Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: September 30, 2023

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from           to         

 

Commission File Number: 001-41282

 

SUNSHINE BIOPHARMA, INC.

(Exact name of registrant as specified in its charter)

 

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

 

6500 Trans-Canada Highway

4th Floor

Pointe-Claire, Quebec, Canada H9R 0A5

(Address of principal executive offices)

 

(514) 426-6161

(Issuer’s Telephone Number)

 

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

 

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock Common Stock Purchase Warrants	SBFM SBFMW	The NASDAQ Stock Market LLC The NASDAQ Stock Market LLC

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

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

 

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

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes  ☒ No

 

The number of shares of the registrant’s common stock, par value $0.001, issued and outstanding as of November 13, 2023, was 25,678,290 shares.

 

 

TABLE OF CONTENTS

 

		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheet as of September 30, 2023 (Unaudited) and December 31, 2022	3
	Consolidated Statements of Operations for the Nine Months Ended September 30, 2023 and 2022 (Unaudited)	4
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (Unaudited)	5
	Consolidated Statement of Shareholders' Equity for the Nine Months Ended September 30, 2023 and 2022 (Unaudited)	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24

 

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	25
	Signatures	26

 

 

 

 

 

 

PART I.  FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Sunshine Biopharma, Inc.

Consolidated Balance Sheets

		September 30,				December 31,
		2023				2022
		(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents		$	18,846,140			$	21,826,437
Accounts receivable			2,034,119				1,912,153
Inventory			4,517,044				3,289,945
Prepaid expenses			37,556				283,799
Total Current Assets			25,434,859				27,312,334
Property and equipment			334,922				394,249
Intangible assets			1,216,207				776,856
Right-of-use-asset			664,296				760,409
TOTAL ASSETS		$	27,650,284			$	29,243,848
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses		$	2,220,870			$	2,802,797
Earnout payable			2,547,831				3,632,000
Income tax payable			201,541				373,191
Right-of-use-liability			117,840				123,026
Total Current Liabilities			5,088,082				6,931,014
Long-Term Liabilities:
Deferred tax liability			43,032				43,032
Right-of-use-liability			555,687				642,232
Total Long-Term Liabilities			598,719				685,264
TOTAL LIABILITIES			5,686,801				7,616,278
SHAREHOLDERS' EQUITY
Preferred Stock, Series B $0.10 par value per share; 1,000,000 shares authorized; 10,000 Shares issued and outstanding			1,000				1,000
Common Stock, $0.001 par value per share; 3,000,000,000 shares authorized; 25,678,290 and 22,585,632 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively			25,678				22,585
Capital paid in excess of par value			84,387,890				80,841,752
Accumulated comprehensive income			204,549				161,847
Accumulated (Deficit)			(62,655,634	)			(59,399,614	)
TOTAL SHAREHOLDERS' EQUITY			21,963,483				21,627,570
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	27,650,284			$	29,243,848

 

The accompanying notes are an integral part of these unaudited financial statements

 

 

 

 

Sunshine Biopharma, Inc.

Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

		3 Months Ended September 30,								9 Months Ended September 30,
		2023				2022				2023				2022
Sales		$	5,957,668			$	132,808			$	16,412,586			$	405,760
Cost of sales			3,967,412				65,783				10,641,461				200,311
Gross profit			1,990,256				67,025				5,771,125				205,449
General and Administrative Expenses:
Accounting			56,350				122,913				301,381				237,773
Consulting			221,781				162,852				745,850				270,033
Director fees			100,000				100,000				300,000				200,000
Legal			133,302				146,467				392,874				403,386
Marketing			241,897				217,666				502,987				400,386
Office			544,215				76,818				1,422,058				449,730
R&D			238,012				362,500				1,039,502				770,095
Salaries			1,144,377				595,000				4,344,801				1,105,000
Taxes			52,586				–				212,953				–
Depreciation			37,210				789				106,797				6,186
Total General and Administrative Expenses:			2,769,730				1,785,005				9,369,203				3,842,589
(Loss) from operations			(779,474	)			(1,717,980	)			(3,598,078	)			(3,637,140	)
Other Income (Expense):
Foreign exchange			40				25				(206	)			45
Interest income			207,431				260,938				624,361				406,984
Debt release			–				–				–				10,852
Interest expense			(38,527	)			(2	)			(107,198	)			(12,866	)
Total Other Income (Expense)			168,944				260,961				516,957				405,015
Net (loss) before income taxes			(610,530	)			(1,457,019	)			(3,081,121	)			(3,232,125	)
Provision for income taxes			(40,952	)			–				(174,899	)			–
Net (Loss)		$	(651,482	)		$	(1,457,019	)		$	(3,256,020	)		$	(3,232,125	)
Gain (Loss) from foreign exchange translation			(460,507	)			(45,126	)			42,702				(56,764	)
Comprehensive (Loss)		$	(1,111,989	)		$	(1,502,145	)		$	(3,213,318	)		$	(3,288,889	)
Basic (Loss) per common share		$	(0.04	)		$	(0.08	)		$	(0.133	)		$	(0.26	)
Weighted Average Common Shares Outstanding (Basic and Diluted)			25,690,449				18,885,632				24,507,122				12,789,733

 

The accompanying notes are an integral part of these unaudited financial statements

 

 

 

 

Sunshine Biopharma, Inc.

Consolidated Statements of Cash Flows (Unaudited)

		September 30,				September 30,
		2023				2022
Cash Flows From Operating Activities:
Net (Loss)		$	(3,256,020	)		$	(3,232,125	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			106,794				6,186
Foreign exchange			(374	)			45
Debt release			–				(10,852	)
Accounts receivable			(118,482	)			7,776
Inventory			(1,221,112	)			(163,991	)
Prepaid expenses			247,977				2,235
Accounts payable and accrued expenses			(587,973	)			437,267
Income tax payable			(172,076	)			–
Interest payable			(1,084,169	)			(48,287	)
Net Cash Flows (Used) in Operations			(6,085,435	)			(3,001,746	)
Cash Flows From Investing Activities:
Reduction in Right-of-use asset			97,498				–
Purchase of intangible assets			(19,804	)			–
Purchase of equipment			(464,614	)			–
Net Cash Flows (Used) in Investing Activities			(386,920	)			–
Cash Flows From Financing Activities:
Common stock issued			4,089,218				43,560,363
Exercise of warrants			1,156				–
Purchase of treasury stock			(541,143	)			(99,000	)
Lease liability			(93,125	)			–
Payments of notes payable			–				(1,900,000	)
Net Cash Flows Provided by Financing Activities			3,456,106				41,561,363
Cash and Cash Equivalents at Beginning of Period			21,826,437				2,045,167
Net increase (decrease) in cash and cash equivalents			(3,016,249	)			38,559,617
Effect of exchange rate changes on cash			–				(105,617	)
Foreign currency translation adjustment			35,952				56,764
Cash and Cash Equivalents at End of Period		$	18,846,140			$	40,555,931
Supplementary Disclosure of Cash Flow Information:			–				–
Cash paid for interest		$	–			$	61,151
Cash paid for income taxes		$	–			$	–

 

The accompanying notes are an integral part of these unaudited financial statements

 

 

 

 

Sunshine Biopharma, Inc.

