31, 2017, the note, together with all accrued interest thereon and
an additional principal amount of $3,000 Canadian paid to the
Company in March 2017, was renewed for a 90-day period under the
same terms and conditions as the original note. In the event of
default, the interest rate will increased to 18% per annum and a
penalty of $1,000 Canadian per day will accrue.
On
February 10 2017, the Company executed a Convertible Promissory
Note payable having a face value of $50,000. The proceeds from this
note were received by the Company on February 14,
2017.
On
March 8, 2017, the Company sold 6,000,000 shares of Common Stock
for $15,000 Canadian (approximately $11,250 US) under Regulation S
exemption to pay for obtaining an outside valuation of the
Company's assets.
On
March 31, 2017, the $100,000 remaining principal balance of a note
payable held by a related party principal shareholder of the
Company was renewed together with $11,715 in accrued interest for a
90-day period under the same terms and conditions as the original
note.
On
April 3, 2017, the Company sold 34,000,000 shares of Common Stock
for $85,000 Canadian (approximately $63,750 US) under Regulation S
exemption to pay for obtaining an outside valuation of the
Company's assets and filing expenses.
The Company's principal place of
business is located at 469 Jean-Talon West, 3rd Floor, Montreal,
Quebec, Canada, H3N 1R4. This is also the location
of the
Company's former licensor, Advanomics Corporation, who provided
this space to us on a rent free basis in 2015 and 2016. Dr. Steve
N. Slilaty,
our Chief
Executive Officer and a Director, is an Officer, Director and
principal shareholder of Advanomics. Effective January 1, 2017 the
Company took
over the lease
from Advanomics making this space exclusively its own.
F-24
None
Disclosure Controls and Procedures
Disclosure
Controls and Procedures
–
Our
management, with the participation of our Chief Executive Officer
and Chief Financial Officer, has evaluated the effectiveness of our
disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the “Exchange Act”) as of the end of
the period covered by this Report.
These
controls are designed to ensure that information required to be
disclosed in the reports we file or submit pursuant to the
Securities Exchange Act of 1934 is recorded, processed, summarized
and reported within the time periods specified in the rules and
forms of the Securities and Exchange Commission, and that such
information is accumulated and communicated to our management,
including our CEO/CFO to allow timely decisions regarding required
disclosure.
Based
on this evaluation, our CEO and CFO have concluded that our
disclosure controls and procedures were not effective as of
December 31, 2016, at reasonable assurance level, for the following
reasons:
●
ineffective control
environment and lack of qualified full-time CFO who has SEC
experience to focus on our financial affairs;
●
lack of qualified
and sufficient personnel, and processes to adequately and timely
identify making any and all required public
disclosures;
●
deficiencies in the
period-end reporting process and accounting policies;
●
inadequate internal
controls over the application of new accounting principles or the
application of existing accounting principles to new
transactions;
●
inadequate internal
controls relating to the authorization, recognition, capture, and
review of transactions, facts, circumstances, and events that could
have a material impact on the company’s financial reporting
process;
●
deficient revenue
recognition policies;
●
inadequate internal
controls with respect to inventory transactions; and
●
improper and lack
of timely accounting for accruals such as prepaid expenses,
accounts payable and accrued liabilities.
Our
Board of Directors has assigned a priority to the short-term and
long-term improvement of our internal control over financial
reporting. We are reviewing various potential solutions to remedy
the processes that would eliminate the issues that may arise due to
the absence of separation of duties within the financial reporting
functions. Additionally, the Board of Directors will work with
management to continuously review controls and procedures to
identified deficiencies and implement remediation within our
internal controls over financial reporting and our disclosure
controls and procedures.
We
believe that our financial statements presented in this annual
report on Form 10-K fairly present, in all material respects, our
financial position, results of operations, and cash flows for all
periods presented herein.
Inherent
Limitations
– Our management, including our Chief
Executive Officer and Chief Financial Officer, does not expect that
our disclosure controls and procedures will prevent all error and
all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are
met. The design of any system of controls is based in
part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed
in achieving its stated goals under all potential future
conditions. Further, the design of a control system must
reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within our company
have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and
that breakdown can occur because of simple error or mistake. In
particular, many of our current processes rely upon manual reviews
and processes to ensure that neither human error nor system
weakness has resulted in erroneous reporting of financial
data.
