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:
March
31, 2019
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 May 20, 2019, was 95,417,765
shares.
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TABLE OF CONTENTS
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PART I
FINANCIAL INFORMATION
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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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15
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24
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24
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PART II
OTHER INFORMATION
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26
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2
6
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26
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26
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27
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27
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27
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28
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PART I.
FINANCIAL
INFORMATION
ITEM 1.
F
INANCIAL
STATEMENTS
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Sunshine Biopharma, Inc.
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March
31,
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December
31,
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2019
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2018
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ASSETS
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Current
Assets:
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Cash and cash
equivalents
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$
95,129
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$
115,216
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Accounts
receivable
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119,197
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94,955
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Inventory
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13,237
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-
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Prepaid
expenses
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3,743
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1,341
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Total Current
Assets
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231,306
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211,512
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Non-Current
Assets:
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-
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Equipment (net of
$74,832 and $57,964 depreciation)
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254,336
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269,362
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Patents (net of $58,918
amortization and $556,120 impairment)
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-
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-
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Right-of-use
assets
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95,610
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-
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Goodwill
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665,697
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665,697
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Total Non-Current
Assets
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1,015,643
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935,059
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TOTAL
ASSETS
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$
1,246,949
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$
1,146,571
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LIABILITIES AND
SHAREHOLDERS' EQUITY
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Current
Liabilities:
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Notes
payable
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745,397
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419,663
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Notes payable - related
party
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108,796
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243,094
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Related party
advances
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59,558
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49,349
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Accounts payable &
accrued expenses
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140,343
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191,080
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Interest
payable
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19,393
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9,291
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Lease
liability
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46,461
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-
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Total Current
Liabilities
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1,119,748
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912,477
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Long-Term
Liabilities:
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Lease
liability
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49,148
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-
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Related party note
payable
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289,825
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289,847
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Total Long-Term
Liabilities
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338,973
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289,847
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TOTAL
LIABILITIES
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1,458,721
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1,202,324
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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; Authorized 850,000
shares;
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Issued and outstanding
-0- shares at March 31, 2019 and December 31,
2018
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-
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-
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Preferred Stock, Series B
$0.10 par value per share; Authorized 500,000
shares;
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Issued and outstanding
500,000 shares at March 31, 2019 and December 31,
2018
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50,000
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50,000
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Common Stock, $0.001 per
share; Authorized 3,000,000,000 shares;
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Issued and outstanding
89,348,981 and 85,652,400 at March 31, 2019 and December 31,
2018
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89,349
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85,652
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Reserved for issuance
158,945,360 at March 31, 2019
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Capital paid in excess
of par value
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15,630,289
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15,586,678
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Accumulated
Comprehensive Income (Loss)
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(4,523
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(3,738
)
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Accumulated
(Deficit)
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(15,976,887
)
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(15,774,345
)
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TOTAL SHAREHOLDERS'
EQUITY (DEFICIT)
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(211,772
)
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(55,753
)
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY (DEFICIT)
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$
1,246,949
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$
1,146,571
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See Accompanying Notes To These Financial
Statements.
3
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Sunshine Biopharma, Inc.
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Consolidated Condensed Statement Of
O
perations and Comprehensive Loss
(Unaudited)
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3
Months
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3
Months
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Ended
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Ended
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March
31,
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March
31,
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2019
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2018
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Revenue:
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$
119,728
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$
91,168
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Cost
of Sales
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84,866
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100,819
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Gross
profit
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34,862
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(9,651
)
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General
& Administrative Expenses:
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Accounting
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17,000
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28,000
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Consulting
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11,076
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4,118
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Legal
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32,656
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27,485
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Office
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54,153
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19,048
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Officer
& Director remuneration
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40,201
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77,787
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Depreciation
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579
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6,08
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Total
General & Administrative
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155,665
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157,046
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Income
(Loss) from operations
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(120,803
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(166,697
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Other
Income (Expense):
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Foreign
exchange gain (loss)
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(9,616
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14,868
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Interest
expense
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(49,815
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(75,467
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Loss
on debt conversions
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(22,308
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(38,340
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Total
Other Income (Expense)
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(81,739
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(98,939
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Net
Income (Loss)
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$
(202,542
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$
(265,636
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Unrealized
Gain (Loss) from foreign exchange translation
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(785
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(2,738
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Comprehensive
Income (Loss)
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(203,327
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(268,374
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Basic
(Loss) per Common Share
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$
0.00
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$
(0.01
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Weighted
Average Common Shares Outstanding
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86,094,708
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47,080,329
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See
Accompanying Notes To These Financial
Statements.
