SUNSHINE BIOPHARMA, INC
10-Ks and 10-Qs
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended:
June
30, 2018
Commission File Number:
000-52898
SUNSHINE BIOPHARMA INC.
(Exact name of small business issuer as specified in its
charter)
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Colorado
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20-5566275
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(State
of other jurisdiction of incorporation)
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(IRS
Employer ID No.)
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6500 Trans-Canada Highway
4th Floor
Pointe-Claire, Quebec, Canada H9R 0A5
(Address of principal executive offices)
514) 426-6161
(Issuer’s Telephone
Number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days: Yes
☑
No
☐
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes
☑
No
☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer”, “smaller reporting company”, and
“emerging growth company” in Rule 12b-2 of the Exchange
Act. (Check one)
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Large
accelerated filer
☐
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Accelerated
filer
☐
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Non-accelerated
filer
☐
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Smaller
reporting company
☐
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Emerging
growth company
☒
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If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act).
☐
Yes
☑
No
The number of shares of the registrant’s only class of common
stock issued and outstanding as of August 17, 2018, was
1,179,237,384
shares.
TABLE OF CONTENTS
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Page
No.
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3
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3
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4
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5
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6
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12
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19
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19
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21
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21
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21
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21
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21
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21
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22
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23
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2
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S
unshine Biopharma, Inc.
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Consolidated
Condensed Balance Sheet
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||||||
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Unaudited
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Audited
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June
30,
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December
31,
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2018
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2017
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ASSETS
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Current Assets:
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Cash and cash
equivalents
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$
36,395
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$
107,532
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Accounts
receivable
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108,230
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-
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Other receivable
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51,000
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-
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Prepaid expenses
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1,089
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9,667
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Total Current
Assets
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196,714
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117,199
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Equipment (net of $25,864 and $9,132
depreciation resepctively)
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299,946
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59,996
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Patents (net of $58,918 amortization
and $556,120
impairment)
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-
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-
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Deposits
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-
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80,290
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Goodwill
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673,646
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-
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TOTAL ASSETS
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$
1,170,306
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$
257,485
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LIABILITIES AND SHAREHOLDERS'
EQUITY
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Current
Liabilities:
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Notes payable
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719,730
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516,867
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Notes payable - related
party
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242,672
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205,742
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Bank overdraft
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1,012
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-
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Accounts payable & accrued
expenses
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139,020
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19,314
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Interest payable
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34,334
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9,215
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Total Current
Liabilities
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1,136,768
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751,138
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Long-term
Liabilities:
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Note payable
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-
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79,710
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Related party note
payable
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309,668
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-
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TOTAL
LIABILITIES
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1,446,436
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830,848
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COMMITMENTS AND
CONTINGENCIES
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SHAREHOLDERS' EQUITY
(DEFICIT)
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Preferred stock, Series A $0.10 par
value per share;
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Authorized 850,000 Shares;
Issued
and outstanding -0-
shares.
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-
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-
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Preferred stock, Series B $0.10 par
value per share;
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Authorized 500,000 Shares;
Issued
and outstanding 500,000
shares.
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50,000
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50,000
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Common Stock, $0.001 par value per
share;
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Authorized 3,000,000,000
Shares; Issued
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and outstanding 1,104,105,806
and 918,736,498 at
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June 30, 2018 and December 31,
2017 respectively
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1,104,106
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918,737
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Reserved for issuance 572,727,700
shares at June 30, 2018
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Capital paid in excess of par
value
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13,106,164
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12,075,586
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Accumulated comprehensive
income
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(8,266
)
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504
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Accumulated
(Deficit)
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(14,528,134
)
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(13,618,190
)
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TOTAL SHAREHOLDERS' EQUITY
(DEFICIT)
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(276,130
)
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(573,363
)
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TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
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$
1,170,306
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$
257,485
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See Accompanying
Notes To These Financial Statements.
3
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S
unshine Biopharma, Inc.
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Unaudited
Consolidated Condensed Statement Of Operations and Comprehensive
Loss
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Unaudited
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Unaudited
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Unaudited
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Unaudited
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3
Months
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3
Months
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6
Months
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6
Months
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Ended
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Ended
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Ended
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Ended
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June
30,
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June
30,
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June
30,
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June
30,
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2018
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2017
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2018
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2017
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Revenue:
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$
107,250
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$
-
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$
198,418
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$
-
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Cost of
Revenue
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91,631
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-
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190,913
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-
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Gross
profit
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15,619
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-
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7,505
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-
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General & Administrative
Expenses
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Accounting
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61,939
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48,415
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89,939
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64,015
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Consulting
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23,682
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33,930
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27,800
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59,867
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Legal
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31,600
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27,920
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59,085
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42,824
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Office
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20,068
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13,032
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39,116
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22,098
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Officer & director
renumeration
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446,644
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348,415
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524,431
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391,380
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Rent
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2,035
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3,572
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Depreciation
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602
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506
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1,210
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1,024
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Total G & A
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586,570
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472,218
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745,153
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581,208
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(Loss) from
operations
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(570,951
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(472,218
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(737,648
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(581,208
)
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Other Income
(expense):
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Foreign exchange gain
(loss)
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10,016
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(3,628
)
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24,884
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(4,267
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Interest expense
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(28,375
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(9,598
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(103,842
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(18,742
)
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Loss on debt
conversions
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(54,998
)
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-
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(93,338
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(76,929
)
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Total Other
(Expense)
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(73,357
)
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(13,226
)
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(172,296
)
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(99,938
)
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Net
(loss)
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$
(644,308
)
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$
(485,444
)
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$
(909,944
)
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$
(681,146
)
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Basic (Loss) per common
share
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$
0.00
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$
0.00
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$
0.00
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$
0.00
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Weighted Average Common Shares
Outstanding
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1,000,371,607
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857,473,771
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971,151,423
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811,800,080
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Net Income
(Loss)
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$
(644,308
)
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$
(485,444
)
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$
(909,944
)
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$
(681,146
)
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Other comprehensive
income:
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Gain (Loss) from foreign exchange
translation
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(4,056
)
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2,680
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(5,786
)
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3,795
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Comprehensive
(Loss)
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(648,364
)
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(482,764
)
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(915,730
)
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(677,351
)
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Basic (Loss) per Common
Share
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$
0.00
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$
0.00
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$
0.00
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$
0.00
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Weighted Average Common Shares
Outstanding
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1,000,371,607
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857,473,771
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971,151,423
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811,800,080
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See Accompanying Notes To These Financial
Statements.