Consolidated Statement of Shareholders' Equity (Unaudited)

		Number Of Common Shares				Common				Capital Paid in Excess of Par				Number Of Preferred Shares				Preferred				Comprehensive				Accumulated
		Issued				Stock				Value				Issued				Stock				Income				Deficit				Total
Three Month Period Ended September 30, 2023
Balance at June 30, 2023			25,746,302			$	25,746			$	84,422,143				10,000			$	1,000			$	665,056			$	(62,004,152	)		$	23,109,793
Repurchase stock			(68,012	)			(68	)			(34,253	)			–				–				–				–				–
Net (loss)			–				–				–				–				–				(460,507	)			(651,482	)			(1,111,989	)
Balance at September 30, 2023			25,678,290			$	25,678			$	84,387,890				10,000			$	1,000			$	204,549			$	(62,655,634	)		$	21,963,483
Nine Month Period Ended September 30, 2023
Balance December 31, 2022			22,585,632			$	22,585			$	80,841,752				10,000			$	1,000			$	161,847			$	(59,399,614	)		$	21,627,570
Repurchase of common stock			(513,723	)			(514	)			(540,629	)			–				–				–				–				–
Common stock and pre-funded warrants issued in a private offering			2,450,000				2,451				4,086,767				–				–				–				–				4,089,218
Exercise of warrants			1,156,381				1,156				–				–				–				–				–				1,156
Net (loss)			–				–				–				–				–				42,702				(3,256,020	)			(3,213,318	)
Balance at September 30, 2023			25,678,290			$	25,678			$	84,387,890				10,000			$	1,000			$	204,549			$	(62,655,634	)		$	21,963,483
Three Month Period Ended September 30, 2022
Balance at June 30, 2022			18,885,632			$	18,886			$	76,331,451				10,000			$	1,000			$	(34,777	)		$	(34,430,280	)		$	41,886,280
Net (loss)			–				–				–				–				–				(45,126	)			(1,457,019	)			(1,502,145	)
Balance at September 30, 2022			18,885,632			$	18,886			$	76,331,451				10,000			$	1,000			$	(79,903	)		$	(35,887,299	)		$	40,384,135
Nine Month Period Ended September 30, 2022
Balance December 31, 2021			2,595,620			$	2,596			$	32,787,379				1,000,000			$	100,000			$	(23,139	)		$	(32,655,174	)		$	211,662
Common stock and pre-funded warrants issued in public offering			6,656,526				6,657				30,360,528				–				–				–				–				30,367,185
Exercise of warrants			9,633,486				9,633				13,183,544				–				–				–				–				13,193,177
Preferred stock purchased from related party			–				–				–				(990,000	)			(99,000	)			–				–				(99,000	)
Net (loss)			–				–				–				–				–				(56,764	)			(3,232,125	)			(3,288,889	)
Balance at September 30, 2022			18,885,632			$	18,886			$	76,331,451				10,000			$	1,000			$	(79,903	)		$	(35,887,299	)		$	40,384,135

 

The accompanying notes are an integral part of these unaudited financial statements

 

 

 

 

Sunshine Biopharma, Inc.

Notes to Unaudited Consolidated Financial Statements

For the Nine Months Ended September 30, 2023 and 2022

 

Note 1 – Description of Business

 

The Company was originally incorporated under the name Mountain West Business Solutions, Inc. on August 31, 2006, in the State of Colorado. Effective October 15, 2009, the Company acquired Sunshine Biopharma, Inc. in a transaction classified as a reverse acquisition. Upon completion of the reverse acquisition transaction, the Company changed its name to Sunshine Biopharma, Inc. and began operating as a pharmaceutical company.

 

In addition to conducting its own drug development activities, Sunshine Biopharma operates two wholly owned subsidiaries: (i) Nora Pharma Inc. (“Nora Pharma”), a Canadian corporation with a portfolio of pharmaceutical products consisting of 51 generic prescription drugs on the market in Canada, and (ii) Sunshine Biopharma Canada Inc. (“Sunshine Canada”), a Canadian corporation which develops and sells nonprescription over-the-counter (“OTC”) products. In addition to the 51 generic prescription drugs currently on the market in Canada, the Company has 32 additional generic prescription drugs scheduled to be launched in 2024 and 2025 in Canada.

 

The Company has determined that it has two reportable segments:

 

	·	Prescription Generic Pharmaceuticals (“Generic Pharmaceuticals”)
	·	Nonprescription Over-The-Counter Products (“OTC Products)

 

Through December 31, 2022 and as of September 30, 2023, sales from the Generic Pharmaceuticals segment represented approximately 97% of total revenues of the Company while the remaining approximately 3% was generated from the sale of OTC Products. Based on these results, the Company deems segmentation reporting to be immaterial at September 30, 2023.

 

The Company is not subject to material customer concentration risks as it sells its products directly to pharmacies in several Canadian Provinces. Provincial governments in Canada reimburse patients for their prescription drugs expenditures to various degrees under drug reimbursement programs, making generic drugs prices highly dependent on government regulations which may change over time. The most recent negotiations between the pan-Canadian Pharmaceutical Alliance and the Canadian Generic Pharmaceutical Association have resulted in updated generic pricing for certain products which took effect on October 1, 2023. The updated prices are valid for three years and the agreement contains an option to extend for an additional two years.

 

In addition, the Company is engaged in the development of the following proprietary drugs:

 

	·	Adva-27a, a small chemotherapy molecule for treatment of pancreatic cancer (IND-enabling studies were paused on November 2, 2023 due to unfavorable results. See Note 13 – Subsequent Events)
	·	K1.1 mRNA, a lipid nano-particle (LNP) targeted for liver cancer
	·	SBFM-PL4, a protease inhibitor for treatment of Coronavirus infections

 

 

 

 

Note 2 – Basis of Presentation

 

The unaudited financial statements of the Company for the nine months periods ended September 30, 2023 and 2022 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2022, was derived from the audited financial statements included in the Company's financial statements as of and for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 4, 2023. These financial statements should be read in conjunction with that report.