4
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Sunshine Biopharma, Inc.
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Consolidated Condensed Statement Of
C
ash Flows
(Unaudited)
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3
Months
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3
Months
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Ended
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Ended
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March
31,
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March
31,
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2019
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2018
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Cash Flows From Operating Activities:
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Net
(Loss)
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$
(202,542
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$
(265,636
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Depreciation
and amortization
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16,475
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6,740
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Foreign
exchange gain (loss)
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9,616
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(14,868
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Rent
from ASC 842 lease calculation
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3,389
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-
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Stock
issued for payment interest
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-
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1,712
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Loss
on debt conversion
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22,308
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38,340
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(Increase)
in accounts receivable
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(24,242
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(12,882
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(Increase)
in inventory
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(13,237
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-
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(Increase)
decrease in prepaid expenses
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(2,402
)
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4,331
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decrease
in deposits
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-
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72,534
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(decrease)
in Accounts Payable & accrued expenses
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(53,426
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(11,435
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Increase
in interest payable
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10,102
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12,709
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Net
Cash Flows (Used) in Operations
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(233,959
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(168,455
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Cash Flows From Investing Activities:
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Cash
paid for acquisition of subsidiary
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-
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(80,289
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Cash
received from acquisition of subsidiary
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-
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4,942
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Purchase
of equipment
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-
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(4,783
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Net
Cash Flows (Used) in Investing Activities
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-
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(80,130
)
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Cash Flows From Financing Activities:
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Proceed
from notes payables
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249,500
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356,885
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Payment
of notes payable
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(53,767
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(130,908
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Advances
from related parties
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2,993
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12,240
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Payments
to related parties
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-
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(1,163
)
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Note
payable used to pay origionation fees & interest
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15,930
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11,500
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Net
Cash Flows Provided by Financing Activities
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214,656
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248,554
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Net
Increase (Decrease) in Cash and Cash Equivalents
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(19,302
)
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(31
)
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Foreign
currency translation adjustment
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(785
)
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(2,738
)
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Cash
and cash equivalents at beginning of period
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115,216
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107,532
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Cash
and cash equivalents at end of period
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$
92,129
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$
104,763
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Supplementary Disclosure of Cash Flow Information:
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Stock
issued for services, licenses and other assets
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$
-
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$
484,100
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Stock
issued for note conversions including interest
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$
47,308
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$
95,052
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Stock
issued for acqusition of subsidiary
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$
-
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$
246,000
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Cash
paid for interest
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$
11,034
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$
9,428
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Cash
paid for income taxes
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$
-
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$
-
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5
Sunshine
Biopharma Inc.
For the Three Month
Interim Period Ended March 31, 2019
Note 1 – Nature of Business and Basis of
Presentation
The
Company was originally incorporated under the name Mountain West
Business Solutions, Inc. 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
($676,748 US). The purchase price included a cash payment of
$100,500 Canadian ($80,289 US), plus the issuance of 1,000,000
shares of the Company’s Common Stock valued at $238,000 or
$0.238 per share, and a promissory note in the principal amount of
$450,000 Canadian ($358,407 US), with interest payable at the rate
of 3% per annum. Atlas is a certified company dedicated to chemical
analysis of pharmaceutical and other industrial samples.
Atlas’ operations are authorized by a Drug Establishment
License issued by Health Canada. Atlas is also registered with the
FDA.
The Company has performed analysis of the fair market value of
Atlas Pharma Inc. assets and liabilities. The following table
summarizes the allocation of the purchase price as of the
acquisition date:
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Cash
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$
4,942
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Accounts receivable
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$
79,508
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Prepaids
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$
1,428
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Property
and equipment
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$
62,990
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Goodwill
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$
665,697
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Less:
Liabilities assumed ($172,899 Canadian)
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$
(137,817
)
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Total
consideration
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$
676,748
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6
Sunshine Biopharma Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Month
Interim Period Ended March 31, 2019
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.
