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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form
For the quarterly period ended:
For the transition period from ____________ to ______________
Commission File Number:
(Exact name of small business issuer as specified in its charter)
| (State of other jurisdiction of incorporation) | (IRS Employer ID No.) |
(Address of principal executive offices)
(Issuer’s Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
| N/A | N/A | N/A |
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:
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted 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 such files).
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)
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑
The number of shares of the registrant’s only class of Common Stock issued and outstanding as of November 9, 2021, was shares.
TABLE OF CONTENTS
PART II OTHER INFORMATION |
||
| Item 1. | Legal Proceedings | 23 |
| Item 1A. | Risk Factors | 23 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 23 |
| Item 3. | Defaults Upon Senior Securities | 23 |
| Item 4. | Mine Safety Disclosures | 23 |
| Item 5. | Other Information | 23 |
| Item 6. | Exhibits | 24 |
| Signatures | 25 | |
| 2 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Sunshine Biopharma, Inc.
Unaudited Condensed Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Deposits | ||||||||
| Total Current Assets | ||||||||
| Equipment (net of $ |
||||||||
| Patents (net of $ |
||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Notes payable | $ | $ | ||||||
| Notes payable - related party | ||||||||
| Accounts payable & accrued expenses | ||||||||
| Interest payable | ||||||||
| Total Current Liabilities | ||||||||
| Long-term portion of notes payable | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| SHAREHOLDERS' EQUITY (DEFICIT) | ||||||||
| Preferred Stock, Series B $ par value per share; Authorized Shares; Issued and outstanding shares. | ||||||||
| Common Stock, $ par value per share; Authorized Shares; Issued and outstanding and at September 30, 2021 and December 31, 2020 respectively | ||||||||
| Capital paid in excess of par value | ||||||||
| Accumulated comprehensive income | ( | ) | ( | ) | ||||
| Accumulated (Deficit) | ( | ) | ( | ) | ||||
| TOTAL SHAREHOLDERS' EQUITY (DEFICIT) | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | $ | $ | ||||||
See Accompanying Notes To These Financial Statements
| 3 |
Sunshine Biopharma, Inc.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss
| 3 Months | 3 Months | 9 Months | 9 Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue: | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| General & Administrative Expenses | ||||||||||||||||
| Accounting | ||||||||||||||||
| Consulting | ||||||||||||||||
| Legal | ||||||||||||||||
| Office | ||||||||||||||||
| Officer & director remuneration | ||||||||||||||||
| Patent fees | ||||||||||||||||
| R&D | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Total General & Administrative Expenses | ||||||||||||||||
| (Loss) from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expense): | ||||||||||||||||
| Foreign exchange | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Miscellaneous income | ||||||||||||||||
| Debt release | ||||||||||||||||
| Loss on debt conversions | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Other Income (Expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive income: | ||||||||||||||||
| Unrealized loss from foreign exchange translation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted (loss) per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted Average Common Shares Outstanding (Basic & Diluted) | ||||||||||||||||
See Accompanying Notes To These Financial Statements
| 4 |
Sunshine Biopharma, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
| 9 Months | 9 Months | |||||||
| Ended | Ended | |||||||
| September 30, | September 30, | |||||||
| 2021 | 2020 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net (Loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Foreign exchange (gain) loss | ( | ) | ( | ) | ||||
| Stock issued for services | ||||||||
| Stock issued for payment interest | ||||||||
| Loss on debt conversion | ||||||||
| Debt & interest release | ( | ) | ( | ) | ||||
| Decrease in accounts receivable | ||||||||
| (Increase) in inventory | ( | ) | ( | ) | ||||
| (Increase) in prepaid expenses | ( | ) | ( | ) | ||||
| (Decrease) in Accounts Payable & accrued expenses | ( | ) | ( | ) | ||||
| Increase in interest payable | ||||||||
| Net Cash Flows (used) in operations | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities: | ||||||||
| Purchase of equipment | ( | ) | ||||||
| Net Cash Flows (used) in Investing activities | ( | ) | ||||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from notes payable | ||||||||
| Note payable to pay fees | ||||||||
| Payments of notes payable | ( | ) | ||||||
| Net Cash Flows provided by financing activities | ||||||||
| Cash and Cash Equivalents at Beginning of Period | ||||||||
| Net increase in cash and cash equivalents | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| Cash and Cash Equivalents at End of Period | $ | $ | ||||||
| Supplementary Disclosure Of Cash Flow Information: | ||||||||
| Stock issued for note conversions including interest | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
See Accompanying Notes To These Financial Statements.
| 5 |
Sunshine Biopharma, Inc.