 

Note 3 – Private Placement

 

On May 16, 2023, the Company completed a private placement pursuant to a securities purchase agreement with a single institutional investor for gross proceeds of approximately $5 million, before deducting fees to the placement agent and other offering expenses payable by the Company. The net proceeds received by the Company were $4,089,218.

 

In connection with the private placement, the Company issued (i) 2,450,000 shares of common stock, (ii) 3,502,381 pre-funded warrants (the “May Pre-Funded Warrants”), and (iii) investor warrants (the “May Investor Warrants”) to purchase up to 11,904,762 shares of common stock at $0.59 per share. Each share of common stock and accompanying two May Investor Warrants were sold together at a combined offering price of $0.84 and each May Pre-Funded Warrant and accompanying two May Investor Warrants were sold together at a combined offering price of $0.839. The May Pre-Funded Warrants are immediately exercisable at a nominal exercise price of $0.001, and may be exercised at any time until all of the May Pre-Funded Warrants are exercised in full. The May Investor Warrants which have an exercise price of $0.59 per share (subject to adjustment as set forth therein), are exercisable upon issuance and will expire five and a half years from the date of issuance. As of September 30, 2023, a total of 1,156,381 May Pre-Funded Warrants and no May Investor Warrants have been exercised. The net proceeds received from the exercise of May Pre-Funded Warrants were $1,156.

 

Note 4 – Acquisition of Nora Pharma Inc.

 

On October 20, 2022, the Company acquired all of the issued and outstanding shares of Nora Pharma Inc. The purchase price for the shares was $18,860,637 (USD), $14,346,637 of which was paid in cash and the remainder was paid through the issuance of 3,700,000 shares of the Company’s common stock valued at $4,514,000 or $1.22 per share. Nora Pharma sells generic pharmaceutical products in Canada. Nora Pharma’s operations are authorized by a Drug Establishment License issued by Health Canada.

 

 

 

 

The following table summarizes the allocation of the purchase price as of October 20, 2022, the acquisition date using Nora Pharma’s balance sheet assets and liabilities:

Schedule of allocation of purchase price
Accounts receivable		$	1,358,121
Inventory			3,181,916
Intangible assets			659,571
Equipment & furniture			210,503
Other assets			1,105,093
Total assets			6,515,204
Liabilities assumed			(5,981,286	)
Net assets			533,918
Goodwill			18,326,719
Total Consideration		$	18,860,637

 

The value of the 3,700,000 common shares issued as part of the consideration paid for Nora Pharma was determined based on the closing market price of the Company’s common shares on the acquisition date, October 20, 2022 ($1.22 per share).

 

The Company impaired 100% of the goodwill amount in 2022 and plans to depreciate the intangible assets as detailed in Note 5 below.

 

As part of the consideration paid for Nora Pharma, the Company agreed to a $5,000,000 CAD ($3,632,000 USD) earnout amount payable to Mr. Malek Chamoun, the Seller of Nora Pharma. The earnout is payable in the form of twenty (20) payments of $250,000 CAD for every $1,000,000 CAD increase in gross sales (as defined in the Purchase Agreement) above Nora Pharma’s June 30, 2022 gross sales, provided that his employment with the Company is not terminated pursuant to the Company’s employment agreement with him. The total earnout amount of $3,632,000 has been recorded as a salary payable. During the nine-month period ended September 30, 2023, the Company paid an earn-out amount of $1,084,169 leaving a balance earn-out to be paid of $2,547,831 at September 30, 2023.

 

The unaudited financial information in the table below summarizes the combined results of operations of the Company and Nora Pharma for the years ended December 31, 2022 and 2021, on a pro forma basis, as though the two companies had been combined as of January 1, 2021. The unaudited pro forma financial information does not purport to be indicative of the Company's combined results of operations which would have been obtained had the acquisition taken place on January 1, 2021, nor should it be taken as indicative of future consolidated results of operations: 

Schedule of Pro Forma results from acquisition
Pro Forma Results From Acquisition		December 31, 2022				December 31, 2021
Total revenues		$	14,758,115			$	7,927,165
Net (loss) from operations		$	(26,192,503	)		$	(2,224,253	)
Net (loss)		$	(26,164,764	)		$	(12,289,655	)
Basic and fully diluted (loss) per share		$	(1.74	)		$	(4.70	)
Weighted average number of shares outstanding			15,056,097				2,612,061

 

 

 

 

Note 5 – Intangible Assets

 

Intangible assets, net, consisted of the following at September 30, 2023: 

Schedule of intangible assets
Balance June 30, 2023		$	1,233,570
Dossier fee additions			13,905
Balance at September 30, 2023			1,247,475
Less accumulated amortization			(31,268	)
Finite-lived intangible assets, net, at September 30, 2023		$	1,216,207
Balance December 31, 2022		$	776,856
Dossier fee additions			470,619
Balance at September 30, 2023			1,247,475
Less accumulated amortization			(31,268	)
Finite-lived intangible assets, net, at September 30, 2023		$	1,216,207

 

Amortization expense for the three months period ended September 30, 2023, and the nine months period ended September 30, 2023, amounted to $10,797 and $26,746, respectively.

 

As of September 30, 2023, estimated amortization expense of the Company’s intangible assets for each of the next five years is as follows: 

Schedule of estimated amortization expense
2024		$	55,418
2025			55,418
2026			54,240
2027			15,599
2028			7,370

 

Note 6 – Reverse Stock Splits

 

Effective February 9, 2022, the Company completed a 1 for 200 reverse split of its common stock. The Company had previously completed two 20 to 1 reverse stock splits, one in 2019 and the other in 2020. The Company’s financial statements reflect all three reverse stock splits on a retroactive basis for all periods presented and for all references to common stock, unless specifically stated otherwise.

 

 

 

 

Note 7 – Capital Stock

 

The Company’s authorized capital is comprised of 3,000,000,000 shares of common stock, par value $0.001, and 30,000,000 shares of preferred stock, $0.10 par value. As of December 31, 2022 and September 30, 2023, the Company had authorized 1,000,000 shares of Series B Preferred Stock. 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. As of September 30, 2023 and December 31, 2022, 10,000 shares of Series B Preferred Stock are outstanding and held by the Company’s chief executive officer.

 

On February 17, 2022, the Company completed a public offering and received net proceeds of $6,833,071 from the offering. Pursuant to the public offering, the Company issued and sold an aggregate of 1,882,353 shares of common stock and 4,102,200 warrants to purchase shares of common stock (the “Tradeable Warrants”).

