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:
September
30, 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)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common
Stock
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SBFM
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OTC
Pink Sheets
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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 November 13, 2019, was
520,130,745 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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Item
1.
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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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Item
2.
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14
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Item
3.
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22
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Item
4.
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22
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PART II
OTHER INFORMATION
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Item
1.
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23
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Item 1A.
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23
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Item
2.
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23
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Item
3.
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24
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Item
4.
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24
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Item
5.
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24
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Item
6.
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24
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25
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PART I.
F
INANCIAL
INFORMATION
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Sunshine Biopharma, Inc.
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September 30,
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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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$
81,973
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$
110,534
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Inventory
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17,778
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-
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Prepaid
expenses
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3,155
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1,341
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Deposits
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7,590
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-
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Assets
of discontinued operations
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-
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989,572
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Total
Current Assets
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110,496
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1,101,447
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Equipment
(net of $33,479 and $23,005 depreciation,
respectively)
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35,839
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45,124
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Patents
(net of $58,918 amortization and $556,120 impairment)
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-
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-
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TOTAL
ASSETS
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$
146,335
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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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662,917
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419,663
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Notes
payable - related party
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88,751
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243,094
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Advances
- related party
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27,541
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20,871
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Accounts
payable & accrued expenses
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64,829
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115,826
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Interest
payable
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45,153
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9,291
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Liability
of discontinued operations
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-
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103,732
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Total
Current Liabilities
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889,191
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912,477
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Longterm
Liabilities
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-
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289,847
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TOTAL
LIABILITIES
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889,191
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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 850,00
shares;
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Issued
and outstanding -0- shares at September 30, 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 September 30, 2019 and December
31, 2018
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50,000
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50,000
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Common
Stock, $0.001 par value per share; Authorized 3,000,000,000
shares;
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Issued
and outstanding 311,426,060 and 85,652,400 at September 30, 2019
and December 31, 2018, respectively
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311,426
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85,652
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Capital
paid in excess of par value
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15,935,875
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15,586,678
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Accumulated
comprehensive income
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(2,139
)
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(3,738
)
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Accumulated
(Deficit)
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(17,038,018
)
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(15,774,345
)
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TOTAL
SHAREHOLDERS' EQUITY (DEFICIT)
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(742,856
)
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(55,753
)
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TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
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$
146,335
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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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Unaudited Consolidated Statements Of
O
perations and Comprehensive Income
(Loss)
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3
Months
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3
Months
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9
Months
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9
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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September
30,
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September
30,
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September
30,
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September
30,
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2019
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2018
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2019
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2018
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Sales:
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$
7,326
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$
-
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$
10,565
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$
-
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Cost
of sales
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5,293
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-
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6,865
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-
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Gross
profit
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2,033
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-
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3,700
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-
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General
& Administrative Expenses:
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Accounting
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16,402
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10,473
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57,542
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94,573
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Consulting
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48,222
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-
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70,238
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27,800
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Legal
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13,219
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24,663
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52,188
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83,748
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Office
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17,035
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36,960
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51,945
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62,594
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Officer
& director remuneration
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90,600
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212,000
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134,552
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736,431
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Rent
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518
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1,544
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2,775
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5,116
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Research
& development
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15,204
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-
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15,204
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-
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Depreciation
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3,473
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3,185
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10,302
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10,317
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Total
General & Administrative Expenses
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204,673
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288,825
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394,746
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1,020,579
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Income
(Loss) from operations
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(202,640
)
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(288,825
)
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(391,046
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(1,020,579
)
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Other
Income (Expense):
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Interest
income
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5
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-
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5
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-
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Foreign
exchange gain (loss)
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961
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(11,700
)
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(12,095
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13,184
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Interest
expense
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(27,847
)
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(20,546
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(92,486
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(115,910
)
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Loss
on debt conversions
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(120,720
)
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(591,763
)
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(185,814
)
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(685,348
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Total
Other Income (Expense)
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(147,601
)
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(624,009
)
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(290,390
)
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(788,074
)
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Income
(Loss) before income taxes
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(350,241
)
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(912,834
)
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(681,436
)
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(1,808,653
)
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Income
taxes
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-
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-
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-
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-
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Income
(Loss) from continuing operations
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(350,241
)
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(912,834
)
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(681,436
)
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(1,808,653
)
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Income
(Loss) from discontinued operations
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-
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5,278
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(582,237
)
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(8,847
)
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Net
Income (Loss)
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$
(350,241
)
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$
(907,556
)
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$
(1,263,673
)
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$
(1,817,500
)
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Unrealized
gain (loss) from foreign exchange translation
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(115
)
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12,002
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1,599
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3,232
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Comprehensive
Income (Loss)
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(350,356
)
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(899,610
)
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(1,262,074
)
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(1,814,268
)
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Basic
and diluted loss from continuing operations per common
share
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$
0.00
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$
(0.02
)
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$
(0.01
)
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$
(0.04
)
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Basic
and diluted loss from discontinued operations per common
share
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$
0.00
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$
0.00
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$
(0.01
)
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$
0.00
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Basic
and diluted loss per common share
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$
0.00
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$
(0.02
)
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$
(0.01
)
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$
(0.04
)
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Weighted
Average Common Shares Outstanding (Basic and Diluted)
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165,376,483
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50,018,580
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88,407,255
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48,557,571
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See
Accompanying Notes To These Financial
Statements.