On
December 17, 2018, the Company launched its first over-the-counter
product, Essential 9
tm
,
a dietary supplement comprised of the nine amino acids that the
human body cannot synthesize. Essential 9
tm
has been authorized for marketing by Health Canada under NPN
80089663.
Effective
February 1, 2019, the Company completed a 20 to 1 reverse split of
its $0.001 par value Common Stock reducing the issued and
outstanding shares of Common Stock from 1,713,046,242 to 85,652,400
(“Reverse Stock Split”).
The
financial statements reflect the Reverse Stock Split on a
retroactive basis and represent the consolidated activity of
Sunshine Biopharma, Inc. and its subsidiaries (Sunshine Biopharma
Canada Inc., Atlas Pharma Inc. and NOX Pharmaceuticals Inc.) herein
collectively referred to as the "Company").
During the last
three month period the Company has continued to raise money through
the issuance of convertible debt.
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 month periods ended March 31, 2019 and 2018 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 December 31, 2018 was derived
from the audited financial statements included in the Company's
financial statements as of and for the year ended December 31, 2018
included in the Company’s Annual Report on Form 10-K filed
with the Securities and Exchange Commission (the “SEC”)
on April 12, 2019. These financial statements should be read in
conjunction with that report.
7
Sunshine Biopharma Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Month
Interim Period Ended March 31, 2019
Recently Issued Accounting Pronouncements
Recently
issued amendments by the FASB are effective for fiscal years
beginning after December 15, 2018, 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
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 adopted this pronouncement on January 1, 2019.
Due to
this pronouncement the balance sheet will show an asset reflecting
the value of a Right-of-use asset and a current and long-term lease
liability. The rent expense will be calculated based on this
pronouncement and therefore not reflect the actual rent paid for
the period by the Company.
At
March 31, 2019 the Right-to-use-asset has a balance of $95,610. The
current portion of the lease liability is $46,461 and the long-term
portion is $49,148. The rent expense for the three month period
ended March 31, 2019 is $15,027 which is $3,389 higher than the
actual rent paid of $11,638.
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 June
27, 2018, the Company received net proceeds of $51,000 in exchange
for a note payable having a face value of $53,000 and accruing
interest at the rate of 8% per annum. 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. During
January 2019, $69,930 was paid for a total of $53,000 in principal,
$5,332 in accrued interest and $11,598 in additional
interest.
8
Sunshine Biopharma Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Month
Interim Period Ended March 31, 2019
On
August 17, 2018 the Company received net proceeds of $51,000 in
exchange for a note payable having a face value of $53,000 and
accruing interest at the rate of 8% per annum. The note, due on May
30, 2019, is convertible after 180 days from issuance into $0.001
par value Common Stock at a price 35% below market value. During
March 2019, the holder of this note elected to convert a total of
$25,000 in principal into 3,696,581 shares of $0.001 par value
Common Stock leaving a principal balance of $28,000 and incurring a
loss on conversion of $22,308.
On
January 8, 2019, the Company received net proceeds of $50,500 in
exchange for a note payable having a face value of $54,000 and
accruing interest at the rate of 8% per annum. The note, due on
January 8, 2020, 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
January 10, 2019, the Company received net proceeds of $38,000 in
exchange for a note payable having a face value of $40,660 and
accruing interest at the rate of 8% per annum. The note, due on
October 10, 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 5, 2019, the Company received net proceeds of $35,000 in
exchange for a note payable having a face value of $37,450 and
accruing interest at the rate of 8% per annum. The note, due on
October 10, 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 11, 2019,
the Company received net proceeds of $50,000 in
exchange for a note payable having a face value of $52,000 and
accruing interest at the rate of 8% per annum. The note, due on
November 30, 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
March 18, 2019, the Company received net proceeds of $38,000 in
exchange for a note payable having a face value of $40,660 and
accruing interest at the rate of 8% per annum. The note, due on
December 18, 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
March 18, 2019, the Company received net proceeds of $38,000 in
exchange for a note payable having a face value of $40,660 and
accruing interest at the rate of 8% per annum. The note, due on
December 18, 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
March 31, 2019 and December 31, 2018, total accrued interest on
Notes Payable was $19,393 and $9,291, respectively.