 

On February 22, 2022, the Company redeemed 990,000 shares of Series B Preferred Stock from the CEO of the Company at a redemption price equal to the stated value of $0.10 per share. The remaining 10,000 shares of Series B Preferred Stock could not be voted pursuant to a warrant agent agreement relating to the Tradeable Warrants (the “Warrant Agent Agreement”). On October 12, 2023, the Company held a special meeting of the holders of the outstanding Tradeable Warrants in which the holders of the majority of the outstanding Tradeable Warrants approved an amendment to the Warrant Agent Agreement to eliminate the provision that prohibited the Company’s CEO from exercising his voting rights under the Series B Preferred Stock, as well as to lower the exercise price of the Tradeable Warrants to $0.11. The Company entered into the amendment to the Warrant Agent Agreement on October 18, 2023.

 

On March 14, 2022, the Company completed a private placement and received net proceeds of $6,781,199. In connection with this private placement, the Company issued (i) 2,301,353 shares of its common stock together with investor warrants (“Investor Warrants”) to purchase up to 2,301,353 shares of common stock, and (ii) 1,302,251 pre-funded warrants (“Pre-Funded Warrants”) with each Pre-Funded Warrant exercisable for one share of common stock, together with Investor Warrants to purchase up to 1,302,251 shares of common stock. Each share of common stock and accompanying Investor Warrant was sold together at a combined offering price of $2.22 and each Pre-Funded Warrant and accompanying Investor Warrant were sold together at a combined offering price of $2.219. The Pre-Funded Warrants were immediately exercisable, at a nominal exercise price of $0.001, and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. The Investor Warrants have an exercise price of $2.22 per share (subject to adjustment as set forth in the warrant), are exercisable upon issuance and will expire five years from the date of issuance.

 

On April 28, 2022, the Company completed another private placement and received net proceeds of $16,752,915. In connection with this private placement, the Company issued (i) 2,472,820 shares of its common stock together with warrants (“April Warrants”) to purchase up to 4,945,640 shares of common stock, and (ii) 2,390,025 pre-funded warrants (“Pre-Funded Warrants”) with each Pre-Funded Warrant exercisable for one share of common stock, together with April Warrants to purchase up to 4,780,050 shares of common stock. Each share of common stock and accompanying two April Warrants were sold together at a combined offering price of $4.01 and each Pre-Funded Warrant and accompanying two April Warrants were sold together at a combined offering price of $4.009. The Pre-Funded Warrants were immediately exercisable, at a nominal exercise price of $0.001, and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. The April Warrants have an exercise price of $3.76 per share (subject to adjustment as set forth in the warrant), are exercisable upon issuance and will expire five years from the date of issuance.

 

On October 20, 2022, the Company issued 3,700,000 shares of common stock as part of the acquisition of Nora Pharma. These shares were valued at $4,514,000, or $1.22 per share.

 

 

 

 

On January 19, 2023, the Company announced a stock repurchase program of up to $2 million (“Stock Repurchase Program”). During the six months ended June 30, 2023, the Company repurchased a total of 445,711 shares of common stock at an average price of $1.1371 per share for a total cost of $506,822. The 445,711 repurchased common shares were cancelled and returned to treasury reducing the number of issued and outstanding shares from 22,585,632 to 22,139,921.

 

On May 16, 2023, the Company completed a private placement pursuant to a securities purchase agreement with a single institutional investor for gross proceeds of approximately $5 million, before deducting fees to the placement agent and other offering expenses payable by the Company. The net proceeds received by the Company were $4,089,218. In connection with the private placement, the Company issued (i) 2,450,000 shares of common stock, (ii) 3,502,381 pre-funded warrants (the “May Pre-Funded Warrants”), and (iii) investor warrants (the “May Investor Warrants”) to purchase up to 11,904,762 shares of common stock at $0.59 per share. Each share of common stock and accompanying two May Investor Warrants were sold together at a combined offering price of $0.84 and each May Pre-Funded Warrant and accompanying two May Investor Warrants were sold together at a combined offering price of $0.839. The May Pre-Funded Warrants are immediately exercisable, at a nominal exercise price of $0.001, and may be exercised at any time until all of the May Pre-Funded Warrants are exercised in full. The May Investor Warrants which have an exercise price of $0.59 per share (subject to adjustment as set forth therein), are exercisable upon issuance and will expire five and a half years from the date of issuance.

 

In 2022 and the first six months of 2023, the Company issued a total of 10,789,867 shares of common stock in connection with warrant exercises for aggregate net proceeds of $13,194,335.

 

In July 2023, the Company repurchased a total of 68,012 shares of common stock on the open market under the Stock Repurchase Program announced on January 19, 2023, at an average price of $0.5046 per share for a total cost of $34,321. In October 2023, the 68,012 repurchased common shares were cancelled and returned to treasury reducing the number of issued and outstanding shares from 25,746,302 to 25,678,290.

 

As of September 30, 2023 and December 31, 2022, the Company has a total of 25,678,290 and 22,585,632 shares of common stock issued and outstanding, respectively.

 

The Company has declared no dividends since inception.

 

Note 8 – Warrants

 

The Company accounts for issued warrants either as a liability or equity in accordance with ASC 480-10 or ASC 815-40. Under ASC 480-10, warrants are considered a liability if they are mandatorily redeemable and they require settlement in cash, other assets, or a variable number of shares. If warrants do not meet liability classification under ASC 480-10, the Company considers the requirements of ASC 815-40 to determine whether the warrants should be classified as a liability or as equity. Under ASC 815-40, contracts that may require settlement for cash are liabilities, regardless of the probability of the occurrence of the triggering event. Liability-classified warrants are measured at fair value on the issuance date and at the end of each reporting period. Any change in the fair value of the warrants after the issuance date is recorded in the consolidated statements of operations as a gain or loss. If warrants do not require liability classification under ASC 815-40, in order to conclude warrants should be classified as equity, the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP standard. Equity-classified warrants are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date.

 

 

 

 

In 2022 and during the first nine months of 2023, the Company completed four financing events, and in connection therewith, it issued warrants as follows:

Schedule of warrants issued with financing
Type		Number		Exercise Price		Expiry Date
Pre-Funded Warrants		3,692,276		$0.001		Unlimited
Tradeable Warrants		4,102,200		$2.22*		February 2027
Investor Warrants		3,603,604		$2.22		March 2027
April Warrants		9,725,690		$3.76		April 2027
May Pre-Funded Warrants		3,502,381		$0.001		Unlimited
May Investor Warrants		11,904,762		$0.59		November 2028

*	The Tradeable Warrants had an initial exercise price of $4.25, subject to adjustment. Upon the closing of the Company's private placement on March 14, 2022, the exercise price of the Tradeable Warrants was reduced to $2.22, in accordance with the terms thereof.