4
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Sunshine Biopharma, Inc.
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Unaudited Consolidated Statements Of
C
ash Flows
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9 Months
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9 Months
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Ended
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Ended
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September 30,
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September 30,
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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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$
(1,263,673
)
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$
(1,817,500
)
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Depreciation
and amortization
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10,302
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43,260
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Foreign
exchange gain (loss)
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12,095
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(13,184
)
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Stock
issued for licenses, services & other assets
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136,490
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676,100
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Stock
issued for interest
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7,905
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29,468
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Loss
on debt conversion
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190,494
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684,854
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Loss
on disposition of subsidiary
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582,237
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-
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(Increase)
decrease in inventory
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(17,778
)
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(23,384
)
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(Increase)
decrease in prepaid expenses
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(1,814
)
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8,501
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(Increase)
decrease in deposits
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(7,590
)
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-
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Increase
(decrease) in accounts payable & accrued expenses
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(52,489
)
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(5,391
)
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Increase
(decrease) in interest payable
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35,862
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20,517
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Net Cash Flows (Used) in Operations
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(367,959
)
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(396,759
)
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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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4,942
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Advances
to discontinued operations
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(14,416
)
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-
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Purchase
of equipment
|
-
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(27,370
)
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Net Cash Flows (Used) in Investing Activities
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(14,416
)
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(22,428
)
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Cash Flows From Financing Activities:
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Proceed
from notes payables
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376,000
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432,885
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Payment
of notes payable
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(53,000
)
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(146,184
)
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Advances
(to) from related parties
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6,670
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19,965
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Payments
to related parties
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-
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(7,063
)
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Notes
payable used to pay expenses
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-
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36,500
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Note
payable used to pay origination fees & interest
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22,430
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18,750
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Net Cash Flows Provided by Financing Activities
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352,100
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354,853
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Net
increase (decrease) in Cash and Cash Equivalents
|
(30,275
)
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(64,334
)
|
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Foreign
currency translation adjustment
|
1,714
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3,232
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Cash
and Cash Equivalents at beginning of period
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110,534
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107,532
|
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Cash
and Cash Equivalents at end of period
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$
81,973
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$
46,430
|
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Supplementary Disclosure Of Cash Flow Information:
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Stock
issued for note conversions including interest
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$
151,169
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$
290,039
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Stock
issued for acquisition of subsidiary
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$
-
|
$
246,000
|
|
Note
payable issued for acquisition of subsidiary
|
$
-
|
$
358,407
|
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Cash
paid for interest
|
$
11,034
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$
13,622
|
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Cash
paid for income taxes
|
$
-
|
$
-
|
See
Accompanying Notes To These Financial
Statements.
5
Sunshine Biopharma, Inc.
N
otes to Unaudited Consolidated
Financial Statements
For the Three and Nine Month Interim Periods Ended September 30,
2019 and 2018
Note 1 – Nature of Business and Basis of
Presentation
Sunshine
Biopharma, Inc. (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 of 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).
On
January 1, 2018, the Company acquired all of the issued and
outstanding shares of Atlas Pharma Inc. (“Atlas”), a
Canadian privately held analytical chemistry 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.
Effective
April 1, 2019, the Company re-assigned all of its stock in Atlas
back to the original owner in exchange for the Atlas related debt.
The loss on the disposition was $580,125.
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 essential 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
(the “Reverse Stock Split”). The number of authorized
Common Shares was established at 3,000,000,000
post-split.
The
Company's 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. and NOX Pharmaceuticals Inc.) herein collectively
referred to as the "Company". During the last nine 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 Financial
Information
The
unaudited financial statements of the Company for the three and
nine month periods ended September 30, 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-X. 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 September 30, 2019 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.
6
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.