Changes in
Internal Control over Financial Reporting
– There were
no changes in our internal control over financial reporting during
our fiscal year ended December 31, 2016, which were identified in
conjunction with management’s evaluation required by
paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act,
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
This
Annual Report does not include an attestation report of our
registered public accounting firm regarding internal control over
financial reporting. Management’s report was not
subject to attestation by our registered public accounting firm
pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management’s report
in this Annual Report.
21
Management Report on Internal Control over Financial
Reporting
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rule
13a-15(f) or 15d-15(f) promulgated under the Exchange
Act. Those rules define internal control over financial
reporting as a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and
includes those policies and procedures that:
|
|
●
|
Pertain
to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets
of the company;
|
|
|
●
|
Provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with
generally accepted accounting principles, and the receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the Company;
and
|
|
|
●
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisitions, use or disposition of the
company’s assets that could have a material effect on the
financial statements.
|
Because
of its inherent limitations, internal controls over financial
reporting may not prevent or detect
misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may
deteriorate.
Management assessed
the effectiveness of our internal control over financial reporting
as of December 31, 2016. In making this assessment, our management
used the criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
Based
on an assessment carried out March 10, 2017, management believes
that, as of December 31, 2016, our internal control over financial
reporting were ineffective based in part on the issues discussed
above.
None.
Following is a list
of our officers and directors:
|
Name
|
|
Age
|
|
Position(s)
|
|
|
|
|
|
|
|
Dr.
Steve N. Slilaty
|
|
64
|
|
President,
Chief Executive Officer, and Chairman
|
|
|
|
|
|
|
|
Dr.
Abderrazzak Merzouki
|
|
53
|
|
Chief
Operating Officer and Director
|
|
|
|
|
|
|
|
Camille
Sebaaly
|
|
56
|
|
Chief
Financial Officer, Secretary and Director
|
Our
directors serve as directors until our next Annual Meeting of
Stockholders and the election and qualification of the
director’s respective successor or until the director’s
earlier death, removal or resignation.
22
Following is
biographical information of our current management:
Dr. Steve N. Slilaty
was appointed as our CEO, President and Chairman of our Board of
Directors on October 15, 2009. Dr. Slilaty is an
accomplished scientist and business executive. His scientific
publications are widely cited including university textbooks.
Sunshine Biopharma is the third in a line of biotechnology
companies that Dr. Slilaty founded and managed through their early
and mid-stages of development. The first,
Quantum Biotechnologies Inc.
later
known as
Qbiogene Inc.
, was
founded in 1991 and grew to over $60 million in annual
sales. Today,
Qbiogene
is a member of a family of
companies owned by
MP
Biomedicals
, one of the largest international suppliers of
biotechnology reagents and other research products. The
second company which Dr. Slilaty founded,
Genomics One Corporation
, later known
as
Alert B&C
Corporation
, conducted an initial public offering (IPO) of
its capital stock in 1999 and, on the basis of its ownership of Dr.
Slilaty’s patented TrueBlue® Technology,
Genomics One
became one of the key
participants in the Human Genome Project. Formerly a
research team leader of the
Biotechnology Research Institute
, a
division of the
National Research
Council of Canada
, Dr. Slilaty also served as a consultant
in a management and advisory capacity for a major Canadian
biotechnology company between 1995 and 1997 during which time the
company completed one of the largest biotechnology IPO‘s in
Canada. Dr.
Slilaty is one of the pioneers of Gene Therapy having developed the
first gene delivery system applicable to humans in 1983 [Science
220:725-727 (1983)]. Dr. Slilaty's other distinguished scientific
career accomplishments include the discovery of a new class of
enzymes, the S24 Family of Proteases (IUBMB Enzyme Nomenclature: EC
3.4.21.88), development of the first site-directed mutagenesis
system applicable to double-stranded DNA, cloning the gene for the
first yeast-lytic enzyme (lytic b-1,3-glucanase), developing a new
molecular strategy for increasing the rate of enzyme reactions,
inventing a powerful new cloning system for genomic cloning and
gene discovery (TrueBlue® Technology) and developing a new
transcriptomics technology for generating entire RNA profiles.
