In the Company’s financial statements for the fiscal years ended December 31, 2018,2019, and 2017,2018, the Reports of the Independent Registered Public Accounting Firm includeincluded an explanatory paragraph that describes substantial doubt about the Company’s ability to continue as a going concern. These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Based on the Company’s current financial projections, management believes it does not have sufficient existing cash resources to fund its current limited operations.
It is the Company’s current intention to raise debt and/or equity financing to fund ongoing operating expenses. There is no assurance that these events will be satisfactorily completed or at terms acceptable to the Company. Any issuance of convertible debt or equity securities, if accomplished, could cause substantial dilution to existing stockholders. Any failure by the Company to successfully implement these plans would have a material adverse effect on its business, including the possible inability to continue operations.
Note 3 – Notes Payable
Outstanding Notes Payable at March 31, 2020 consisted of the following:
On June 27, 2018,April 1, 2017 the Company received net proceeds of $51,000monies in exchange for a note payableNote Payable having a face valueFace Value of $53,000 and accruing$100,000 Canadian ($70,490 US at March 31, 2020) with interest payable quarterly at the rate of 8% per annum. The note9%, which Note was due on April 15,1, 2019. During January 2019, the Company paid off this note by issuing payment in the amount of $69,930 for $53,000 in principal, $5,332 in accrued interest and $11,598 in additional interest.
On 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 total of $53,000 in principal and $ 1,700 in accrued interest into 11,323,131 shares of $0.001 par value Common Stock valued at $99,101 leaving balance of $420 innew Note which included accrued interest and incurring a loss on conversionaccelerated interest of $44,401. The remaining balance of $420 was paid off in July 2019.
On December 24, 2018, the Company received net proceeds of $80,000monies in exchange for a note payableNote Payable having a face valueFace Value of $87,000 andwith interest accruing interest at the rate of 8% per annum. The note,is due on 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. As of March 31, 2020, a total principal amount of $62,000 of this Note plus accrued interest of $5,342 was converted into 14,606,229 shares of Common Stock valued at $121,665 resulting in a loss of $54,323. The remaining principal balance of this note at March 31, 2020 was $25,000.During the three month period ended March 31, 2020, a total principal amount of $26,500 of this Note plus accrued interest of $2,886 was converted into 11,255,748 shares of Common Stock valued at $63,695 resulting in a loss of $34,309. This note is past due and is currently payable on demand.
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. 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. This note is past due and is currently payable on demand.
On January 8,February 5, 2019, the Company received net proceeds of $50,500monies in exchange for a note payableNote Payable having a faceFace 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 $54,000$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 March 31, 2020, the remaining principal balance of this note was $32,185. This note is past due and is currently payable on demand.
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. During the three months period ended March 31, 2020, the entire principal amount of $40,000 of this Note plus accrued interest of $1,600 was converted into 13,099,359 shares of Common Stock valued at $58,684 resulting in a loss of $17,084 and a remaining principal balance of $-0-.
On July 26, 2019, the rateCompany received monies in exchange for a Note Payable having a Face Value of $50,000 with interest accruing at 8% per annum.is due July 26, 2020. The note, due on January 8, 2020,Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The Company estimates that the fair value of this convertible debt approximates the face value,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,September 12, 2019, the Company received net proceeds of $38,000monies in exchange for a note payableNote Payable having a face valueFace Value of $40,660 and$43,000 with interest accruing interest at the rate of 8% per annum.is due July 15, 2020. The note, due on October 10, 2019,Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The Company estimates that the fair value of this convertible debt approximates the face value,Face Value, so no value has been assigned to the beneficial conversion feature. Any gain or loss will be recognized at conversion.
On February 5,December 14, 2019, the Company received net proceeds of $35,000monies in exchange for a note payableNote Payable having a face valueFace Value of $37,450 and$42,800 with interest accruing interest at the rate of 8% per annum.is due December 14, 2020. The note, due on October 10, 2019,Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The Company estimates that the fair value of this convertible debt approximates the face value,Face Value, so no value has been assigned to the beneficial conversion feature. Any gain or loss will be recognized at conversion.
December 31, 2019. On March 18,December 31, 2019, the Company received net proceedsrenewed the Note, together with accrued interest of $38,000 in exchange$3,227 for a note payable12-month period. The new Note has a Face Value of $30,120 and accrues interest at 12%. This Note is nonconvertible and matures on December 31, 2020.