Discontinued Operations
Effective
April 1, 2019, the Company disposed of its Atlas Pharma Inc.
subsidiary. As a consequence of the sale, the operating results and
the assets and liabilities of the discontinued operations, which
formerly comprised the lab testing operations, are presented
separately in the Company's financial statements. Summarized
financial information for the discontinued business is shown below.
Prior period balances have been reclassified to present the
operations of the lab testing business as a discontinued
operation.
Discontinued
Operations Income Statement:
|
|
Unaudited
|
Unaudited
|
Unaudited
|
Unaudited
|
|
|
3 Month
Ended
|
3 Month
Ended
|
9 Month
Ended
|
9 Month
Ended
|
|
|
September
30,
|
September
30,
|
September
30,
|
September
30,
|
|
|
2019
|
2018
|
2019
|
2018
|
|
|
|
|
|
|
|
Revenues
|
$
-
|
$
136,939
|
$
119,522
|
$
335,357
|
|
Cost
of revenues
|
-
|
100,219
|
81,920
|
285,210
|
|
Gross
profit
|
-
|
36,720
|
37,602
|
50,147
|
|
|
|
|
|
|
|
General&
Administrative Expenses
|
-
|
27,649
|
36,196
|
46,970
|
|
Gain
(Loss) from operations
|
-
|
9,071
|
1,406
|
3,177
|
|
Other
income (expense) – Interest
|
-
|
(3,793
)
|
(3,518
)
|
(12,024
)
|
|
Net
Income (Loss) from operations
|
-
|
5,278
|
(2,112
)
|
(8,847
)
|
|
|
|
|
|
|
|
Loss
on Disposal
|
-
|
-
|
(580,125
)
|
-
|
|
|
|
|
|
|
|
Net
Income (Loss) from Discontinued Operations
|
-
|
5,278
|
(582,237
)
|
(8,847
)
|
7
The
individual assets and liabilities of the discontinued lab testing
business are in the captions "Assets of Discontinued Operation" and
"Liabilities of Discontinued Operation" in the Consolidated Balance
Sheet. The carrying amounts of the major classes of assets and
liabilities included part of the discontinued business are
presented in the following table:
Discontinued
Operations Balance Sheets:
|
|
Unaudited
September
30,
2019
|
Unaudited
December
31,
2018
|
|
ASSETS
|
|
|
|
Current
Assets:
|
|
|
|
Cash
and cash equivalents
|
$
-
|
$
4,682
|
|
Accounts
receivable
|
-
|
94,955
|
|
Total
Current Assets
|
-
|
99,637
|
|
|
|
|
|
Equipment
(net of $ 0 and $34,959 depreciation)
|
-
|
224,238
|
|
Goodwill
|
-
|
665,697
|
|
|
|
|
|
TOTAL
ASSETS
|
$
-
|
$
989,572
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
Notes
payable
|
-
|
4,657
|
|
Notes
payable - related party
|
-
|
18,230
|
|
Related
party advances
|
-
|
10,248
|
|
Accounts
payable & accrued expenses
|
-
|
70,597
|
|
Total
Current Liabilities
|
-
|
103,732
|
|
|
|
|
|
TOTAL
LIABILITIES
|
$
-
|
$
103,732
|
Discontinued
Operations Cash Flows:
Cash
flows used in discontinued operations for the nine months ended
September 30, 2019 and 2018 were $8,510 and $17,342, respectively.
There were no cash flows used in or provided by investing
activities during those periods.
8
Note 2 – Going Concern and Liquidity
As of
September 30, 2019, and December 31, 2018, the Company had $81,973
and $110,534 in cash on hand respectively, and limited
revenue-producing business and other sources of income.
Additionally, as of September 30, 2019, the Company had outstanding
liabilities totaling $889,191 and $110,496 in current
assets.
In the
Company’s financial statements for the fiscal years ended
December 31, 2018, and 2017, the Reports of the Independent
Registered Public Accounting Firm include an explanatory paragraph
that describes substantial doubt about the Company’s ability
to continue as a going concern. These financial statements have
been prepared on a going concern basis, which contemplates the
realization of assets and the settlement of liabilities and
commitments in the normal course of business. Based on the
Company’s current financial projections, management believes
it does not have sufficient existing cash resources to fund its
current limited operations.
It is
the Company’s current intention to raise debt and/or equity
financing to fund ongoing operating expenses. There is no assurance
that these events will be satisfactorily completed or at terms
acceptable to the Company. Any issuance of equity securities, if
accomplished, could cause substantial dilution to existing
stockholders. Any failure by the Company to successfully implement
these plans would have a material adverse effect on its business,
including the possible inability to continue
operations.
