Sunshine Biopharma, Inc - Annual Report: 2019 (Form 10-K)

 

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

(Mark one)

 

 

Commission File Number 000-52898

 

SUNSHINE BIOPHARMA, INC.

 (Exact name of registrant as specified in its charter)

 

Colorado		20-5566275
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

6500 Trans-Canada Highway

4th Floor

Pointe-Claire, Quebec, Canada H9R 0A5

 (Address of principal executive offices)

 

(514) 426-6161

(Registrant’s Telephone Number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:   None

 

Securities registered pursuant to Section 12(g) of the Act:

 

Title of each class		Name of each exchange on which registered
Common Stock, par value $0.001 per share		OTC Pink Sheets

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☑

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 every Interactive Data File required to be submitted pursuant to 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). Yes ☑   No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☑ No ☐ Yes

 

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

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	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 Act). Yes ☐   No ☑

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter on June 30, 2019 was $3,713,994.

 

As of April 30, 2020, the Registrant had 69,939,306 shares of Common Stock issued and outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE - None

 

 

TABLE OF CONTENTS

 

		Page No.
Index
PART I		3
Item 1. Business		3
Item 1A. Risk Factors		10
Item 1B. Unresolved Staff Comments		11
Item 2 Properties		11
Item 3. Legal Proceedings		11
Item 4. Mine Safety Disclosures		11
PART II		12
Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities		12
Item 6. Selected Financial Data		14
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk		20
Item 8. Financial Statements and Supplementary Data		20
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure		23
Item 9A. Controls and Procedures		23
Item 9B. Other Information		24
PART III		25
Item 10. Directors, Executive Officers and Corporate Governance		25
Item 11. Executive Compensation		26
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		28
Item 13. Certain Relationships and Related Transactions, and Director Independence		29
Item 14. Principal Accounting Fees and Services		30
PART IV		31
Item 15. Exhibits, Financial Statement Schedules		31
Signatures		32

  

 

FORWARD LOOKING STATEMENTS

 

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. The statements regarding Sunshine Biopharma Inc. contained in this Report that are not historical in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “likely,” “expects,” “anticipates,” “estimates,” “believes” or “plans,” or comparable terminology, are forward-looking statements based on current expectations and assumptions, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements.

 

Important factors known to us that could cause such material differences are identified in this Report. We undertake no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any future disclosures we make on related subjects in future reports to the SEC.

 

PART I

 

ITEM 1. BUSINESS

 

History

 

We were incorporated in the State of Colorado on August 31, 2006 under the name “Mountain West Business Solutions, Inc.” Until October 2009, our business was to provide management consulting with regard to accounting, computer and general business issues for small and home-office based companies.

 

In October 2009, we acquired Sunshine Biopharma, Inc., a Colorado corporation holding an exclusive license to a new anticancer drug bearing the laboratory name, Adva-27a. As a result of this transaction we changed our name to “Sunshine Biopharma, Inc." and our officers and directors resigned their positions with us and were replaced by Sunshine’s management at the time, including our current CEO, Dr. Steve N. Slilaty, and our current CFO, Camille Sebaaly each of whom remain part of our current management. Our principal business became that of a pharmaceutical company focusing on the development of our licensed Adva-27a anticancer compound. In December 2015 we acquired all issued and pending patents pertaining to our Adva-27a technology and terminated the license.

 

In July 2014, we formed a wholly owned Canadian subsidiary, Sunshine Biopharma Canada Inc. (“Sunshine Canada”), for the purposes of offering generic pharmaceutical products in Canada and elsewhere around the world. In April and June 2016 Sunshine Canada signed licensing agreements for four (4) generic prescription drugs for the treatment of breast cancer, prostate cancer and BPH (Benign Prostatic Hyperplasia).

 

In January 2018, we acquired all of the issued and outstanding shares of Atlas Pharma Inc. (“Atlas”), a Health Canada certified company dedicated to chemical analysis of pharmaceutical and other industrial samples. See “ITEM 1. Business – Discontinued Analytical Chemistry Services Operations” for a more detailed explanation of this acquisition and its disposition in April 2019.

 

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 a new dietary supplement which we trademarked Essential 9TM. This dietary supplement is an over-the-counter tablet comprised of the nine 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 on March 23, 2019 we recorded our first revenues of Essential 9TM sales.

 

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 1, 2019, we re-assigned all of our stock in Atlas back to the original owner in exchange for the Atlas related debt. See “Discontinued Analytical Chemistry Services Operations” below in this section for a more detailed explanation of this disposition.

 

In November 2019, we received Health Canada approval for a new Calcium-Vitamin D supplement. Health Canada issued NPN 80093432 through which it authorized us to manufacture and sell the new Calcium-Vitamin D supplement under the brand name Essential Calcium-Vitamin Dtm.

 

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.

 

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.

 

Business Operations

 

As of the date of this Report our operations include the following:

  

Proprietary Drug Development Operations

 

Since inception, our proprietary drug development activities have been focused on the development of a small molecule called Adva-27a for the treatment of aggressive forms of cancer. A Topoisomerase II inhibitor, Adva-27a has been shown to be effective at destroying Multidrug Resistant Cancer cells including Pancreatic Cancer cells, Breast Cancer cells, Small-Cell Lung Cancer cells and Uterine Sarcoma cells (Published in ANTICANCER RESEARCH, Volume 32, Pages 4423-4432, October 2012). Sunshine Biopharma is direct owner of all issued and pending worldwide patents pertaining to Adva-27a including U.S. Patents Number 8,236,935 and 10,272,065. See “Intellectual Property/Trademarks - Tradenames” below for more details.

 

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).

 

 

Figure 2

 

 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.

 

We have been delayed in our clinical development program due to lack of funding. Our fund raising efforts are continuing and as soon as adequate financing is in place we will continue our clinical development program of Adva-27a by conducting the following next sequence of steps:

 

 

Adva-27a’s initial indication will be Pancreatic Cancer for which there are currently little or no treatment options available. We are planning to conduct our clinical trials at McGill University’s Jewish General Hospital in Montreal, Canada. All aspects of the clinical trials in Canada will employ FDA standards at all levels.

 

According to the American Cancer Society, nearly 1.5 million new cases of cancer are diagnosed in the U.S. each year.  While particularly effective against Multidrug Resistant Cancer, we believe Adva-27a can potentially treat all cancer types as it is general chemotherapy drug. We believe that upon successful completion of Phase I Clinical Trials we may receive one or more offers from large pharmaceutical companies to buyout or license our drug.  However, there are no assurances that our Phase I Trials will be successful, or if successful, that any pharmaceutical companies will make an acceptable offer to us.  In the event we do not consummate such a transaction, we will require significant capital in order to manufacture and market our new drug on our own. The following, Figure 3, is a space-filling molecular model of our Adva-27a.

 

 

 

Figure 3

 

Generic Pharmaceuticals Operations

 

In 2016, our Canadian wholly owned subsidiary, Sunshine Biopharma Canada Inc. (“Sunshine Canada”), signed Licensing Agreements with a major pharmaceutical company for four prescription generic drugs for the treatment of Breast Cancer, Prostate Cancer and Enlarged Prostate. We have since been working towards commencement of marketing of these pharmaceutical products under our own, Sunshine Biopharma, label. These four generic products are as follows:

 

 

 

Sunshine Canada is currently in the process of securing a Drug Identification Number (“DIN”) for each of these products from Health Canada. We are also required to obtain a Drug Establishment License (“DEL”) from Health Canada. Upon receipt of the DEL and DIN’s, we will be able to accept orders for our own label SBI-Anastrozole, SBI-Letrozole, SBI-Bicalutamide and SBI-Finasteride. We cannot estimate the timing for our obtaining either the DIN’s or the DEL due to variables involved that are out of our control. Figure 4 shows our 30-Pill blister pack of Anastrozole.

 

 

Figure 4

 

We currently have a number of additional generic pharmaceuticals under review for in-licensing. While no assurances can be provided that we will acquire the rights to any additional generic drugs, we believe that a larger product portfolio will provide us with more opportunities and a greater reach into the marketplace.

  

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

 

Dietary Supplements Operations

 

In 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 9tm dietary supplement tablets contain a balanced formula of the 9 essential amino acids that the human body cannot make. Essential Amino Acids are 9 out of the 20 amino acids required for protein synthesis. Proteins are involved in all body functions – From the musculature and immune system to hormones and neurotransmitters. Like vitamins, Essential Amino Acids cannot be made by the human body and must be obtained through diet. Deficiency in one or more of the 9 Essential Amino Acids can lead to loss of muscle mass, fatigue, weight gain and reduced ability to build muscle mass in athletes. Sunshine Biopharma’s Essential 9tm 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 5 shows our 60-Tablet Essential 9™ product.