 

As of September 30, 2023, all of the Pre-Funded Warrants and a total of 3,138,507 Tradeable Warrants, 2,802,703 Investor Warrants, and 1,156,381 May Pre-Funded Warrants were exercised resulting in aggregate proceeds of $13,194,335 received by the Company.

 

The Company’s outstanding warrants at September 30, 2023 consisted of the following: 

Schedule of outstanding warrants
Type		Number		Exercise Price		Expiry Date
Pre-Funded Warrants		None		$0.001		Unlimited
Tradeable Warrants		963,693		$2.22*		February 2027
Investor Warrants		800,901		$2.22		March 2027
April Warrants		9,725,690		$3.76		April 2027
May Pre-Funded Warrants		2,346,000		$0.001		Unlimited
May Investor Warrants		11,904,762		$0.59		November 2028

*

On October 12, 2023, the Company held a special meeting of the holders of its outstanding Tradeable Warrants in which a majority of the holders approved an amendment to the Warrant Agent Agreement to reduce the exercise price of the Tradeable Warrants to $0.11 per warrant. The amendment was executed on October 18, 2023.

 

Note 9 – Net Loss Per Common Share

 

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents.

 

Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, taking into consideration common stock equivalents.

 

 

 

 

In February 2022, the Company issued 4,102,200 Tradeable Warrants pursuant to the Company’s Public Offering. In March and April 2022, the Company issued 3,603,604 Investor Warrants and 9,725,690 April Warrants pursuant to two private placements. In May 2023, the Company issued 11,904,762 May Investor Warrants pursuant to two private placements. As of September 30, 2023, 3,138,507 Tradeable Warrants and 2,802,703 Investor Warrants were exercised, leaving 963,693 Tradeable Warrants, 800,901 Investor Warrants, 9,725,690 April Warrants, and 11,904,762 May Investor Warrants outstanding. These warrants are dilutive and were included in the diluted earnings per share.

 

In March and April 2022, the Company issued and sold Pre-Funded Warrants to purchase an aggregate of 3,692,276 shares of common stock at a nominal exercise price of $0.001 per share. During the nine months ended September 30, 2023, all of these warrants were exercised and therefore had no remaining dilutive effect.

 

In May 2023, the Company issued and sold May Pre-Funded Warrants to purchase an aggregate of 3,502,381 shares of common stock at a nominal exercise price of $0.001 per share. During the nine months ended September 30, 2023, 1,156,381 of these warrants were exercised leaving 2,346,000 outstanding. These warrants were not included in the calculation of weighted average outstanding shares as they would be ant-dilutive.

 

Note 10 – Lease

 

The Company has obligations as a lessee for office space with initial non-cancellable terms in excess of one year. The Company classified the lease as an operating lease. The lease contains a renewal option for a period of five years. Because the Company is certain to exercise the renewal option, the optional period is included in determining the lease term, and associated payments under the renewal option are included in the lease payments. The Company’s lease does not include termination options for either party to the lease or restrictive financial or other covenants. Payments due under the lease contract include fixed payments plus a variable Payment. The Company’s office space lease requires it to make variable payments for the Company’s proportionate share of building’s property taxes, insurance, and common area maintenance. These variable lease payments are not included in lease payments used to determine lease liability and are recognized as variable costs when incurred.

 

Amounts reported on the balance sheet as of September 30, 2023 were as follows:

	Schedule of lease information
	Operating lease ROU asset	$664,296
	Operating Lease liability - Short-term	$117,840
	Operating lease liability - Long-term	$555,687
	Remaining lease term	6 years 3 months
	Discount rate	6%

 

Amounts disclosed for ROU assets obtained in exchange for lease obligations and reductions of ROU assets resulting from reductions of lease obligations include amounts reduced from the carrying amount of ROU assets resulting from deferred rent.

 

 

 

 

Maturities of lease liabilities under non-cancellable operating leases at September 30, 2023 are as follows:

Schedule of maturities of lease liabilities
2023	$	30,124
2024		116,090
2025		116,277
2026		110,134
2027		103,736
Thereafter		197,166

 

Note 11 – Management and Director Compensation

 

The Company paid its officers cash compensation totaling $245,000 and $362,500 and $1,290,000 and $770,095 for the three and nine-month periods ended September 30, 2023 and 2022, respectively.

 

The Company paid its directors cash compensation totaling $100,000 and $300,000 and $100,000 and $200,000 for the three and nine-month periods ended September 30, 2023 and 2022, respectively.

 

Note 12 – Income Taxes

 

In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon currently known facts and circumstances and applies that rate to its year-to-date earnings or losses. The Company’s effective tax rate is based on expected income and statutory tax rates and takes into consideration permanent differences between financial statement and tax return income applicable to the Company in the various jurisdictions in which the Company operates. The effect of discrete items, such as changes in estimates, changes in rates or tax status, and unusual or infrequently occurring events, is recognized in the interim period in which the discrete item occurs. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the result of new judicial interpretations or regulatory or tax law changes.

 

The Company’s interim effective tax rate, inclusive of discrete items, for the nine-month periods ended September 30, 2023 and 2022 was 26.83%.

 

Note 13 – Subsequent Events

 

On October 12, 2023, the Company held a special meeting of the holders of its outstanding Tradeable Warrants in which the holders of the majority of the outstanding Tradeable Warrants approved an amendment to the Warrant Agent Agreement to (i) reduce the exercise price of the Tradeable Warrants to $0.11, subject to further adjustment as provided therein, and (ii) eliminate the provision that prohibits the Company’s CEO from exercising his voting rights under his Series B Preferred Stock.

 

In December 2022, the Company had entered into a research agreement with the Jewish General Hospital (“JGH”), Montreal, Canada to conduct IND-enabling studies of the Company’s anticancer drug candidate, Adva-27a (the “Research Agreement”). In August 2023, the Company was advised by JGH that the lab results on testing of the Adva-27a molecule were not favorable. After conclusion of an internal review of the lab results on November 2, 2023, the Company provided notice of termination of the Research Agreement, which will become effective on December 2, 2023, pursuant to the terms of the Research Agreement. The Company has now paused the IND-enabling studies of Adva-27a pending a review of the possibility of chemical modification of the compound to address the suboptimal performance of the molecule in certain studies.

 

 

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included herein. This discussion includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. 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 and in our annual report on Form 10-K for the year ended December 31, 2022. We undertake no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law. You are advised, however, to consult any future disclosures we make on related subjects in future reports to the SEC.

