Sunshine Biopharma, Inc - Quarter Report: 2017 September (Form 10-Q)

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, 2017

 

Commission File Number: 000-52898

 

SUNSHINE BIOPHARMA INC.

(Exact name of small business issuer as specified in its charter)

 

Colorado		20-5566275
(State of other jurisdiction of incorporation)		(IRS Employer ID No.)

 

6500 Trans-Canada Highway

4th Floor

Pointe-Claire, Quebec, Canada H9R 0A5

(Address of principal executive offices)

 

(514) 426-6161

(Issuer’s Telephone Number)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☑ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

 

	Large accelerated filer  ☐	Accelerated filer  ☐
	Non-accelerated filer  ☐	Smaller reporting company  x
	Emerging growth company x

 

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 15, 2017, was 918,736,498 shares.

 

TABLE OF CONTENTS

 

PART I

FINANCIAL INFORMATION

 

				Page No.
Item 1.		Financial Statements			3
		Unaudited Consolidated Balance Sheet as of September 30, 2017			3
		Unaudited Consolidated Statement of Operations for the Three and Nine month Periods Ended September 30, 2017 and 2016			4
		Unaudited Consolidated Statement of Cash Flows for the for the Nine month Periods Ended September 30, 2017 and 2016			5
		Notes to Consolidated Financial Statements			6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			10
Item 3.		Quantitative and Qualitative Disclosures About Market Risk.			18
Item 4.		Controls and Procedures.			18
		PART II
		OTHER INFORMATION
Item 1.		Legal Proceedings
Item 1A.		Risk Factors			19
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			19
Item 3.		Defaults Upon Senior Securities			19
Item 4.		Mine Safety Disclosures			20
Item 5.		Other Information			21
Item 6.		Exhibits			21

 

 

Sunshine Biopharma, Inc.
Consolidated Condensed Balance Sheet
	Unaudited	Audited
	September 30,	December 31,
	2017	2016
ASSETS
Current Assets:
Cash and cash equivalents	$188,086	$57,453
Prepaid expenses	9,820	1,007
Total Current Assets	197,906	58,460
Equipment (net of $7362 and $2,272 depreciation, resepctively)	58,094	5,944
Patents (net of $58,918 amortization and $556,120 impairment)	-	-
TOTAL ASSETS	$256,000	$64,404
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable	391,569	69,939
Notes payable - related party	200,177	167,032
Accounts payable	12,105	28,122
Interest payable	6,014	9,011
Total current liabilities	609,865	274,104
TOTAL LIABILITIES	609,865	274,104
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock, Series A $0.10 par value per share;
Authorized 850,000 Shares;
Issued and outstanding -0- shares.	-	-
Preferred stock, Series B $0.10 par value per share;
Authorized 500,000 Shares;
Issued and outstanding 500,000 shares.	50,000	50,000
Common Stock, $0.001 par value per share;
Authorized 3,000,000,000 Shares;
Issued and outstanding 918,736,498 and 769,399,858 at
September 30, 2017 and December 31, 2016, respectively	918,737	769,400
Reserved for issuance 349,069,087 at September 30, 2017
Capital paid in excess of par value	12,075,586	11,548,460
Accumulated comprehensive income	8,524	394
Accumulated (Deficit)	(13,406,712)	(12,577,954)
TOTAL SHAREHOLDERS' EQUITY (DEFICIT)	(353,865)	(209,700)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)	$256,000	$64,404

 

  See Accompanying Notes To These Financial Statements.

 

Sunshine Biopharma, Inc.
Unaudited Consolidated Condensed Statement Of Operations and Comprehensive Loss
	Unaudited	Unaudited	Unaudited	Unaudited
	3 Months	3 Months	9 Months	9 Months
	Ended	Ended	Ended	Ended
	September 30,	September 30,	September 30,	September 30,
	2017	2016	2017	2016
Revenue:	$-	$-	$-	$-
General & Administrative Expenses
Accounting	2,781	46,311	66,796	59,280
Legal	22,831	11,442	65,655	19,203
Consulting	46,284	24,054	106,151	156,477
Office	10,916	9,387	33,014	35,098
Licenses	16,800	9,483	16,800	53,272
Officer & director remuneration	10,359	376	401,739	255,719
Research & development	-	-	-	32,793
Amortization & depreciation	3,834	14,963	4,858	45,169
Total G & A	113,805	116,016	695,013	657,011
(Loss) from operations	(113,805)	(116,016)	(695,013)	(657,011)
Other Income (expense):
Forign exchange (loss)	(6,379)	381	(10,646)	381
Interest expense	(27,427)	(12,129)	(46,169)	(29,080)
Litigation settlement proceeds	-	-	-	25,000
Debt release		7,790		7,790
Loss on debt conversions	-	(1,465,646)	(76,929)	(1,719,304)
Total Other (Expense)	(33,806)	(1,469,604)	(133,744)	(1,715,213)
Net (loss)	$(147,611)	$(1,585,620)	$(828,757)	$(2,372,224)
Basic (Loss) per common share	$0.00	$(0.01)	$0.00	$(0.01)
Weighted Average Common Shares Outstanding	907,729,815	262,370,859	857,166,626	238,983,449
Net Income (Loss)	$(147,611)	$(1,585,620)	$(828,757)	$(2,372,224)
Other comprehensive income:
Unrealized Gain (Loss) from foreign exchange translation	4,335	(305)	8,130	1,029
Comprehensive (Loss)	(143,276)	(1,585,925)	(820,627)	(2,371,195)
Basic (Loss) per common share	$0.00	$0.00	$0.00	$(0.01)
Weighted Average Common Shares Outstanding	907,729,815	581,464,440	857,166,626	353,977,067

 

See Accompanying Notes To These Financial Statements.