These and other works of Dr. Slilaty are cited in research papers,
editorials, review articles and textbooks. Dr. Slilaty
received his Ph.D. degree in Molecular Biology from the University
of Arizona in 1983 and Bachelor of Science degree in Genetics and
Biochemistry from Cornell University in 1976. In
addition, Dr. Slilaty holds a position as Adjunct Professor at
Université du Québec in the Department of Microbiology
and Biotechnology. He devotes approximately 50% of his
time to our business affairs.
Dr. Abderrazzak
Merzouki
was appointed as a Director and our Chief Operating
Officer in February 2015. In addition to his new
positions with our Company, since January 2015 he has been
self-employed as a consultant in the fields of biotechnology and
pharmacology. From July 2007 through December 2015, Dr.
Merzouki worked at the Institute of Biomedical Engineering in the
Department of Chemical Engineering at Ecole Polytechnique de
Montreal, where he taught and acted as a senior scientist involved
in the research and development of plasmid and siRNA-based
therapies. Dr. Merzouki is a molecular biologist and an
immunologist with extensive experience in the area of gene therapy
where he performed several preclinical studies for pharmaceutical
companies involving the use of adenoviral vectors for cancer
therapy and plasmid vectors for the treatment of peripheral
arterial occlusions. Dr. Merzouki also has extensive
expertise in the design of expression vectors, and production and
purification of recombinant proteins. He developed
technologies for production of biogeneric therapeutic proteins for
the treatment of various diseases including cancer, diabetes,
hepatitis and multiple sclerosis. Dr. Merzouki obtained
his Ph.D. in Virology and Immunology from Institut Armand-Frappier
in Quebec and received his post-doctoral training at the University
of British Columbia and the BC Center for Excellence in HIV/AIDS
research. Dr. Merzouki has over 30 publications and 70
communications in various, highly respected scientific journals in
the field of cellular and molecular biology. He will
devote approximately 50% of his time to our business
affairs.
Camille Sebaaly
was
appointed as our Chief Financial Officer, Secretary and a Director
of our Company on October 15, 2009. Since 2001, Mr.
Sebaaly has been self-employed as a business consultant, primarily
in the biotechnology and biopharmaceutical sectors. He
held a number of senior executive positions in various areas
including, financial management, business development, project
management and finance. As an executive and an entrepreneur, he
combines expertise in strategic planning and finance with strong
skills in business development and deal structure and
negotiations. In addition, Mr. Sebaaly worked in
operations, general management, investor relations, marketing and
business development with emphasis on international business and
marketing of advanced technologies including hydrogen generation
and energy saving. In the area of marketing, Mr. Sebaaly
has evaluated market demands and opportunities, created strategic
marketing and business development plans, designed marketing
communications and launched market penetration
programs. Mr. Sebaaly was a cofounder of Advanomics
Corporation with Dr. Slilaty. Mr. Sebaaly graduated from
State University of New York at Buffalo with an Electrical and
Computer Engineering Degree in 1987. He devotes
approximately 50% of his time to our business affairs.
There
are no family relationships between any of our former or current
officers and directors.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Securities Exchange Act of 1934 (the “34
Act”) requires our officers and directors and persons owning
more than ten percent of the Common Stock, to file initial reports
of ownership and changes in ownership with the Securities and
Exchange Commission (“SEC”). Additionally,
Item 405 of Regulation S-K under the 34 Act requires us to
identify in our Form 10-K and proxy statement those individuals for
whom one of the above referenced reports was not filed on a timely
basis during the most recent year or prior years. To our best
knowledge, all reports that were required to be filed were filed in
a timely manner.
23
Code of Ethics
Our
board of directors has not adopted a code of ethics but plans to do
so in the near future.
Committees of the Board of Directors
There
are no committees of the Board of Directors but it is anticipated
that we will establish an audit committee, nominating committee and
governance committee once independent directors are appointed,
which is expected to occur in the near future.
The
following table sets forth information concerning all cash and
non-cash compensation awarded to, earned by or paid to our
executive officers. We do not currently have an established policy
to provide compensation to members of our Board of Directors for
their services in that capacity, although we may choose to adopt a
policy in the future.
SUMMARY COMPENSATION TABLE
|
Name and
Principal Position
|
|
Year
|
Salary
($)
|
Bonus
($)
|
Option
Awards
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
Dr. Steve N.