Note 3 – Notes Payable
On
April 1, 2017 the Company received monies in exchange for a Note
Payable having a Face Value of $100,000 Canadian (approximately
$75,500 US at September 30, 2019) with interest payable quarterly
at 9%, which Note was due April 1, 2019. The Note is convertible
any time after issuance into $0.001 par value Common Stock at a
price of $0.015 Canadian (approximately $0.011 US) per share. 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. Any gain or loss will be recognized
at conversion. In June 2018, the Company filed an action in the
Superior Court of the Province of Quebec in the District of
Montreal (Canada) against the holder of this Note. The complaint
alleges among other things, claims of misrepresentations and
misleading conduct resulting in damages to the Company in an amount
of approximately $200,000 Canadian (approximately $151,000 US). The
matter is currently pending. See “Part II, Item 1, Legal
Proceedings”, below.
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 was due on April 15,
2019. During January 2019, the Company paid off this note by
issuing payment in the amount of $69,930 for $53,000 in principal,
$5,332 in accrued interest and $11,598 in additional
interest.
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 was due on
May 30, 2019, was convertible after 180 days from issuance into
$0.001 par value Common Stock at a price 35% below market value.
Through June 2019 the holder of this note elected to convert a
total of $53,000 in principal and $ 1,700 in accrued interest into
11,323,131 shares of $0.001 par value Common Stock valued at
$99,101 leaving balance of $420 in accrued interest and incurring a
loss on conversion of $44,401. The remaining balance of $420 was
paid off in July 2019.
On
September 10, 2018, the Company received consulting services in
exchange for a Note Payable having a Face Value of $16,500 with
interest accruing at 8%. The Note is nonconvertible and became due
on June 20, 2019. The Company is currently negotiating a renewal
arrangement.
On
September 10, 2018, the Company received consulting services in
exchange for a Note Payable having a Face Value of $20,000 with
interest accruing at 8%. The Note is nonconvertible and became due
on June 30, 2019. The Company is currently negotiating a renewal
arrangement.
On
October 23, 2018 the Company received net proceeds of $85,500 in
exchange for a note payable having a face value of $90,000 and
accruing interest at the rate of 8% per annum. The note, due on
October 23, 2019, is convertible after 180 days from issuance into
$0.001 par value Common Stock at a price 35% below market value.
Through September 2019 the holder of this note elected to convert a
total of $84,000 in principal and $5,035 in accrued interest into
55,545,131 shares of $0.001 par value Common Stock valued at
$164,913 leaving a principal balance of $6,000 and incurring a loss
on conversion of $75,878.
9
On
December 24, 2018, the Company received net proceeds of $80,000 in
exchange for a note payable having a face value of $87,000 and
accruing interest at the rate of 8% per annum. The note, due on
December 24, 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
December 31, 2018, a note payable having a Face Value of $24,012
and accrued interest of $2,881 was renewed, together with the
accrued interest, for a 12 month period. The new note has a Face
Value of $26,893 and accrues interest at 12%. The new note is
nonconvertible and is due December 31, 2019.
On
December 31, 2018 a note payable having a Face Value of $122,093
and accrued interest of $14,651 was renewed, together with the
accrued interest, for a 12 month period. The new note has a Face
Value of $136,744 and accrues interest at 12%. The new note is
nonconvertible and is due December 31, 2019.
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.
Through September 30,
2019, the holder of this note elected to convert a total of $40,660
in principal and $1,693 in accrued interest into 32,096,307 shares
of $0.001 par value Common Stock valued at $75,469 leaving a
principal balance of $-0- and incurring a loss on conversion of
$33,116.
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. The Company is currently negotiating
a renewal arrangement.
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.
Through September 30,
2019, the holder of this note elected to convert a total of $52,000
in principal and $2,080 in accrued interest into 45,763,500 shares
of $0.001 par value Common Stock valued at $81,990 leaving a
principal balance of $-0- and incurring a loss on conversion of
$27,910.
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.
Through September 30,
2019, the holder of this note elected to convert a total of $11,500
in principal into 12,945,591 shares of $0.001 par value Common
Stock valued at $22,008 leaving a principal balance of $29,160 and
incurring a loss on conversion of $10,508.
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.
10
On July
2, 2019, the Company received net proceeds of $38,000 in exchange
for a note payable having a face value of $40,000 and accruing
interest at the rate of 8% per annum. The note, due on April 30,
2020 and 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 July
26, 2019, the Company received net proceeds of $47,500 in exchange
for a note payable having a face value of $50,000 and accruing
interest at the rate of 8% per annum. The note, due on July 26,
2020 and 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
September 12, 2019, the Company received net proceeds of $41,000 in
exchange for a note payable having a face value of $43,000 and
accruing interest at the rate of 8% per annum. The note, due on
July 15, 2020 and 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
September 30, 2019 and December 31, 2018, total accrued interest on
Notes Payable was $45,153 and $9,291, respectively.