 

Sunshine Biopharma, Inc.
Unaudited Consolidated Condensed Statement Of Cash Flows
	Unaudited	Unaudited
	9 Months	9 Months
	Ended	Ended
	September 30,	September 30,
	2017	2016
Cash Flows From Operating Activities:
Net Income (Loss)	$(828,757)	$(2,372,224)
Depreciation and amortization	4,858	45,169
Foreign exchange loss	10,646	-
Stock issued for licenses, services, and other assets	413,000	419,500
Stock issued for payment of interest	3,022	6,520
Debt forgiveness		(1,313)
Loss on debt conversion	76,929	1,719,304
Stock issued for payment of expenses	14,400	-
Increase (decrease) in prepaid expenses	(8,813)	2,105
Increase (decrease) in accounts payable & accrued expenses	(16,326)	(107,799)
Increase (decrease) in interest payable	(2,997)	5,750
Net Cash Flows (used) in Operations	(334,038)	(282,988)
Cash Flows From Investing Activities:
Purchase of equipment	-	(2,343)
Net Cash Flows (used) in Investing Activities	-	(2,343)
Cash Flows From Financing Activities:
Proceed from notes payable	404,444	131,150
Payment of notes payable	(50,000)	-
Notes payable used to pay expenses	13,962	-
Notes payable used to pay origination fees & interest	24,223	20,015
Sale of common stock	63,912	104,128
Net Cash Flows Provided by Financing Activities	456,541	255,293
Net Increase (Decrease) In Cash and cash equivalents	122,503	(30,038)
Foreign currency translation adjustment	8,130	1,029
Cash and cash equivalents at beginning of period	57,453	50,798
Cash and cash equivalents at end of period	$188,086	$21,789
Supplementary Disclosure Of Cash Flow Information:
Stock issued for services, licenses and other assets	$484,100	$419,500
Stock issued for note conversions including interest	$128,451	$2,767,254
Cash paid for interest	$3,537	$-
Cash paid for income taxes	$-	$-

 

 

 

Sunshine Biopharma, Inc.

Notes To Unaudited Consolidated Financial Statements

For The Three and Nine Month Interim Period Ended September 30, 2017

 

Note 1 – Nature of Business and Basis of Presentation

 

Mountain West Business Solutions, Inc. (“MWBS”) was incorporated on August 31, 2006 in the State of Colorado. Sunshine Etopo, Inc. (formerly Sunshine Biopharma, Inc.) was incorporated in the State of Colorado on August 17, 2009. Effective October 15, 2009, MWBS was acquired by Sunshine Etopo, Inc. in a transaction classified as a reverse acquisition. MWBS concurrently changed its name to Sunshine Biopharma, Inc. Sunshine Etopo, Inc. has been inactive and was recently dissolved. In July 2014, the Company formed a wholly owned Canadian subsidiary, Sunshine Biopharma Canada Inc. The financial statements represent the consolidated activity of Sunshine Biopharma, Inc. and Sunshine Biopharma Canada Inc. (hereinafter together referred to as the "Company"). The Company was formed for the purposes of conducting research, development and commercialization of drugs for the treatment of various forms of cancer. The Company may also engage in any other business that is permitted by law, as designated by the Board of Directors of the Company.

 

The Company’s wholly owned Canadian Subsidiary, Sunshine Biopharma Canada Inc. (“Sunshine Canada”) was formed for the purposes of offering generic pharmaceutical products in Canada and elsewhere around the world. Sunshine Canada has recently signed licensing agreements for four (4) generic prescription drugs for treatment of breast cancer, prostate cancer and BPH (Benign Prostatic Hyperplasia). In addition, Sunshine Canada is currently evaluating several other generic products for in-licensing and is working on securing a Drug Establishment License (“DEL”) and a Drug Identification Number (“DIN”) per product from Health Canada. Once the DEL and the DIN’s are secured, Sunshine Canada will begin its generic pharmaceuticals marketing and sales program in Canada and overseas.

 

In addition, the Company has been and continues to work on the development of its proprietary anticancer drug, Adva-27a. The next series of steps in the development of Adva-27a include (i) GMP-manufacturing of a 2-kilogram quantity of the drug, (ii) completing requisite IND-enabling studies, and (iii) conducting Phase I clinical trials. In the preclinical studies, Adva-27a was shown to be effective at destroying multidrug resistant cancer cells including Pancreatic Cancer, Breast Cancer, Lung Cancer and Uterine Sarcoma, cells.

 

During the last three month period the Company has continued to raise money through stock sales and borrowings.

 

The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company’s generics business and proprietary drug development program.

 

Basis of Presentation of Interim Unaudited Condensed Financial Information

 

The interim unaudited condensed financial statements of the Company for the three and nine month periods ended September 30, 2017 and 2016 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2016 was derived from the audited financial statements included in the Company's financial statements as of and for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 17, 2017. These financial statements should be read in conjunction with that report.

 

Recently Issued Accounting Pronouncements

 

The amendments are effective for fiscal years beginning after December 15, 2017, and should be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted, including adoption in an interim period. The Company does not expect this amendment to have a material impact on its financial statements.

  

In March 2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, to amend the amortization period for certain purchased callable debt securities held at a premium. The ASU shortens the amortization period for the premium to the earliest call date. Under current Generally Accepted Accounting Principles (“GAAP”), entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. The amendments should be applied on a modified retrospective basis, and are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of this amendment on its financial statements.

 

 

 

 

In February 2017, the FASB issued ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, to clarify the scope of Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, and to add guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was issued in May 2014 as a part of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. The amendments are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, which is the same time as the amendments in ASU No. 2014-09, and early adoption is permitted. The Company is currently evaluating the impact of this amendment on its financial statements.