 

 

Figure 5

 

In November 2019, we received Health Canada approval for another dietary supplement, a new Calcium-Vitamin D tablets. Health Canada issued NPN 80093432 through which it authorized us to manufacture and sell the new Calcium-Vitamin D supplement under the brand name Essential Calcium-Vitamin D™.

 

Vitamin D is a group of steroid-like molecules responsible for increasing intestinal absorption of calcium, magnesium, and phosphate. They are also involved in multiple other biological functions, including promoting the healthy growth and remodeling of bone, cell growth, neuromuscular and immune functions, and reduction of inflammation. The most important compounds in this group are Vitamin D2 (ergocalciferol) and Vitamin D3 (cholecalciferol). Sunshine Biopharma’s Essential Calcium-Vitamin D™ tablets contain both of these compounds as well as Calcium for optimum health benefits. We anticipate that Essential Calcium-Vitamin D™ will be available on Amazon.ca in the third quarter of 2020.

 

Discontinued Analytical Chemistry Services Operations

On January 1, 2018, we acquired all of the issued and outstanding shares of Atlas Pharma Inc. (“Atlas”), a privately held Canadian company providing analytical chemistry testing services (“Atlas Business”). The purchase price for the shares was $848,000 Canadian ($676,748 US). The purchase price included a cash payment of $100,500 Canadian ($80,289 US), plus the issuance of 50,000 shares of the Company’s Common Stock valued at $238,000, and a promissory note in the principal amount of $450,000 Canadian ($358,407 US), with interest payable at the rate of 3% per annum (“Atlas Note”).

Effective April 1, 2019, we disposed of Atlas by re-assigning all of our stock in Atlas back to the original owner in exchange for the Atlas Note. As a consequence of the sale, the operating results and the assets and liabilities of the discontinued Atlas Business are presented separately in the Company's financial statements as Discontinued Operations. In additions, prior period balances have been reclassified to present the operations of the Atlas Business as Discontinued Operations.

 

Intellectual Property/Trademarks-Tradenames

 

We are the exclusive owner of all worldwide rights pertaining to Adva-27a covered by PCT/FR2007/000697 and PCT/CA2014/000029.  The patent applications filed under PCT/FR2007/000697 have been issued in Europe, Canada, the United States (US Patent Number 8,236,935) and India.  The patent application filed in the U.S. under PCT/CA2014/000029 has recently been issued (US Patent Number 10,272,065). The remaining international patent applications filed under the same PCT are still pending.

 

 

In 2016 we signed Licensing 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.

 

In 2018 we completed the development of Essential 9™, our first dietary supplement. On December 14, 2018, Health Canada issued NPN 80089663 through which it authorized Sunshine Biopharma Inc. to manufacture and sell the Essential 9™ product. We are currently preparing the necessary documents for registration of our Essential 9tm trademark in the United States.

 

In November 2019, we received Health Canada approval for another dietary supplement, a new Calcium-Vitamin D tablets. Health Canada issued NPN 80093432 through which it authorized us to manufacture and sell the new Calcium-Vitamin D supplement under the brand name Essential Calcium-Vitamin D™.

  

Government Regulations

 

All of our business operations, including the Proprietary Drug Development Operations, the Generic Pharmaceutical Operations, and Dietary Supplements Operations are subject to extensive and frequently changing federal, state, provincial and local laws and regulations.

 

In the U.S, the Federal Government agency responsible for regulating drugs and dietary supplements is the U.S. Food and Drug Administration (“FDA”). The Canadian counterpart to the FDA is Health Canada. Both the FDA and Health Canada have similar requirements for drugs and supplements to be approved for marketing. In Canada, drugs and dietary supplements are authorized through the issuance by Health Canada of a Drug Identification Number (DIN) and a Natural Product Number (NPN) on a per product basis, respectively. In both the U.S. and Canada, the quality standards for brand name drugs and generic drugs are the same. In addition, the ingredients, manufacturing processes and facilities for all drugs and supplements must meet the guidelines for Good Manufacturing Practices (“GMP”). Moreover, all drug manufacturers must perform a series of tests, both during and after production, to show that every drug batch made meets the regulatory requirements for that product.

  

In connection with our development of the new chemical entity, Adva-27a, we will be subject to significant regulations in the U.S. in order to obtain approval of the FDA to offer our product on the market.  The approximate procedure for obtaining FDA approval involves an initial filing of an IND application following which the FDA would review and give the go ahead for the drug developer to proceed with Phase I clinical (human) trials.  Following completion of Phase I, the results are filed with the FDA and a request is made to proceed to Phase II.  Similarly, following completion of Phase II the data are filed with the FDA and a request is made to proceed to Phase III.  Following completion of Phase III, a request is made for marketing approval.  Depending on various issues and considerations, the FDA could provide limited marketing approval for “compassionate-use” if the drug treats terminally ill patients with limited other treatment options available.  As of the date of this Report we have not made any filings with the FDA or other regulatory bodies in other jurisdictions.  We have however had discussions with clinicians at the McGill University’s Jewish General Hospital in Montreal where we plan to undertake our Phase I study for pancreatic cancer and they believe that Health Canada is likely to grant us a so-called “fast-track” process on the basis of the terminal nature of the cancer type we will be treating.  There are no assurances this will occur.

 

 

Employees

 

As of the date of this Report we have a total of three (3) employees, comprised of our management team. We anticipate that if we receive financing we will need additional employees in all three areas of our operations including accounting, regulatory affairs, marketing, sales and laboratory personnel.

 

Competition

 

In the area of proprietary anticancer drug development, we are competing with large publicly and privately held companies engaged in developing new cancer therapies. There are numerous other entities engaged in this business that have greater resources, both financial and otherwise, than the resources presently available to us.  Nearly all major pharmaceutical companies including Merck, Amgen, Roche, Pfizer, Bristol-Myers Squibb and Novartis, to name a few, have on-going anticancer drug development programs and some of the drugs they may develop could be in direct competition with our own.  Also, a number of small companies are also working in the area of cancer therapy and could develop drugs that may be in competition with ours.  However, none of these competitor companies can use molecules similar to ours as they would be infringing our patents.

 

The generic pharmaceuticals business is fairly competitive and there are many players in the field including several multinationals such as Teva (Israel), Novartis - Sandoz (Switzerland), Hospira (USA), Mylan (Netherlands), Sanofi (France), Fresenius Kabi (Germany) and Apotex (Canada) with annual sales in the range of approximately $2 billion to over $10 billion. With our offering of Canadian approved generic products, we believe that we will be able to access a small percentage of the generic pharmaceuticals market.

 

Similarly, our Essential 9™ and Essential Calcium-Vitamin Dtm together with our other planned line of dietary supplement products fall directly within a very crowded and highly competitive product sector. As of the date of this Report, Essential 9™ is the only Essential Amino Acid product that comprises all 9 essential amino acids in tablet form. We believe this will provide us with a competitive advantage, at least for the near future.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company and not required to include this disclosure in this Report.

 

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

Our principal place of business is located at 6500 Trans-Canada Highway, 4th Floor, Pointe-Claire, Quebec, Canada H9R 0A5. We pay a monthly fee of $227 (Canadian), including applicable taxes for use of the available space and services. We are not party to a lease agreement in connection with this service. Additional office space and conference rooms are available to us on a pay-per-use basis. Our arrangement in connection with this office has no short-term or long-term asset or liability value.

We believe that our existing facilities and equipment are adequate. We continuously review our anticipated requirements for facilities and equipment, and on the basis of such reviews, may from time to time acquire additional facilities or equipment, or dispose of some of the existing space or equipment.

 

ITEM 3. LEGAL PROCEEDINGS

  

In June 2018 we filed an action in the Superior Court of the Province of Quebec in the District of Montreal (Canada) against one of our existing shareholders residing in Quebec City (Canada) arising out of a possible equity investment intended to be completed by August 2018. The complaint alleges among other things, claims of misrepresentations and misleading conduct resulting in damages to us in an amount of approximately $200,000 Canadian (approximately $154,000 US). On April 1, 2019, a note payable held by the defendant having a face value of $100,000 Canadian (approximately $76,000 US) became due and payable. We have elected not to pay the amount due and to petition the courts to link this matter to the ongoing litigation. On March 6, 2020, the Superior Court in the District of Montreal granted our motion and the two proceedings were linked. A date for the hearings to commence was subsequently set for April 7, 2020, however due to the Coronavirus (COVID-19) Pandemic, the date has been postponed until further notice.