Slilaty, CEO
|
|
2016
|
1,000
|
-
|
-
|
164,600
(2)
|
165,600
|
|
|
|
2015
|
-
|
-
|
-
|
50,000
(1)
|
50,000
(1)
|
|
|
|
2014
|
-
|
-
|
-
|
$
-
|
$
-
|
|
|
|
|
|
|
|
|
|
|
Camille Sebaaly,
CFO
|
|
2016
|
4,597
|
|
|
164,600
(2)
|
$
169,187
(2)
|
|
|
|
2015
|
|
|
|
-
|
-
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abderrazzak
Merzouki, COO
|
|
2016
|
|
|
|
164,600
(2)
|
164,600
(2)
|
|
|
|
2015
|
|
|
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Michele Di Turi,
COO(3)
|
|
|
|
|
|
|
|
|
|
|
2015
|
$
20,000
|
-
|
-
|
-
|
$
20,000
|
|
|
|
2014
|
$
15,000
|
-
|
-
|
|
$
15,000
|
(1)
In consideration for services
valued at $50,000, Dr. Slilaty was issued 500,000 shares of Series
“B” Preferred Stock having 1,000 votes per share. The
Series “B” Preferred Stock is non-convertible,
non-redeemable, non-retractable and has a stated value of $0.10 per
share. In addition, Dr. Slilaty was issued 12,000,000 shares of our
Common Stock in exchange for services valued at $84,000 during
2015. These Officers and Directors shares are restricted and may
not be sold without prior written consent of the Board of Directors
of the Company .
(2)
Each member of our Board of
Directors were issued 26,000,000 and 12,000,000 shares of our
Common Stock in 2016 for services rendered in 2016 and 2015,
respectively, which shares were valued at $80,600 and 84,000,
respectively. However, because these shares were issued in 2016 and
we had no legal obligation to issue these shares in 2015, the
aggregate value of these shares is listed as 2016 compensation
only. These Officers ad Directors shares are restricted and may not
be sold without prior written consent of the Board of Directors of
the Company.
(3)
Mr. Di Turi resigned his positions with us in
February 2015.
Salaries are
established by our Board of Directors. We currently do
not have a Compensation Committee but expect to have one in place
in the future once we have independent directors. We
have not and do not expect to pay any other compensation to our
current executive officers or directors until such time as we are
able to secure adequate funding for our operations.
None of
our employees are employed pursuant to an employment
agreement.
24
Employment Agreements
None of
our executive officers is party to an employment agreement with
us.
Stock Plan
We have
not adopted any stock option or other employee plans as of the date
of this Report. We may adopt such plans in the
future.
The
following table sets forth certain information regarding the
ownership of Common Stock and Preferred Stock voting with the
Common Stock as of the date of this Report ,by (i) each person
known to us to own more than 5% of our outstanding Common Stock as
of the date of this Report, (ii) each of our directors, (iii) each
of our executive officers, and (iv) all of our directors and
executive officers as a group. Unless otherwise
indicated, all shares are owned directly and the indicated person
has sole voting and investment power. The information provided is
based upon 851,927,983 Common Shares and 500,000 Series B Preferred
Shares issued and outstanding as of the date of this
Report.
|
Title of
Class
|
|
Name and Address
Of Beneficial Owner
|
Amount and
Nature Of Beneficial Ownership
|
Percent Of
Class
|
|
|
|
|
|
|
|
Common
|
|
Dr. Steve N.
Slilaty
(1)
579 rue
Lajeunesse
Laval,
Quebec
Canada H7X
3K4
|
253,398,597
(2)
|
29.8
%
|
|
|
|
|
|
|
|
Series B Preferred
(500,000 shares of 1,000 votes per share)
|
|
|
500,000,000
(3)
|
100
%
|
|
|
|
|
|
|
|
Common
|
|
Dr. Abderrazzak
Merzouki
(1)
731 Place de l'Eeau
Vive
Laval,
Quebec
Canada H7Y
2E1
|
39,467,000
|
4.6
%
|
|
|
|
|
|
|
|
Common
|
|
Camille
Sebaaly
())
14464 Gouin West,
#B
Montreal,
Quebec
Canada H9H
1B1
|
167,703,300
(4)
|
19.9
%
|
|
|
|
|
|
|
|
Common
|
|
Nabil
Dabar
150 Cote Vertu, Su,
200
Montreal, Quebec
H4N 1C6
Canada
|
49,219,656
|
5.8
%
|
|
|
|
|
|
|
|
Common
|
|
All Officers and
Directors
As a Group (3
persons)
|
960,568,897
|
71.1
%
|
|
|
|
|
|
|
|
Series B
Preferred
|
|
Dr, Steve N.