 

In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250). The ASU adds SEC disclosure requirements for both the quantitative and qualitative impacts that certain recently issued accounting standards will have on the financial statements of a registrant when such standards are adopted in a future period. Specially, these disclosure requirements apply to the adoption of ASU No. 2014- 09, Revenue from Contracts with Customers (Topic 606); ASU No. 2016-02, Leases (Topic 842); and ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.   The Company is currently evaluating the impact of these amendments on its financial statements.

 

Between May 2014 and December 2016, the FASB issued several ASU’s on Revenue from Contracts with Customers (Topic 606). These updates will supersede nearly all existing revenue recognition guidance under current U.S. generally accepted accounting principles (GAAP). The core principle is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services.

 

 A five-step process has been defined to achieve this core principle, and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standards are effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standards in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting the standards recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of its pending adoption of these standards on its financial statements and has not yet determined the method by which it will adopt the standard in 2018.

 

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force), to provide guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flow. The amendments should be applied using a retrospective transition method, and are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of these amendments on its financial statements.

 

Note 2 – Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Since inception, the Company has had recurring operating losses and negative operating cash flows. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company’s continuation as a going concern is dependent on its ability to obtain additional financing to fund operations, implement its business model, and ultimately, attain profitable operations. The Company will need to secure additional funds through various means, including equity and debt financing or any similar financing. There can be no assurance that the Company will be able to obtain additional equity or debt financing, if and when needed, on terms acceptable to the Company, or at all. Any additional equity or debt financing may involve substantial dilution to the Company’s stockholders, restrictive covenants or high interest costs. The Company’s long-term liquidity also depends upon its ability to generate revenues and achieve profitability.

 

Note 3 – Notes Payable

 

A Note Payable having a face value of $21,439 and a maturity date of December 31, 2017 was entered into on December 31, 2016. This Note accrues interest at a rate of 12% per annum and is convertible after December 31, 2016 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.

 

A Note payable dated July 1, 2016, having a face value of $55,000 and a principal balance of $48,500 at December 31, 2016, accrued interest at 10%. This note was convertible into $0.001 par value Common Stock at a price 40% below market value. During the nine month period ended September 30, 2017, the entire principal balance of $48,500 together with $3,022 in interest was converted into $0.001 par value Common Stock. In connection with this conversion, 42,528,125 shares of $0.001 par value Common Stock valued at $128,451 were issued generating a loss of $76,929 on conversion.

 

 

 

 

On February 10, 2017, the Company received net proceeds of $48,000 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 November 20, 2017, is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 39% 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 August 4, 2017 the note was paid off along with interest of $1,863 and a prepayment penalty of $15,559.

 

On April 1, 2017, the Company received $100,000 Canadian ($80,130 US) in exchange for a note payable having a face value of $100,000 Canadian and accruing interest at the rate of 9% per annum. The note, due on April 1, 2019, is convertible anytime after April 1, 2017 into $0.001 par value Common Stock at a price of $0.015 Canadian (approximately $0.012 US) per share. Payments on this note are comprised of interest only amounts due and payable on the last day of each calendar quarter. 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 April 26, 2017, the Company received net proceeds of $63,000 in exchange for a note payable having a face value of $65,000 and accruing interest at the rate of 8% per annum. The note, due on April 26, 2018, is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The Company estimates that the fair value of this convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature.

 

On August 3, 2017, the Company received net proceeds of $76,000 in exchange for a note payable having a face value of $80,000 and accruing interest at the rate of 8% per annum. The note, due on August 3, 2018, is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The Company estimates that the fair value of this convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature.

 

On August 21, 2017, the Company received net proceeds of $80,000 in exchange for a note payable having a face value of $83,000 and accruing interest at the rate of 8% per annum. The note, due on May 30, 2018, is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The Company estimates that the fair value of this convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature.

 

On September 22, 2017, the Company received net proceeds of $60,000 in exchange for a note payable having a face value of $62,000 and accruing interest at the rate of 8% per annum. The note, due on June 30, 2018, is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The Company estimates that the fair value of this convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature.

 

At September 30, 2017 and December 31, 2016, accrued interest on Notes Payable was $6,014 and $9,011, respectively.

 

Note 4 – Notes Payable Related Party

 

In December 2016, the Company received monies from its CEO in exchange for a note payable having a principal amount of $90,000 Canadian ($67,032 US) with interest at 12% due March 31, 2017. The note is convertible any time after the date of issuance into $0.001 par value Common Stock at a price 35% below market value. The Company estimated that the fair value of the convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature. Any gain or loss will be recognized at conversion. This note is collateralized by all of the assets of the Company. In the event of default, the interest rate will increased to 18% per annum and a penalty of $1,000 Canadian ($752 US) per day will accrue. On March 31, 2017, the note, together with accrued interest of $3,021 Canadian ($2,271 US) and an additional principal amount of $3,000 Canadian ($2,247 US) paid to the Company on March 28, 2017, was renewed for a 90-day period under the same terms and conditions as the original note. The new note now having a face value of $96,021 Canadian ($72,198 US) was due on June 30, 2017. On June 30, 2017, the note, together with accrued interest of $2,873 Canadian ($2,005 US), was renewed for a 90-day period under the same terms and conditions as the original note except that the new note is non-convertible. The new note now having a face value of $98,894 Canadian ($76,072 US) is due on September 30, 2017. On September 30, 2017, the note, together with accrued interest of $2,991 Canadian ($2,397 US), was renewed for a 90-day period under the same terms and conditions as the original note except that the new note is non-convertible. The new note now having a principal balance of $101,885 Canadian ($81,640 US) matures December 31, 2017.