9
Sunshine Biopharma Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Month
Interim Period Ended March 31, 2019
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 March 31, 2019 was $310,670. The
note is secured by the Atlas Pharma Inc. shares held by the
Company.
In
addition to the above, at March 31, 2019 the Company had a note
payable held by the CEO of the Company having a principal amount of
$87,951 and accrued interest of $2,548.
Note 5 – Stockholders’ Equity
During
the three months ended March 31, 2019, the Company issued a total
of 3,696,581 shares of $0.001 par value Common Stock for the
conversion of outstanding notes payable, reducing the debt by
$25,000 and interest payable by $-0- and generating a loss on
conversion of $22,308.
The
Company declared no dividends through March 31, 2019.
The
following table shows the changes in shareholders’
equity:
10
Sunshine Biopharma Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Month
Interim Period Ended March 31, 2019
|
|
Three
Months Ended
|
|
|
|
2019
|
2018
|
|
Total
beginning shareholders' (deficit)
|
$
(55,753
)
|
$
(573,363
)
|
|
|
|
|
|
Beginning
and ending Series B preferred stock
|
50,000
|
50,000
|
|
|
|
|
|
Beginning
common stock
|
85,652
|
45,937
|
|
Common
stock issued
|
3,697
|
1,464
|
|
Ending
common stock
|
89,349
|
47,401
|
|
|
|
|
|
Beginning
additonal paid in capital
|
15,586,678
|
12,948,386
|
|
APIC
increase from common stock issued
|
43,611
|
339,588
|
|
Ending
additional paid in capital
|
15,630,289
|
13,287,974
|
|
|
|
|
|
Beginning
other comprehensive income
|
(3,738
)
|
504
|
|
Other
comprehensive income (loss)
|
(785
)
|
(2,738
)
|
|
Ending
other comprehensive income
|
(4,523
)
|
(2,234
)
|
|
|
|
|
|
Beginning
accumulated deficit
|
(15,774,345
)
|
(13,618,190
)
|
|
Net
(loss)
|
(202,542
)
|
(265,636
)
|
|
Ending
accumulated deficit
|
(15,976,887
)
|
(13,883,826
)
|
|
|
|
|
|
Total
ending shareholders' equity
|
$
(211,772
)
|
$
(500,685
)
|
Note 6 – Leases
The Company’s subsidiary, Atlas Pharma Inc. (Atlas), leases
one facility under a 60 month, non-cancelable operating lease
agreement (the “Lease”). The Lease expires on May 31,
2021 (remaining lease term of 2 years) and does not have a renewal
option.
The Lease requires Atlas to pay additional rent for real estate
taxes, insurance, and repairs. The Lease also requires the Company
to provide a lien on all of furniture and equipment used at the
facility.
The following is a maturity analysis of the annual undiscounted
cash flows of the operating Lease liability as of March 31,
2019:
11
Sunshine Biopharma Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Month
Interim Period Ended March 31, 2019
|
Year Ending
December 31, 2019
|
$
35,216
|
|
Year Ending
December 31, 2020
|
$
46,554
|
|
Year Ending
December 31, 2021
|
$
19,397
|
|
|
|
|
Total
|
$
101,167
|
|
|
|
|
Less: Imputed
Interest
|
$
(5,557
)
|
|
|
|
|
Total Lease
Liability
|
$
95,610
|
The
following are total lease cost, cash flows, and discount rates for
the three months period ended March 31,
|
|
2019
|
2018
|
|
Operating lease
cost
|
$
11,638
|
$
46,554
|
|
Variable lease
cost
|
$
3,389
|
$
13,553
|
|
|
|
|
|
Total lease
cost
|
$
15,027
|
$
60,107
|
|
Cash paid for
amounts included in the measurement of lease
liabilities
|
$
11,638
|
-
|
|
Operating cash
flows from operating leases
|
$
11,638
|
-
|
|
Weighted-average
discount rate - Operating leases
|
5.2
%
|
-
|
12
Sunshine Biopharma Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Month
Interim Period Ended March 31, 2019
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, “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 ($676,748
US). The net book value of the assets acquired was $11,051. The
remainder of the purchase price ($665,697) was applied to
Goodwill.
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. In 2018 the Company
issued 50,000 shares of its Common Stock valued at $5,900 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 $40,201 and $77,787 for the three month
periods ended March 31, 2019 and 2018,
respectively.