Silaty
|
500,000
(3)
|
100
%
|
|
(1)
|
Officer and Director of our
Company.
|
|
(2)
|
Includes 215,014,224 shares held in
the name of Advanomics Corporation. Dr. Slilaty is an
officer, director and principal shareholder of Advanomics and as a
result, controls the disposition of these
shares.
|
|
(3)
|
Comprised of 500,000 shares of
$0.10 par value Series “B” Preferred Stock having 1,000
votes per share. The Series “B” Preferred Stock is
non-convertible, non-redeemable, non-retractable and has a superior
liquidation value of $0.10 per share. See “Part
II, Item13 – Certain Relationships and Related Transactions
and Director Independence.”
|
| (4) | Includes 129,488,927 shares held in the name of 4019318 Canada, Inc. Mr. Sebaaly is the sole officer and director of this company and as a result, controls the disposition of these shares. |
25
Related Party Transactions
In December 2016, we received monies from our CEO
in exchange for a note payable having a principal of $90,000
Canadian ($67,032 US) with interest at 12% due March 31, 2017. The
Note is convertible any time after the date of issuance into shares
of our Common Stock at
a price 35% below market value.
We estimated that the fair value of the convertible debt
approximates the face value, so no value has been assigned to the
beneficial conversion feature.
This Note is collateralized by all our assets. On
March 31, 2017, the Note, together with all accrued interest
thereon and an additional principal amount of $3,000 Canadian paid
to us in March 2017, was renewed for a 90-day period under the same
terms and conditions as the original Note.
Effective October
8, 2015, we executed a Patent Purchase Agreement (the
“October Purchase Agreement”), with Advanomics, a
related party, pursuant to which we acquired all of the right,
title and interest in and to U.S. Patent Number 8,236,935 (the
“US Patent”) for our anticancer compound,
Adva-27a. The October Purchase Agreement provided us
with direct ownership of the US Patent, which includes all rights
to this intellectual property within the United
States. Prior, we had been licensing the right to use
the US Patent from Advanomics pursuant to the terms of an Exclusive
License Agreement, as amended (the “Exclusive License
Agreement”). In consideration for the assignment
of the US Patent, we agreed to make payments of twelve (12)
consecutive annual payments of $360,000 starting in
2016.
Effective December
28, 2015, we executed a second Patent Purchase Agreement (the
“December Purchase Agreement”), with Advanomics
pursuant to which we acquired all of the right, title and interest
in and to all of the remaining worldwide patent rights for issued
and pending patents under PCT/FR2007/000697 and PCT/CA2014/000029
(the “Worldwide Patents”) for our anticancer compound,
Adva-27a. The purchase price paid by us for these patent
rights was $12,822,499, which is payable pursuant to the terms of a
secured promissory note, with quarterly payments of $70,000 in
principal and interest beginning in March 2016 and continuing each
consecutive calendar quarter thereafter through December
2020. Advanomics was granted a security interest in both
the US Patent and the Worldwide Patents until all payments due
under the both Patent Purchase Agreements have been
made.
Effective December
28, 2015, the parties agreed to amend both of the aforesaid Patent
Purchase Agreements. The relevant notes of the original
Patent Purchase Agreements were cancelled and each replaced with a
new convertible note. The note applicable to the October
Purchase Agreement now has a face value of $210,519, comprised of
$155,940 in principal amount which is Advanomics’ book value
of the US Patent, plus $54,579 as an adjustment for the currency
exchange difference. The new note pertaining to the
December Purchase Agreement was replaced with a convertible note
having a face value of $624,875, comprised of $462,870 in principal
amount, which is Advanomics’ book value of the Worldwide
Patents, plus $162,005 as an adjustment for the currency exchange
difference. Advanomics has retained a security interest
in the Patents until such time as the automatic conversion of the
new notes into Common shares is completed.