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 was due on December 31, 2023. Payments on this note
were $10,000 Canadian (approximately $8,000 US) per quarter. The
note was secured by the Atlas Pharma Inc. shares held by the
Company. Effective April 1, 2019 the Company re-assigned all of the
Atlas shares back to the seller and as a result this note was
cancelled.
In
addition to the above, at September 30, 2019 the Company had a note
payable held by the CEO of the Company having a principal amount of
$88,751 and accrued interest of $7,905. The note is unsecured,
nonconvertible and accrues interest at 12%. It matures on December
31, 2019.
Note 5 – Shareholders’ Equity
During
the nine months ended September 30, 2019 the Company issued a total
of 225,773,660 shares of $0.001 par value Common Stock valued at
$443,481 for the conversion of outstanding notes payable, reducing
the debt by $241,160 and interest payable by $11,402 and generating
a loss on conversion of $221,813. In addition, the Company issued
29,100,000 shares of $0.001 par value Common Stock valued at
$57,390 for consulting services. The Company also issued 39,000,000
shares of $0.001 par value Common Stock valued at $74,100 as
remuneration for its Officers and Directors.
The
Company declared no dividends through September 30,
2019.
11
The
following table shows the changes in shareholders’
equity:
|
|
Three Months ended
|
Nine Months Ended
|
||
|
|
September 30,
|
September 30,
|
||
|
|
2019
|
2018
|
2019
|
2018
|
|
|
|
|
|
|
|
Beginning
Shareholders' Equity (Deficit)
|
$
(816,302
)
|
$
(276,130
)
|
$
(55,753
)
|
$
(573,363
)
|
|
|
|
|
|
|
|
Beginning
and ending Series B Rreferred Stock
|
50,000
|
50,000
|
50,000
|
50,000
|
|
|
|
|
|
|
|
Beginning
Common Stock
|
104,287
|
55,205
|
85,652
|
45,936
|
|
Common
Stock issued
|
207,139
|
24,076
|
225,774
|
33,345
|
|
Ending
Common Stock
|
311,426
|
79,281
|
311,426
|
79,281
|
|
|
|
|
|
|
|
Beginning
additonal paid in capital
|
15,719,212
|
14,155,065
|
15,586,678
|
12,948,386
|
|
Increase
in additional paid in capital
|
216,663
|
1,192,271
|
349,197
|
2,398,950
|
|
Ending
additional paid in capital
|
15,935,875
|
15,347,336
|
15,935,875
|
15,347,336
|
|
|
|
|
|
|
|
Beginning
other comprehensive income (loss)
|
(2,024
)
|
(8,266
)
|
(3,738
)
|
504
|
|
Other
comprehensive income (loss)
|
(115
)
|
12,002
|
1,599
|
3,232
|
|
Ending
other comprehensive income (loss)
|
(2,139
)
|
3,736
|
(2,139
)
|
3,736
|
|
|
|
|
|
|
|
Beginning
retained earnings (deficit)
|
(16,687,777
)
|
(14,528,134
)
|
(15,774,345
)
|
(13,618,190
)
|
|
Net
income (loss)
|
(350,241
)
|
(907,556
)
|
(1,263,673
)
|
(1,817,500
)
|
|
Ending
retained income (deficit)
|
(17,038,018
)
|
(15,435,690
)
|
(17,038,018
)
|
(15,435,690
)
|
|
|
|
|
|
|
|
Ending
Shareholders' Equity (Deficit)
|
$
(742,856
)
|
$
44,663
|
$
(742,856
)
|
$
44,663
|
|
|
|
|
|
|
Note 6 – 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 7 – 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 8 – Royalties Payable
As part
of a subscription agreement entered into in 2016, the Company had
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 May 2018, the
Company issued 50,000 shares of its Common Stock valued at $5,900
in exchange for cancellation of this royalty
obligation.
Note 9 – 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 $3,751 and $41,000 for the three months ended
September 30, 2019 and 2018 and $43,952 and $136,131 for the nine
month periods ended September 30, 2019 and 2018, respectively. The
Company also paid its Officers and Directors non-cash compensation
in the form of shares of Common Stock valued $74,100 and $171,000
for the three month periods ended September 30, 2019 and 2018 and
$74,100 and $600,300 for the nine month periods ended September 30,
2019 and 2018, respectively.