Unaudited Condensed Consolidated Statement of Shareholders' Equity
| Number Of | Capital Paid | Number Of | ||||||||||||||||||||||||||||||
| Common | Common | in Excess | Preferred | Preferred | Comprehensive | Accumulated | ||||||||||||||||||||||||||
| Shares Issued | Stock | of Par Value | Shares Issued | Stock | Income | Deficit | Total | |||||||||||||||||||||||||
| Three Month Period | ||||||||||||||||||||||||||||||||
| Balance June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Common stock issued for the reduction of note payable and payment of interest | – | |||||||||||||||||||||||||||||||
| Net (loss) | – | – | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Nine Month Period | ||||||||||||||||||||||||||||||||
| Balance December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Common stock issued for the reduction of note payable and payment of interest | – | |||||||||||||||||||||||||||||||
| Common stock issued for management compensation | – | |||||||||||||||||||||||||||||||
| Net (loss) | – | – | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Three Months Period | ||||||||||||||||||||||||||||||||
| June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Common stock issued for the reduction of note payable and payment of interest | – | |||||||||||||||||||||||||||||||
| Preferred stock issued for management compensation | – | |||||||||||||||||||||||||||||||
| Net (loss) | – | – | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Nine Months Period | ||||||||||||||||||||||||||||||||
| Balance December 31, 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Common stock issued for the reduction of note payable and payment of interest | – | |||||||||||||||||||||||||||||||
| Preferred stock issued for management compensation | – | |||||||||||||||||||||||||||||||
| Net (loss) | – | – | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
See Accompanying Notes To These Financial Statements.
| 6 |
Sunshine Biopharma, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Month Interim Periods Ended September 30, 2021 and 2020
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 (the “License Agreement”). 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 October 2012, the Company published the results of its initial preclinical studies of Adva-27a in the peer-reviewed journal, ANTICANCER RESEARCH. The studies were conducted in collaboration with Binghamton University, a State University of New York, and Ecole Polytechnique, Universite de Montreal. The publication is entitled “Adva-27a, a Novel Podophyllotoxin Derivative Found to Be Effective Against Multidrug Resistant Human Cancer Cells” [ANTICANCER RESEARCH Volume 32, Pages 4423-4432 (2012)].
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 recently transitioned its focus to the development and marketing of Science-Based Nutritional Supplements.
In December 2015, the Company acquired all worldwide issued (US Patent Number 8,236,935, and 10,272,065) and pending patents under PCT/FR2007/000697 and PCT/CA2014/000029 for the Adva-27a anticancer compound from Advanomics Corporation, a related party, and terminated the License Agreement. In 2016, the remaining value of these patents was impaired. The Company is however continuing development of the Adva-27a anticancer drug covered by these patents.
In March 2018, the Company formed NOX Pharmaceuticals, Inc., a wholly owned Colorado corporation and assigned all of the Company’s interest in the Adva-27a anticancer drug to that company. NOX Pharmaceuticals Inc.’s mission is to research, develop and commercialize proprietary drugs including Adva-27a.
In December 2018, the Company launched its first Science-Based Nutritional Supplements product, Essential 9™, an over-the-counter tablet comprised of the nine (9) essential amino acids that the human body cannot make. Essential 9™ has been authorized for marketing by Health Canada under NPN 80089663.
On May 22, 2020, the Company filed a provisional patent application in the United States for a new treatment for Coronavirus infections. The Company’s patent application covers composition subject matter pertaining to small molecules for inhibition of the main Coronavirus protease, Mpro, an enzyme that is essential for viral replication. The patent application has a priority date of May 22, 2020. On April 30, 2021, the Company filed a PCT application containing new research results and extending coverage to include the Coronavirus Papain-Like protease, PLpro. The priority date of May 22, 2020 has been maintained in the newly filed PCT application.
| 7 |
On June 17, 2020, the Company filed an amendment to its Articles of Incorporation (the “Amendment”) with the State of Colorado, to eliminate the Series “A” Preferred Shares consisting of Eight Hundred and Fifty Thousand (850,000) shares, par value $0.10 per share, and the designation thereof, which shares were returned to the status of undesignated shares of Preferred Stock. In addition, the Amendment increased the number of authorized Series “B” Preferred Shares from Five Hundred Thousand (500,000) to One Million (1,000,000) shares.
Also on June 17, 2020, the Company issued Five Hundred Thousand (500,000) shares of Series “B” Preferred Stock in favor of Dr. Steve N. Slilaty, the Company’s CEO, in consideration for the COVID-19 treatment technology he developed. The Series “B” Preferred Stock is non-convertible, non-redeemable, non-retractable and has a superior liquidation value of $0.10 per share. Each share of Series “B” Preferred Stock is entitled to 1,000 votes per share. This issuance brought the total number of Series “B” Preferred Stock held by Dr. Slilaty to 1,000,000 shares.