4
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S
unshine Biopharma, Inc.
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Unaudited
Consolidated Condensed Statement Of Cash Flows
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|||||
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Unaudited
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Unaudited
|
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6
Months
|
6
Months
|
|
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Ended
|
Ended
|
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June
30,
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June
30,
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2018
|
2017
|
|
Cash
Flows From Operating Activities:
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Net Loss
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$
(909,944
)
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$
(681,146
)
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Depreciation and
amortization
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16,404
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1,024
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Foreign exchange
loss
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(24,884
)
|
4,267
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Stock issued for licenses, services,
and other assets
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505,100
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64,000
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Stock issued for payment
interest
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7,886
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3,022
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Loss on debt
conversion
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93,585
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76,929
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Interest
forgiven
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(247
)
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Stock issued for payment of
expenses
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-
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14,400
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(Increase) decrease in accounts
receivable
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(28,722
)
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-
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(Increase) decrease in prepaid
expenses
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8,578
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(7,530
)
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Increase (decrease) in Accounts
Payable & accrued expenses
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14,227
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342,773
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Increase (decrease) in interest
payable
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25,119
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(3,589
)
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Net Cash Flows Used in
Operations
|
(292,898
)
|
(185,850
)
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Cash
Flows From Investing Activities:
|
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Cash received from acquisition of
subsidiary
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4,942
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Purchase of
equipment
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(27,370
)
|
(22,295
)
|
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Net Cash Flows Used in Investing
Activities
|
(22,428
)
|
(22,295
)
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Cash
Flows From Financing Activities:
|
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|
Proceed from notes
payables
|
381,885
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188,444
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|
Sale of common
stock
|
|
63,912
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|
Payment of notes
payable
|
(146,184
)
|
-
|
|
Advances from related
parties
|
12,240
|
|
|
Payments to related
parties
|
(13,216
)
|
|
|
Note payable used to pay
expenses
|
|
13,962
|
|
Note payable used to pay origination
fees & interest
|
15,250
|
9,347
|
|
|
|
|
|
Net Cash Flows Provided by Financing
Activities
|
249,975
|
275,665
|
|
|
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|
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Net Increase (Decrease) In Cash and
cash equivalents
|
(65,351
)
|
67,520
|
|
Foreign currency translation
adjustment
|
(5,786
)
|
3,795
|
|
Cash and cash equivalents at
beginning of period
|
107,532
|
57,453
|
|
|
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|
Cash and cash equivalents at end of
period
|
$
36,395
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$
128,768
|
|
|
-
|
|
|
Supplementary Disclosure Of Cash Flow
Information:
|
|
|
|
Stock issued for services, licenses
and other assets
|
$
679,908
|
$
78,400
|
|
Stock issued for note conversions
including interest
|
$
290,039
|
$
128,451
|
|
Stock issued for acqusition of
subsidiary
|
$
246,000
|
$
-
|
|
Note payable issued for acquisition
of subsidiary
|
$
358,407
|
$
-
|
|
Cash paid for
interest
|
$
13,622
|
$
-
|
|
Cash paid for income
taxes
|
$
-
|
$
-
|
See Accompanying Notes To These Financial
Statements.
5
S
unshine Biopharma, Inc.
Notes
To Unaudited Consolidated Financial Statements
For The
Three and Six Month Interim Period Ended June 30, 2018
Note 1 – Nature of Business and Basis of
Presentation
The
Company was originally incorporated under the name Mountain West
Business Solutions, Inc. (“MBS”) on August 31, 2006 in
the State of Colorado. Until October 2009, the Company was
operating as a business consultancy firm. Effective October 15,
2009, the Company acquired Sunshine Biopharma, Inc. in a
transaction classified as a reverse acquisition. Sunshine
Biopharma, Inc. was holding an exclusive license to a new
anticancer drug bearing the laboratory name, Adva-27a. Upon
completion of the reverse acquisition transaction, the Company
changed its name to Sunshine Biopharma, Inc. and began operating as
a pharmaceutical company focusing on the development the licensed
Adva-27a anticancer drug.
In July
2014, the Company 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 world. Sunshine Canada has signed
licensing agreements for four (4) generic prescription drugs for
treatment of breast cancer, prostate cancer and BPH (Benign
Prostatic Hyperplasia). 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.