As a
result of the aforesaid two transactions we now own all of the
patents and rights throughout the world for Adva-27a.
We
believe that purchase of the Patents would facilitate our ability
to obtain the funding necessary to complete the development and FDA
approval process for Adva-27a. Entering into amendments
(“Amendments”) of the original patent purchase
agreements was subsequently believed to be necessary as the
burdensome financial obligations imposed by the terms of the
original Patent Purchase Agreements were not conducive to obtaining
such financing, to the mutual detriment of both ourselves and
Advanomics. The Amendments amended the purchase price of
the Patents, eliminated all cash payments obligations and replaced
the non-convertible notes totaling $17,142,499 with convertible
notes that will automatically convert into an aggregate of
321,305,415 shares of our Common Stock (representing approximately
59% of our issued and outstanding Common shares) once we
successfully amend our Articles of Incorporation to increase our
authorized capital of Common Stock to 3 billion.
26
Prior
to the aforesaid patent purchase transactions we had been licensing
our technology on an exclusive basis (“Exclusive License
Agreement”) from Advanomics. On December 21, 2011,
we executed an amendment to the Exclusive License Agreement which
waived a condition of termination and revised the consideration
payable to Advanomics. The original Exclusive License
Agreement required us to exercise an option to purchase shares in
Advanomics for aggregate consideration of $9,700,000.00 ($5.00 per
share). This obligation was waived and replaced with an
annual licensing fee of $360,000.00 and reimbursement of R&D
expenses incurred by Advanomics in connection with Adva-27a, the
Licensed Material as defined in the original Exclusive License
Agreement.
We
believe the financial terms of the two aforesaid patents purchase
arrangements are more favorable to us than under the Exclusive
License Agreement. Our obligations under the Exclusive
License Agreement required us to pay Advanomics a perpetual annual
license fee of $360,000 and reimburse Advanomics for all R&D
expenses incurred by Advanomics in connection with Adva-27a, the
Licensed Material (as defined in the Exclusive License
Agreement). The October Purchase Agreement terminated
the Exclusive License Agreement and all obligations
thereunder.
Certain
members of our management, including Dr. Steve N. Slilaty, our
President, CEO and a Director and Camille Sebaaly, our Secretary,
CFO and a Director, hold similar positions with
Advanomics. We believe that the terms of the patent
acquisitions are fair and reasonable and will result in a greater
opportunity for us to obtain the funding necessary to complete the
approval process of the FDA for Adva-27a. However, there
are no assurances this will occur and as of the date of this
report, we have no binding commitment from any financing source to
provide us with the funds necessary to complete the approval
process.
During
the fiscal year ended December 31, 2015, we authorized 500,000
shares of $0.10 par value Series “B” Preferred
Stock. The Series “B” Preferred Stock is
non-convertible, non-redeemable, and non-retractable, has a
superior liquidation value of $0.10 per share and gives the holder
the right to 1,000 votes per share. All 500,000 shares
of the Series “B” Preferred Stock were issued to Dr.
Slilaty, our CEO, in exchange for services valued at
$50,000.
Our
principal place of business is located at 469 Jean-Talon West, 3rd
Floor, Montreal, Quebec, Canada, H3N 1R4. This is also
the location of our former licensor, Advanomics Corporation, who
provided this space to us on a rent free basis in 2015 and
2016. Dr. Steve N. Slilaty, our Chief Executive Officer
and a Director, is an Officer, Director and principal shareholder
of Advanomics. Starting January 1, 2017 we took over the
lease from Advanomics and this space is now exclusively our
own.
In
February and April 2016, we paid $30,000 and $50,487 to Advanomics
for the balance of 2015 licensing fees.