Note 12 – Revenue Recognition
As of
January 1, 2018, the Company adopted ASU No. 201409, “Revenue
from Contracts with Customers” (ASC 606). 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 prospective basis.
The adoption did not have an impact on the Company's financial
statements. All 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.
13
Sunshine Biopharma Inc.
Notes to Unaudited Consolidated Financial
Statements
For the Three Month
Interim Period Ended March 31, 2019
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.
Note 14 – Subsequent Events
On May
6, 2019 the holder of a note payable dated October 23, 2018 elected
to convert $18,000 in principal and $765 in interest into 3,184,169
shares of Common Stock leaving a principal balance of
$72,000.
On May
10, 2019 the holder of a note payable dated August 17, 2018 elected
to convert $15,000 in principal into 2,884,615 shares of Common
Stock leaving a principal balance of $13,000.
14
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 Histor
y
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 (the
“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 Canadian 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
majority of the revenues reported in our consolidated financial
statements 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.
In
December 2018, we completed the development of a new dietary
supplement which we trademarked Essential 9
tm
.
This dietary supplement is an over-the-counter tablet comprised of
the nine amino acids which the human body cannot synthesize.
Essential 9
tm
has been authorized for marketing by Health Canada under NPN
80089663.
Effective February
1, 2019, we completed a 20 to 1 reverse split of our $0.001 par
value Common Stock reducing the issued and outstanding shares of
Common Stock from 1,713,046,242 to 85,652,400 (the “Reverse
Stock Split”). All references in this report to our issued
and outstanding Common Stock as well as the price per share of
Common Stock are presented on a post Reverse Stock Split
basis.
15
On
March 12, 2019 Essential 9
tm
became available for sale on Amazon.ca and on March 23, 2019 we
recorded our first revenues of Essential 9
tm
sales.
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.
Plan of Operation
Despite
the fact that we now are generating revenues, we have elected to
include a Plan of Operation to discuss our ongoing research and
development activities relating to our proprietary drug development
operations, as well as, our other business activities.
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 is direct owner of all
issued and pending worldwide patents pertaining to Adva-27a
including U.S. Patent Number 8,236,935.
Figure
1
Adva-27a is a
GEM-difluorinated C-glycoside derivative of Podophyllotoxin (see
Figure 1). 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 greater cell
killing activity (see Figure 2).
16
Figure
2
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
.
17
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.
According to the
American Cancer Society, nearly 1.5 million new cases of cancer are
diagnosed in the U.S. each year. While particularly
effective against Multidrug Resistant Cancer, we believe Adva-27a
can potentially treat all cancer types as it is general
chemotherapy drug. 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. The following, Figure 3, is a
space-filling molecular model of our Adva-27a.
Figure 3
Generic Pharmaceuticals Operations
In
2016, our Canadian wholly owned subsidiary, Sunshine Biopharma
Canada Inc. (“Sunshine Canada”), signed Licensing
Agreements with a major pharmaceutical company for four
prescription generic drugs for the treatment of Breast Cancer,
Prostate Cancer and Enlarged Prostate. We have since been working
towards commencement of marketing of these pharmaceutical products
under our own, Sunshine Biopharma, label. These four generic
products are as follows:
18
|
●
|
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)
|
Sunshine Canada is
currently in the process of securing a Drug Identification Number
(“DIN”) for each of these products from Health Canada.
We are planning to use part of the already approved Atlas Pharma
Inc. space as a drug warehouse to facilitate the process of
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’s or the
DEL due to variables involved that are out of our control. Figure 4
below shows our 30-Pill blister pack of Anastrozole.
Figure
4
We
currently have a number of additional Generic Pharmaceuticals under
review for in-licensing. While no assurances can be provided that
we will acquire the rights to all or any of these drugs, we are
confident we will acquire most, if not all of these rights. We
believe that a larger product portfolio will provide 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. There are no assurances this
will occur.
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 pharmaceutical
marketplace.
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.
19
Analytical Chemistry Services Operations
On
January 1, 2018, we acquired all of the issued and outstanding
shares of Atlas Pharma Inc. (“Atlas”). The purchase
price was $848,000 Canadian (approximately $676,748 US). Payment of
the purchase price was comprised of (i) a cash payment of $100,500
Canadian (approximately $80,300 US); (ii) the issuance of 1,000,000
shares of our Common Stock, and (iii) a promissory note in the
principal amount of $450,000 Canadian (approximately $360,000 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.