On September 8, 2020, the Company executed a financing
agreement with RB Capital Partners, Inc., La Jolla, CA, (“RB Capital”) who agreed to provide the Company with a minimum of
$2 million in convertible debt financing during the ensuing three to six month period pursuant to the terms and conditions included in
relevant Promissory Notes (the “Promissory Notes”). The Promissory Notes bear interest at the rate of
Effective October 6, 2020, the Company entered into a Research Agreement (the “Agreement”) with the University of Georgia Research Foundation, Inc. (“UGARF”), representing the University of Georgia (“UGA”). The purpose of the Agreement is to memorialize the terms of the Company working together with UGA to conduct the necessary research and development to advance the Company’s Anti-Coronavirus lead compound, SBFM-PL4 (or derivatives thereof) through various stages of preclinical development, animal studies and clinical trials for Coronavirus infections. The Agreement grants the Company an exclusive worldwide license for all of the intellectual property developed by UGA, whether developed alone or jointly with the Company.
On January 26, 2021, the Company received a Notice of Allowances from the Canadian Intellectual Property Office for a new patent application covering Adva-27a. The newly issued patent contains new subject matter and extends the proprietary protection of Adva-27a in Canada until 2033.
On February 4, 2021, the Company entered into an exclusive license agreement with the University of Georgia (“UGA”) for two Anti-Coronavirus compounds which UGA had previously developed and patented. The Company and UGA will advance the development of these two compounds in parallel with the Company’s own Anti-Coronavirus compound, SBFM-PL4.
On March 9, 2021, the Company received a Notice of Allowance from the European Patent Office for a new patent application covering Adva-27a. The newly issued patent contains new subject matter and extends the proprietary protection of Adva-27a in Europe until 2033. The equivalent patent in the United States was issued in 2019 (US Patent Number 10,272,065).
On June 25, 2021, the Company entered into an engagement agreement with Aegis Capital Corp. (“Aegis”), pursuant to which we engaged Aegis to act as lead underwriter in connection with a proposed public offering of approximately $10 million of common stock and warrants by the Company (the “Offering”). The Offering is contingent on satisfaction of various conditions, including Aegis’s due diligence examination of the Company, Nasdaq approval of the listing of the Company’s Common Stock, and successful completion of a reverse stock split.
On October 6, 2021, the Company filed its Definitive Information Statement with the SEC to complete the reverse split of the Company’s Common Stock in part to meet the Nasdaq listing requirement concerning minimum price per share.
The Company's financial statements reflect both the First and Second 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".
| 8 |
In March 2020, the World Health Organization declared Coronavirus and its associated disease, COVID-19, a global pandemic. Conditions surrounding the Coronavirus outbreak have been and are continuing to evolve rapidly. Government authorities in the U.S. and around the world have implemented emergency measures to mitigate the spread of the virus. The outbreak and related mitigation measures have had and will continue to have a material adverse impact on the world economies and the Company's business activities. It is not possible for the Company to predict the duration or magnitude of the adverse conditions of the outbreak and their effects on the Company’s business or ability to raise funds. No adjustments have been made to the amounts reported in the Company's financial statements as a result of this matter.
Basis of Presentation of Unaudited Financial Information
The unaudited financial statements of the Company for the three and nine month periods ended September 30, 2021 and 2020 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 December 31, 2020 was derived from the audited financial statements included in the Company's financial statements as of and for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2021. These financial statements should be read in conjunction with that report.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This guidance removes certain exceptions to the general principles in Topic 740 and provides consistent application of U.S. GAAP by clarifying and amending existing guidance. The effective date of the new guidance for public companies is for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. Early adoption is permitted. There was no impact of the updated guidance on the Company’s financial statements for the year ended December 31, 2020. The Company is currently evaluating the impact of the updated guidance on its financial statements for 2021 and going forward.
In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. The Company believes the adoption will modify the way the Company analyzes financial instruments, but it does not anticipate a material impact on results of operations. The Company is in the process of determining the effects adoption will have on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU2020-06 amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluating the impact of this guidance on its unaudited consolidated financial statements.
Note 2 – Going Concern and Liquidity
As of September 30, 2021 and December 31,
2020, the Company had $
| 9 |
The consolidated financial statements included in this Report 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. The consolidated financial statements included in this Report do not include any adjustments that may result from the outcome of any going concern uncertainty.