On November 27,
2014, we issued a Note Payable in the principal amount of $128,000
to an individual who is now a principal shareholder. This Note
accrues interest at 10% per annum and was originally due May 27,
2015 and was originally convertible into shares of our Common Stock
at a price of $0.20 per share. On June 30, 2015, we renewed this
note with the addition of accrued interest amounting to $7,540 and
an origination fee of $25,600. The new Note has a Face Value of
$161,140 and accrues interest at 12%. The new Note was due December
31, 2015, and was convertible any time from the date of issuance
into shares of our Common Stock at a 35% discount from market
price. On December 31, 2015, we again renewed this note with the
addition of accrued interest amounting to $9,668 and an origination
fee of $32,228. The new Note has a Face Value of $203,036 and
accrues interest at 12%. The new Note was due June 30, 2016, was
convertible anytime from the date of issuance into shares of our
Common Stock at a 35% discount from market price. In January 2016,
$38,036 of the principal was converted, leaving a principal balance
of $165,000. In connection therewith, 7,705,186 shares of our
Common Stock, valued $231,156 were issued generating a loss on
conversion of $193,120. We renewed this note again with the
addition of accrued interest amounting to $9,852. The renewed note
has a Face Value of $174,852 and accrues interest at 12%. It is due
on March 31, 2017. In October 2016, $74,852 of the principal amount
was converted, leaving a principal balance of $100,000, which was
renewed with interest thereon for 90 days. In connection therewith,
40,374,475 shares of our Common Stock valued $290,696 were issued
generating a loss of $215, 844 on conversion. As a result of this
conversion, the holder then held over 5% of our issued and
outstanding Common Shares. We estimate that the fair value of this
convertible debt approximates the face value, so no value has been
assigned to the beneficial conversion feature to be recognized at
conversion.
In
January, 2017, we paid $2,000 Canadian (approximately $1,500 US) to
our COO for consulting services to be rendered to us in
2017.
During
the fiscal year ended December 31, 2016, Advanomics Corporation
paid on our behalf $13,725 Canadian in patenting fees. Advanomics
was fully reimbursed by us in January 2017.
On
March 31, 2017, the $100,000 remaining principal balance of a
convertible note payable held by on eof our principal shareholders,
was renewed together with $11,715 in accrued interest for a 90-day
period under the same terms and conditions as the original
note.
There
are no other related party transactions that are required to be
disclosed pursuant to Regulation S-K promulgated under the
Securities Act of 1933, as amended.
Director Independence
None of
our current directors are deemed “independent” pursuant
to SEC rules. We anticipate appointing independent
directors in the foreseeable future.
Fees Paid to Independent Registered Public Accounting
Firms
The
following table presents fees for professional audit services
rendered by B F Borgers CPA PC, our independent auditors, during
our fiscal year ended December 31, 2016 and 2015:
27
|
|
December
31,
2015
|
December
31,
2016
|
|
Audit
Fees
|
$
13,000
|
$
21,600
|
|
|
-
|
|
|
Tax
Fees
|
-
|
|
|
All Other
Fees
|
-
|
|
|
Total
|
$
13,000
|
$
21,600
|
Audit Fees
. Consist of amounts billed
for professional services rendered for the audit of our annual
financial statements included in our Annual Reports on Forms 10-K
for our fiscal years ended December 31, 2016 and 2014 and reviews
of our interim financial statements included in our Quarterly
Reports on Form 10-Q.
Tax Fees
. Consists of amounts
billed for professional services rendered for tax return
preparation, tax planning and tax advice.
All Other Fees
. Consists of
amounts billed for services other than those noted
above.
We do
not have an audit committee and as a result our entire board of
directors performs the duties of an audit committee. Our
board of directors evaluates the scope and cost of the engagement
of an auditor before the auditor renders audit and non-audit
services.
28
The
following exhibits are included herewith:
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to
18 U.S.C. Section 1350
|
|
101.INS
|
XBRL
Instances Document
|
|
|
|
|
101.SCH
|
XBRL
Taxonomy Extension Schema Document
|
|
|
|
|
101.CAL
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
101.DEF
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
101.LAB
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
|
|
|
101.PRE
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
Following
are a list of exhibits which we previously filed in other reports
which we filed with the SEC, including the Exhibit No., description
of the exhibit and the identity of the Report where the exhibit was
filed.
|
No.