On
January 1, 2018 the Company acquired all of the issued and
outstanding shares of Atlas Pharma Inc. (“Atlas”), a
Canadian privately held company. The purchase price for the shares
was Eight Hundred Forty Eight Thousand Dollars $848,000 Canadian
($684,697 US). The purchase price included a cash payment of
$100,500 Canadian ($80,289 US), plus the issuance of 20,000,000
shares of the Company’s Common Stock valued at $246,000 or
$0.0123 per share, and a promissory note in the principal amount of
$450,000 Canadian ($358,407 US), with interest payable at the rate
of 3% per annum. Atlas is a certified company dedicated to chemical
analysis of pharmaceutical and other industrial samples.
Atlas’ operations are authorized by a Drug Establishment
License issued by Health Canada. Atlas is also registered with the
FDA.
The Company has performed analysis of the fair market value of
Atlas Pharma Inc. assets and liabilities. The following table
summarizes the allocation of the purchase price as of the
acquisition date:
|
Cash
|
$
4,942
|
|
Accounts
receivable
|
79,508
|
|
Prepaids
|
1,428
|
|
Property
and equipment
|
62,990
|
|
Goodwill
|
673,646
|
|
|
|
|
Less:
Liabilities assumed ($172,899 Canadian)
|
( 137,817
)
|
|
|
|
|
Total
consideration
|
$
684,697
|
While
the agreement to acquire Atlas Pharma Inc. was signed effective
January 1, 2018, there are several matters which are yet to be
completed. In addition, as of the date of this report, the audit of
Atlas Pharma Inc. has not been completed. As a result, various
disclosures in this report may have to be updated. The updated
information may differ and the difference may be
material.
In
March 2018, the Company formed NOX Pharmaceuticals, Inc., a wholly
owned Colorado corporation and assigned all of the Company’s
interest in the Adva27a anticancer drug to that company. NOX
Pharmaceuticals Inc.’s mission is to research, develop and
commercialize proprietary drugs including Adva-27a.
The
financial statements represent the consolidated activity of
Sunshine Biopharma, Inc., Sunshine Biopharma Canada Inc., Atlas
Pharma Inc. and NOX Pharmaceuticals, Inc. (herein collectively
referred to as the "Company").
6
Sunshine
Biopharma, Inc.
Notes
To Unaudited Consolidated Financial Statements
For The
Three and Six Month Interim Period Ended June 30, 2018
The
Company has been and continues to work on the development of its
proprietary anticancer drug, Adva-27a. The next series of steps in
the development of Adva-27a include (i) GMP-manufacturing of a
2-kilogram quantity of the drug, (ii) completing the requisite
IND-enabling studies, and (iii) conducting Phase I clinical trials.
In the preclinical studies, Adva-27a was 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.
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.
Basis of Presentation of Unaudited Condensed Financial
Information
The
unaudited condensed financial statements of the Company for the
three and six month periods ended June 30, 2018 and 2017 have been
prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial
information and pursuant to the requirements for reporting on Form
10-Q and Regulation S-K. Accordingly, they do not include all the
information and footnotes required by accounting principles
generally accepted in the United States of America for complete
financial statements. However, such information reflects all
adjustments (consisting solely of normal recurring adjustments),
which are, in the opinion of management, necessary for the fair
presentation of the financial position and the results of
operations. Results shown for interim periods are not necessarily
indicative of the results to be obtained for a full fiscal year.
The balance sheet information as of June 30, 2018 was derived from
the audited financial statements included in the Company's
financial statements as of and for the year ended December 31, 2017
included in the Company’s Annual Report on Form 10-K filed
with the Securities and Exchange Commission (the “SEC”)
on April 2, 2018. These financial statements should be read in
conjunction with that report.
Recently Issued Accounting Pronouncements
Recently
issued amendments by the FASB are effective for fiscal years
beginning after December 15, 2017, and should be applied
prospectively on or after the adoption date. Early adoption is
permitted, including adoption in an interim period. The Company
does not expect these amendments to have a material impact on its
financial statements.
In
March 2017, the FASB issued ASU No. 2017-08,
Receivables—Nonrefundable Fees and Other Costs (Subtopic
310-20): Premium Amortization on Purchased Callable Debt
Securities, to amend the amortization period for certain purchased
callable debt securities held at a premium. The ASU shortens the
amortization period for the premium to the earliest call date.
Under current Generally Accepted Accounting Principles
(“GAAP”), entities generally amortize the premium as an
adjustment of yield over the contractual life of the instrument.
The amendments should be applied on a modified retrospective basis,
and are effective for fiscal years beginning after December 15,
2018. Early adoption is permitted, including adoption in an interim
period. The Company is currently evaluating the impact of this
amendment on its financial statements.
In
February 2016, the FASB issued ASU 2016-02, Leases, effective for
annual reporting periods beginning on or after December 15, 2018,
and interim periods within those annual periods. Earlier
application is permitted as of the beginning of an interim or
annual period. This update requires organizations to recognize
lease assets and lease liabilities on the balance sheet with lease
terms of more than 12 months and also disclose certain qualitative
and quantitative information about leasing arrangements. The
Company does not expect adoption of this amendment to have a
material impact on the financial statements.
7
Sunshine
Biopharma, Inc.
Notes
To Unaudited Consolidated Financial Statements
For The
Three and Six Month Interim Period Ended June 30, 2018
Note 2 – Going Concern
The
accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. Since
inception, the Company has had recurring operating losses and
negative operating cash flows. These factors raise substantial
doubt about the Company’s ability to continue as a going
concern.