Note 10 – 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.
12
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. The Company’s revenue recognition policy is in
compliance with these local regulations.
Note 11 – Subsequent Events
On
October 1, 2019 the holder of a note payable dated December 31,
2018 elected to convert $30,000 in principal into 30,000,000 shares
of Common Stock leaving a principal balance of
$106,744.
On
October 1 and 17, 2019, the holder of a note payable dated March
18, 2019 elected to convert a total of $28,594 in principal into
30,526,493 shares of Common Stock leaving a principal balance of
$12,066.
On
October 16, 2019 the holder of a note payable dated October 23,
2018 elected to convert a total of $6,000 in principal and $469 in
accrued interest into 7,282,716 shares of Common Stock leaving a
principal balance of $-0-.
On
October 23 and November 7, 2019, the holder of a note payable dated
December 24, 2018, elected to convert a total of $28,000 in
principal and $1,902 in accrued interest into 42,228,183 shares of
Common Stock leaving a principal balance of $59,000.
On
November 4 and 6, 2019, the holder of a note payable dated March
18, 2019, elected to convert a total of $17,500 in principal and
$1,967 in accrued interest into 32,668,293 shares of Common Stock
leaving a principal balance of $11,660.
13
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 privately held analytical chemistry company offering
sample testing services to the pharmaceutical and other industrial
sectors. Effective April 1, 2019, we assigned all of our interest
in the Atlas securities back to the seller in exchange for the
Atlas related debt.
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 nutritional
supplement which we trademarked Essential 9
tm
.
This nutritional supplement is an over-the-counter tablet comprised
of the nine essential 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 retroactive post Reverse Stock
Split basis.
14
On
March 12, 2019 Essential 9
tm
became available for sale on Amazon.ca and later on Amazon.com in
the United States and elsewhere around the world. On March 23, 2019
we recorded our first revenues of Essential 9
tm
sales.
On
April 30, 2019, we were issued United States Patent Number:
10,272,065, a new patent extending proprietary coverage of our
Adva-27a anticancer drug until 2033.
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 currently are generating revenue, we have elected
to include a Plan of Operation to discuss our ongoing 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 Numbers 8,236,935 and
10,272,065.
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).
15
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
.
16
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 a 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 securing regulatory approval to commence marketing 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)
17
Figure
4 below shows a draft of our Generic Pharmaceuticals label using
Anastrozole as an example.
Figure
4
We are
currently looking into a number of additional Generic
Pharmaceuticals for possible in-licensing. No assurances can be
provided that we will acquire the rights to all or any of these
generic drugs. 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 Generic Pharmaceuticals
portfolio over time. There are no assurances this will
occur.
Various
publicly available sources indicate that the worldwide sales of
generic pharmaceuticals are approximately $250 billion per year. In
the United States and Canada, the sales of generic pharmaceuticals
are approximately $70 billion and $7 billion, respectively. The
generic pharmaceuticals business is very competitive. There are
several multinational players in the field including Teva (Israel),
Novartis - Sandoz (Switzerland), Hospira (USA), Mylan
(Netherlands), Sanofi (France), Fresenius Kabi (Germany) and
Pharmascience (Canada). While no assurances can be provided, with
our offering of Canadian approved products we believe that we will
be able to access a small percentage of the generic pharmaceuticals
marketplace.
Nutritional 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
18
Results Of Operations
Comparison of Results of Operations for the Nine Months ended
September 30, 2019 and 2018
During
the nine months ended September 30, 2019, we generated revenues of
$10,565 from the sale of products generated by our Nutritional
Supplements Operations which we launched in March 2019. The direct
cost for generating these revenues was $6,865. We did not generate
any revenues during the comparable period in 2018.
General
and Administrative Expenses during the nine months ended September
30, 2019 was $394,746, compared to $1,020,579 during the nine
months ended September 30, 2018, a decrease of $625,833. The reason
for this relatively large decrease was an effort to reduce expenses
across the board. Specifically, executive compensation decreased by
$601,879, accounting by $37,031, legal by $31,560 and office by
$10,649. The only category that saw an increase was consulting
expenses which increased by $42,438 as a result of the launching of
our Nutritional Supplements products and our continuing effort to
raise capital to fund our Proprietary Drug Development program. In
addition, we incurred $15,204 in research and development (R&D)
expenses during the nine months ended September 30, 2019 compared
to no R&D expenses incurred during the similar period in
2018.