 

To the best of our management’s knowledge and belief, there are no other material claims that have been brought against us nor any claims threatened. 

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information

 

Trading of our Common Stock commenced on the OTCBB in September 2007 under the symbol “MWBN.”  Effective November 30, 2009, the trading symbol for our Common Stock was changed to “SBFM” as a result of our name change discussed above.

 

In the third quarter of 2016 our Common Stock began trading on OTC Pink Sheets (otcmarkets.com) because the price of our stock had dropped below $0.01 per share.

 

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”).

 

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 $0.001 par value Common Stock remained as previously established at 3,000,000,000 shares.

 

The table below sets forth the reported high and low transaction prices for the periods indicated taking into account and giving retroactive effect to the First and Second Reverse Stock Split.

 

Quarter Ended	High	Low
March 31, 2018	$3.2400	$3.1600
June 30, 2018	$2.6800	$2.1200
September 30, 2018	$0.6800	$0.6000
December 31, 2018	$0.4000	$0.3200

 

March 31, 2019	$0.1600	$0.1600
June 30, 2019	$0.0980	$0.0700
September 30, 2019	$0.0460	$0.0360
December 31, 2019	$0.0100	$0.0080

 

As of April 29, 2020, the closing bid price of our Common Stock was $0.0017 per share.

 

Trading volume in our Common Stock varies between a few hundred thousand shares to several million shares per day.  As a result, the trading price of our Common Stock is subject to significant fluctuations.

 

The Securities Enforcement and Penny Stock Reform Act of 1990

 

The Securities and Exchange Commission (“Commission” or “SEC”) has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.  Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).

 

 

As of the date of this Report, our Common Stock is defined as a “penny stock” under the Securities and Exchange Act.  It is anticipated that our Common Stock will remain a penny stock for the foreseeable future.  The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his/her investment.  Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in us will be subject to Rules 15g-1 through 15g-10 of the Securities and Exchange Act.  Rather than creating a need to comply with those rules, some broker-dealers will refuse to attempt to sell penny stock.

 

The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the Commission, which:

 

 

 

 

 

 

 

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, to the customer:

 

 

 

 

 

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.  These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules.  Therefore, stockholders may have difficulty selling their securities.

 

Holders

 

We had 147 holders of record of our Common Stock as of the date of this Report, not including those persons who hold their shares in “street name.”

 

Our CEO, Dr. Steve N. Slilaty, holds all 500,000 shares of our Series “B” Preferred Stock issued in 2015.

 

 

Stock Transfer Agent

 

The stock transfer agent for our securities is Equiniti Trust Company. Their address is 1110 Centre Pointe Curve, Suite 101, Mendota Heights, Minnesota 55120. Their phone number is (800) 468-9716 and web address is www.shareowneronline.com. 

Dividends

 

We have not paid any dividends since our incorporation and do not anticipate the payment of dividends in the foreseeable future. At present, our policy is to retain earnings, if any, to develop and market our products.  The payment of dividends in the future will depend upon, among other factors, our earnings, capital requirements, and operating financial conditions.

 

Reports

 

We are subject to certain reporting requirements and furnish annual financial reports to our stockholders, certified by our independent accountants, and furnish unaudited quarterly financial reports in our quarterly reports filed electronically with the SEC.  All reports and information filed by us can be found at the SEC website, www.sec.gov. In addition, we are subject to similar reporting requirements in Canada and all reports and information filed by us in Canada can be found at www.sedar.com.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not applicable.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with our audited financial statements and notes thereto included herein.  In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this Report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission.  Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change.  These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf.  We disclaim any obligation to update forward looking statements.

 

Overview and History

 

We were incorporated in the State of Colorado on August 31, 2006 under the name “Mountain West Business Solutions, Inc.” Until October 2009, our business was to provide management consulting with regard to accounting, computer and general business issues for small and home-office based companies.

 

In October 2009, we acquired Sunshine Biopharma, Inc., a Colorado corporation holding an exclusive license to a new anticancer drug bearing the laboratory name, Adva-27a. As a result of this transaction we changed our name to “Sunshine Biopharma, Inc. and our officers and directors resigned their positions with us and were replaced by Sunshine’s management at the time, including our current CEO, Dr. Steve N. Slilaty, and our current CFO, Camille Sebaaly each of whom remain part of our current management. Our principal business became that of a pharmaceutical company focusing on the development of our licensed Adva-27a anticancer compound. In December 2015 we acquired all issued and pending patents pertaining to our Adva-27a technology and terminated the license.

 

 

In July 2014, we formed a wholly owned Canadian subsidiary, Sunshine Biopharma Canada Inc. (“Sunshine Canada”), for the purposes of offering generic pharmaceutical products in Canada and elsewhere around the world. In April and June 2016 Sunshine Canada signed licensing agreements for four (4) generic prescription drugs for the treatment of breast cancer, prostate cancer and BPH (Benign Prostatic Hyperplasia).

 

In January 2018, we acquired all of the issued and outstanding shares of Atlas Pharma Inc., a Health Canada certified company dedicated to chemical analysis of pharmaceutical and other industrial samples. See “ITEM 1. Business – Discontinued Analytical Chemistry Services Operations” for a more detailed explanation of this acquisition and its disposition in April 2019.

 

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 launched our first over-the-counter Essential Brand™ product, Essential 9™, a dietary supplement comprised of the nine amino acids which the human body cannot synthesize. Essential 9™ has been authorized for marketing by Health Canada under NPN 80089663.

 

Effective February 1, 2019, we completed a 20 to 1 reverse split of our $0.001 par value Common Stock reducing the issued and outstanding shares of Common Stock from 1,713,046,242 to 85,652,400 (the “First Reverse Stock Split”). Our authorized capital of Common Stock remained as previously established at 3,000,000,000 shares.

 

Effective April 1, 2019, we re-assigned all of our stock in Atlas back to the original owner in exchange for the Atlas related debt. See “ITEM 1. Business – Discontinued Analytical Chemistry Services Operations” for a more detailed explanation of this disposition.

 

In November 2019, we received Health Canada approval for a new Calcium-Vitamin D supplement. Health Canada issued NPN 80093432 through which it authorized us to manufacture and sell the new Calcium-Vitamin D supplement under the brand name Essential Calcium-Vitamin D™.

 

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. 

 

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 never been subject to any bankruptcy, receivership or similar proceeding.

 

Going Concern

 

Our financial statements accompanying this Report have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The financial statements do not include any adjustment that might result from the outcome of this uncertainty. We have a minimal operating history and minimal revenues or earnings from operations. We have no significant assets or financial resources. We will, in all likelihood, sustain operating expenses without corresponding revenues for the immediate future.  See “ITEM 8. Financial Statements and Supplementary Data.”

 

 

Results Of Operations

 

Comparison of Results of Operations for the fiscal years ended December 31, 2019 and 2018

 

During our fiscal years ended December 31, 2019 we generated revenues of $21,121 from our Dietary Supplements Operations. The direct cost for generating these revenues was $11,050. We did not generate any revenues in 2018 or prior thereto.

 

General and administrative expenses for our fiscal year ended December 31, 2019 were $651,707, compared to $1,164,290 during our fiscal year ended December 31, 2018, a decrease of $512,583. The expense categories that saw a decrease included accounting and legal fees, which decreased by $70,508, office expenses by $9,750 and executive compensation by $477,963. The general and administrative categories that saw an increase were consulting fees by $43,842 and research and development by $2,404. The increase in consulting fees was largely due to fees related to expansion of our Dietary Supplements Operations.

 

We also incurred $115,906 in interest expense and $314,752 in losses from debt conversion during the year ended December 31, 2019, compared to $143,463 in interest expense and $871,726 in losses from debt conversion during the similar period in 2018. The decrease in interest expense and losses from debt conversion in 2019 was due to a decrease in issuance of convertible debt instruments.

  

As a result, we incurred a net loss of $1,660,291 (approximately $0.15 per share) for the year ended December 31, 2019, compared to a net loss of $2,156,155 (approximately $0.71 per share) during the year ended December 31, 2018.