There is no assurance that these events will be satisfactorily completed. The issuance of equity securities in connection with the Offering (see Note 1), 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
The Company’s Notes Payable at September 30, 2021 consisted of the following:
A Note Payable dated December 31, 2018 having
a Face Value of $
On April 17, 2020, the Company’s Canadian
subsidiary received a CEBA Loan (Canada Emergency Business Account Loan) from CIBC (Canadian Imperial Bank of Commerce) in the principal
amount of $
On April 27, 2020, the Company received a Paycheck
Protection Program loan ("PPP Loan") in the principal amount of $
On July 7, 2020, the Company received monies in
exchange for a Note Payable having a Face Value of $
On July 27, 2020, the Company received monies
in exchange for a Note Payable having a Face Value of $
On August 14, 2020, the Company received monies
in exchange for a Note Payable having a Face Value of $
| 10 |
On September 14, 2020, the Company received
monies in exchange for a Note Payable having a Face Value of $
On September 24, 2020, the Company received monies
in exchange for a Note Payable having a Face Value of $ with interest accruing at
On October 20, 2020, the Company received
monies in exchange for a Note Payable having a Face Value of $
On November 19, 2020, the Company received
monies in exchange for a Note Payable having a Face Value of $
On November 24, 2020, the Company received
monies in exchange for a Note Payable having a Face Value of $
On November 25, 2020, the Company received monies
in exchange for a Note Payable having a Face Value of $
On December 2, 2020, the Company received monies
in exchange for a Note Payable having a Face Value of $
On January 12, 2021, the Company received monies
in exchange for a Note Payable having a Face Value of $
On January 27, 2021, the Company received monies
in exchange for a Note Payable having a Face Value of $
On February 12, 2021, the Company received monies
in exchange for a Note Payable having a Face Value of $
| 11 |
On April 5, 2021, the Company received monies
in exchange for a Note Payable having a Face Value of $
On April 20, 2021, the Company received monies
in exchange for a Note Payable having a Face Value of $
On July 6, 2021, the Company received monies in
exchange for a Note Payable having a Face Value of $
On August 18, 2021, the Company received monies
in exchange for a Note Payable having a Face Value of $
At September 30, 2021 and December 31, 2020, total
accrued interest on Notes Payable was $
Note 4 – Notes Payable - Related Party
Outstanding Notes Payable at September 30, 2021 held by related parties consist of the following:
A Note Payable dated December 31, 2019 held by
the CEO of the Company having a Face Value of $
Note 5 – Shareholders’ Equity
During the nine months ended September 30,
2021, the Company issued a total of
shares of Common Stock valued at $
The Company declared
Note 6 – Management Compensation
The Company paid its Officers and Directors cash compensation totaling $
Note 7 – Subsequent Events
On October 13, 2021, the holder of a Note Payable dated April 5, 2021 elected to convert a total of $330,000 in principal and $16,500 in accrued interest into 5,250,000 shares of Common Stock leaving a principal balance of $-0-.
| 12 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this Report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.
Overview and History
We were incorporated in the State of Colorado on August 31, 2006 under the name “Mountain West Business Solutions, Inc.” Until October 2009, our business was to provide management consulting services to 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. 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 October 2012, we published the results of our initial preclinical studies of Adva-27a in the peer-reviewed journal, ANTICANCER RESEARCH. The preclinical studies were conducted in collaboration with Binghamton University, a State University of New York, and Ecole Polytechnique, Universite de Montreal. The publication is entitled “Adva-27a, a Novel Podophyllotoxin Derivative Found to Be Effective Against Multidrug Resistant Human Cancer Cells” [ANTICANCER RESEARCH Volume 32, Pages 4423-4432 (2012)].
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 recently transitioned its focus to the development and marketing of Science-Based Nutritional Supplements.
In March 2018, we formed NOX Pharmaceuticals, Inc., a wholly owned 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 our first Science-Based Nutritional Supplements product, Essential-9tm. This new supplement is an over-the-counter tablet comprised of the nine (9) amino acids which the human body cannot make. Essential-9tm has been authorized for marketing by Health Canada under NPN 80089663. On March 12, 2019, Essential-9tm became available for sale on Amazon.ca and shortly thereafter on Amazon.com.
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 “First Reverse Stock Split”). The number of authorized shares of our $0.001 par value Common Stock remained at 3,000,000,000 shares.
Effective April 6, 2020, we completed another 20 to 1 reverse split of our $0.001 par value Common Stock, reducing the issued and outstanding shares of Common Stock from 1,193,501,925 to 59,675,417 (the “Second Reverse Stock Split”). The authorized capital of our Common Stock remained as previously established at 3,000,000,000 shares. Except in the paragraphs describing the reverse stock splits, all references in this Report to our Common Stock as well as the price per share of Common Stock are presented on a post First and Second Reverse Stock Splits basis.
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On May 22, 2020, we filed a patent application in the United States for a new treatment for Coronavirus infections, including COVID-19. Our patent application covers composition subject matter pertaining to small molecules for inhibition of the main Coronavirus protease (Mpro), an enzyme that is essential for viral replication. The small molecules covered by the patent application were computer modelled and designed by Dr. Steve N. Slilaty, our CEO. The patent application has a priority date of May 22, 2020. On April 30, 2021, we filed a PCT application containing new research results and extending coverage to include the Coronavirus Papain-Like protease, PLpro. The priority date of May 22, 2020 has been maintained in the newly filed PCT application.
On June 17, 2020, we filed an amendment to our Articles of Incorporation (the “Amendment”) with the Secretary of State for the State of Colorado, to eliminate the Series “A” Preferred Shares, consisting of Eight Hundred and Fifty Thousand (850,000) shares, par value $0.10 per share, and the designation thereof, such shares to be returned to the status of undesignated shares of Preferred Stock. In addition, the Amendment increased the number of authorized Series “B” Preferred Shares from Five Hundred Thousand (500,000) to One Million (1,000,000) shares.