The
Company’s continuation as a going concern is dependent on its
ability to obtain additional financing to fund operations,
implement its business, and ultimately, attain profitability. The
Company will need to secure additional funds through various means,
including equity and debt financing. There can be no assurance that
the Company will be able to obtain additional equity or debt
financing, if and when needed, on terms acceptable to the Company,
or at all. Any additional equity or debt financing may involve
substantial dilution to the Company’s stockholders,
restrictive covenants or high interest costs. The Company’s
long-term liquidity also depends upon its ability to generate
revenues and achieve profitability.
Note 3 – Notes Payable
On
January 12, 2018, the Company received net proceeds of $100,000 in
exchange for a note payable having a face value of $102,000 and
accruing interest at the rate of 8% per annum. The note, due on
October 30, 2018, is convertible after 180 days from issuance into
$0.001 par value Common Stock at a price 35% below market value.
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.
On
February 7, 2018, the Company received net proceeds of $142,500 in
exchange for a note payable having a face value of $150,000 and
accruing interest at the rate of 8% per annum. The note, due on
February 7, 2019, is convertible after 180 days from issuance into
$0.001 par value Common Stock at a price 35% below market value.
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.
On
February 20, 2018, the Company received net proceeds of $83,000 in
exchange for a note payable having a face value of $85,000 and
accruing interest at the rate of 8% per annum. The note, due on
November 30, 2018, is convertible after 180 days from issuance into
$0.001 par value Common Stock at a price 35% below market value.
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.
On May
29, 2018, the Company received net proceeds of $25,000 in exchange
for a note payable having a face value of $26,750 and accruing
interest at the rate of 8% per annum. The note, due on February 28,
2019 is convertible after 180 days from issuance into $0.001 par
value Common Stock at a price 35% below market value. 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.
On June
27, 2018, the Company issued a note payable having a face value of
$53,000 and accruing interest at the rate of 8% per annum. The net
proceeds of $51,000 from this note were received by the Company on
July 2, 2018. The note, due on April 15, 2019 is convertible after
180 days from issuance into $0.001 par value Common Stock at a
price 35% below market value. 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.
At June
30, 2018 and December 31, 2017, accrued interest on Notes Payable
was $34,334 and $9,481, respectively.
8
Sunshine
Biopharma, Inc.
Notes
To Unaudited Consolidated Financial Statements
For The
Three and Six Month Interim Period Ended June 30, 2018
Note 4 – Notes Payable - Related Party
On
January 1, 2018 as part of the acquisition of Atlas Pharma Inc.,
the Company issued a note payable in the amount of $450,000
Canadian ($358,407 US) and accruing interest at the rate of 3% per
annum. The note is due on December 31, 2023. Payments on this note
are $10,000 Canadian (approximately $8,000 US) per quarter. The
outstanding principal balance at June 30, 2018 is $331,668. The
note is secured by the Atlas Pharma Inc. shares held by the
Company.
In
addition to the above, on June 30, 2018 the Company had notes
payable from related parties amounting to $201,786 and accrued
interest of $12,125.
Note 5 – Issuance of Common Stock
During
the six months ended June 30, 2018, the Company issued a total of
185,369,308 shares of $0.001 par value Common Stock. Of these,
42,584,566 shares valued at $290,286 were issued upon conversion of
outstanding notes payable, reducing the debt by $188,568 and
interest payable by $8,133 and generating a loss on conversion of
$93,585. The Company also issued 92,650,000 shares valued at
$499,200 for services, and 29,134,742 shares valued at $174,808 in
exchange for equipment.
In
addition, 20,000,000 shares valued at $246,000 or $0.0123 per share
were issued as part of the acquisition of Atlas Pharma Inc.
The Company also
issued 1,000,000
shares valued at $5,900 in exchange for cancellation of a royalty
obligation.
The
Company declared no dividends through June 30, 2018.
Note 6 – Commitments
The Company’s subsidiary, Atlas Pharma Inc., has entered into
long-term lease agreements for the rental of buildings which call
for minimum lease payments of $228,113 and additional lease
payments based on operating expenses. The lease expires on May 21,
2021. Minimum lease payments for the next four years are $62,213 in
2018, $62,213 in 2019, $62,213 in 2020, and $41,474 in
2021.
Note 7 – Earnings (Loss) Per Share
Earnings
(loss) per share is computed using the weighted average number of
Common Shares outstanding during the period. The Company has
adopted ASC 260 (formerly SFAS128), “Earnings per
Share”.
Note 8 – Goodwill
On January 1, 2018, the Company acquired all of the issued and
outstanding shares of Atlas Pharma Inc. ("Atlas"), a Canadian
privately held company. The purchase price for the shares was Eight
Hundred Forty Eight Thousand Dollars ($848,000) Canadian ($684,697
US). The book value of the fixed assets acquired was $11,051. The
remainder of the purchase price ($673,646) was applied to
Goodwill.
9
Sunshine
Biopharma, Inc.
Notes
To Unaudited Consolidated Financial Statements
For The
Three and Six Month Interim Period Ended June 30, 2018
Note 9 – Income Taxes
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.
A
deferred tax asset at each date has been offset by a 100% valuation
allowance.
Note 10 – Royalties Payable
As part
of a subscription agreement entered into in 2016, 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. During the period ended
June 30, 2018 1,000,000 shares of the Company’s common stock
valued at $5,900 was issued in exchange for cancellation of this
royalty obligation.