  

Liquidity and Capital Resources

 

As of December 31, 2019, we had cash and cash equivalents of $40,501.

 

Net cash used in operating activities was $498,255 during our fiscal year ended December 31, 2019, compared to $501,806 during our fiscal year ended December 31, 2018.  We anticipate that our cash requirements for our operations will increase in the future before we reach profitability levels. 

 

Cash flows used in investing activities were $15,276 during our fiscal year ended December 31, 2019.  For the fiscal year ended December 31, 2018, cash flows used in investing activities were $18,590 arising primarily out of the purchase of computer and related equipment.  Net cash flows provided by financing activities totaled $442,255 in 2019, compared to $527,640 during our fiscal year ended December 31, 2018.

 

We have issued convertible and non-convertible notes to both related and unaffiliated parties in order to fund our operations. The following is a description of our liquidity and capital resources events in 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the fiscal year ended December 31, 2019, we issued an aggregate of 31,037,370 shares of our Common Stock as follows:

 

 

We relied upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, to issue the respective shares. We did not generate any proceeds from the issuance of these shares.

 

We are not generating significant revenue from our operations, and our ability to implement our business plan as set forth herein will depend on the future availability of financing.  Such financing will be required to enable us to further develop our proprietary drug development program, generic pharmaceuticals business, and dietary supplements development and sales operations.  We intend to raise funds through private placements of our Common Stock and/or debt financing. We estimate that we will require approximately $6 million ($1 million for the Generic Pharmaceuticals and Dietary Supplements operations and $5 million for the Proprietary Drug Development program) to fully implement our business plan in the future and there are no assurances that we will be able to raise this capital.

  

We are currently in discussion with various investment groups for financing. There are no assurances that we will be successful in raising any funds.

 

Our cost to continue operations 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 and planned expansions.

 

 

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 our fiscal year ended December 31, 2019.

 

Critical Accounting Policies and Estimates

 

Critical Accounting Estimates

 

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these 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.

  

Leases

 

We follow the guidance in ASC 842 “Accounting for Leases,” as amended, which requires us to evaluate the lease agreements we enter into to determine whether they represent operating or capital leases at the inception of the lease. Our Company is not party to any lease agreements. Our corporate offices in Pointe-Claire, Quebec (Canada) are on a month-to-month, pay-per-use basis. Our arrangement in connection with this office has no short-term or long-term asset or liability value.

 

Recently Adopted Accounting Standards

 

In January 2018, the FASB issued ASU No. 2018-01, Leases (Topic 842), to provide guidance on recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements, specifically differentiating between different types of leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from all leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. There continues to be a differentiation between finance leases and operating leases. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the balance sheet. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Our Company is not party to any lease agreements. Our corporate offices in Pointe-Claire, Quebec (Canada) are on a month-to-month, pay-per-use basis. Our arrangement in connection with this office has no short-term or long-term asset or liability value.

  

Off-Balance Sheet Arrangements

 

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

 

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Reference is made to the Financial Statements, the notes thereto, and the Report of Independent Public Accountants thereon commencing at page F-1 of this Report, which Financial Statements, notes and report are incorporated herein by reference.

 

 

 

  

Sunshine Biopharma, Inc.

 

CONSOLIDATED FINANCIAL STATEMENTS

With Independent Accountant’s Audit Report

At December 31, 2019 and 2018

 

 

 

 

 

 

TABLE OF CONTENTS

 

	Page
Independent Accountant’s Audit Report	F-1
Consolidated Balance Sheet	F-2
Consolidated Statement of Operations	F-3
Consolidated Statement of Cash Flows	F-4
Consolidated Statement of Shareholders’ Equity	F-5
Notes to Consolidated Financial Statements	F-6

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

To the shareholders and the board of directors of Sunshine Biopharma, Inc.:

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Sunshine Biopharma, Inc. (the "Company") as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive income (loss), shareholders' equity, and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States.

 

Going Concern Uncertainty

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

/s/ BF Borgers CPA PC

BF Borgers CPA PC

 

We have served as the Company's auditor since 2013.

Lakewood, CO

April 30, 2020

 

 

 

Sunshine Biopharma, Inc.

Consolidated Balance Sheet

	December 31,	December 31,
	2019	2018
ASSETS
Current Assets:
Cash and cash equivalents	$40,501	$110,534
Accounts receivable	430	-
Inventory	15,910	-
Prepaid expenses	1,255	1,341
Deposits	7,590	-
Assets of discontinued operations	-	989,572
Total Current Assets	65,686	1,101,447
Equipment (net of $37,109 and $23,005 depreciation, respectively)	32,456	45,124
Patents (net of $58,918 amortization and $556,120 impairment)	-	-
TOTAL ASSETS	$98,142	$1,146,571
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable	586,307	419,663
Notes payable - related party	129,261	243,094
Related party advances	-	20,871
Accounts payable and accrued expenses	96,882	115,826
Interest payable	21,077	9,291
Liability of discontinued operations	-	103,732
Total Current Liabilities	833,527	912,477
Long-Term Liabilities	-	289,847
TOTAL LIABILITIES	833,527	1,202,324
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 per share; Authorized 3,000,000,000 shares; Issued and outstanding 35,319,990 and 4,282,620 at December 31, 2019 and December 31, 2018, respectively	35,320	4,283
Capital paid in excess of par value	16,616,426	15,668,047
Accumulated other comprehensive income	(2,495)	(3,738)
Accumulated (Deficit)	(17,434,636)	(15,774,345)
TOTAL SHAREHOLDERS' EQUITY (DEFICIT)	(735,385)	(55,753)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)	$98,142	$1,146,571

 

 

Sunshine Biopharma, Inc.

Consolidated Statement of Operations and Comprehensive Income (Loss)

	December 31,	December 31,
	2019	2018
Revenues	$21,121	$-
Cost of revenues	11,050	-
Gross profit	10,071	-
General & Administrative Expenses:
Accounting	89,253	153,889
Legal	107,196	113,068
Consulting	74,124	30,300
Office	74,904	84,654
Officer and director remuneration	277,252	755,215
Research and development	15,204	12,800
Amortization and depreciation	13,774	14,364
Total General & Administrative Expenses	651,707	1,164,290
Income (Loss) from operations	(641,636)	(1,164,290)
Other Expenses:
Interest expense	(115,901)	(143,463)
Loss on conversion of notes payable	(314,752)	(871,726)
Income (Loss) from foreign exchange transactions	(15,099)	41,528
Interest forgiveness	1,367	-
Debt release	7,967	-
Total Other Expenses	(436,418)	(973,661)
Income (Loss) before income taxes	$(1,078,054)	$(2,137,951)
Income taxes	-	-
Net Income (Loss) from continuing operations	(1,078,054)	(2,137,951)
Net Income (Loss) from discontinued operations (Atlas Pharma Inc.)	(582,237)	(18,204)
Net Income (Loss)	$(1,660,291)	$(2,156,155)
Gain (Loss) from foreign exchange transactions	1,243	(4,242)
Comprehensive Income (Loss)	(1,659,048)	(2,160,397)
Basic Income (Loss) from continuing operations per common share	(0.10)	(0.70)
Basic Income (Loss) from discontinued operations per common share	(0.05)	(0.01)
Basic Income (Loss) per common share	(0.15)	(0.71)
Weighted Average Common Shares Outstanding (basic and diluted)	10,932,813	3,046,807

 

 

 

Sunshine Biopharma, Inc.

Statement of Cash Flows

	December 31,	December 31,
	2019	2018
Cash Flows From Operating Activities:
Net Income (Loss)	$(1,660,291)	$(2,156,155)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	13,774	49,361
Foreign exchange gain (loss)	15,099	(42,399)
Stock issued for services	261,690	676,100
Stock issued for interest	17,197	33,977
Loss on debt conversion	314,752	871,973
Gain on Interest and debt forgiveness	(9,334)	(247)
Loss on disposition of subsidiary	582,237	-
Increase (decrease) in accounts receivable	(430)	(15,447)
Increase in inventory	(15,910)	-
Increase (decrease) in prepaid expenses	(7,676)	8,326
Increase (decrease) in accounts payable	(18,692)	61,629
Increase(decrease) in interest payable	11,786	76
Net Cash Flows (Used) in Operations	(495,798)	(512,806)
Cash Flows From Investing Activities:
Cash received from purchase of subsidiary	-	4,942
Advances from discontinued operations	(14,416)	-
Purchase equipment	(860)	(18,850)
Net Cash Flows (Used) in Investing Activities	(15,276)	(13,908)
Cash Flows From Financing Activities:
Proceed from note payable	441,230	609,885
Payment of notes payable	(53,000)	(194,184)
Notes payable - interest expense	25,795	26,759
Advances from related parties	-	29,930
Note payable used to pay expenses	-	36,500
Note payable used to pay origination fees and interest	28,230	18,750
Net Cash Flows Provided by Financing Activities	442,255	527,640
Cash and cash equivalents at beginning of period	115,216	107,532
Net increase (decrease) in cash and cash equivalents	(68,819)	926
Foreign currency translation adjustment	(5,896)	6,758
Cash and cash equivalents at end of period	40,501	115,216
Supplementary Disclosure of Cash Flow Information:
Cash paid for interest	$-	$23,496
Stock issued for note conversions	$717,726	$1,589,099
Stock issued to buy equipment	$-	$17,808

  

 

Sunshine Biopharma, Inc.