We
incurred $185,814 in losses arising from debt conversion during the
nine months ended September 30, 2019, compared to $685,348 in
losses from debt conversion during the similar period in 2018. We
also incurred $92,486 in interest expense during the nine months
ended September 30, 2019, compared to $115,910 in interest expense
during the similar period in 2018. The decrease in both of these
two expense categories was a result of some convertible notes
having been paid off or reduced prior to maturity. In addition, we
incurred a loss of $582,237 during the nine months ended September
30, 2019, compared to $8,847 in losses from discontinued operations
during the similar period in 2018 as a result of termination of our
Analytical Chemistry Services Operations and sale of Atlas Pharma
Inc.
As a
result, we incurred a Net Loss of $1,263,673 ($0.01 per share) for
the nine month period ended September 30, 2019, compared to a Net
Loss of $1,817,500 ($0.04 per share) during the nine month period
ended September 30, 2018.
Comparison of Results of Operations for the Three Months Ended
September 30, 2019 and 2018
For the
three months ended September 30, 2019, we generated $7,326 in
revenues, compared to no revenues for the same three months period
of 2018. All of these revenues were generated from our newly
launched Nutritional Supplements Operations. The direct cost for
generating these revenues was $5,293.
General
and Administrative Expenses during the three month period ended
September 30, 2019 were $204,673, compared to General and
Administrative Expenses of $288,825 incurred during the three month
period ended September 30, 2018, a decrease of $84,152. The reason
for this decrease was an effort to reduce expenses across the
board. Specifically, executive compensation decreased by $121,400,
office by $19,925 and legal by $11,444. The two categories that saw
an increase were accounting which increased by $5,929 and
consulting by $48,222 as a result of the launching of our
Nutritional Supplements products and our continuing effort to raise
capital to fund our Proprietary Drug Development program.
In
addition, we incurred $15,204 in R&D expenses during the three
months ended September 30, 2019 compared to no R&D expenses
incurred during the similar period in 2018.
We
incurred $27,847 in interest expense during the three months ended
September 30, 2019, compared to $20,546 in interest expense during
the similar period in 2018. We also incurred $120,720 in losses
arising from debt conversion during the three months ended
September 30, 2019, compared to $591,763 in losses from debt
conversion during the similar period in 2018. Both of these
decreases were a result of decreased borrowings or prepayment of
principal balances prior to maturity. In addition, we incurred a
loss of $-0- during the three months ended September 30, 2019,
compared to $5,278 in income from discontinued operations during
the similar period in 2018 as a result of termination of our
Analytical Chemistry Services Operations and sale of Atlas Pharma
Inc.
19
As a
result, we incurred a Net Loss of $350,241 ($0.00 per share) for
the three month period ended September 30, 2019, compared to a Net
Loss of $907,556 ($0.02 per share) during the three month period
ended September 30, 2018.
Liquidity and Capital Resources
As
of September 30, 2019, we had cash or cash equivalents of
$81,973.
Net cash used in Operating Activities was $367,959
during the nine month period ended September 30, 2019, compared to
$396,759 for the nine month period ended September 30,
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, and Nutritional Supplements operations as
discussed above.
Cash
flows provided by Financing Activities were $352,100 for the nine
month period ended September 30, 2019, compared to $354,853 during
the nine months ended September 30, 2018. Cash Flows
used in Investing Activities were $14,416 for the nine month period
ended September 30, 2019 compared to $22,370 during the same nine
month period in 2018.
During
the nine months ended September 30, 2019, we issued a total of
225,773,660 shares of $0.001 par value Common Stock for the
conversion of outstanding notes payable, reducing the debt by
$241,160 and interest payable by $11,402 and generating a loss on
conversion of $221,813.
During
the nine months ended September 30, 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.
●
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.
Through September 2019, the holder
of this note elected to convert a total of $40,660 in principal and
$1,693 in accrued interest into 32,096,307 shares of $0.001 par
value Common Stock valued at $75,469 leaving a principal balance of
$-0- and incurring a loss on conversion of $33,116.
●
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.
●
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.
Through September 2019 the holder of
this note elected to convert a total of $52,000 in principal and
$2,080 in accrued interest into 45,763,500 shares of $0.001 par
value Common Stock valued at $81,990 leaving a principal balance of
$-0- and incurring a loss on conversion of $27,910.
●
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.
Through September 2019 the holder of
this note elected to convert a total of $11,500 in principal into
12,945,591 shares of $0.001 par value Common Stock valued at
$22,008 leaving a principal balance of $29,160 and incurring a loss
on conversion of $10,508.
20
●
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.
●
On July 2, 2019, we
received net proceeds of $38,000 in exchange for a note payable
having a face value of $40,000 and accruing interest at the rate of
8% per annum. The note, due on April 30, 2020 and is convertible
after 180 days from issuance into $0.001 par value Common Stock at
a price 35% below market value.