 

About Sunshine Biopharma

 

We are a pharmaceutical company offering and researching life-saving medicines in a wide variety of therapeutic areas, including oncology and antivirals. In addition to pursuing our own drug development program, we operate two wholly owned subsidiaries: (i) Nora Pharma Inc. (“Nora Pharma”), a Canadian corporation with a portfolio consisting of 51 generic prescription drugs on the market in Canada and 32 additional drugs scheduled to be launched in Canada in 2024 and 2025, and (ii) Sunshine Biopharma Canada Inc. (“Sunshine Canada”), a Canadian corporation which develops and sells nonprescription over-the-counter (“OTC”) products.

 

History

 

We were incorporated in the State of Colorado on August 31, 2006, and on October 15, 2009, we acquired Sunshine Biopharma, Inc. in a transaction classified as a reverse acquisition.

 

Sunshine Biopharma, Inc. held an exclusive license to a new anticancer drug bearing the laboratory name, Adva-27a (the “License Agreement”). Upon completion of the reverse acquisition transaction, we changed our name to Sunshine Biopharma, Inc. and began operating as a pharmaceutical company.

 

In December 2015, we acquired all worldwide issued (US Patent Number 8,236,935, and 10,272,065) and pending patents under PCT/FR2007/000697 and PCT/CA2014/000029 for the Adva-27a anticancer compound and terminated the License Agreement.

 

In early 2020, we initiated a new R&D project focused on the development of a treatment for COVID-19 and on May 22, 2020, we filed a provisional patent application in the United States for the new coronavirus treatment. The patent application covers composition subject matter pertaining to small molecules for inhibition of the main Coronavirus protease, Mpro. On April 30, 2021, we filed a PCT application containing new research results and extending coverage to include the Coronavirus Papain-Like protease, PLpro.

 

In June 2021, we initiated another R&D project in which we set out to determine if certain mRNA molecules can be used as anticancer agents. The data obtained for mRNA molecules bearing the laboratory name K1.1 became the subject of a new patent application filed in April 2022.

 

In October 2022, we acquired Nora Pharma, a Canadian generic pharmaceuticals company based in the greater Montreal area. Nora Pharma has 41 employees and operates in a 15,000 square foot facility certified by Health Canada. Nora Pharma currently sells 51 generic prescription drugs in Canada. The consolidated financial statements contained in this report include the results of operations of Nora Pharma and Sunshine Canada.

 

 

 

 

Generic Prescription Drugs on the Market

 

As a result of the acquisition of Nora Pharma we now have the following generic prescription drugs on the market in Canada:

 

Drug		Action/Indication		Reference Brand
Alendronate		Osteoporosis		Fosamax®
Amlodipine		Cardiovascular		Norvasc®
Apixaban		Cardiovascular		Eliquis®
Atorvastatin		Cardiovascular		Lipitor®
Azithromycin		Antibacterial		Zithromax®
Candesartan		Hypertension		Atacand®
Candesartan HCTZ		Hypertension		Atacand Plus®
Celecoxib		Anti-inflammatory		Celebrex®
Cetirizine		Allergy		Reactine®
Ciprofloxacin		Antibiotic		Cipro®
Citalopram		Central nervous system		Celexa®
Clindamycin		Antibiotic		Dalacin®
Clopidogrel		Cardiovascular		Plavix®
Dapagliflozin		Diabetes		Forxiga®
Donepezil		Central nervous system		Aricept®
Duloxetine		Central nervous system		Cymbalta®
Dutasteride		Urology		Avodart®
Escitalopram		Central nervous system		Cipralex®
Ezetimibe		Cardiovascular		Ezetrol®
Finasteride		Urology		Proscar®
Flecainide		Cardiovascular		Tambocor®
Fluconazole		Antifungal		Diflucan®
Fluoxetine		Central nervous system		Prozac®
Hydroxychloroquine		Antimalarial		Plaquenil®
Lacosamide		Central nervous system		Vimpat®
Letrozole		Oncology		Femara®
Levetiracetam		Central nervous system		Keppra®
Mirtazapine		Central nervous system		Remeron®
Metformin		Diabetes		Glucophage®
Montelukast		Allergy		Singulair®
Olmesartan		Cardiovascular		Olmetec®
Olmesartan HCTZ		Cardiovascular		Olmetec Plus®
Pantoprazole		Gastroenterology		Pantoloc®
Paroxetine		Central nervous system		Paxil®
Perindopril		Cardiovascular		Coversyl®
Pravastatin		Cardiovascular		Pravachol®
Pregabalin		Central nervous system		Lyrica®
Quetiapine		Central nervous system		Seroquel®
Quetiapine XR		Central nervous system		Seroquel XR®
Ramipril		Cardiovascular		Altace®
Rizatriptan ODT		Central nervous system		Maxalt® ODT
Rosuvastatin		Cardiovascular		Crestor®
Sertraline		Central nervous system		Zoloft®
Sildenafil		Urology		Viagra®
Tadalafil		Urology		Cialis®
Telmisartan		Cardiovascular		Micardis®
Telmisartan HCTZ		Cardiovascular		Micardis Plus®
Topiramate		Anticonvulsant		Topamax®
Tramadol Acetaminophen		Central nervous system		Tramacet®
Zolmitriptan		Central nervous system		Zomig®
Zopiclone		Central nervous system		Imovane®

 

 

 

Generic Prescription Drugs Pipeline

 

In addition to the 51 drugs on the market, we currently have the following roster of generic prescription drugs scheduled to be launched in 2024 and 2025:

 

Generic Drugs		Therapeutic Area(s)		Development Stage		Launch Date
Group A (2 Products)		Cardiovascular, CNS*		Under manufacturing		2024Q1
Group B (6 Products)		Oncology, Gastroenterology, CNS*		Under regulatory review		2024Q2
Group C (3 Products)		Central Nervous System, Diabetes, CNS*		Under regulatory review		2024Q3
Group D (5 Products)		Cardiovascular, Urology, Endocrinology		Under regulatory review		2024Q4
Group E (16 Products)		Cardiovascular, Oncology, Anti-infectives, Anti-inflammatory, Diabetes, Gastroenterology, CNS*		Soon to be under regulatory review		2025

* Central Nervous System

 

We believe the addition of these products to our existing portfolio will strengthen our presence in the Canadian generic drugs marketplace and provide us with greater access to pharmacies as we become more of a go-to supplier for every-day and specialty medicines.