Consolidated Statement of Shareholders' Equity

	Number Of Common Shares Issued	Common Stock	Capital Paid in Excess of Par Value	Number Of Preferred Shares Issued	Preferred Stock	Comprehensive Income	Accumulated Deficit	Total
Balance at December 31, 2017	2,296,841	$2,297	$12,992,026	500,000	$50,000	$504	$(13,618,190)	$(573,363)
Common stock issued for the acquisition of Atlas Pharma, Inc.	50,000	50	237,950					238,000
Common stock issued for services	519,125	519	675,581					676,100
Common stock issued for equipment	72,837	73	174,735					174,808
Common stock issued for the reduction of debt and payment of interest	1,343,817	1,344	1,587,755					1,589,099
Net Income (Loss)	-	-	-			(4,242)	(2,156,155)	(2,160,397)
Balance at December 31, 2018	4,282,620	$4,283	$15,668,047	500,000	$50,000	$(3,738)	$(15,774,345)	$(55,753)
Common stock issued to directors	9,150,000	9,150	195,150					204,300
Common stock issued for services	1,455,000	1,455	55,935					57,390
Common stock issued for the reduction of debt and payment of interest	20,432,370	20,432	697,294					717,726
Net Income (Loss)	-	-	-			1,243	(1,660,291)	(1,659,048)
Balance at December 31, 2019	35,319,990	$35,320	$16,616,426	500,000	$50,000	$(2,495)	$(17,434,636)	$(735,385)

 

 

Sunshine Biopharma, Inc.

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

 

Note 1 – Description of Business

 

Sunshine Biopharma, Inc. (the "Company") was originally incorporated under the name Mountain West Business Solutions, Inc. on August 31, 2006 in the State of Colorado. Until October 2009, the Company was operating as a business consultancy firm. Effective October 15, 2009, the Company acquired Sunshine Biopharma, Inc. in a transaction classified as a reverse acquisition. Sunshine Biopharma, Inc. was holding an exclusive license to a new anticancer drug bearing the laboratory name, Adva-27a. Upon completion of the reverse acquisition transaction, the Company changed its name to Sunshine Biopharma, Inc. and began operating as a pharmaceutical company focusing on the development of the licensed Adva-27a anticancer drug.

 

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

 

On January 1, 2018, the Company acquired all of the issued and outstanding shares of Atlas Pharma Inc. (“Atlas”), a Canadian privately held analytical chemistry company. The purchase price for the shares was Eight Hundred Forty-Eight Thousand Dollars $848,000 Canadian ($676,748 US). The purchase price included a cash payment of $100,500 Canadian ($80,289 US), plus the issuance of 50,000 shares of the Company’s Common Stock valued at $238,000, and a promissory note (“Atlas Debt”) in the principal amount of $450,000 Canadian ($358,407 US), with interest payable at the rate of 3% per annum.

 

In March 2018, the Company formed NOX Pharmaceuticals, Inc., a wholly owned Colorado corporation and assigned all of the Company’s interest in the Adva27a anticancer drug to that company. NOX Pharmaceuticals Inc.’s mission is to research, develop and commercialize proprietary drugs including Adva-27a.

 

In December 2018, the Company launched its first over-the-counter product, Essential 9™, a dietary supplement comprised of the nine essential amino acids that the human body cannot synthesize. Essential 9™ has been authorized for marketing by Health Canada under NPN 80089663.

 

Effective February 1, 2019, the Company completed a 20 to 1 reverse split of its $0.001 par value Common Stock, reducing the issued and outstanding shares of Common Stock from 1,713,046,242 to 85,652,400 (the “First Reverse Stock Split”). The Company’s authorized capital of Common Stock remained as previously established at 3,000,000,000 shares.

 

Effective April 1, 2019, the Company re-assigned all of its stock in Atlas back to the original owner in exchange for the Atlas Debt. The loss on the disposition was $580,125. See “Note 12 – Acquisition and Disposition of Atlas Pharma Inc.” below for a more detailed explanation of this disposi

 

In November 2019, the Company received Health Canada approval for a new Calcium-Vitamin D supplement. Health Canada issued NPN 80093432 through which it authorized the Company to manufacture and sell the new Calcium-Vitamin D supplement under the brand name Essential Calcium-Vitamin D™.

 

Effective April 6, 2020, the Company completed another 20 to 1 reverse split of its $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 number of authorized Common Shares remained as previously established at 3,000,000,000 post-second split.

 

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". During the last twelve month period the Company has continued to raise money through the issuance of convertible debt.

 

 

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

 

Note 2 – Summary of Significant Accounting Policies

 

This summary of significant accounting policies is presented to assist the reader in understanding the Company's financial statements. The consolidated financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to Generally Accepted Accounting Principles and have been consistently applied in the preparation of the financial statements.

 

PRINCIPLES OF CONSOLIDATION

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

 

USE OF ESTIMATES

 

The preparation of financial statements in conformity with US Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant estimates and assumptions made by management are valuation of equity instruments, depreciation of property and equipment, and deferred tax asset valuation. Actual results could differ from those estimates as the current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.

 

CASH AND CASH EQUIVALENTS

 

For the Balance Sheets and Statements of Cash Flows, all highly liquid investments with maturity of 90 days or less are considered to be cash equivalents. The Company had a cash balance of $40,501 and $110,534 as of December 31, 2019 and December 31, 2018, respectively. At times such cash balances may be in excess of the FDIC limit of $250,000 or the equivalent in Canada.

 

PROPERTY AND EQUIPMENT

 

Property and equipment is reviewed for recoverability when events or changes in circumstances indicate that its carrying value may exceed future undiscounted cash inflows. As of December 31, 2019 and 2018, the Company had not identified any such impairment. Repairs and maintenance are charged to operations when incurred and improvements and renewals are capitalized.

 

Property and equipment are stated at cost. Depreciation is calculated using the straight-line method for financial reporting purposes and accelerated methods for tax purposes. Their estimated useful lives are as follows:

 

Office Equipment:	5-7 Years
Laboratory Equipment:	5 Years
Vehicles:	5 Years

 

INTELLECTUAL PROPERTY RIGHTS – PATENTS

 

The cost of patents acquired is capitalized and is amortized over the remaining life of the patents.

 

The Company evaluates recoverability of identifiable intangible assets whenever events or changes in circumstances indicate that intangible assets carrying amount may not be recoverable. Such circumstances include, but are not limited to: (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an accumulation of cost significantly in excess of the amount originally expected for the acquisition of an asset. The Company measures the carrying amount of the assets against the estimated undiscounted future cash flows associated with it.

 

 

The Company’s management determined that the expected cash flows would be less than the carrying amount of certain intangible assets; therefore an impairment loss was recognized in 2016. The impairment loss was calculated as the amount by which the carrying amount of the intangible assets exceeded fair value.

 

EARNINGS PER SHARE

 

The Company has adopted the Financial Accounting Standards Board (FASB) ASC Topic 260 regarding earnings / loss per share, which provides for calculation of “basic” and “diluted” earnings / loss per share. Basic earnings / loss per share includes no dilution and is computed by dividing net income / loss available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings / loss per share reflect the potential dilution of securities that could share in the earnings of an entity similar to fully diluted earnings / loss per share.

 

INCOME TAXES

 

In accordance with ASC 740 – Income Taxes, the provision for income taxes is computed using the asset and liability method. The liability method measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts on the financial statements. The resulting deferred tax assets or liabilities have been adjusted to reflect changes in tax laws as they occur. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized.