 

A note payable held by a private individual who became a principal shareholder of the Company having a face value of $100,000 at December 31, 2016 and a maturity date of March 31, 2017, accrues interest at 12%. The Note is convertible any time from the date of issuance into $0.001 par value Common Stock at a 35% discount from market price. The Company estimates that the fair value of this convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature. On March 31, 2017, the note’s principal balance of $100,000 plus accrued interest of $11,715 was renewed for a period of 90-day under the same terms and conditions as the original note. The new note now having a face value of $111,715 matures on June 30, 2017. On June 30, 2017, the note’s principal balance of $111,715 plus accrued interest of $3,342 was renewed for a period of 90-days under the same terms and conditions as the original note. The new note now having a face value of $115,057 matures on September 30, 2017. On September 30, 2017, the note’s principal balance of $115.057 plus accrued interest of $3,480 was renewed for a period of 90-days under the same terms and conditions as the original note. The new note now having a principal balance of $118,537 matures on December 31, 2017.

 

 

 

Note 5 – Issuance of Common Stock

 

During the nine months ended September 30, 2017, the Company issued a total of 149,336,640 shares of $0.001 par value Common Stock. Of these 42,528,125 shares valued at $128,451 were issued upon conversion of outstanding notes payable, reducing the debt by $48,500 and interest payable by $3,022 and generating a loss on conversion of $76,929. The remaining 106,808,515 shares were issued by the Company as follows:

 

 

The Company declared no dividends through September 30, 2017.

 

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 (formerly SFAS128), “Earnings per Share”.

Note 7 – Generic Drugs Licenses

In 2016, the Company entered into License Agreements for the following four Generic Drugs:

 

The cost of these Licenses has been fully expensed.

 

Note 8 – 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 9 – Royalties Payable

 

As part of a subscription agreement entered into in 2016, the Company has an obligation to pay a royalty of 5% of net sales on one of its generic products (Anastrozole) for a period of three (3) years from the date of the first sale of that product.

 

Note 10 – Related Party Transactions

 

In addition to the related party transactions detailed in Note 4 above, during the three and nine month period ended September 30, 2017 and 2016, the Company paid its Officers and Directors cash and stock compensation totaling $10,359 and $376 and $401,739 and $255,719, respectively. Included in the amounts allocated to the Officers and Directors during the three and nine month periods ended September 30, 2017 were $-0- and $60,114 paid to Advanomics Corporation, a company controlled by the CEO of the Company.

 

Note 11 – Subsequent Events

 

On October 26, 2017, the Company issued payment in the amount of $85,107 to pay off a note payable having a principal amount of $65,000, accrued interest of $2,607 and prepayment penalty of $17,500. The note had a maturity date of April 26, 2018.

 

On October 26, 2017, the Company received monies in exchange for a convertible note payable having a face value of $115,000.

 

 

PART I.

 

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 with regard to accounting, computer and general business issues for small and home-office based companies. Effective October 15, 2009, we executed an agreement to acquire Sunshine Biopharma, Inc., a Colorado corporation, in exchange for the issuance of 21,962,000 shares of our Common Stock and 850,000 shares of Convertible Preferred Stock, each convertible into twenty (20) shares of our Common Stock. As a result of this transaction we changed our name to “Sunshine Biopharma, Inc. and our officers and directors resigned their positions with us and were replaced by our current management. The majority of the Common Shares and all of the Convertible Preferred Shares we issued for this transaction were issued to Advanomics Corporation, a privately held Canadian company (“Advanomics”). On December 21, 2011, Advanomics exercised its right to convert the 850,000 shares of Series “A” Preferred Stock it held in our Company into 17,000,000 shares of Common Stock.  

 

Following the above detailed transactions, we began to operate as a pharmaceutical company focusing on development of the Adva-27a anticancer compound. We operated under a the exclusive technology license agreement with Advanomics until December 2015, at which time we acquired all of the worldwide right to the technology and became direct owner of all issued and pending patents pertaining to the Adva-27a technology. Following acquisition of the Adva-27a patents, the exclusive license agreement with Advanomics was terminated and Sunshine Etopo, Inc., Sunshine Biopharma Inc.’s subsidiary holding the exclusive license with Advanomics, was dissolved.

 

In July 2014, we formed a wholly owned Canadian subsidiary, Sunshine Biopharma Canada Inc. (“Sunshine Canada”), for the purposes of offering generic pharmaceutical products in Canada and elsewhere around the globe. Sunshine Canada has recently signed licensing agreements for four (4) generic prescription drugs for the treatment of cancer and BPH (Benign Prostatic Hyperplasia).

 

With our entry into the generic pharmaceuticals business, we have become a fully integrated pharmaceutical company offering generic and proprietary drugs for the treatment of cancer and other acute and chronic indications.

 

Effective August 1, 2017 we moved our principal place of business to 6500 Trans-Canada Highway, 4th Floor, Pointe-Claire, Quebec, Canada H9R 0A5.  Our new 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.

 

Results Of Operations

 

Comparison of Results of Operations for the three months ended September 30, 2017 and 2016

 

For the three months ended September 30, 2017 and 2016, we did not generate any revenues.

 

 

General and administrative (G&A) expenses during the three month period ended September 30, 2017 remained relatively consistent with the prior period in 2016. G&A expenses during the three months ended September 30, 2017 were $113,805, compared to general and administrative expense of $116,016 incurred during the three month period ended September 30, 2016, a decrease of $2,211. However, the various components of our G&A expense varied between the two respective periods. Specifically, we incurred $46,284 in consulting fees during the three months ended September 30, 2017, compared to $24,054 in consulting fees incurred during the similar period in 2016. This increase was as a result of new work required for setting up the warehouse, documentation and logistics for our Generic Pharmaceuticals Operations. Officer and director compensation increased by $9,983 in the three months ended September 30, 2017, compared to the same period in 2016. In addition, we saw an increase of $11,389 in legal expenses due to patenting fees which were paid during the three month period ended September 30, 2017. We also saw an increase of $1,529 and $7,317 in office expenses and licenses, respectively. These increases were offset by accounting costs, which dropped $43,530 during the three months ended September 30, 2017 compared to the same period in 2016. This drop was due to a lump-sum payment that was made in the three month period ended September 30, 2016. In addition, we saw a decrease of $11,129 in our amortization & depreciation due to write-downs. Also as a result of shifting our current efforts towards the development of our Generic Pharmaceuticals Operations, we incurred no research & development expenses during the three months ended September 30, 2017 and 2016. See “Plan of Operation” below.