Atlas
is a Health Canada certified company dedicated to chemical analysis
of pharmaceutical and other industrial samples. Atlas has 9
full-time employees and generated revenues of $580,558 and $598,109
Canadian (approximately $447,000 and $478,000 US) in 2018 and 2017,
respectively. 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 Laboratory Practices (GLP). Atlas is also
registered with the FDA. Atlas Pharma Inc.’s website address
is www.atlaspharmainc.ca.
In June
2018, we acquired testing and other laboratory equipment as part of
our plan to expand Atlas’ business operations. Part of the
expansion will include hiring additional technical and sales
personnel and offering microbiology and other sample testing
capabilities.
Dietary Supplements Operations
In
December 2018, we completed the development of Essential
9
tm
,
the first in a line of essential micronutrients products that we
are planning to launch. On December 14, 2018, Health Canada issued
NPN 80089663 through which it authorized Sunshine Biopharma Inc. to
manufacture and sell the Essential 9
tm
product. Our Essential 9
tm
dietary supplement tablets contain a balanced formula of the 9
Essential Amino Acids that the human body cannot make. Essential
Amino Acids are 9 out of the 20 amino acids required for protein
synthesis. Proteins are involved in all body functions – From
the musculature and immune system to hormones and
neurotransmitters. Like vitamins, Essential Amino Acids cannot be
made by the human body and must be obtained through diet.
Deficiency in one or more of the 9 Essential Amino Acids can lead
to loss of muscle mass, fatigue, weight gain and reduced ability to
build muscle mass in athletes. Sunshine Biopharma’s Essential
9
tm
provides all 9 Essential Amino Acids in freeform and in the
proportions recommended by Health Canada. Essential 9
tm
is currently available on Amazon.com, Amazon.ca and soon other
Amazon sites. Figure 5 below shows our 60-Tablet Essential
9
tm
product.
Figure
5
20
Results Of Operations
Comparison of Results of Operations for the Three Months Ended
March 31, 2019 and 2018
During
the three months ended March 31, 2019, we generated $119,728 in
revenues, compared to $91,168 in revenues for the same three months
period of 2018, an increase of $28,560. Nearly 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 other component of the revenues
generated during the three months ended March 31, 2019 were initial
sales of our new dietary supplement, Essential 9
tm
,
which was launched on March 12, 2019 ($206). The direct cost for
generating these revenues was $84,866 for the period ended March
31, 2019 compared to $100,819 for the same period in 2018, a
decrease of $15,953.
The cost of revenues is comprised of Atlas related salaries,
laboratory supplies, rent and depreciation.
On the
whole, our gross profit increased to $34,862 for the period ended
March 31, 2019 compared to a gross loss of $9,651 for the same
period in 2018.
General
and administrative expenses during the three month period ended
March 31, 2019 were $155,665, compared to general and
administrative expense of $157,178 incurred during the three month
period ended March 31, 2018, a decrease of $1,513. While our
overall general and administrative expenses remained relatively
constant some of our expense categories saw an increase while
others decreased. The expense categories that saw an increase
included consulting fees by $6,958, legal fees by $5,171 and office
expenses by $35,105. The increase in office expenses is due to
administrative expenses associated with the acquisition of Atlas.
The expense categories that saw a decrease included accounting by
$11,000 and executive compensation by $37,586.
We also
incurred $49,815 in interest expense during the three months ended
March 31, 2019, compared to $75,467 in interest expense during the
similar period in 2018. In addition, we incurred $22,308 in losses
arising from debt conversion during the three months ended March
31, 2019, compared to $38,340 in losses from debt conversion during
the similar period in 2018 as a result of decreased
borrowings.
As a
result, we incurred a net loss of $202,542 ($0.00 per share) for
the three month period ended March 31, 2019, compared to a net loss
of $265,636 ($0.01 per share) during the three month period ended
March 31, 2018.
Liquidity and Capital Resources
As
of March 31, 2019, we had cash or cash equivalents of
$95,129.
Net cash used in operating activities was $233,959
during the three month period ended March 31, 2019, compared to
$168,455 for the three month period ended March 31,
2018. 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, Analytical Chemistry Services and Dietary
Supplements operations as
discussed
above.