 

The Company expects to recognize the financial statement benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a "more-likely-than-not" threshold, the amount to be recognized in the financial statements will be the benefit expected to be realized upon settlement with the tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. As of December 31, 2019 the Company had no uncertain tax positions. The Company recognizes interest and penalties, if any, related to uncertain tax positions as general and administrative expenses. The Company currently has no federal or state tax examinations nor has it had any federal or state examinations since its inception. To date, the Company has not incurred any interest or tax penalties.

 

For Canadian and US tax purposes, the Company’s 2016 through 2018 tax years remain open for examination by the tax authorities under the normal three-year statute of limitations.

 

FUNCTIONAL CURRENCY

 

The U.S. dollar is the functional currency of the Company which is operating in the United States. The functional currency for the Company's Canadian subsidiaries is the Canadian dollar.

 

The Company translates its Canadian subsidiary's financial statements into U.S. dollars as follows:

 

 

The Company includes translation adjustments from currency exchange and the effect of exchange rate changes on intercompany transactions of a long-term investment nature as a separate component of shareholders’ equity. There are currently no transactions of a long-term investment nature, nor any gains or losses from non U.S. currency transactions.

 

CONCENTRATION OF CREDIT RISKS

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents and trade receivables. The Company places its cash equivalents with high credit quality financial institutions.

 

 

FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Company applies the provisions of accounting guidance, FASB Topic ASC 825, Financial Instruments. ASC 825 requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of December 31, 2019 and 2018, the fair value of cash, accounts receivable and notes receivable, accounts payable, accrued expenses, and other payables approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates.

 

The Company defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

 

 

 

 

The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared.

 

NOTES PAYABLE

 

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.

 

ACCOUNTING FOR DERIVATIVES LIABILITIES

 

The Company evaluates stock options, stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or other expense.

 

Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date. The Company determined that none of the Company’s financial instruments meet the criteria for derivative accounting as of December 31, 2019 and 2018.

 

 

EQUITY INSTRUMENTS ISSUED TO NON-EMPLOYEES FOR AQUIRING GOODS OR SERVICES

 

Issuances of the Company’s common stock or warrants for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.

 

NONCASH EQUITY TRANSACTIONS

 

Shares of equity instruments issued for noncash consideration are recorded at the estimated fair market value of the consideration granted based on the estimated market value of the equity instrument, or at the estimated value of the goods or services received whichever is more readily determinable.

 

RELATED PARTIES

 

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

 

GENERAL AND ADMINISTRATIVE EXPENSES

 

General and administrative expenses consisted of professional service fees, rent and utility expenses, meals, travel and entertainment expenses, and other general and administrative overhead costs. Expenses are recognized when incurred.

 

BASIC AND DILUTED NET GAIN (LOSS) PER SHARE

 

The Company computes loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement.

 

Basic net income (loss) per share is calculated by dividing net (loss) by the weighted-average common shares outstanding. Diluted net income per share is calculated by dividing net income by the weighted-average common shares outstanding during the period using the treasury stock method or the two-class method, whichever is more dilutive. As the Company incurred net losses for the year ended December 31, 2019 no potentially dilutive securities were included in the calculation of diluted earnings per share as the impact would have been anti-dilutive.

 

Therefore, basic and dilutive net (loss) per share were the same as of December 31, 2019 and 2018.

 

COMMON STOCK

 

The Company completed a 20 to 1 reverse stock split of the $0.001 par value Common Stock effective February 1, 2019. The Company completed an additional 20 to 1 reverse stock split of the $0.001 par value Common Stock effective April 6, 2020. All shares and share prices in this Report have been restated to reflect both of these reverse splits.

 

 

REVENUE RECOGNITION

 

As of January 1, 2018, the Company adopted ASU No. 201409, “Revenue from Contracts with Customers” (ASC 606). Under the new guidance, an entity will recognize revenue to depict the transfer of promised goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. A five-step model has been introduced for an entity to apply when recognizing revenue. The new guidance also includes enhanced disclosure requirements. The guidance was effective January 1, 2018 and was applied on a modified retrospective basis. The adoption did not have an impact on the Company's financial statements. All of the revenues of the Company are the Company's wholly owned Canadian subsidiary, which sells dietary supplements through Amazon.com and Amazon.ca.

 

In Canada, governmental regulations require that companies recognize revenues upon completion of the work by issuing an invoice and remitting the applicable sales taxes (GST and QST) to the appropriate government agency. The Company’s wholly owned Canadian subsidiary's revenue recognition policy is in compliance with these local regulations.

 

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

In January 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-01, LEASES (TOPIC 842): LAND EASEMENT PRACTICAL EXPEDIENT FOR TRANSITION TO TOPIC 842. In February 2016, the FASB issued Accounting Standards Update No. 2016- 02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. The Company is evaluating the impact of this standard on the financial statements.

 

DIRECTOR AND OFFICER COMPENSATION

 

For the period ended December 31, 2019, the Company issued to the Board of Directors 1,950,000 shares of $0.001 par value Common Stock valued at $74,100, 3,300,000 shares of $0.001 par value Common Stock valued at $99,000, and 3,900,000 shares of $0.001 par value Common Stock valued at $31,200. During the year ended December 31, 2019 the Directors and officers were paid $72,916 in cash. Of this amount, $28,000 was paid to Advanomics Corporation, a company controlled by the CEO of the Company.

 

For the period ended December 31, 2018, the Company issued 202,500 shares of par value $0.001 Common Stock valued at $429,300 and 285,000 shares of $0.001 par value Common Stock valued at $171,000 to the Board of Directors. During the year ended December 31, 2018 the Directors and officers were paid $154,915 in cash. Of this amount, $85,000 was paid to Advanomics Corporation, a company controlled by the CEO of the Company.

 

LEGAL FEES

 

During the years ended December 31, 2019 and 2018, the legal fees incurred were related to services provided to the Company to assist with its regulatory requirements with the Securities and Exchange Commission, patenting costs and one ongoing litigation.

 

DATE OF MANAGEMENT’S REVIEW

 

Subsequent events have been evaluated through April 30, 2020, which is the date the Financial Statements were available to be issued.

 

Note 3 – Going Concern

 

In the course of its life, the Company has had limited operations and Working Capital deficit. This raises substantial doubt about the Company’s ability to continue as a going concern. The Company believes it can raise capital through equity sales and borrowing to fund its operations. Management believes this will contribute toward its subsequent profitability. The accompanying Financial Statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

 

Note 4 – Patents

 

The following is a summary of the patents held by the Company at December 31, 2019 and 2018:

 

On October 8, 2015, the Company acquired US Patent Number 8,236,935 (the “US Patent”) for the Adva-27a anticancer compound from Advanomics Corporation (“Advanomics”), a related party, in exchange for an interest-free note payable for $4,320,000. Effective December 28, 2015, the parties executed an amendment pursuant to which this note payable for $4,320,000 was cancelled and replaced with a new interest-free convertible note having a face value of $210,519, comprised of $155,940 in principal amount which is the Advanomics book value of the US Patent, plus $54,579 as an adjustment for the currency exchange difference. The new note is automatically convertible into 202,423 shares of the Company’s Common Stock upon the Company increasing its authorized capital to a level that would permit the issuance of such shares.

 

On December 28, 2015, the Company acquired the remaining worldwide issued and pending patents under PCT/FR2007/000697 and PCT/CA2014/000029 (the “Worldwide Patents”) for the Adva-27a anticancer compound from Advanomics, a related party, in exchange for a note payable for $12,822,499. Effective December 28, 2015, the parties executed an amendment pursuant to which this note payable for $12,822,499 was cancelled and replaced with a new interest-free convertible note having a face value of $624,875, comprised of $462,870 in principal amount, which is the Advanomics book value of the Worldwide Patents, plus $162,005 as an adjustment for the currency exchange difference. The new note is automatically convertible into 600,842 shares of the Company’s Common Stock upon the Company increasing its authorized capital to a level that would permit the issuance of such shares.

 

In July 2016, the Company issued 803,264 shares of $0.001 par value Common Stock in exchange for the aforementioned patents related notes payable totaling $835,394. 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.