A Note Payable dated December 31, 2018 having a face valueFace Value of $40,660$136,744 and accruing interest at 12% was due December 31, 2019. On October 1, 2019, the rateholder of 8% per annum. Thethis note due on December 18, 2019 is convertible after 180 days from issuancerequested to convert $30,000 in principal amount into $0.001 par value1,500,000 shares of Common Stock, atleaving a price 35% below market value. The Company estimates that the fair value of this convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature.
principal balance $106,744. On March 18,December 31, 2019, the Company received net proceedsrenewed the remaining principal balance of $38,000 in exchangethis Note, together with accrued interest of $15,509 for a note payable having12-month period. The new Note has a face valueFace Value of $40,660$122,253 and accruingaccrues interest at the rate of 8% per annum. The note, due12%. This Note is nonconvertible and matures on December 18, 2019 is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The Company estimates that the fair value of this convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature.31, 2020.
At June 30, 2019March 31, 2020 and December 31, 2018,2019, total accrued interest on Notes Payable was $34,660$32,654 and $9,291,$21,077, respectively.
Note 4 – Notes Payable - Related Party
A Note Payable dated December 31, 2023. Payments on this note were $10,000 Canadian (approximately $8,000 US) per quarter. The note was secured by the Atlas Pharma Inc. shares held by the Company. Effective April 1, 2019 the Company re-assigned all of the Atlas shares back to the seller and as a result this note was cancelled.
2020.
Note 5 – Shareholders’ Equity
During the sixthree months ended June 30, 2019March 31, 2020 the Company issued a total of 18,635,02124,355,427 shares of $0.001 par value Common Stock for the conversion of outstanding notes payable, reducing the debt by $83,000$66,500 and interest payable by $3,841$4,486 and generating a loss on conversion of $65,093.$51,393.
The Company declared no dividends through June 30, 2019.March 31, 2020.
Three Months Ended June 30, | Six Months Ended June 30, | |||
2019 | 2018 | 2019 | 2018 | |
| Total beginning Shareholders' Equity (Deficit) | $(211,772) | $(500,685) | $(55,753) | $(573,363) |
| Beginning and ending Series B Preferred Stock | 50,000 | 50,000 | 50,000 | 50,000 |
| Beginning Common Stock | 89,349 | 47,401 | 85,652 | 45,937 |
Common Stock issued | 14,938 | 7,804 | 18,635 | 9,268 |
| Ending Common Stock | 104,287 | 55,205 | 104,287 | 55,205 |
| Beginning additonal paid in capital (APIC) | 15,630,289 | 13,287,974 | 15,586,678 | 12,948,386 |
APIC increase from Common Stock issued | 88,923 | 867,091 | 132,534 | 1,206,679 |
| Ending additional paid in capital | 15,719,212 | 14,155,065 | 15,719,212 | 14,155,065 |
| Beginning other comprehensive income (loss) | (4,523) | (2,234) | (3,738) | 504 |
Other comprehensive income (loss) | 2,499 | (6,032) | 1,714 | (8,770) |
| Ending other comprehensive income (loss) | (2,024) | (8,266) | (2,024) | (8,266) |
| Beginning retained deficit | (15,976,887) | (13,883,826) | (15,774,345) | (13,618,190) |
Net (loss) | (710,890) | (644,308) | (913,432) | (909,944) |
| Ending retained deficit | (16,687,777) | (14,528,134) | (16,687,777) | (14,528,134) |
Total ending Shareholders' Equity (Deficit) | $(816,302) | $(276,130) | $(816,302) | $(276,130) |
Note 96 – Related Party Transactions
In addition to the related party transactionstransaction detailed in Note 4 above, the Company paid its Officers and Directors cash and stock compensation totaling $3,751$3,830 and $446,644$40,201 for the three months ended June 30,March 31, 2020 and 2019, and 2018 and $43,952 and $524,431 for the six month periods ended June 30, 2019 and 2018, respectively.
Note 127 – Subsequent Events
On JulyApril 16, 20, and 23, 2019and May 5, and 13, 2020, the holder of a note payable dated October 23, 2018September 12, 2019 elected to convert a total of $15,000$43,000 in principal and $894$1,720 in accrued interest into an aggregate of 8,150,89738,855,726 shares of Common Stock leaving a principal balance of $45,000.$-0-.
On July 25 and August 12, 2019May 5, 2020 the holder of a note payable dated January 10, 2019December 24, 2018 elected to convert a total of $18,068$12,000 in principal and $1,999 in accrued interest into an aggregate of 10,246,74014,357,856 shares of Common Stock leaving a principal balance of $22,592 and accrued and unpaid interest of $1,693.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.
We were incorporated in the State of Colorado on August 31, 2006 under the name “Mountain West Business Solutions, Inc.” Until October 2009, our business was to provide management consulting with regard to accounting, computer and general business issues for small and home-office based companies.