Note 11 – Related Party Transactions
In
addition to the related party transactions detailed in Note 4
above, the Company paid its Officers and Directors cash
compensation totaling $17,344 and $12,415 and $95,131 and $55,380
for the three and six month periods ended June 30, 2018 and 2017,
respectively. The Company also paid its Officers and Directors
non-cash compensation in the form of shares of common stock valued
at $429,300 and $336,000 and $429,300 and $336,000 during the three
and six month periods ended June 30, 2018 and 2017 respectively. In
June 2018 the Company expensed an additional $429,300 in
compensation to the directors in exchange for 81,000,000 shares of
$0.001 par value common stock issued in June 2018 valued at $0.0053
per share. Stock issued for executive compensation is valued at the
closing price on the date of issuance.
Note 12 – Revenue Recognition
As of
January 1, 2018, the Company adopted ASU No. 201409, “Revenue
from Contracts with Customers” (ASU 201409). Under the new
guidance, an entity will recognize revenue to depict the transfer
of promised goods or services to customers at an amount that the
entity expects to be entitled to in exchange for those goods or
services. A five-step model has been introduced for an entity to
apply when recognizing revenue. The new guidance also includes
enhanced disclosure requirements. The guidance was effective
January 1, 2018 and was applied on a modified basis. The adoption
did not have an impact on the Company's financial statements.
A
ll of the revenues
of the Company are generated by Atlas Pharma Inc., the Company's
wholly owned Canadian subsidiary which provides laboratory testing
services. Local governmental regulations require that companies
recognize revenues upon completion of the work by issuing an
invoice and remitting the applicable sales taxes (GST and QST) to
the appropriate government agency. Atlas Pharma Inc.'s revenue
recognition policy is in compliance with these local
regulations.
Note 13 – Accounts Receivable
Accounts
receivable consist of trade accounts arising in the normal course
of business and are classified as current assets and carried at
original invoice amounts less an estimate for doubtful receivables
based on a review of outstanding balances on a monthly basis. The
estimate of allowance for doubtful accounts is based on the
Company's bad debt experience, market conditions, and aging of
accounts receivable, among other factors. If the financial
condition of the Company's customers deteriorates resulting in the
customer's inability to pay the Company's receivables as they come
due, additional allowances for doubtful accounts will be
required.
10
Sunshine
Biopharma, Inc.
Notes
To Unaudited Consolidated Financial Statements
For The
Three and Six Month Interim Period Ended June 30, 2018
Note 14 – Subsequent Events
On July
5, 2018, the holder of a note payable dated November 14, 2017
elected to convert $20,000 in principal into 6,505,122 shares of
Common Stock leaving a principal balance of $93,000.
On July
11, and August 2, 2018, the holder of a note payable dated October
26, 2017 elected to convert a total of $44,000 in principal and
$2,531 in accrued interest into 20,821,004 shares of Common Stock
leaving a principal balance of $23,000.
On July
17, 23, 26, and August 2,
7, and 10
,
2018, the holder of a note payable dated January 12, 2018 elected
to convert a total of $81,000 in principal into an aggregate
of
47,805,452
shares of Common Stock leaving a principal balance of
$21,000.
11
The following discussion should be read in conjunction with our
consolidated 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.
Overview and 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.
In
October 2009, we acquired Sunshine Biopharma, Inc., a Colorado
corporation holding an exclusive license to a new anticancer drug
bearing the laboratory name, Adva-27a. 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 Sunshine Biopharma, Inc.’s
management at the time, including our current CEO, Dr. Steve N.
Slilaty, and our current CFO, Camille Sebaaly each of whom remain
part of our current management. Our principal business became that
of a pharmaceutical company focusing on the development of our
licensed Adva-27a anticancer compound. In December 2015 we acquired
all issued and pending patents pertaining to our Adva-27a
technology and terminated the license.
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 world. Sunshine Canada has signed licensing
agreements for four (4) generic prescription drugs for the
treatment of breast cancer, prostate cancer and BPH (Benign
Prostatic Hyperplasia). We have applied for and are currently
awaiting the issuance by Health Canada of a Drug Establishment
License and a Drug Identification Number for each of our four (4)
generic products in order to begin marketing of the
same.
In
January 2018, we acquired Atlas Pharma Inc. (“Atlas”),
a certified company dedicated to chemical analysis of
pharmaceutical and other industrial samples whose operations are
authorized by a Drug Establishment License issued by Health Canada.
Atlas has been generating revenues since its inception in September
2013. The revenues reported in our consolidated financial
statements for the first calendar quarter of 2018 are a result of
the Atlas operations.
In
March 2018, we formed NOX Pharmaceuticals, Inc., a Colorado
corporation, and assigned all of our interest in our Adva-27a
anticancer compound to that company. NOX Pharmaceuticals
Inc.’s mission is to research, develop and commercialize
proprietary drugs including Adva-27a.
As a
result, we are now a holding company operating through these three
wholly owned subsidiaries.
Our
principal place of business is located at
6500 Trans-Canada Highway, 4th Floor,
Pointe-Claire, Quebec, Canada H9R 0A5.
Our phone number is
(514) 426-6161and our website address is
www.sunshinebiopharma.com.
We have
not been subject to any bankruptcy, receivership or similar
proceeding.
12
Operations
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 forms of cancer. 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 Inc. owns all of the
rights, as well as, all of the issued and pending worldwide patents
pertaining to Adva-27a, including U.S. Patent Number
8,236,935.
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.
●
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
.