●
On July 26, 2019,
we received net proceeds of $47,500 in exchange for a note payable
having a face value of $50,000 and accruing interest at the rate of
8% per annum. The note, due on July 26, 2020 and is convertible
after 180 days from issuance into $0.001 par value Common Stock at
a price 35% below market value.
●
On September 12,
2019, we received net proceeds of $41,000 in exchange for a note
payable having a face value of $43,000 and accruing interest at the
rate of 8% per annum. The note, due on July 15, 2020 and is
convertible after 180 days from issuance into $0.001 par value
Common Stock at a price 35% below market value.
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 Nutritional Supplements
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 (approximately $2 million for the Nutritional Supplements
and Generic Pharmaceuticals Operations and approximately $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 through the sales of Generic
Drugs and Nutritional 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 products sales
program to accomplish these objectives.
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.
Subsequent Events
On
October 1, 2019 the holder of a note payable dated December 31,
2018 elected to convert $30,000 in principal into 30,000,000 shares
of Common Stock leaving a principal balance of
$106,744.
On
October 1 and 17, 2019, the holder of a note payable dated March
18, 2019 elected to convert a total of $28,594 in principal into
30,526,493 shares of Common Stock leaving a principal balance of
$12,066.
On
October 16, 2019 the holder of a note payable dated October 23,
2018 elected to convert a total of $6,000 in principal and $469 in
accrued interest into 7,282,716 shares of Common Stock leaving a
principal balance of $-0-.
On
October 23 and November 7, 2019, the holder of a note payable dated
December 24, 2018, elected to convert a total of $28,000 in
principal and $1,902 in accrued interest into 42,228,183 shares of
Common Stock leaving a principal balance of $59,000.
On
November 4 and 6, 2019, the holder of a note payable dated March
18, 2019, elected to convert a total of $17,500 in principal and
$1,967 in accrued interest into 32,668,293 shares of Common Stock
leaving a principal balance of $11,660.
21
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 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
September 30, 2019, 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.
22
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 nine month period ended September 30, 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.
PART II. OTHER INFORMATION
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.
We
are a smaller reporting company and are not required to provide the
information under this item pursuant to Regulation
S-K.
During
the nine months ended September 30, 2019 we issued a total of
225,773,660 shares of $0.001 par value Common Stock valued at
$443,481 for the conversion of outstanding notes payable, reducing
the debt by $241,160 and interest payable by $11,402 and generating
a loss on conversion of $221,813. In addition, we issued 29,100,000
shares of $0.001 par value Common Stock valued at $57,390 for
consulting services. We also issued 39,000,000 shares of $0.001 par
value Common Stock valued at $74,100 as remuneration for our
Officers and Directors.
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.
Subsequent Events
On
October 1, 2019 the holder of a note payable dated December 31,
2018 elected to convert $30,000 in principal into 30,000,000 shares
of Common Stock leaving a principal balance of
$106,744.
On
October 1 and 17, 2019, the holder of a note payable dated March
18, 2019 elected to convert a total of $28,594 in principal into
30,526,493 shares of Common Stock leaving a principal balance of
$12,066.
On
October 16, 2019 the holder of a note payable dated October 23,
2018 elected to convert a total of $6,000 in principal and $469 in
accrued interest into 7,282,716 shares of Common Stock leaving a
principal balance of $-0-.
On
October 23 and November 7, 2019, the holder of a note payable dated
December 24, 2018, elected to convert a total of $28,000 in
principal and $1,902 in accrued interest into 42,228,183 shares of
Common Stock leaving a principal balance of $59,000.
On
November 4 and 6, 2019, the holder of a note payable dated March
18, 2019, elected to convert a total of $17,500 in principal and
$1,967 in accrued interest into 32,668,293 shares of Common Stock
leaving a principal balance of $11,660.
23
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.
None.
Not
Applicable.
None.
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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.
24
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 November 13, 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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Camille Sebaaly
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Camille
Sebaaly,
Principal
Financial Officer and
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Principal
Accounting Officer
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25
TABLE OF CONTENTS
Part I. Financial InformationItem 1. Financial StatementsNote 1 Nature Of Business and Basis Of PresentationNote 2 Going Concern and LiquidityNote 3 Notes PayableNote 4 Notes Payable - Related PartyNote 5 Shareholders EquityNote 6 Earnings (loss) Per ShareNote 7 Income TaxesNote 8 Royalties PayableNote 9 Related Party TransactionsNote 10 Revenue RecognitionNote 11 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