Also on June 17, 2020, our Board of Directors authorized the issuance of Five Hundred Thousand (500,000) shares of our Series “B” Preferred Stock in favor of Dr. Steve N. Slilaty, our CEO and a director, in consideration for his development of a new treatment for Coronavirus infections, including COVID-19. The Series “B” Preferred Stock is non-convertible, non-redeemable, non-retractable and has a superior liquidation value of $0.10 per share. Each share of Series “B” Preferred Stock is entitled to 1,000 votes per share. This issuance brought the total number of Series “B” Preferred Stock held by Dr. Slilaty to 1,000,000 shares.
On September 8, 2020, we executed a financing agreement with RB Capital Partners, Inc., La Jolla, CA, who agreed to provide us with a minimum of $2 million in convertible debt financing during the ensuing three to six month period pursuant to the terms and conditions included in relevant Promissory Notes (the “Promissory Notes”). The Promissory Notes bear interest at the rate of 5% per annum and have a maturity date of two years from the date of issuance. We have the right to pay off all or any part of the Promissory Notes at any time without penalty. As of September 30, 2021, the total outstanding principal amounts of the Promissory Notes was $3,204,215.
Effective October 6, 2020, we entered into a Research Agreement (the “Agreement”) with the University of Georgia Research Foundation, Inc. (“UGARF”), representing the University of Georgia (“UGA”). The purpose of the Agreement is to memorialize the terms of our working together with UGA to conduct the necessary research and development to advance our Anti-Coronavirus lead compound, SBFM-PL4 (or derivatives thereof) through various stages of preclinical development, animal studies and clinical trials for Coronavirus infections. The Agreement grants us an exclusive worldwide license for all of the intellectual property developed by UGA, whether alone or jointly with us.
On January 26, 2021, we received a Notice of Allowances from the Canadian Intellectual Property Office for a new patent application covering Adva-27a. The newly issued patent contains new subject matter and extends the proprietary protection of Adva-27a in Canada until 2033.
On February 4, 2021, we entered into an exclusive license agreement with the University of Georgia (“UGA”) for two Anti-Coronavirus compounds which UGA had previously developed and patented. In collaboration with UGA, we are currently advancing the development of these two compounds in parallel with our own Anti-Coronavirus compound, SBFM-PL4.
On March 9, 2021, we received a Notice of Allowance from the European Patent Office for a new patent application covering Adva-27a. The newly issued patent contains new subject matter and extends the proprietary protection of Adva-27a in Europe until 2033. The equivalent patent in the United States was issued in 2019 (US Patent Number 10,272,065).
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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) 426-6161 and our website address is www.sunshinebiopharma.com.
We have not been subject to any bankruptcy, receivership or similar proceeding.
Plan of Operation
Despite the fact that we now are generating revenues, we have elected to include a Plan of Operation to discuss our ongoing research and development activities relating to our proprietary drug development operations, as well as our other business activities.
Drug Development Operations
Anti-Coronavirus Treatment
Viruses carry minimal genetic information as they rely, for the most part, on host cellular machinery to multiply. Coronavirus has a positive-sense RNA genome consisting of approximately 30,000 nucleotides, a genome size that places it among the larger sized viruses. A positive-sense RNA genome is effectively a messenger RNA which allows the virus to express its genes immediately upon gaining entry into the host cell without the need for any prior replication or transcription steps as is the case with negative-sense RNA or DNA viruses. This is part of what makes Coronavirus a highly aggressive pathogen. Many of the causative agents of serious human diseases are positive-sense RNA viruses, including Hepatitis C, Zeka, Polio, West Nile, Dengue, Cardiovirus, and many others. Some positive-sense RNA viruses, such as the rhinoviruses that cause the common cold, are less clinically serious but they are responsible for widespread morbidity on a yearly basis.