13
We have
been delayed in 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 following next
sequence of steps:
●
GMP Manufacturing
of 2 kilogram for use in IND-Enabling Studies and Phase I Clinical
Trials
●
IND-Enabling
Studies
●
Regulatory Filing
(Fast-Track Status Anticipated)
●
Phase I Clinical
Trials (Pancreatic Cancer Indication)
Adva-27a’s
initial indication will be Pancreatic Cancer for which there are
currently little or no treatment options available. We are planning
to conduct our clinical trials at McGill University’s Jewish
General Hospital in Montreal, Canada. All aspects of the clinical
trials in Canada will employ FDA standards at all levels. We
estimate that the Pancreatic Cancer clinical trials will take
approximately 18 to 24 months from start to finish. Given the
terminal and limited treatment options available for the Pancreatic
Cancer, we anticipate being granted limited marketing approval
(“compassionate-use”) for our Adva-27a following a
successful Phase I clinical trial. It is likely that following such
events, we will begin to receive offers from large pharmaceutical
companies to buyout or license our drug. Alternatively, it may be
more advisable for us to continue our own development of the drug
by proceeding to Phase II clinical trials and attending to other
requirements for full marketing approval.
Our Lead Anti-Cancer Compound, Adva-27a, in 3D
14
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. Following this acquisition
we have been working towards commencement of marketing of these
pharmaceutical products under our own Sunshine Biopharma label.
These four generic products are as follows:
●
Anastrozole (brand
name Arimidex® by AstraZeneca) for treatment of Breast
Cancer;
●
Letrozole (brand
name Femara® by Novartis) for treatment of Breast
Cancer;
●
Bicalutamide (brand
name Casodex® by AstraZeneca) for treatment of Prostate
Cancer;
●
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 by the
respective pharmaceutical company, owner of the registered
trademark are as follows:
●
Arimidex®
$232M in 2016
●
Femara® $380M
in 2014
●
Casodex® $247M
in 2016
●
Propecia®
$183M in 2015
In June
2017, Sunshine Canada submitted an application to Health Canada for
the procurement of a Drug Establishment License
(“DEL”), a requirement for the Company’s drug
handling and pharmaceutical operations. Health Canada has assigned
the Company DEL Application No. 3002475 and File No. 17938. We are
currently awaiting Health Canada to set a date for physical
inspection of our warehouse and drug management operations. In
addition, we are currently in the process of filing applications
for a Drug Identification Number (“DIN”) for each of
its four (4) generic products, Anastrozole, Letrozole, Bicalutamide
and Finasteride. 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. We believe that a larger product
portfolio will provide us with more opportunities and a greater
reach into the marketplace. Our plan is to fund our Proprietary
Drug Development Program, including Adva-27a, through the sales of
Generic Drugs. 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 own proprietary drugs as they
become available.
Analytical Chemistry Services Operations
On
January 1, 2018, we entered into an agreement (the “Atlas
Agreement”) to acquire Atlas Pharma Inc.
(“Atlas”). The purchase price was $848,000 Canadian
($684,697 US). Payment of the purchase price was comprised of (i) a
cash payment of $100,500 Canadian ($80,289 US), (ii) the issuance
of 20,000,000 shares of our Common Stock valued at $246,000, and
(iii) a promissory note in the principal amount of $450,000
Canadian ($358,407 US), with interest payable at the rate of 3% per
annum. We are required to make payments of $10,000 Canadian
(approximately $8,000 US) per calendar quarter, due and payable on
or before the end of each such calendar quarter through December
31, 2023.
15
Atlas
is a certified company dedicated to chemical analysis of
pharmaceutical and other industrial samples. Atlas has 9 full-time
employees and generated revenues of approximately $500,000 Canadian
(approximately $400,000 US) in 2017. Housed in a 5,250 square foot
facility, Atlas’s operations are authorized by a Drug
Establishment License (DEL) issued by Health Canada and are fully
compliant with the requirements of Good Manufacturing Practices
(GMP). Atlas is also registered with the FDA.
Atlas
is the owner of a relatively large portfolio of analytical
chemistry methodology and Standard Operating Procedure. This
intellectual property is protected as company secrets and
controlled through employee and management confidentiality
agreements.
On June
18, 2018, we purchased laboratory equipment at a total cost of
$235,870 Canadian (approximately $181,580 US) for Microbiology
Testing as part of our plan to expand the operations services
offering of Atlas. Presently, Atlas offers Analytical Chemistry
Testing and intends to offer Microbiology Testing
soon.
Results Of Operations
Comparison of Results of Operations for the six months ended June
30, 2018 and 2017
During
the six months ended June 30, 2018, we generated revenues of
$198,418 from the operations of our new wholly owned subsidiary,
Atlas Pharma Inc. (“Atlas”), which we acquired on
January 1, 2018. The direct cost for generating these revenues was
$190,913, which is comprised of salaries ($113,495), laboratory
supplies ($24,264), rent ($37,960) and depreciation ($15,194). We
did not generate any revenues during the comparable period in
2017.
General
and administrative expense during the six months ended June 30,
2018 was $745,153, compared to $581,208 during the six months ended
June 30, 2017, an increase of $163,945. The principal reason for
this increase was an increase of $133,051 in executive
compensation, as well as increases in accounting, legal and office
expenses. These increases were a result of our increased business
activities relating to Atlas, as well as our continuing efforts to
raise additional funding. The only category that saw a decrease was
consulting fees by $32,067, as efforts were made to complete more
work in-house.