|
|
Description
|
|
Filed With
|
|
Date
|
|
3.1
|
|
Articles
of Incorporation
|
|
Form
SB-2 Registration Statement
|
|
October
19, 2007
|
|
3.2
|
|
Bylaws
|
|
Form
SB-2 Registration Statement
|
|
October
19, 2007
|
|
3.3
|
|
Articles
of Amendment (Name Change)
|
|
Form
8-K Dated November 2, 2009
|
|
November
6, 2009
|
|
3.4
|
|
Statement
of Share and Equity Capital Exchange
|
|
Form
10-Q For Quarter Ended 06/30/10
|
|
August
4, 2010
|
|
3.5
|
|
Articles
of Amendment (Add Preferred and Series A Preferred to
Authorized)
|
|
Form
10-Q For Quarter Ended 06/30/10
|
|
August
4, 2010
|
|
10.1
|
|
Share
Exchange Agreement with Sunshine Biopharma, Inc.
|
|
Form
8-K Dated October 15, 2009
|
|
October
20, 2009
|
|
10.2
|
|
License
Agreement with Advanomics, Inc.
|
|
Form
8-K/A1 Dated October 15, 2009
|
|
January
19, 2010
|
|
10.3
|
|
Amendment
No. 1 to License Agreement with Advanomics, Inc.
|
|
Form
8-K/A1 Dated October 15, 2009
|
|
January
19, 2010
|
|
10.4
|
|
Research
Agreement with The Research Foundation of the State University of
New York
|
|
Form
8-K Dated January 17, 2011
|
|
January
19, 2011
|
|
10.5
|
|
Research
Agreement with Jewish General Hospital
|
|
Form
8-K Dated June 14, 2011
|
|
June
17, 2011
|
|
10.6
|
|
Amendment
No. 2 to License Agreement with Advanomics
|
|
Form
8-K Dated December 21, 2011
|
|
December
27, 2011
|
|
10.7
|
|
Investment
Agreement with Dutchess Investment Group II
|
|
Form
8-K dated April 23, 2015
|
|
April
28, 2015
|
|
10.8
|
|
Registration
Rights Agreement with Dutchess Investment Group II
|
|
“
|
|
“
|
|
10.9
|
|
Patent
Purchase Agreement with Advanomics Corporation
|
|
Form
8-K dated October 8, 2015
|
|
October
9, 2015
|
|
10.10
|
|
Second
Patent Purchase Agreement with Advanomics Corporation
|
|
Form
8-K dated December 28, 2015
|
|
December
28, 2015
|
|
10.11
|
|
Amendment
No. 1 to Patent Purchase Agreement with Advanomics Corporation
dated October 8, 2015, including Secured Convertible Promissory
Note.
|
|
Form
8-K dated March 14, 2016
|
|
March
14, 2016
|
|
10.12
|
|
Amendment
No. 1 to Patent Purchase Agreement with Advanomics Corporation
dated December 28, 2015, including Secured Convertible Promissory
Note
|
|
Form
8-K dated March 14, 2016
|
|
March
14, 2016
|
|
21.2
|
|
List of
Subsidiaries
|
|
Form
10-K For FYE December 31, 2010
|
|
March
30, 2011
|
29
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned thereunder duly
authorized.
|
|
SUNSHINE BIOPHARMA, INC.
|
|
|
|
|
|
|
|
|
Dated:
April 17, 2017
|
By:
|
/s/ Dr.
Steve N. Slilaty
|
|
|
|
|
Dr.
Steve N. Slilaty, Principal Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Camille Sebaaly
|
|
|
|
|
Camille
Sebaaly, Principal Financial and Accounting Officer
|
|
|
|
|
|
|
In
accordance with the Exchange Act, this Annual Report has been
signed below by the following persons on behalf of the registrant
and in the capacities indicated on April 17, 2017.
s/ Dr. Steve N. Slilaty
Dr.
Steve N. Slilaty, Director
s/ Camille Sebaaly
Camille
Sebaaly, Director
s/ Dr. Abderrazzak Merzouki
Dr.
Abderrazzak Merzouki, Director
30
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Mine Safety DisclosuresPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataNote 1 Description Of BusinessNote 2 Summary Of Significant Accounting PoliciesNote 3 Going ConcernNote 4 PatentsNote 5 Capital StockNote 6 Earnings Per ShareNote 7 Issuance Of Series B Preferred StockNote 8 Income TaxesNote 9 Notes PayableNote 10 Notes Payable - Related EntityNote 11 Related Party TransactionsNote 12 Royalties PayableNote 13 Subsequent EventsItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions and Director IndependenceItem 14. Principal Accounting Fees and ServicesPart IVItem 15. Exhibits, Financial Statement Schedules