The initial genome expression products of Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2), the causative agent of COVID-19, are two large polyproteins, referred to as pp1a and pp1ab. These two polyproteins are cleaved at 15 specific sites by two virus encoded proteases (Mpro and PLpro) to generate 16 different non-structural proteins essential for viral replication. Mpro and PLpro represent an attractive anti-viral drug development targets as they play a central role in the early stages of viral replication. The crystal structure of Mpro shows the presence of an active site Cysteine (Cys145) and a coordinated active site Histidine (His41), both of which are essential for the enzyme’s proteolytic activity. Similarly, PLpro, also a Cysteine Protease, has an active site Cysteine at position 112 and a Histidine at 273. The following is a summary of the development to date of our Coronavirus Treatment project:
| ● | On May 22, 2020, we filed a patent application in the United States for a new treatment for Coronavirus infections. Our patent application covers composition subject matter pertaining to small molecules for inhibition of the Coronavirus main protease (Mpro), an enzyme that is essential for viral replication. The small molecules covered by the patent application were computer modelled and designed by Dr. Steve N. Slilaty, our CEO. The patent application has a priority date of May 22, 2020. |
| ● | In August 2020, we completed the synthesis of four different potential inhibitors of Coronavirus protease. These compounds are based on the technology described in our patent application filed on May 22, 2020. |
| ● | In September 2020, we completed the screening of our four compounds and subsequently identified a lead Anti-Coronavirus drug candidate (SBFM-PL4). The screening which pinpointed the lead compound was performed at the University of Georgia, College of Pharmacy under the leadership of Dr. Scott D. Pegan, Director of the Center for Drug Discovery and Interim Associate Head of Pharmaceutical and Biomedical Sciences. |
| ● | In October 2020, we expanded our collaboration with Dr. Scott Pegan group by entering into a research agreement with the University of Georgia to further develop our Anti-Coronavirus lead compound, SBFM-PL4. |
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| ● | On February 1, 2021, we entered into an exclusive license agreement with the University of Georgia for two Anti-Coronavirus compounds which the University of Georgia had previously developed and patented. We are currently advancing the development of these two compounds in parallel with our SBFM-PL4 by conducting a transgenic mice study in collaboration with the University of Georgia. The mice being used in the study have been genetically engineered to express the human angiotensin-converting enzyme 2 (hACE2) transmembrane protein in their lungs making them susceptible to lethal infection by SARS-CoV-2, the causative agent of COVID-19. The SARSCoV-2 virus uses the hACE2 receptor to gain entry into human cells to replicate. The goal of the study is to determine if our protease inhibitors will protect the hACE2-transgenic mice from disease progression and death following infection with SARS-CoV-2 virus. Should these mice studies prove successful, we plan to submit the results to the FDA for authorization to conduct testing on actual COVID-19 patient volunteers in a Phase I clinical trial setting. The implications of a COVID-19 treatment becoming available are vast. This is particularly the case in view of the fact that some of the variants emerging around the world are more virulent and may escape neutralization by the current vaccines. |
Adva-27a Anticancer Drug
Since inception, our proprietary drug development activities has 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. Patents Number 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 however, Adva-27a is able to penetrate and 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).
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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 reduced 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.
We have been delayed in our clinical development program due to lack of funding. See “Liquidity and Capital Resources” below for a discussion of our financing requirements.
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); and |
| ● | Phase I Clinical Trials (Pancreatic Cancer Indication). |
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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, particularly those in which Topoisomerase II has been amplified. It is possible 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 on our own.
The following, Figure 3, is a space-filling molecular model of our Adva-27a.
Figure 3
Generic Pharmaceuticals Operations
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. Due to unfavorable evolution of the generic drugs marketplace, Sunshine Canada has recently terminated its Generic Pharmaceuticals Operations and shifted its focus to the development and marketing of Science-Based Nutritional Supplements.
Science-Based Nutritional Supplements Operations
In December 2018, we completed the development of Essential 9™, 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™ product. Our Essential 9™ nutritional 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™ provides all 9 Essential Amino Acids in freeform and in the proportions recommended by Health Canada. Essential 9™ is currently available on Amazon.com and Amazon.ca. Figure 4 below shows our 60-Tablet Essential 9™ product.
Figure 4
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Results of Operations
Comparison of Results of Operations for the Nine Months ended September 30, 2021 and 2020
During the nine months ended September 30, 2021, we generated revenues of $143,308 from the sale of products generated by our Science-Based Nutritional Supplements Operations which we launched in March 2019. The direct cost for generating these sales was $56,541 (39.5%). We generated $43,397 in sales revenues during the comparable period in 2020. The direct cost for generating these sales was $15,384 (35.4%). The decrease in our gross margin during the nine months ended September 30, 2021, was due to the introduction of new products that have lower profitability margins.
General and administrative expenses during the nine months ended September 30, 2021 was $2,247,270, compared to $261,569 during the nine months ended September 30, 2020, an increase of $1,985,701. The reason for this relatively large increase was due to a general increase in our business activities as funding for our drug development projects became available. Specifically, all of our expense categories saw increases including executive compensation which increased by $1,093,497 due to issuance of Common Stock to our Directors. Similarly, our R&D expenditures increased by $581,011 and our patenting fees by $14,571. Our other expense categories, including accounting, consulting, legal and office expenses together increased by a total of $297,591.
We incurred $10,709,843 in losses arising from debt conversion during the nine months ended September 30, 2021, compared to $1,416,313 in losses from debt conversion during the similar period in 2020. This large increase was due to more costly convertible debt financing that we took on in order to fund our R&D activities. The other contributing factor is related to recent volatility in our stock price. We also incurred $292,191 in interest expense during the nine months ended September 30, 2021, compared to $62,669 in interest expense during the similar period in 2020. The increase was a result of the aforementioned more costly debt financing we took on.
As a result, we incurred a net loss of $13,103,563 ($0.03 per share) during the nine month period ended September 30, 2021, compared to a net loss of $1,700,298 ($0.01 per share) during the nine month period ended September 30, 2020.