 

Proprietary Drugs in Development

 

We are currently developing the following drug candidates:

 

Proprietary Drugs		Therapeutic Area		Development Stage		Launch Date
Adva-27a (Small Molecule)		Oncology (Pancreatic Cancer)		See Note 9 - Subsequent Events		TBD*
K1.1 (mRNA LNP)		Oncology (Liver Cancer)		Preclinical		TBD*
SBFM-PL4 (Small Molecule)		Antiviral (COVID-19)		Preclinical		TBD*

* To be determined

 

Adva-27a Anticancer Drug

 

Adva-27a is a small molecule designed 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). We are the direct owner of all patents pertaining to Adva-27a including U.S. Patents Number 8,236,935 and 10,272,065.

 

In December 2022, we entered into a research agreement with the Jewish General Hospital (“JGH”), to conduct the IND-enabling studies of Adva-27a (the “Research Agreement”). In August 2023, we were informed by the JGH that the lab results on testing of the Adva-27a molecule were not favorable. After conclusion of an internal review of the lab results on November 2, 2023, we provided notice to JGH of termination of the Research Agreement. We have now paused the IND-enabling studies of Adva-27a pending a review of the possibility of chemical modification of the compound to address the suboptimal performance of the molecule in certain studies.

 

 

 

 

K1.1 Anticancer mRNA

 

In June 2021, we initiated a new research project in which we set out to determine if certain mRNA molecules can be used as anti-cancer agents. The data collected to date have shown that a selected group of mRNA molecules are capable of destroying cancer cells in vitro including multidrug resistant breast cancer cells (MCF-7/MDR), ovarian adenocarcinoma cells (OVCAR-3), and pancreatic cancer cells (SUIT-2). Studies using non-transformed (normal) human cells (HMEC cells) showed that these mRNA molecules had little cytotoxic effects. These new mRNA molecules, bearing the laboratory name K1.1, are readily adaptable for delivery into patients using the mRNA vaccine technology. In April 2022, we filed a provisional patent application in the United States covering the subject mRNA molecules.

 

We recently concluded an agreement with a specialized partner for the purposes of formulating our K1.1 mRNA molecules into lipid nanoparticles, ready for use to conduct studies in xenograft mice. We anticipate commencing such studies later this year.

 

SBFM-PL4 Coronavirus Treatment

 

The initial genome expression products following infection by Betacoronavirus, the causative agent of COVID-19, are two large polyproteins, referred to as pp1a and pp1ab. These two polyproteins are cleaved at 15 specific sites by two virus encoded proteases, called Mpro and PLpro, to generate 16 different non-structural proteins essential for viral replication. Mpro and PLpro represent attractive anti-viral drug development targets as they play a central role in the early stages of viral replication. PLpro is of particular interest as a therapeutic target in that, in addition to processing essential viral proteins, it is also responsible for suppression of the human immune system making the virus more life-threatening. PLpro is present only in Betacoronaviruses, the subgroup of Coronaviruses represented by the highly pathogenic SARS-CoV, MERS-CoV, and SARS-CoV-2.

 

Our Anti-Coronavirus research effort has been focused on developing an inhibitor of PLpro and, on May 22, 2020, we filed a patent application in the United States covering composition subject matter pertaining to small molecules for inhibition of the Coronavirus PLpro as well as Mpro.

 

In February 2022, we expanded our PLpro inhibitors research effort by entering into a research agreement with the University of Arizona for the purposes of conducting research focused on determining the in vivo safety, pharmacokinetics, and dose selection properties of three University of Arizona owned PLpro inhibitors, to be followed by efficacy testing in mice infected with SARS-CoV-2 (the “Research Project”). Under the agreement, the University of Arizona granted the Company a first option to negotiate a commercial, royalty-bearing license for all intellectual property developed by University of Arizona under the Research Project. In addition, the Company and the University of Arizona entered into an option agreement (the “Option Agreement”) whereby the Company was granted a first option to negotiate a royalty-bearing commercial license for the underlying technology of the Research Project. On September 13, 2022, we exercised our options, and on February 24, 2023, we entered into an exclusive worldwide license agreement with the University of Arizona for all of the technology related to the Research Project.

 

We have recently expanded our objective to include the development of an injectable candidate of first-in-class PLpro inhibitor to treat SARS-CoV2 and potentially SARS-CoV and MERS-CoV infection in patients who could not use Paxlovid, Molnupiravir, or Remdesivir, due to concerns about drug interaction and possible ‘rebound’ infections and other side effects.

 

 

 

 

Intellectual Property

 

We are the sole owner of all worldwide rights pertaining to Adva-27a. These patent rights are covered by PCT/FR2007/000697 and PCT/CA2014/000029. The patent applications filed under these two PCT's have been issued in the United States (US Patent Number 8,236,935 and 10,272,065), Europe, and Canada.

 

On May 22, 2020, we filed a provisional patent application in the United States for a new treatment for Coronavirus infections. Our patent application covers composition subject matter pertaining to small molecules for inhibition of the main Coronavirus protease, Mpro, an enzyme that is essential for viral replication. The patent application has a priority date of May 22, 2020. On April 30, 2021, we filed a PCT application containing new research results and extending coverage to include the Coronavirus Papain-Like protease, PLpro. The priority date of May 22, 2020 has been maintained in the newly filed PCT application.

 

On April 20, 2022, we filed a provisional patent application in the United States covering mRNA molecules capable of destroying cancer cells in vitro. The patent application contains composition and utility subject matter pertaining to the structure and sequence of the relevant mRNA molecules.

 

Our wholly owned subsidiary, Nora Pharma, owns 180 Drug Identification Numbers (“DIN’s”) issued by Health Canada for prescription drugs currently on the market in Canada. These DIN’s were secured through in-licenses or cross-licenses from international manufacturers of generic pharmaceutical products.

 

In addition, we are the owner of two Natural Product Numbers (“NPN’s”) issued by Health Canada: NPN 80089663 authorizes us to manufacture and sell our in-house developed OTC product, Essential 9™, and NPN 80093432 authorizes us to manufacture and sell the OTC product, Calcium-Vitamin D under the brand name Essential Calcium-Vitamin D™.

  

Results of Operations

 

Comparison of results of operations for the three months ended September 30, 2023 and 2022

 

During the three months ended September 30, 2023, we generated $5,957,668 in sales, compared to $132,808 for the three months ended September 30, 2022, an increase of $5,824,860. The increase is attributable to sales generated by our wholly owned subsidiary, Nora Pharma. The direct cost for generating these sales was $3,967,412 (66.6%) for the three months ended September 30, 2023, compared to $65,783 (49.5%) for the three months ended September 30, 2022. The increase in the cost of goods sold in 2023 is due to increased cost of manufacturing of the generic prescription drugs sold by Nora Pharma. Our gross profit grew to $1,990,256 for the three months ended September 30, 2023, compared to $67,025 for the three months ended September 30, 2022.