We
incurred $93,338 in losses arising from debt conversion during the
six months ended June 30, 2018, compared to $76,929 in losses from
debt conversion during the similar period in 2017 as a result of
some convertible notes having been paid off or reduced prior to
maturity.
As a
result, we incurred a net loss of $909,944 ($0.00 per share) for
the six month period ended June 30, 2018, compared to a net loss of
$681,146 ($0.00 per share) during the six month period ended June
30, 2017.
16
Comparison of Results of Operations for the three months ended June
30, 2018 and 2017
For the
three months ended June 30, 2018, we generated $107,250 in revenues
compared to no revenues for the same three months of 2017. All of
these revenues were generated from the operations of our new wholly
owned subsidiary, Atlas Pharma Inc. (“Atlas”), which we
acquired on January 1, 2018. The direct cost for generating these
revenues was $91,631, which is comprised of salaries ($55,937),
laboratory supplies ($10,194), rent ($16,438) and depreciation
($9,062). We did not generate any revenues during the comparable
period in 2017.
General
and administrative expenses during the three month period ended
June 30, 2018 were $586,570, compared to general and administrative
expense of $472,218 incurred during the three month period ended
June 30, 2017, an increase of $114,352. This increase is
attributable to an increase in executive compensation of $98,229,
as well as increases accounting fees, legal fees, and office
expenses due to costs associated with the acquisition of Atlas. The
only category that saw a decrease was consulting fees by $10,248,
as efforts were made to complete more work in-house.
We also
incurred $28,375 in interest expense during the three months ended
June 30, 2018, compared to $9,598 in interest expense during the
similar period in 2017 as a result of increased borrowings.
However, we incurred $54,998 in losses arising from debt conversion
during the three months ended June 30, 2018, compared to $0 in
losses from debt conversion during the similar period in 2017 as a
result of some convertible notes having been paid off prior to
maturity in the same period of 2017.
As a
result, we incurred a net loss of $644,308 ($0.00 per share) for
the three month period ended June 30, 2018, compared to a net loss
of $485,444 ($0.00 per share) during the three month period ended
June 30, 2017.
Liquidity and Capital Resources
As
of June 30, 2018, we had cash or cash equivalents of
$36,395.
Net cash used in operating activities was $292,898
during the six month period ended June 30, 2018, compared to
$185,850 for the six month period ended June 30,
2017. We anticipate that overhead costs and other
expenses will increase in the future as we move forward with our
proprietary drug development activities and expansion of our
generic pharmaceuticals operations as well as our newly acquired
analytical chemistry services operations as
discussed above.
Cash
flows from financing activities were $249,975 for the six month
periods ended June 30, 2018, compared to $275,665 during the six
months ended June 30, 2017. Cash flows used by investing
activities were $22,428 for the six month period ended June 30,
2018 compared to $22,295 during the same six month period in
2017.
During
the three months period ended June 30, 2018, we issued a total of
185,369,308 shares of our Common Stock. Of these, 42,584,566 shares
valued at $290,039 were issued upon conversion of outstanding notes
payable, reducing debt by $188,568 and interest payable by $8,133
and generating a loss on conversion of $93,585. In addition, we
issued 20,000,000 shares of our Common Stock valued at $246,000 or
$0.0123 per share as part of the acquisition of Atlas Pharma
Inc.
During
the six months ended June 30, 2018, we entered into the following
new debt arrangements:
●
On January 12,
2018, we received net proceeds of $100,000 in exchange for a note
payable having a face value of $102,000 and accruing interest at
the rate of 8% per annum. The note, due on October 30, 2018, is
convertible after 180 days from issuance into $0.001 par value
Common Stock at a price 35% below market value. 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.
17
●
On February 7,
2018, we received net proceeds of $142,500 in exchange for a note
payable having a face value of $150,000 and accruing interest at
the rate of 8% per annum. The note, due on February 7, 2019, is
convertible after 180 days from issuance into $0.001 par value
Common Stock at a price 35% below market value. 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.
●
On February 22,
2018, we received net proceeds of $83,000 in exchange for a note
payable having a face value of $85,000 and accruing interest at the
rate of 8% per annum. The note, due on November 30, 2018, is
convertible after 180 days from issuance into $0.001 par value
Common Stock at a price 35% below market value. 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.
●
On May 29, 2018, we
received net proceeds of $25,000 in exchange for a note payable
having a face value of $26,750 and accruing interest at the rate of
8% per annum. The note, due on February 28, 2019 is convertible
after 180 days from issuance into $0.001 par value Common Stock at
a price 35% below market value. 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.
●
On June 27, 2018,
we issued a note payable having a face value of $53,000 and
accruing interest at the rate of 8% per annum. The net proceeds of
$51,000 from this note were received by us on July 2, 2018. The
note, due on April 15, 2019 is convertible after 180 days from
issuance into $0.001 par value Common Stock at a price 35% below
market value. 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.
During the six
month period ended June 30, 2018, the holders of certain notes
payable converted principal and interest of $290,039 into
42,584,566 shares of Common Stock.
As part
of a subscription agreement entered into in 2016, we had an
obligation to pay a royalty of 5% of net sales on one of one of our
generic products (Anastrozole) for a period of three (3) years from
the date of the first sale of that product. On May 28, 2018 we
issued 1,000,000 shares of our Common Stock valued at $5,900 in
exchange for cancellation of this royalty obligation.