 

Our interest expense of $27,427 during the three months ended September 30, 2017 was $15,298 more than we incurred during the similar period in 2016 due to a prepayment penalty of $15,559 incurred in connection the early payoff of one of our notes payable (see Note 3 to the Financial Statements). Finally, we incurred no losses arising from debt conversion during the three months ended September 30, 2017, but incurred a loss on debt conversions of $1,465,646 during the three months ended September 30, 2016.

 

As a result, we incurred a net loss of $147,611 ($0.00 per share) for the three month period ended September 30, 2017, compared to a net loss of $1,585,620 (approximately $0.01 per share) during the three month period ended September 30, 2016.

 

Comparison of Results of Operations for the nine months ended September 30, 2017 and 2016

 

For the nine months ended September 30, 2017 and 2016, we did not generate any revenues.

 

General and administrative expenses during the nine month period ended September 30, 2017 were $695,013, compared to $657,011 incurred during the nine month period ended September 30, 2016, an increase of $38,002. Some components of our general and administrative expense increased while others decreased during the nine month period ended September 30, 2017, compared to the corresponding period of 2016. The expense categories that saw an increase included accounting fees, legal fees, and executive compensation. The increase of $46,452 in legal fees during the nine months ended September 30, 2017, was due to patenting costs associated with office actions on pending patent applications. Officer and director compensation increased by $146,020 in the nine months ended September 30, 2017, compared to the same period in 2016. The $7,516 increase in accounting fees was due to a general increase in business activities. These increases were offset by decreases in consulting fees, license fees and research & development expenses incurred during the nine months ended September 30, 2017, compared to the similar period in 2016. The decrease of $2,084 in consulting fees, $36,472 in license fees and $32,793 in research & development expenses were a result of the shifting of our activities towards the development of our Generic Pharmaceuticals Operations. In addition, we saw a decrease of $40,311 in our amortization & depreciation due to write-downs. See “Plan of Operation” below.

 

We incurred $46,169 in interest expense during the nine months ended September 30, 2017, compared to $29,080 in interest expense during the similar period in 2016.  However, we incurred $76,929 in losses arising from debt conversion during the nine months ended September 30, 2017, compared to $1,719,304 in losses from debt conversion during the similar period in 2016, a decrease of $1,642,375 as a result of a smaller amount of convertible notes outstanding. We also received $25,000 from the settlement of litigation in 2016 that we did not receive during the nine months ended September 30, 2017.

 

As a result, we incurred a net loss of $828,757 ($0.00 per share) for the nine month period ended September 30, 2017, compared to a net loss of $2,372,224 (approximately $0.01 per share) during the nine month period ended September 30, 2016.

 

Because we did not generate any revenues since our inception, following is our Plan of Operation.

 

Plan of Operation

 

Since inception, we have been operating as a pharmaceutical company focused on the research, development and commercialization of proprietary drugs for the treatment of various forms of cancer.  In July 2014, we formed Sunshine Biopharma Canada Inc., a Canadian wholly owned subsidiary, for the purposes of conducting generic pharmaceuticals business in Canada and elsewhere around the world. During 2016, we intensified our activities in the generic pharmaceuticals area as we continued to pursue our proprietary anticancer drug development efforts. Accordingly, we have become a fully integrated pharmaceutical company offering generic and proprietary drugs for the treatment of cancer and other acute and chronic indications. Below we describe our Generic Pharmaceuticals Operations followed by our Proprietary Drug Development Program.

 

 

 

Generic Pharmaceuticals Operations

 

In 2016, our Canadian wholly owned subsidiary, Sunshine Biopharma Canada Inc. (“Sunshine Canada”), signed Cross Referencing Agreements with a major pharmaceutical company for four prescription generic drugs for the treatment of Breast Cancer, Prostate Cancer and Enlarged Prostate. We will market and sell these new pharmaceutical products under our own Sunshine Biopharma label. These four generic products are as follows:

 

 

Worldwide sales of the brand name version of these products as reported in the SEC filing of the respective owner of the registered trademark are as follows:

 

 

On June 12, 2017, Sunshine Canada submitted an application to Health Canada for the procurement of a Drug Establishment License (“DEL”), a requirement for the Company’s drug handling and pharmaceutical operations. Health Canada has assigned the Company DEL Application No. 3-002475 and File No. 17938. Sunshine Canada is currently awaiting Health Canada to set a date for physical inspection of our warehouse and drug management operations which we have set up at the facility of our strategic alliance partner, Atlas Pharma Inc. In addition, Sunshine Canada is currently in the process of preparing the documentation for filing applications for a Drug Identification Number (“DIN”) for each of its four (4) generic products, SBI-Anastrozole, SBI-Letrozole, SBI-Bicalutamide and SBI-Finasteride. We cannot estimate the timing for our obtaining the DEL and the DIN’s due to variables involved that are out of our control. The Figure below shows our 30-Pill blister pack of Anastrozole.

 

 

We currently have twenty three (23) additional Generic Pharmaceuticals under review for in-licensing. While no assurances can be provided, when completed, this will bring our Generic Products portfolio to a total of twenty seven (27). We believe that a larger product portfolio provides us with more opportunities and a greater reach into the marketplace. We hope to further build our generics portfolio of “SBI” label Generic Pharmaceuticals over time.