 

Note 5 – Capital Stock

 

The Company’s authorized capital is comprised of 3,000,000,000 shares of $0.001 par value Common Stock and 30,000,000 shares of $0.10 par value Preferred Stock, to have such rights and preferences as the Directors of the Company have or may assign from time to time. Out of the authorized Preferred Stock, the Company has designated 850,000 shares as Series “A” Preferred Stock (“Series A”). The Series A is convertible at any time after issuance into 20 shares of the Company's Common Stock with no further consideration, has full voting rights at 20 votes per share, and has superior liquidation rights to the Common Stock. During the year ended December 31, 2015, the Company authorized 500,000 shares of $0.10 par value Series “B” Preferred Stock (“Series B”). The Series B Preferred Stock is non-convertible, non-redeemable and non-retractable. It has superior liquidation rights to the Common Stock at $0.10 per share and gives the holder the right to 1,000 votes per share. All shares of the Series B Preferred Stock are held by the CEO of the Company. Through December 31, 2019 and December 31, 2018, the Company has issued and outstanding a total of 35,319,990 and 4,282,620 shares of Common Stock, respectively. Through the same periods, the Company has issued and outstanding a total of -0- and -0- shares of Series A Preferred Stock and 500,000 and 500,000 shares of Series B Preferred Stock, respectively.

 

During the fiscal year ended December 31, 2019, the Company issued an aggregate of 31,037,370 shares of its Common Stock as follows:

 

 

 

During the fiscal year ended December 31, 2018, the Company issued an aggregate of 1,985,779 shares of its Common Stock as follows:

 

 

The Company has declared no dividends since inception.

 

The Company completed a 20 to 1 reverse stock split of the $0.001 par value Common Stock effective February 1, 2019. The Company completed an additional 20 to 1 reverse stock split of the $0.001 par value Common Stock effective April 6, 2020. All shares and share prices in this filing have been restated to reflect both of these reverse splits.

 

Note 6 – Earnings Per Share

 

The following table sets forth the computation of basic and diluted net income per share for the years ended December 31:

 

	2019	2018
Net gain (loss) attributable to Common Stock	$(1,660,291)	$(2,156,155)
Basic weighted average outstanding shares of Common Stock	10,932,813	3,046,807
Dilutive effects of common share equivalents	-0-	-0-
Dilutive weighted average outstanding shares of Common Stock	10,932,813	3,046,807
Net gain (loss) per share attributable to Common Stock	$(0.15)	$(0.71)

 

Note 7 – Income Taxes

 

The Company files a United States federal income tax return and a Canadian branch return on a calendar year basis. The Company and its wholly-owned subsidiaries, Sunshine Biopharma Canada Inc., have not generated taxable income since inception.

 

Deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses and other items. These loss carryovers are limited under the Internal Revenue Code should a significant change in ownership occur. The Company accounts for income taxes pursuant to ASC 740, “Accounting for Income Taxes”, which requires, among other things, an asset and liability approach to calculating deferred income taxes. The components of the deferred income tax assets and liabilities arising under ASC No. 740 were as follows:

 

	December 31, 2019		December 31, 2018
	Amount	Tax Effect	Amount	Tax Effect
Deferred tax assets:
Net operating loss	$1,660,291	$407,767	$2,156,155	$541,626
Other differences	$(235,633)	$(57,871)	$(611,178)	$(153,528)
Net deferred tax assets	$1,424,658	$349,896	$1,544,977	$388,098
Valuation allowance	$(1,424,658)	$(349,896)	$(1,544,977)	$(388,098)
Total deferred tax asset	$-0-	$-0-	$-0-	$-0-
Deferred tax liabilities:	$-0-	$-0-	$-0-	$-0-
Net deferred tax asset	$-0-	$-0-	$-0-	$-0-

 

 

Deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses. These loss carryovers are limited under the Internal Revenue Code should a significant change in ownership occur.

 

At December 31, 2019 and December 31, 2018, the Company had approximately $13,581,556 and $12,156,898 respectively, in unused federal net operating loss carryforwards, which begin to expire principally in the year 2029. A deferred tax asset at each date of approximately $349,896 and $388,098 resulting from the loss carryforwards has been offset by a 100% valuation allowance. The change in the valuation allowance for the period ended December 31, 2019 and December 31, 2018 was approximately $(38,202) and $(878,965), respectively.

 

A reconciliation of the U.S. statutory federal income tax rate to the effective tax rate is as follows:

 

	December 31, 2019	December 31, 2018
U.S. Federal statutory graduated income tax rate	21.00%	21.00%
State income tax rate, net of federal benefit	3.56%	4.12%
Net income tax rate	24.56%	25.12%
Net operating loss used	0.00%	0.00%
Net operating loss for which no tax benefit is currently available	0.00%	0.00%
Canada Federal statutory rate	15.00%	15.00%
Canada Provincial rate	11.80%	11.80%
Net Canada rate	26.80%	26.80%
Net operating loss used (Canada)	0.00%	0.00%
Net operating loss for which no tax benefit is currently available (Canada)	-26.80%	-26.80%

 

The Company’s income tax filings are subject to audit by various taxation authorities. The Company’s open audit periods are 2017, 2018, and 2019, although, the statute of limitations for the 2017 tax year will expire effective October 15, 2020. In evaluating the Company’s provisions and accruals, future taxable income, and reversal of temporary differences, interpretations and tax planning strategies are considered. The Company believes its estimates are appropriate based on current facts and circumstances.

 

Note 8 – Notes Payable

 

Notes payable consist of the following:

 

On June 27, 2018, the Company received monies in exchange for a Note Payable having a Face Value of $53,000 with interest accruing at 8% is due April 15, 2019. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The note was paid off in January 2019 along with accrued interest of $16,930.95.

 

On August 17, 2018, the Company received monies in exchange for a Note Payable having a Face Value of $53,000 with interest accruing at 8% is due April 15, 2019. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The principal amount of $53,000 of this note plus accrued interest of $1,700 was converted in 2019 into 566,157 shares of Common Stock valued at $99,101 resulting in a loss of $44,401. A remaining amount of $420 in accrued interest was paid in cash.

 

 

On September 10, 2018, the Company issued two Notes Payable having an aggregate Face Value of $36,500 with interest accruing at 8%. The two Notes were issued for services rendered to the Company and had maturity dates in June 2019. The Company was unable to pay the notes and on November 30, 2019 the Company issued a new Note which included accrued interest and accelerated interest of $7,059 for a total Face Value of $43,559. The new Note accrues interest at 8% and is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The new Note is due August 31, 2020. The Company estimates that the fair value of this convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature. Any gain or loss will be recognized at conversion.

 

On October 23, 2018, the Company received monies in exchange for a Note Payable having a Face Value of $90,000 with interest accruing at 8% is due October 23, 2019. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The principal amount of $90,000 of this Note plus accrued interest of $5,506 was converted in 2019 into 3,141,393 shares of Common Stock valued at $176,565 resulting in a loss of $81,061.

 

On December 24, 2018, the Company received monies in exchange for a Note Payable having a Face Value of $87,000 with interest accruing at 8% is due December 24, 2019. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. A principal amount of $35,500 of this Note plus accrued interest of $2,456 was converted in 2019 into 3,350,482 shares of Common Stock valued at $57,880 resulting in a loss of $19,924. Interest accrued at December 31, 2019 was $4,245 with a remaining principal balance of $51,500. The Company estimates that the fair value of this convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature. Any gain or loss will be recognized at conversion.

 

On January 8, 2019, the Company received monies in exchange for a Note Payable having a Face Value of $54,000 with interest accruing at 8% is due January 8, 2020. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. Interest accrued at December 31, 2019 was $4,226. The Company estimates that the fair value of this convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature. Any gain or loss will be recognized at conversion.

 

On January 10, 2019, the Company received monies in exchange for a Note Payable having a Face Value of $40,660 with interest accruing at 8% is due October 10, 2019. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The principal amount of $40,660 of this note plus accrued interest of $1,693 was converted in 2019 into 1,604,816 shares of Common Stock valued at $75,469 resulting in a loss of $33,116.

 

On February 5, 2019, the Company received monies in exchange for a Note Payable having a Face Value of $37,450 with interest accruing at 8% is due October 10, 2019. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. A principal amount of $5,265 of this Note plus accrued interest of $-0- was converted in 2019 into 450,000 shares of Common Stock valued at $6,300 resulting in a loss of $1,035. At December 31, 2019, accrued interest was $2,639 with a remaining principal balance of $32,185.

 

On February 11, 2019, the Company received monies in exchange for a Note Payable having a Face Value of $52,000 with interest accruing at 8% is due November 30, 2019. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The principal amount of $52,000 of this Note plus accrued interest of $2,080 was converted in 2019 into 2,288,175 shares of Common Stock valued at $81,990 resulting in a loss of $27,910.