 

General and administrative expenses during the three-month period ended September 30, 2023, were $2,769,730, compared to $1,785,005 during the three-month period ended September 30, 2022, an increase of $984,725. This increase was the result of increased overhead associated with being a Nasdaq listed company and expenses related to Nora Pharma operations. Specifically, we incurred increased costs in consulting ($58,929), office ($467,397), salaries ($549,377) and taxes ($52,586). Overall, we incurred a loss of $779,474 from our operations for the three months ended September 30, 2023, compared to a loss of $1,717,980 from our operations in the three-month period ended September 30, 2022.

 

 

 

 

In addition, we had net interest income of $168,904 during the three months ended September 30, 2023, compared to a net interest income of approximately $260,936 during the three months ended September 30, 2022, as a result of interest earned on cash on hand.

 

As a result, we incurred a net loss of $651,482 ($0.04 per share) for the three months ended September 30, 2023, compared to a net loss of $1,457,019 ($0.08 per share) for the three-month period ended September 30, 2022.

 

Comparison of results of operations for the nine months ended September 30, 2023 and 2022

 

During the nine months ended September 30 2023, we generated revenues of $16,412,586, compared to revenues of $405,760 for the nine months ended September 30, 2022, an increase of $16,006,826. The increase is attributable to sales generated by our recently acquired wholly owned subsidiary, Nora Pharma. The direct cost for generating these revenues was $10,641,461 (64.8%) for the nine months ended September 30, 2023, compared to $200,311 (49.4%) for the nine months ended September 30, 2022. The increase in the cost of goods sold in 2023 is due to increased cost of manufacturing of the generic prescription drugs sold by Nora Pharma. Our gross profit increased to $5,771,125 for the nine months ended September 30, 2023, compared to a gross profit of $205,449 for the same period in 2022.

 

General and administrative expenses during the nine-month period ended September 30, 2023 were $9,369,203 compared to $3,842,589 during the nine-month period ended September 30, 2022, an increase of $5,526,614. This increase was the result of increased overhead associated with being a Nasdaq listed company and expenses related to Nora Pharma operations. Specifically, we incurred increased costs in accounting ($63,608), consulting ($475,817), office costs ($972,328), research and development ($269,407), salaries ($3,239,801) and taxes ($212,953). Overall, we incurred a loss of $3,598,078 from our operations in the nine-month period ended September 30, 2023, compared to a loss from operations of $3,637,140 in the similar period of 2022.

 

In addition, we had net interest income of $517,163 during the nine months ended September 30, 2023, compared to a net interest income of $394,118 during the nine months ended September 30, 2022, as a result of interest earned on cash on hand.

 

As a result, we incurred a net loss of $3,256,020 ($0.12 per share) for the nine-month period ended September 30, 2023, compared to a net loss of $3,232,125 ($0.26 per share) for the nine-month period ended September 30, 2022.

 

Liquidity and Capital Resources

 

As of September 30, 2023, we had cash or cash equivalents of $18,846,140.

  

Net cash used in operating activities was $6,085,435 during the nine months ended September 30, 2023, compared to $3,001,746 during the nine-month period ended September 30, 2022. The increase was a result of the addition of Nora Pharma’s operations.

 

Cash flows used in investing activities were $386,920 for the nine months ended September 30, 2023, compared to $0 for the nine months ended September 30, 2022. The increase was the result of cash invested in Nora Pharma.

 

Cash flows provided by financing activities were $3,456,106 during the nine months ended September 30, 2023, compared to $41,561,363 during the nine months ended September 30, 2022. The decrease was primarily as a result of one offering made during the nine months ended September 30, 2023, compared to three offerings completed in February, March, and April 2022, and due to our repurchase of a total of $540,629 in common stock in the first and third quarter of 2023.

 

 

 

 

We are not generating adequate revenues from our operations to fully implement our business plan as set forth herein. On February 17, 2022, we received net proceeds of approximately $6.8 million from the sale of common stock and warrants in an underwritten public offering. On March 14, 2022, we received net proceeds of approximately $6.8 million from the sale of common stock and warrants in a private placement. On April 28, 2022, we received net proceeds of approximately $16.8 million from the sale of common stock and warrants in a private placement. On May 16, 2023, we received net proceeds of approximately $4.1 million from the sale of common stock and warrants in a private placement. We believe our existing cash will be sufficient to fund our operations, including general and administrative expenses, research and development activities, and the generic pharmaceuticals sales business, for the next 18 to 24 months. There is no assurance our estimates will be accurate.

 

Management estimates that we will need additional capital in the amount of approximately $30 million for expansion of our drug development activities and generic pharmaceuticals operations, including possibly a Phase I clinical trial. Additional capital may not be available on terms acceptable to us, or at all. Currently, we do not have any committed arrangements for financing and can provide no assurance that we will be able to obtain financing when required. No assurance can be given that we will obtain access to capital markets in the future or that financing, adequate to satisfy the cash requirements of implementing our business will be available on acceptable terms. Our inability to obtain acceptable financing could have an adverse effect upon the results of our operations and financial condition.

 

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.

 

For a detailed list of significant accounting policies, please see our annual report on Form 10-K for the fiscal year ended December 31, 2022, including our financial statements and notes thereto included therein as filed with the SEC on April 4, 2023.

 

Recently Adopted Accounting Standards

 

In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. The Company believes the adoption will modify the way the Company analyzes financial instruments, but it does not anticipate a material impact on results of operations. The Company is in the process of determining the effects adoption will have on its consolidated financial statements.

 

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU2020-06 amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluating the impact of this guidance on its unaudited consolidated financial statements.

 

Off Balance-Sheet Arrangements

 

None.

 

 

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company and are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.

 

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

 

Based on this evaluation, our management, including our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2023, at reasonable assurance levels.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not party to, and our property is not the subject of, any material legal proceedings.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company and are not required to provide the information under this item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

Exhibit No.		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2022*
32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101		Inline XBRL Document Set for the financial statements and accompanying notes in Part I, Item 1, of this Quarterly Report on Form 10-Q.*
104		Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.*

 

	*	Filed herewith.
	**	Furnished herewith.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on November 13, 2023.

 

	SUNSHINE BIOPHARMA, INC.
	By:	/s/ Dr. Steve N. Slilaty
		Dr. Steve N. Slilaty
		Chief Executive Officer (principal executive officer)
	By:	/s/ Camille Sebaaly
		Camille Sebaaly Chief Financial Officer (principal financial and accounting officer)