 

Various publicly available sources indicate that the worldwide sales of generic pharmaceuticals are approximately $200 billion per year. In the United States and Canada, the sales of generic pharmaceuticals are approximately $50 billion and $5 billion, respectively. The generic pharmaceuticals business is fairly competitive and there are several multinational players in the field including Teva (Israel), Novartis - Sandoz (Switzerland), Hospira (USA), Mylan (Netherlands), Sanofi (France), Fresenius Kabi (Germany) and Apotex (Canada). While no assurances can be provided, with our offering of Canadian approved products we believe that we will be able to access at least a small percentage of the generic pharmaceuticals marketplace.

 

As part of a subscription agreement, we have an obligation to pay a royalty of 5% of net sales on one of our generic products (Anastrozole) for a period of three (3) years from the date of the first sale of that product.

 

While no assurances can be provided and subject to the availability of adequate financing, of which there is no assurance, we anticipate that profits from the sales of Generic Products will be used to finance our proprietary drug development program, including Adva-27a, our flagship anticancer compound. In addition to near-term revenue generation, building the generics business infrastructure and securing the proper permits will render us appropriately positioned for the marketing and distribution of our proprietary Adva-27a drug candidate, provided that Adva-27a is approved for such marketing and distribution, of which there can be no assurance.

 

 

 

Proprietary Drug Development Operations

 

Our proprietary drug development activities have been focused on the development of a small molecule called Adva-27a for the treatment of aggressive cancers. A Topoisomerase II inhibitor, Adva-27a has been shown to be effective at destroying Multidrug Resistant cancer cells including Pancreatic Cancer cells, Breast Cancer cells, Small-Cell Lung Cancer cells and Uterine Sarcoma cells (Published in ANTICANCER RESEARCH, Volume 32, Pages 4423-4432, October 2012). Sunshine Biopharma is direct owner of all issued and pending worldwide patents pertaining to Adva-27a including U.S. Patent Number 8,236,935. See “Part I, Item 1 – Business - Intellectual Property.”

 

 

Summary of Adva-27a Preclinical Studies

 

Adva-27a is a GEM-difluorinated C-glycoside derivative of Podophyllotoxin. Another derivative of Podophyllotoxin called Etoposide is currently on the market and is used to treat various types of cancer including leukemia, lymphoma, testicular cancer, lung cancer, brain cancer, prostate cancer, bladder cancer, colon cancer, ovarian cancer, liver cancer and several other forms of cancer. Etoposide is one of the most widely used anticancer drugs. Adva-27a and Etoposide are similar in that they both attack the same target in cancer cells, namely the DNA unwinding enzyme, Topoisomerase II. Unlike Etoposide, and other anti-tumor drugs currently in use, Adva-27a is able to destroy Multidrug Resistant Cancer cells. Adva-27a is the only compound known today that is capable of destroying Multidrug Resistant Cancer. In addition, Adva-27a has been shown to have distinct and more desirable biological and pharmacological properties compared to Etoposide. In side-by-side studies using Multidrug Resistant Breast Cancer cells and Etoposide as a reference, Adva-27a showed markedly improved cell killing activity (see Figure below). Our preclinical studies to date have shown that:

 

 

 

 

 

 

 

 

 These and other preclinical data have been published in ANTICANCER RESEARCH, a peer-reviewed International Journal of Cancer Research and Treatment. The publication which is entitled “Adva-27a, a Novel Podophyllotoxin Derivative Found to Be Effective Against Multidrug Resistant Human Cancer Cells” [ANTICANCER RESEARCH 32: 4423-4432 (2012)] is available on our website at www.sunshinebiopharma.com.

 

 

 

 

 

Clinical Development Path

 

The early stage preclinical studies for our lead compound, Adva-27a, were successfully completed and the results have been published in ANTICANCER RESEARCH 32: 4423-4432 (2012). We have been delayed in our implementation of our clinical development program due to lack of funding. Our fund raising efforts are continuing and as soon as adequate financing is in place we will continue our clinical development program of Adva-27a by conducting the next sequence of steps comprised of the following:

 

 

 GMP Manufacturing

 

In November 2014, we entered into a Manufacturing Services Agreement with Lonza Ltd. and Lonza Sales Ltd. (hereinafter jointly referred to as “Lonza”), whereby we engaged Lonza to be the manufacturer of our Adva-27a anticancer drug. In June 2015 we received a sample of the pilot manufacturing run for evaluation. Our laboratory analyses showed that, while the sample meets the required biological specifications, the amount of material generated (the “Yield”) by the pilot run was found to be significantly lower than planned. During the course of our discussions concerning the problem of the low Yield, Lonza informed us that they required us to pay them $687,818 prior to moving forward with any activity pertaining to the manufacturing agreement we have with them. We have repeatedly indicated to Lonza that a clear path defining exactly how the extremely low Yield issue would be addressed is imperative prior to us making any payments. As of the date of this report, neither party has changed its position. See “Part I, Item 3 – Legal Proceedings.”

 

Clinical Trials

 

Adva-27a’s initial indication will be pancreatic cancer for which there are currently little or no treatment options available. We have concluded an agreement with McGill University’s Jewish General Hospital in Montreal, Canada to conduct Phase I clinical trials for this indication. All aspects of the planned clinical trials in Canada will employ FDA standards at all levels. Subject to obtaining the necessary financing, we now anticipate that Phase I clinical trials will commence in mid-2018 and we estimate that it will take 18 months to complete, at which time we expect to receive limited marketing approval for “compassionate-use” under the FDA and similar guidelines in Canada. See “Potential Near-Term Opportunities” below.