In October 2009, we acquired Sunshine Biopharma, Inc., a Colorado corporation holding an exclusive license (the “License”) to a new anticancer drug bearing the laboratory name, Adva-27a. As a result of this transaction we changed our name to “Sunshine Biopharma, Inc.” and our officers and directors resigned their positions with us and were replaced by Sunshine Biopharma, Inc.’s management at the time, including our current CEO, Dr. Steve N. Slilaty, and our current CFO, Camille Sebaaly each of whom remain part of our current management. Our principal business became that of a pharmaceutical company focusing on the development of our licensed Adva-27a anticancer compound. In December 2015 we acquired all issued and pending patents pertaining to our Adva-27a technology and terminated the License.
In July 2014, we formed a wholly owned Canadian subsidiary, Sunshine Biopharma Canada Inc. (“Sunshine Canada”), for the purposes of offering generic pharmaceutical products in Canada and elsewhere around the world. In April and June 2016 Sunshine Canada has signed licensing agreements for four (4) generic prescription drugs for the treatment of breast cancer, prostate cancer and BPH (Benign Prostatic Hyperplasia). We have applied for and are currently awaiting the issuance by Health Canada of a Drug Establishment License and a Drug Identification Number for each of our four (4) generic products in order to begin marketing of the same.
In January 2018, we acquired all of the issued and outstanding shares of Atlas Pharma Inc. (“Atlas”), a Canadian privately held analytical chemistryHealth Canada certified company offering sample testing servicesdedicated to thechemical analysis of pharmaceutical and other industrial sectors.samples. Effective April 1, 2019, we assignedre-assigned all of our intereststock in the Atlas securities back to the selleroriginal owner in exchange for the Atlas related debt. See “Discontinued Analytical Chemistry Services Operations” below for a more detailed explanation of this acquisition and the subsequent disposition thereof 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 essential amino acids which the human body cannot synthesize.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 “Reverse“First Reverse Stock Split”). AllThe number of authorized shares of our $0.001 par value Common Stock remained at 3,000,000,000 shares.
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 reportReport to our issued and outstanding Common Stock as well as the price per share of Common Stock are presented on a post First and Second Reverse Stock SplitSplits 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) 426-6161and426-6161 and our website address is www.sunshinebiopharma.com.
We have not been subject to any bankruptcy, receivership or similar proceeding.
Plan of Operation
Despite the fact that we currentlynow are generating revenue,revenues, we have elected to include a Plan of Operation to discuss our ongoing research and development activities relating to our proprietary drug development operations, as well as, our other business activities.
Proprietary Drug Development Operations
Since inception, our proprietary drug development activities have been focused on the development of a small molecule called Adva-27a for the treatment of aggressive forms of cancer. A Topoisomerase II inhibitor, Adva-27a has been shown to be effective at destroying Multidrug Resistant Cancer cells including Pancreatic Cancer cells, Breast Cancer cells, Small-Cell Lung Cancer cells and Uterine Sarcoma cells (Published in ANTICANCER RESEARCH, Volume 32, Pages 4423-4432, October 2012). Sunshine Biopharma is direct owner of all issued and pending worldwide patents pertaining to Adva-27a including U.S. Patent NumbersPatents Number 8,236,935 and 10,272,065.
Figure 1
Adva-27a is a GEM-difluorinated C-glycoside derivative of Podophyllotoxin (see Figure 1). Another derivative of Podophyllotoxin called Etoposide is currently on the market and is used to treat various types of cancer including leukemia, lymphoma, testicular cancer, lung cancer, brain cancer, prostate cancer, bladder cancer, colon cancer, ovarian cancer, liver cancer and several other forms of cancer. Etoposide is one of the most widely used anticancer drugs. Adva-27a and Etoposide are similar in that they both attack the same target in cancer cells, namely the DNA unwinding enzyme, Topoisomerase II. Unlike Etoposide and other anti-tumor drugs currently in use,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:
| ● | Adva-27a is effective at killing different types of Multidrug Resistant cancer cells, including Pancreatic Cancer Cells (Panc-1), Breast Cancer Cells (MCF-7/MDR), Small-Cell Lung Cancer Cells (H69AR), and Uterine Sarcoma Cells (MES-SA/Dx5). |
| ● | Adva-27a is unaffected by P-Glycoprotein, the enzyme responsible for making cancer cells resistant to anti-tumor drugs. |
| ● | Adva-27a has excellent clearance time (half-life = 54 minutes) as indicated by human microsomes stability studies and pharmacokinetics data in rats. |
| ● | Adva-27a clearance is independent of Cytochrome P450, a mechanism that is less likely to produce toxic intermediates. |
| ● | Adva-27a is an excellent inhibitor of Topoisomerase II with an IC50 of only 13.7 micromolar (this number has recently been reduce to 1.44 micromolar as a result of resolving the two isomeric forms of Adva-27a). |
| ● | Adva-27a has shown excellent pharmacokinetics profile as indicated by studies done in rats. |
| ● | Adva-27a does not inhibit tubulin assembly. |
These and other preclinical data have been published in ANTICANCER RESEARCH, a peer-reviewed International Journal of Cancer Research and Treatment. The publication which is entitled “Adva-27a,��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:
| ● | GMP Manufacturing of 2 kilogram for use in IND-Enabling Studies and Phase I Clinical Trials |
| ● | IND-Enabling Studies |
| ● | Regulatory Filing (Fast-Track Status Anticipated) |
| ● | Phase I Clinical Trials (Pancreatic Cancer Indication) |
Adva-27a’s initial indication will be Pancreatic Cancer for which there are currently little or no treatment options available. We are planning to conduct our clinical trials at McGill University’s Jewish General Hospital in Montreal, Canada. All aspects of the clinical trials in Canada will employ FDA standards at all levels.