We are not generating adequate revenues from our
operations to fully implement our business plan as set forth
herein. As a result, our future success will depend on the future
availability of financing, among other things. Such financing will
be required to enable us to expand our Analytical Chemistry
Services business and further develop our Generic Pharmaceuticals
operations 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 $7
million ($2 million for the Analytical Chemistry and Generic
Pharmaceuticals 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. 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 plan is to fund our Proprietary Drug
Development Program, including Adva-27a, through the sales of
Generic Drugs if we are unable to find any additional financing.
There are also no assurances that we will generate sufficient
revenues and profits from our Proprietary Drug Development Program
to accomplish these objectives.
18
Our
cost of operations is 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 capital in order to continue our
existing operations and finance our expansion plans for the next
year. If we are successful in raising additional funds, we expect
our operations and business efforts to continue and expand. There
are no assurances this will occur.
In
August 2017 we signed an agreement with Jitney Trade Inc.
(“Jitney”), a Canadian broker-dealer, to raise up to
$10 million Canadian (approximately $8 million US) in a private
offering being undertaken only in Canada (the
“Offering”) in order to provide the funding we have
estimated we need to implement our business plan. The Offering
expired on February 28, 2018 without any funds having been raised.
On May 3, 2018, we signed an agreement with Jitney Trade Inc.
whereby the parties agreed to extend the proposed equity financing
that was previously announced of up to $10,000,000 Canadian
(approximately $8,000,000 US), until August 31, 2018. The terms and
conditions of the financing remained unchanged. We intend to offer
at up to 400,000,000 shares of our Common Stock at a price of
$0.025 Canadian (approximately $0.02 US) per share. As of the date
of this report no funds have been raised. There are no assurances
that Jitney will sell any shares of our Common Stock in this
proposed offering.
Subsequent Events
On July
5, 2018, the holder of a note payable dated November 14, 2017
elected to convert $20,000 in principal into 6,505,122 shares of
Common Stock leaving a principal balance of $93,000.
On July
11, and August 2, 2018, the holder of a note payable dated October
26, 2017 elected to convert a total of $44,000 in principal and
$2,531 in accrued interest into 20,821,004 shares of Common Stock
leaving a principal balance of $23,000.
On July
17, 23, 26, and August 2, 7, and 10, 2018, the holder of a note
payable dated January 12, 2018 elected to convert a total of
$81,000 in principal into an aggregate of 47,805,452 shares of
Common Stock leaving a principal balance of $21,000.
Off Balance Sheet Arrangements
None
We
are a smaller reporting company and are not required to provide the
information under this item pursuant to Regulation
S-K.
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.
19
Based on this evaluation, our CEO and CFO have concluded that our
disclosure controls and procedures were not effective as of June
30, 2018, 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
the three month period ended June 30, 2018, 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.
20
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 2016 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. We
issued a letter to them in June 2017 advising of our position. As
of the date of this Report we have not received a response to our
letter and no further action has been taken by either
party.
In June 2018 we
filed an action in the Superior Court of the Province of Quebec in
the District of Montreal (Canada) against one of our existing
shareholders residing in Quebec City (Canada) arising out of a
possible equity investment intended to be completed in the near
future. The complaint alleges among other things, claims of
misrepresentations and misleading conduct resulting in damages to
the Company. As of the date of this report we are awaiting a court
date for the hearings to commence.
To the
best of our management’s knowledge and belief, there are no
other material claims that have been brought against us nor have
there been any claims threatened.
We
are a smaller reporting company and are not required to provide the
information under this item pursuant to Regulation
S-K.
During
the six months ended June 30, 2018, we issued a total of
185,369,308 shares of our Common Stock. Of these, 42,584,566 shares
valued at $290,286 were issued upon conversion of outstanding notes
payable, reducing outstanding debt by $188,568 and interest payable
by $8,133 and generating a loss on conversion of $93,585. We also
issued 93,650,000 shares valued at $558,200 for services, and
29,134,742 shares valued at $174,808 in exchange for
equipment.
We
relied upon the exemption from registration provided by Section
4(2) of the Securities Act of 1933, as amended, to issue these
shares.
Other
than reduction of debt from the conversion of the outstanding
convertible notes described above and obtaining equipment, we did
not receive any direct proceeds from the issuance of these shares.
The proceeds from the notes were used for the acquisition of Atlas
Pharma Inc., purchase of equipment and working
capital.
None.
Not
Applicable.
None.
21
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Exhibit No.
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Description
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Certification
of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
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Certification
of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
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Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
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101.INS
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XBRL
Instance Document*
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101.SCH
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XBRL
Schema Document*
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101.CAL
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XBRL
Calculation Linkbase Document*
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101.DEF
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XBRL
Definition Linkbase Document*
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101.LAB
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XBRL
Label Linkbase Document*
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101.PRE
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XBRL
Presentation Linkbase Document*
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______________________
*
Pursuant to Rule 406T of Regulation S-T, these interactive data
files are not deemed filed or part of a registration statement or
prospectus for purposes of Section 11 or 12 of the Securities Act
or Section 18 of the Securities Exchange Act and otherwise not
subject to liability.
22
S
IGNATURES
Pursuant
to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized
on August 17, 2018.
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SUNSHINE BIOPHARMA, INC.
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By:
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s/ Dr.
Steve N. Slilaty
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Dr.
Steve N. Slilaty,
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Principal
Executive Officer
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By:
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s/
Camille Sebaaly
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Camille
Sebaaly,
Principal
Financial Officer and
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Principal
Accounting Officer
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23
TABLE OF CONTENTS
Part IItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II. Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosureItem 5. Other InformationItem 6. Exhibits