 

Potential Near-Term Opportunities

 

According to the American Cancer Society, nearly 1.5 million new cases of cancer are diagnosed in the U.S. each year.  Given the terminal and limited treatment options available for the pancreatic cancer indication we are planning to study, we anticipate being granted limited marketing approval (“compassionate-use”) for our Adva-27a following receipt of funding and a successful Phase I clinical trial.  There are no assurances that either will occur.  Such limited approval will allow us to make the drug available to various hospitals and health care centers for experimental therapy and/or “compassionate-use”, thereby generating revenues in the near-term.

 

 

 

In addition, 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 at a significant premium.  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 complete the requisite additional clinical trials towards a potential full marketing approval, of which there can be no assurance.

 

 

  

A Space-Filling Model of Our Anticancer Compound, Adva-27a

 

Intellectual Property

 

Effective October 8, 2015, we executed a Patent Purchase Agreement (the “October Purchase Agreement”), with Advanomics, a related party, pursuant to which we acquired all of the right, title and interest in and to U.S. Patent Number 8,236,935 (the “US Patent”) for our anticancer compound, Adva-27a.  On December 28, 2015, we executed a second Patent Purchase Agreement (the “December Purchase Agreement”), with Advanomics, pursuant to which we acquired all of the right, title and interest in and to all of the remaining worldwide rights covered by issued and pending patents under PCT/FR2007/000697 and PCT/CA2014/000029 (the “Worldwide Patents”) for our anticancer compound, Adva-27a.

 

Effective December 28, 2015, we entered into amendments (the “Amendments”) of these Purchase Agreements pursuant to which the total purchase price was reduced from $17,142,499 to $618,810, the book value of this intellectual property on the financial statements of Advanomics.  Further, the Amendments provided for automatic conversion of the promissory notes representing the new purchase price into an aggregate of 321,305,415 shares of our Common Stock once we increase our authorized capital such that these shares can be issued.  In July 2016 we increased our authorized capital and issued the 321,305,415 Common shares to Advanomics thereby completing all aspects of the patent purchase arrangements and securing direct ownership of all worldwide patents and rights pertaining to Adva-27a.

 

In addition, in 2016 we signed Cross Referencing Agreements with a major pharmaceutical company for four (4) prescription generic drugs for the treatment of Breast Cancer, Prostate Cancer and Enlarged Prostate. These agreements give us the right to register the four (4) generic products, Anastrozole, Letrozole, Bicalutamide and Finasteride in Canada under our own label and obtain a DIN for each in order to be able to place them on the market.

 

While no assurances can be provided, we are also planning to expand our product line through acquisitions and/or in-licensing as well as in-house research and development.

 

Liquidity and Capital Resources

 

As of September 30, 2017, we had cash or cash equivalents of $188,086.

 

Net cash used in operating activities was $334,038 during the nine month period ended September 30, 2017, compared to $282,988 for the nine month period ended September 30, 2016.  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 offering of generic pharmaceutical products as discussed above.

 

Cash flows from financing activities were $456,541 for the nine month periods ended September 30, 2017, compared to $255,293 during the nine months ended September 30, 2016.  Cash flows used by investing activities were $-0- and $2,343 for the nine month periods ended September 30, 2017 and 2016, respectively.

 

 

 

During the nine months ended September 30, 2017, we issued a total of 149,336,640 shares of our Common Stock. Of these, 42,528,125 shares valued at $128,451 were issued upon conversion of outstanding notes payable, reducing our debt by $48,500 and interest payable by $3,022 and generating a loss on conversion of $76,929. The remaining 106,808,515 shares were issued as follows:

 

 

 

 

 

 

 

In addition, during the nine months ended September 30, 2017, we engaged in the following debt transactions:

 

 

 

 

 

 

 

 

 

 

Relevant thereto, effective August 29, 2017, we executed an Investment Banking Agreement (the “IB Agreement”) with Jitney Trade Inc. (“Jitney”), a Canadian licensed broker-dealer, headquartered in Montreal with offices in Toronto and Vancouver (Canada). Per the IB Agreement, Jitney has agreed to act as our exclusive placement agent in a proposed financing of up to $10 million Canadian in equity on a “best efforts” basis. In addition, Jitney will aid us and act as our sponsor in connection with the listing of our Common Shares on the TSX Venture Exchange (TSX-V) in Toronto, Canada. The proposed equity financing will be done through a private placement of our Common Stock with qualified investors in Canada. We will rely upon the exemption from registration provided by Regulation S, promulgated under the Securities Act of 1933, as amended, to engage in the proposed offering. The proceeds will be used for implementation of our business plan including the Generic Pharmaceuticals operations and Clinical Development of Adva-27a, our flagship anticancer compound.

 

 

There are no assurances that the aforesaid financing will be completed or that we will receive any funds from this effort. Our inability to obtain sufficient funds from external sources when needed will have a material adverse effect on our plan of operation, results of operations and financial condition.

 

Our cost to continue operations as they are now conducted is nominal, but these are expected to increase as we move forward with implementation of our business plan. We do not have sufficient funds to cover the anticipated increase in the relevant expenses. We need to raise additional funds in order to continue our existing operations to finance our plans to expand our operations 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.

 

Independent Valuation

 

We had previously reported in our Form 10-K for our fiscal year ended December 31, 2016 and Form 10-Q for the three months ended March 31, 2017, that pursuant to terms included in certain Subscription Agreements with us we had undertaken to obtain a valuation report (the “Report”) on our issued and outstanding shares by an independent valuation firm. To comply with this obligation, on March 9, 2017, we engaged MNP LLP (“MNP”) to provide us with such Report.

 

On June 22, 2017, MNP issued its Report, which arrived at an estimated en bloc Fair Market Value at March 31, 2017 (the Valuation Date), of our issued and outstanding shares, in the range of $977.0 million to $1,133.0 million.