 

On March 18, 2019, the Company received monies in exchange for a Note Payable having a Face Value of $40,660 with interest accruing at 8% is due December 18, 2019. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. A principal amount of $38,693 of this Note plus accrued interest of $2,046 was converted in 2019 into 3,951,103 shares of Common Stock valued at $74,721 resulting in a loss of $23,474 and a write off of $1,967.

 

 

On March 18, 2019, the Company received monies in exchange for a Note Payable having a Face Value of $40,660 with interest accruing at 8% is due December 18, 2019. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The principal amount of $40,660 of this note plus accrued interest of $1,718 was converted in 2019 into 3,580,246 shares of Common Stock valued at $85,700 resulting in a loss of $43,322.

 

On July 2, 2019, the Company received monies in exchange for a Note Payable having a Face Value of $40,000 with interest accruing at 8% is due April 30, 2020. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. Interest accrued at December 31, 2019 was $ 1,596. The Company estimates that the fair value of this convertible debt approximates the Face Value, so no value has been assigned to the beneficial conversion feature. Any gain or loss will be recognized at conversion.

 

On July 26, 2019, the Company received monies in exchange for a Note Payable having a Face Value of $50,000 with interest accruing at 8% is due July 26, 2020. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. Interest accrued at December 31, 2019 was $1,731. The Company estimates that the fair value of this convertible debt approximates the Face Value, so no value has been assigned to the beneficial conversion feature. Any gain or loss will be recognized at conversion.

 

On September 12, 2019, the Company received monies in exchange for a Note Payable having a Face Value of $43,000 with interest accruing at 8% is due July 15, 2020. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. Interest accrued at December 31, 2019 was $1,037. The Company estimates that the fair value of this convertible debt approximates the Face Value, so no value has been assigned to the beneficial conversion feature. Any gain or loss will be recognized at conversion.

 

On December 14, 2019, the Company received monies in exchange for a Note Payable having a Face Value of $42,800 with interest accruing at 8% is due December 14, 2020. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. Interest accrued at December 31, 2019 was $159. The Company estimates that the fair value of this convertible debt approximates the Face Value, so no value has been assigned to the beneficial conversion feature. Any gain or loss will be recognized at conversion.

 

A Note Payable having a Face Value of $26,893 at January 1, 2018 and accruing interest at 12% was due December 31, 2018. This Note was nonconvertible. On December 31, 2018, the Company renewed the Note, together with accrued interest of $2,881 for a 12-month period (“2018 Note). On December 31, 2019 the Company renewed the 2018 Note together with accrued interest of $3,227 for a 12-month period (“2019 Note”). The 2019 Note has a Face Value of $30,120 and accrues interest at 12%. The 2019 Note is nonconvertible.

 

Note 9 – Notes Payable Related Party

 

Notes payable to related parties consist of the following:

 

On January 1, 2018, as part of the acquisition of Atlas Pharma Inc., the Company issued a Note Payable in the amount of $450,000 Canadian (approximately $358,407 US). The Note was nonconvertible and accrued interest at the rate of 3% per annum. Payments on this note were $10,000 Canadian (approximately $8,000 US) per quarter. Post-acquisition, the holder of this Note stayed on as a director and officer of Atlas Pharma Inc. The Company disposed of Atlas Pharma Inc. on April 1, 2019 in exchange for this note.

 

A Note Payable held by a private individual who became a principal shareholder of the Company having a Face Value of $122,093 at January 1, 2018 and a maturity date of December 31, 2018, accrues interest at 12%. This private individual ceased to be a principal shareholder of the Company in the third quarter of 2018. On December 31, 2018, the Company renewed this Note, together with accrued interest of $14,651 for a 12-month period by issuing a new Note having a Face Value of $136,744 (the “2018 Note). On October 1, 2019, the holder of this note requested to convert $30,000 in principal amount into 1,500,000 shares of Common Stock, leaving a principal balance $106,744. On December 31, 2019, the Company renewed the remaining principal balance of the 2018 Note, together with accrued interest of $15,509 for a 12-month period (the “2019 Note”). The 2019 Note has a Face Value of $122,253 and accrues interest at 12%. The 2019 Note is nonconvertible and matures on December 31, 2020.

 

 

A Note Payable held by the CEO of the Company having a Face Value of $104,942 Canadian ($83,649 US) at January 1, 2018 and accruing interest at 12% was due December 31, 2018. On December 31, 2018, the Company renewed the Note, together with accrued interest of $12,593 Canadian ($9,227 US) for a 12-month period (the “2018 Note). The 2018 Note had a Face Value of $117,535 Canadian ($86,118 US) and matures on December 31, 2019. On December 31, 2019, the Company renewed the 2018 Note together with accrued interest of $14,104 Canadian ($10,845 US) and cash advances made to the Company of $36,473 Canadian ($28,044 US) for a 12-month period (the “2019 Note”). The amount due under the 2019 Note was converted to US Dollars resulting in the 2019 Note having a Face Value of $128,269 US. The 2019 Note is nonconvertible, accrues interest at 12%, and matures on December 31, 2020.

 

Note 10 – Related Party Transactions

 

In addition to the transactions specified under Note 9 above, during the period ended December 31, 2019, the Company issued to the Board of Directors 1,950,000 shares of Common Stock valued at $74,100, 3,300,000 shares of Common Stock valued at $99,000, and 3,900,000 shares of Common Stock valued at $31,200. The Company also issued 550,000 shares of Common Stock valued at $16,500 to the CFO for consulting services rendered to the Company in 2019. During the year ended December 31, 2019 the Directors and officers were paid $72,916 in cash. Of this amount, $28,000 was paid to Advanomics Corporation, a company controlled by the CEO of the Company.

 

For the period ended December 31, 2018, the Company issued to the Board of Directors 202,500 shares of $0.001 par value Common Stock valued at $429,300 and 285,000 shares of $0.001 par value Common Stock valued at $171,000. During the year ended December 31, 2018 the directors and officers were paid $154,915 in cash. Of this amount, $85,000 was paid to Advanomics Corporation, a company controlled by the CEO of the Company.

 

Note 11 – Royalties Payable

 

As part of a subscription agreement entered into in 2016, the Company had an obligation to pay a royalty of 5% of net sales on one of its generic products (Anastrozole) for a period of three (3) years from the date of the first sale of that product. In September 2018, 2,500 shares of the Company’s Common Stock valued at $5,900 were issued in exchange for cancellation of this royalty obligation.

 

Note 12 – Acquisition and Disposition of Atlas Pharma Inc.

 

On January 1, 2018 the Company acquired all of the issued and outstanding shares of Atlas Pharma Inc. (“Atlas”), a privately held Canadian company providing analytical chemistry testing services (“Atlas Business”). The purchase price for the shares was $848,000 Canadian ($676,748 US). The purchase price included a cash payment of $100,500 Canadian ($80,289 US), plus the issuance of 50,000 shares of the Company’s Common Stock valued at $238,000, and a promissory note in the principal amount of $450,000 Canadian ($358,407 US), with interest payable at the rate of 3% per annum (“Atlas Note”). The following table summarizes the allocation of the purchase price as of the acquisition date:

 

Cash	$4,942
Accounts receivable	$79,508
Prepaids	$1,428
Property and equipment	$62,990
Goodwill	$665,697
Liabilities assumed ($172,899 Canadian)	$(137,817)
Total consideration	$676,748

 

 

Effective April 1, 2019, the Company disposed of Atlas by re-assigning all of its stock in Atlas back to the original owner in exchange for the Atlas Note. As a consequence of the sale, the operating results and the assets and liabilities of the discontinued Atlas Business are presented separately in the Company's financial statements. Summarized financial information for the discontinued Atlas Business is shown below. Prior period balances have been reclassified to present the operations of the Atlas Business as discontinued operations.

 

Discontinued Operations Income Statement:

 

	Audited December 31, 2019	Audited December 31, 2018
Revenues	$119,522	$335,357
Cost of revenues	81,920	285,210
Gross profit	37,602	50,147
General and administrative expenses	36,196	46,970
Gain (Loss) from operations	1,406	3,177
Other income (expense) – Interest	(3,518)	(12,024)
Net Income (Loss) from operations	(2,112)	(8,847)
Loss on Disposal	(580,125)	-
Net Income (Loss) from Discontinued Operations	(582,237)	(8,847)