Cash
flows provided by financing activities were $214,656 for the three
month periods ended March 31, 2019, compared to $248,554 during the
three months ended March 31, 2018. Cash flows used in
investing activities were $-0- for the three month period ended
March 31, 2019 compared to $80,130 during the same three month
period in 2018.
During
the three months ended March 31, 2019, we issued a total of
3,696,581 shares of $0.001 par value Common Stock for the
conversion of outstanding notes payable, reducing the debt by
$25,000 and interest payable by $-0- and generating a loss on
conversion of $22,308.
During
the three month period ended March 31, 2018, we issued a total of
1,464,152 shares of our Common Stock. Of these, 464,152 shares
valued at $95,052 were issued upon conversion of outstanding notes
payable, reducing debt by $55,000 and interest payable by $1,712
and generating a loss on conversion of $38,340. In addition, we
issued 1,000,000 shares of our Common Stock valued at $238,000 or
$0.238 per share as part of the acquisition of Atlas Pharma
Inc.
21
During
the three months ended March 31, 2019, we entered into the
following new debt arrangements:
●
On January 8, 2019,
we received net proceeds of $50,500 in exchange for a note payable
having a face value of $54,000 and accruing interest at the rate of
8% per annum. The note, due on January 8, 2020, 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 January 10,
2019, we received net proceeds of $38,000 in exchange for a note
payable having a face value of $40,660 and accruing interest at the
rate of 8% per annum. The note, due on October 10, 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 5,
2019, we received net proceeds of $35,000 in exchange for a note
payable having a face value of $37,450 and accruing interest at the
rate of 8% per annum. The note, due on October 10, 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 11,
2019, we received net proceeds of $50,000 in exchange for a note
payable having a face value of $52,000 and accruing interest at the
rate of 8% per annum. The note, due on November 30, 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 March 18, 2019,
we received net proceeds of $38,000 in exchange for a note payable
having a face value of $40,660 and accruing interest at the rate of
8% per annum. The note, due on December 18, 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 March 18, 2019,
we received another $38,000 of net proceeds in exchange for a note
payable having a face value of $40,660 and accruing interest at the
rate of 8% per annum. The note, due on December 18, 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.
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 and Dietary Supplements if we are unable to find any
additional financing. There are also no assurances that we will
generate sufficient revenues and profits from our analytical
chemistry services and products sales program to accomplish these
objectives.
22
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.
On
September 10, 2018, we entered into an equity financing agreement
(the “Equity Financing Agreement”) and registration
rights agreement (the “Registration Rights Agreement”)
with GHS Investments LLC, a Nevada limited liability company
(“GHS”). Under the terms of the Equity Financing
Agreement, GHS agreed to provide us with up to $10,000,000 upon
effectiveness of a registration statement on Form S-1 (the
“Registration Statement”) to be filed with the U.S.
Securities and Exchange Commission (the
“Commission”).
Following
effectiveness of the Registration Statement, we will have the
discretion to deliver puts to GHS and GHS will be obligated to
purchase shares of our Common Stock, based on the investment amount
specified in each put notice. The maximum amount that we are
entitled to put to GHS in each put notice shall not exceed two
hundred fifty percent (250%) of the average daily trading dollar
volume of our Common Stock during the ten (10) trading days
preceding the put date, so long as such amount does not exceed
$300,000. Pursuant to the Equity Financing Agreement, GHS and its
affiliates will not be permitted to purchase and we may not put
shares of our Common Stock to GHS that would result in GHS’s
beneficial ownership equaling more than 9.99% of our outstanding
Common Stock. The price of each put share shall be equal to eighty
one percent (81%) of the Market Price (as defined in the Equity
Financing Agreement). Puts may be delivered by us to GHS until the
earlier of thirty-six (36) months after the effectiveness of the
Registration Statement or the date on which GHS has purchased an
aggregate of $10,000,000 worth of Common Stock under the terms of
the Equity Financing Agreement. Additionally, in accordance with
the Equity Financing Agreement, we agreed to issue GHS a promissory
note in the principal amount of $20,000 to offset transaction costs
(the “Note”). The Note bears interest at the rate of 8%
per annum, is not convertible and is due on June 30, 2019.