 

MNP is one of the largest public accountancy firms in Canada (www.mnp.ca). The Montréal Valuation Practice (the “Practice”) is engaged in the valuation of businesses, business ownership interests, and securities and intangible assets in connection with business combinations, distributions of listed and unlisted securities, private placements, exchanges of shares, corporate and financial reorganizations, going-private transactions, leveraged buy-outs, fair value measurement of assets and liabilities for purchase price allocation and annual impairment testing for financial reporting pursuant to generally-accepted accounting principles both in Canada and the United States. The Practice has performed more than 3,000 valuations of public and private companies throughout Canada and in the United States during the past thirty years. Members of the Practice have also been playing an active role in the Canadian and U.S. professional societies of which they are accredited members, including serving on governing boards and standards promulgating committees.

 

MNP is not an insider, associate, or affiliate of our Company or any of our affiliates, associates, or shareholders (collectively, the “Interested Parties”). MNP does not own shares in the Company, nor does it have any agreements, commitments, or undertakings in respect of any future business involving any of the Interested Parties. MNP’s professional fees for services rendered in preparing the Report were not contingent, in whole or in part, on the conclusions reached therein and were based strictly on the professional time expended on the engagement at their standard hourly rates.

 

The results of this valuation have not been used in the preparation of our financial statements.

 

Interim Condensed Financial Statements

 

The interim unaudited condensed financial statements of the Company for the three and nine month periods ended September 30, 2017 and 2016 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2016 was derived from the audited financial statements included in the Company's financial statements as of and for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 17, 2017. The financial statements presented herein should be read in conjunction with that report.

 

Subsequent Events

 

On October 26, 2017, we issued payment in the amount of $85,107 to pay off a note payable having a principal amount of $65,000, accrued interest of $2,607 and prepayment penalty of $17,500. The note had a maturity date of April 26, 2018.

 

On October 26, 2017, we received monies in exchange for a convertible note payable having a face value of $115,000.

 

 

Inflation

 

Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the nine month period ended September 30, 2017.

 

Critical Accounting Estimates

 

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.

 

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.

 

These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our CEO/CFO to allow timely decisions regarding required disclosure.

 

Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were not effective as of September 30, 2017, at reasonable assurance level, for the following reasons:

 

 

 

 

 

 

 

 

 

Our Board of Directors has assigned a priority to the short-term and long-term improvement of our internal control over financial reporting. We are reviewing various potential solutions to remedy the processes that would eliminate the issues that may arise due to the absence of separation of duties within the financial reporting functions. Additionally, the Board of Directors will work with management to continuously review controls and procedures to identified deficiencies and implement remediation within our internal controls over financial reporting and our disclosure controls and procedures.

 

 

 

We believe that our financial statements presented in this annual report on Form 10-K fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.

 

Inherent Limitations – Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.

 

Changes in Internal Control over Financial Reporting – There were no changes in our internal control over financial reporting during the nine month period ended September 30, 2017, 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

 

ITEM 1. LEGAL PROCEEDINGS

 

In November 2014, we entered into a Manufacturing Services Agreement with Lonza Ltd. and Lonza Sales Ltd. (hereinafter jointly referred to as “Lonza”), whereby we engaged Lonza to be the manufacturer of our Adva-27a anticancer drug. In June 2015 we received a sample of the pilot manufacturing run for evaluation. Our laboratory analyses showed that, while the sample meets the required biological specifications, the amount of material generated (the “Yield”) by the pilot run was found to be significantly lower than planned. During the course of our discussions concerning the problem of the low Yield, Lonza informed us that they required us to pay them $687,818 prior to moving forward with any activity pertaining to the manufacturing agreement we have with them. We have repeatedly indicated to Lonza that a clear path defining exactly how the extremely low Yield issue would be addressed is imperative prior to us making any payments. As of the date of this report, neither party has changed its position.

 

We are not party to any material legal proceedings, nor have any other such actions been threatened against us.

 

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 months ended September 30, 2017, we issued a total of 149,336,640 shares of our Common Stock. Of these, 42,528,125 shares valued at $128,451 were issued upon conversion of outstanding notes payable, reducing our debt by $48,500 and interest payable by $3,022 and generating a loss on conversion of $76,929. The remaining 106,808,515 shares were issued as follows:

 

 

 

 

 

 

 

 

 

In addition, during the nine months ended September 30, 2017, we engaged in the following debt transactions:

 

 

 

 

 

 

 

 

 

The funds obtained from these transactions were used for working capital, including the development of our new business described above under “Plan of Operation.” We relied upon the exemption from registration provided by Section 4(a)(1) of the Securities Act of 1933, as amended, to issue these shares.

 

Interim Condensed Financial Statements

 

The interim unaudited condensed financial statements of the Company for the three and nine month periods ended September 30, 2017 and 2016 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2016 was derived from the audited financial statements included in the Company's financial statements as of and for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 17, 2017. The financial statements presented herein should be read in conjunction with that report.

 

Subsequent Events

 

On October 26, 2017, we issued payment in the amount of $85,107 to pay off a note payable having a principal amount of $65,000, accrued interest of $2,607 and prepayment penalty of $17,500. The note had a maturity date of April 26, 2018.

 

On October 26, 2017, we received monies in exchange for a convertible note payable having a face value of $115,000.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4. MINE SAFETY DISCLOSURE

 

Not Applicable

 

 

ITEM 5. OTHER INFORMATION

 

None

 

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		XBRL Instance Document*
101.SCH		XBRL Schema Document*
101.CAL		XBRL Calculation Linkbase Document*
101.DEF		XBRL Definition Linkbase Document*
101.LAB		XBRL Label Linkbase Document*
101.PRE		XBRL Presentation Linkbase Document*

______________________

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are not deemed filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act or Section 18 of the Securities Exchange Act and otherwise not subject to liability.

 

 

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 15, 2017.

 

	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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