Comparison of Results of Operations for the Three Months Ended September 30, 2021 and 2020
During the three months ended September 30, 2021, we generated $50,376 in revenues, compared to $17,150 in revenues for the same three month period in 2020, an increase of $33,226. The increase is attributable to an enhanced advertising campaign we initiated in 2021. All of these revenues were generated from our new Science-Based Nutritional Supplements Operations which we launched in March 2019. The direct cost for generating these revenues was $19,506 (38.7%) for the period ended September 30, 2021, compared to $6,340 (37.0%) for the same period in 2020. Our gross profit increased to $30,870 for the period ended September 30, 2021, compared to a gross profit of $10,810 for the same period in 2020.
General and administrative expenses during the three month period ended September 30, 2021 were $527,120, compared to general and administrative expenses of $78,098 incurred during the three month period ended September 30, 2020, an increase of $449,031. Nearly all categories of our general and administrative expenses saw an increase during the three month period ended September 30, 2021, compared to the same period in 2020. Specifically, the increases included R&D expenditures by $222,465, consulting fees by $16,775, office expenses by $38,993, and legal fees by $50,028. These increases were due to expansion of our drug development and nutritional supplements operations. Overall, we incurred a loss of $496,259 from our operations in the three month period ended September 30, 2021, compared to a loss of $67,288 in the similar period of 2020.
In addition, we incurred $46,850 in interest expense during the three months ended September 30, 2021, compared to $22,094 in interest expense during the similar period in 2020. We also incurred $3,504,000 in losses arising from debt conversion during the three months ended September 30, 2021, compared to $608,899 in losses from debt conversion during the similar period in 2020. These increases were due to increased, more costly borrowings to fund our expanded drug development and nutritional supplements operations.
As a result, we incurred a net loss of $4,039,383 ($0.01 per share) for the three month period ended September 30, 2021, compared to a net loss of $698,595 ($0.00 per share) during the three month period ended September 30, 2020.
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Liquidity and Capital Resources
As of September 30, 2021, we had cash and cash equivalents of $2,386,608.
As discussed in Note 2 to the consolidated financial statements included in this Report for going concern, we have incurred significant continuing losses in 2021 and 2020. Our total accumulated deficits as of September 30, 2021 and December 31, 2020 were $33.3 million and $20.2 million, respectively. Our ability to continue operating is highly dependent upon continued funding from the debt and/or equity markets. Our historical and ongoing dependence on proceeds from debt and/or equity issuances to fund operating expenses could raise substantial doubt about our ability to continue as a going concern. On June 25, 2021, the Company entered into an engagement agreement with Aegis Capital Corp. (“Aegis”), pursuant to which we engaged Aegis to act as lead underwriter in connection with a proposed public offering (the “Offering”) of approximately $10 million of common stock and warrants by the Company. The Offering is contingent on satisfaction of various conditions, including Aegis’s due diligence examination of the Company, Nasdaq approval of the listing of the Company’s Common Stock, and successful completion of a reverse stock split. If successful, of which there can be no assurance, we believe that this financing will fully mitigate the afore expressed doubt about our ability to continue as a going concern. The consolidated financial statements included in this Report have been prepared assuming that we will continue as a going concern and, accordingly, do not include any adjustments relating to any going concern uncertainty.
Net cash used in operating activities was $1,517,015 during the nine month period ended September 30, 2021, compared to $233,627 for the nine month period ended September 30, 2020. We anticipate that overhead costs and other expenses will increase in the future as we move forward with our Proprietary Drug Development activities and our Science-Based Nutritional Supplements operations discussed above.
Cash flows provided by financing activities were $2,928,339 for the nine month periods ended September 30, 2021, compared to $683,643 during the nine months ended September 30, 2020. Cash flows used in investing activities were $-0- for both, the nine month period ended September 30, 2021 and the same nine month period ended in 2020.
During the nine month period ended September 30, 2021, we issued a total of 103,673,969 shares of our Common Stock valued at $11,981,072 for the conversion of outstanding notes payable, reducing debt by $1,233,028 and interest payable by $38,201 and generating a loss on conversion of $10,709,843.
During the nine months ended September 30, 2020, we issued a total of 269,099,306 shares of our Common Stock valued at $1,831,816 for the conversion of outstanding notes payable, reducing the debt by $373,269 and interest payable by $42,233 and generating a loss on conversion of $1,416,314.