On
October 9, 2018, we filed a Registration Statement on Form S-1 and,
as requested by the Commission, on October 31, 2018, we withdrew
the same because our Common Stock is not currently trading on the
OTCQB or a higher stock exchange. We are currently reviewing
various remedy options
On
October 9, 2018, we filed a Registration Statement on Form S-1 and,
as requested by the Commission, on October 31, 2018, we withdrew
the same because our Common Stock is not currently trading on the
OTCQB or a higher stock exchange. We are currently reviewing
various remedy options.
Subsequent Events
On May
6, 2019 the holder of a note payable dated October 23, 2018 elected
to convert $18,000 in principal and $765 in interest into 3,184,169
shares of Common Stock leaving a principal balance of
$72,000.
On May
10, 2019 the holder of a note payable dated August 17, 2018 elected
to convert $15,000 in principal into 2,884,615 shares of Common
Stock leaving a principal balance of $13,000.
23
Off Balance Sheet Arrangements
None
ITEM 3.
Q
UANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.
We
are a smaller reporting company and are not required to provide the
information under this item pursuant to Regulation
S-K.
ITEM 4.
C
ONTROLS 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 and 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 March
31, 2019, at reasonable assurance level, for the following
reasons:
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●
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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;
|
|
●
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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.
24
We
believe that our financial statements presented in this quarterly
report on Form 10-Q 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 March 31, 2019, 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.
25
PART II. OTHER INFORMATION
ITEM 1.
L
EGAL
PROCEEDINGS
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 by August
2018. The complaint alleges among other things, claims of
misrepresentations and misleading conduct resulting in damages to
us in an amount of approximately $200,000 Canadian (approximately
$154,000 US). On April 1, 2019, a note payable held by the
defendant having a face value of $100,000 Canadian (approximately
$76,000 US) became due and payable. We have elected not to pay the
amount due and to petition the courts to link this matter to the
ongoing litigation. 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.
ITEM 1A.
R
ISK FACTORS
We
are a smaller reporting company and are not required to provide the
information under this item pursuant to Regulation
S-K.
ITEM 2.
U
NREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the
three months ended March 31, 2019, we issued a total of 3,696,581
shares of $0.001 par value Common Stock for the conversion of
outstanding notes payable, reducing the debt by $25,000 and
interest payable by $-0- and generating a loss on conversion of
$22,308.
During
the three month period ended March 31, 2018, we issued a total of
1,464,152 shares of our Common Stock. Of these, 464,152 shares
valued at $95,052 were issued upon conversion of outstanding notes
payable, reducing debt by $55,000 and interest payable by $1,712
and generating a loss on conversion of $38,340. In addition, we
issued 1,000,000 shares of our Common Stock valued at $238,000 or
$0.238 per share as part of the acquisition of Atlas Pharma
Inc.
We
relied upon the exemption from registration provided by Section
4(a)(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 acquisition of Atlas Pharma
Inc., we did not receive any direct proceeds from the issuance of
these shares. The proceeds from the notes payable were used for the
acquisition of Atlas Pharma Inc. and working capital.
ITEM 3.
D
EFAULTS UPON SENIOR
SECURITIES
None.
26
ITEM 4.
M
INE SAFETY
DISCLOSURE
Not
Applicable.
ITEM 5.
O
THER
INFORMATION
None.
ITEM 6.
E
XHIBITS
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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*
|
|
101.DEF
|
|
XBRL
Definition Linkbase Document*
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|
101.LAB
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|
XBRL
Label Linkbase Document*
|
|
101.PRE
|
|
XBRL
Presentation Linkbase Document*
|
______________________
*
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.
27
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 May 20, 2019.
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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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|
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Principal
Accounting Officer
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28
TABLE OF CONTENTS
Part IItem 1. Financial StatementsNote 1 Nature Of Business and Basis Of PresentationNote 2 Going ConcernNote 3 Notes PayableNote 4 Notes Payable - Related PartyNote 5 Stockholders EquityNote 6 LeasesNote 7 Earnings (loss) Per ShareNote 8 GoodwillNote 9 Income TaxesNote 10 Royalties PayableNote 11 Related Party TransactionsNote 12 Revenue RecognitionNote 13 Accounts ReceivableNote 14 Subsequent EventsItem 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