During the nine months ended September 30, 2021, we did not sell any of our capital stock for cash; however we entered into the following new debt arrangements:
| · | On January 12, 2021, we received monies in exchange for a Note Payable having a Face Value of $150,000 with interest accruing at 5% is due January 12, 2023. The Note is convertible after 180 days from issuance into Common Stock at a price equal to $0.30 per share. | |
| · | On January 27, 2021, we received monies in exchange for a Note Payable having a Face Value of $300,000 with interest accruing at 5% is due January 27, 2023. The Note is convertible after 180 days from issuance into Common Stock at a price equal to $0.50 per share. | |
| · | On February 12, 2021, we received monies in exchange for a Note Payable having a Face Value of $700,000 with interest accruing at 5% is due February 12, 2023. The Note is convertible after 180 days from issuance into Common Stock at a price equal to $0.60 per share. | |
| · | On April 5, 2021, we received monies in exchange for a Note Payable having a Face Value of $330,000 with interest accruing at 10% is due January 5, 2022. The Note is convertible after 180 days from issuance into Common Stock at a price 35% below market value. | |
| · | On April 20, 2021, we received monies in exchange for a Note Payable having a Face Value of $500,000 with interest accruing at 5% is due February April 20, 2023. The Note is convertible after 180 days from issuance into Common Stock at a price equal to $0.30 per share. |
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| · | On July 6, 2021, we received monies in exchange for a Note Payable having a Face Value of $900,000 with interest accruing at 5% is due July 6, 2023. The Note is convertible after 180 days from issuance into Common Stock at a price equal to $0.30 per share. |
| · | On August 18, 2021, we received monies in exchange for a Note Payable having a Face Value of $500,000 with interest accruing at 5% is due August 18, 2023. The Note is convertible after 180 days from issuance into Common Stock at a price equal to $0.30 per share. |
On September 8, 2020, we executed a financing agreement with RB Capital Partners, Inc., La Jolla, CA, who agreed to provide us with a minimum of $2 million in convertible debt financing during the ensuing three to six month period pursuant to the terms and conditions included in relevant Promissory Notes (the “Promissory Notes”). The Promissory Notes bear interest at the rate of 5% per annum and have a maturity date of two years from the date of issuance. We have the right to pay off all or any part of the Promissory Notes at any time without penalty. As of September 30,, 2021, the total outstanding principal amounts of the Promissory Notes was $3,204,215.
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 actualize our Drug Development program and further develop our Science-Based Nutritional Supplements operation. We intend to raise funds through private placements of our Common Stock and/or debt financing. We estimate that we will require approximately $10 million (approximately $9 million for our Proprietary Drug Development projects and $1 million for our Science-Based Nutritional Supplements operations) 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.
On June 25, 2021, the Company entered into an engagement agreement with Aegis Capital Corp. (“Aegis”), pursuant to which we engaged Aegis to act as lead underwriter in connection with a proposed public offering (the “Offering”) of approximately $10 million of common stock and warrants by the Company. The Offering is contingent on satisfaction of various conditions, including Aegis’s due diligence examination of the Company, Nasdaq approval of the listing of the Company’s Common Stock, and successful completion of a reverse stock split. While there are no assurances that this financing will successfully close, we believe that this financing, if successfully completed, will provide us with adequate working capital for the near term.
Our cost of operations is expected to increase as we continue to 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 13, 2021, the holder of a Note Payable dated April 5, 2021 elected to convert a total of $330,000 in principal and $16,500 in accrued interest into 5,250,000 shares of our Common Stock leaving a principal balance of $-0-.
Off Balance Sheet Arrangements
None
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures – Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Report.
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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, 2021, at reasonable assurance level, for the following reasons:
| · | Ineffective control environment and lack of qualified full-time comptroller 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; |
| · | 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 other transactions. |
Our Board of Directors has assigned a priority to the short-term and long-term improvement of our internal control over financial reporting. We are reviewing various potential solutions to remedy the processes that would eliminate the issues that may arise due to the absence of separation of duties within the financial reporting functions. Additionally, the Board of Directors will work with management to continuously review controls and procedures to identified deficiencies and implement remediation within our internal controls over financial reporting and our disclosure controls and procedures.
We believe that our financial statements presented in this 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, 2021, 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.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
To the best of our management’s knowledge and belief, there are no material claims that have been brought against us nor have there been any claims threatened.
ITEM 1A. RISK FACTORS
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the nine month period ended September 30, 2021, we issued a total of 103,673,969 shares of our Common Stock valued at $11,981,072 for the conversion of outstanding notes payable, reducing debt by $1,233,028 and interest payable by $38,201 and generating a loss on conversion of $10,709,843. In addition, we issued 60,000,000 shares of Common Stock valued at $918,000 to our Officers and Directors during the nine months ended September 30, 2021.
During the nine months ended September 30, 2020, we issued a total of 269,099,306 shares of our Common Stock valued at $1,831,816 for the conversion of outstanding notes payable, reducing the debt by $373,269 and interest payable by $42,233 and generating a loss on conversion of $1,416,314.
We relied upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, to issue these shares.
Other than reduction of debt from the conversion of the outstanding convertible notes payable described above, we did not receive any direct proceeds from the issuance of these shares. The proceeds from the convertible notes payable were used for working capital.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
| Exhibit No. | Description | |
| 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101). |
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SIGNATURES
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 9, 2021.
| SUNSHINE BIOPHARMA, INC. | |||
| By: | s/ Dr. Steve N. Slilaty | ||
| Dr. Steve N. Slilaty, | |||
| Principal Executive Officer | |||
| By: | s/ Camille Sebaaly | ||
|
Camille Sebaaly, Principal Financial Officer and |
|||
| Principal Accounting Officer | |||
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