According to the American Cancer Society, nearly 1.5 million new cases of cancer are diagnosed in the U.S. each year. While particularly effective against Multidrug Resistant Cancer, we believe Adva-27a can potentially treat all cancer types as it is 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.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:
| ● | Anastrozole (brand name Arimidex® by AstraZeneca) for treatment of Breast Cancer; |
| ● | Letrozole (brand name Femara® by Novartis) for treatment of Breast Cancer; |
| ● | Bicalutamide (brand name Casodex® by AstraZeneca) for treatment of Prostate Cancer; |
| ● | Finasteride (brand name Propecia® by Merck) for treatment of BPH (Benign Prostatic Hyperplasia) |
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 infor our obtaining either the DIN’s or the DEL due to variables involved that are out of our control. Figure 4 below shows our 30-Pill blister pack of Anastrozole.
Figure 4
We currently have a number of additional Generic Pharmaceuticals under review for in-licensing. NoWhile no assurances can be provided that we will acquire the rights to all or any of theseadditional generic drugs. Wedrugs, we believe that a larger product portfolio will provide us with more opportunities and a greater reach into the marketplace. We hope to further build our generics portfolio of “SBI” label Generic Pharmaceuticals over time. There are no assurances this will occur.
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 very competitive. Therefairly 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 PharmascienceApotex (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 December 2018, we completed the development of Essential 9tm, 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 9tm 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 9tm is currently available on Amazon.com Amazon.ca and soon other Amazon sites.Amazon.ca. Figure 5 below shows our 60-Tablet Essential 9tm 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.
Results Of Operations
Comparison of Results of Operations for the SixThree Months ended June 30,Ended March 31, 2020 and 2019 and 2018
During the sixthree months ended June 30, 2019,March 31, 2020, we generated $11,102 in revenues, compared to $206 in revenues for the same three months period of $3,2392019, an increase of $10,896. All of these revenues were generated from the sale of products generated by our new Dietary Supplements Operations which we launched in March 2019. The direct cost for generating these revenues was $1,572. We did not generate any revenues during$3,883 for the comparableperiod ended March 31, 2020, compared to $112 for the same period in 2018.2019. Our gross profit increased to $7,219 for the period ended March 31, 2020, compared to a gross profit of $94 for the same period in 2019.
General and Administrative Expensesexpenses during the six monthsthree month period ended June 30, 2019 was $190,073,March 31, 2020 were $44,918, compared to $731,754General and Administrative expense of $122,303 incurred during the six monthsthree month period ended June 30, 2018,March 31, 2019, a decrease of $541,678. The reason for this relatively large$77,385. Nearly all categories of our General and Administrative expenses saw a decrease was an effortduring the three month period ended March 31, 2020, compared to reduce expenses across the board.same period in 2019. Specifically, executive compensation decreasedthe decreases included accounting fees by $480,479, accounting$17,000, consulting fees by $42,960,$9,352, legal fees by $20,116 and consulting by $5,784. The only category that saw an increase was$8,932, office expenses which increased by $9,276 as$5,086, and officer and director compensation by $36,371. These decreases were part of a resultcost-cutting effort we initiated in the beginning of 2020 and plan to continue going forward. Overall, we incurred a loss of $37,699 from our continuing effort to raise capital to fund our proprietary drug development program.
In the area of other expenses, we incurred $64,639$16,356 in interest expense during the sixthree months ended June 30, 2019,March 31, 2020, compared to $95,364$46,297 in interest expense during the similar period in 2018. The decrease in both of these two expense categories was a result of some convertible notes having been paid off or2019 due to reduced prior to maturity.borrowings. In addition, we incurred a loss of $582,237 during the six months ended June 30, 2019, compared to $14,125 in losses from discontinued operations during the similar period in 2018 as a result of termination of our Analytical Chemistry Services Operations and sale of Atlas Pharma Inc.
As a result, we incurred a Net Lossnet loss of $710,890$94,259 ($0.010.00 per share) for the three month period ended June 30, 2019,March 31, 2020, compared to a Net Lossnet loss of $644,308$202,542 ($0.010.05 per share) during the three month period ended June 30, 2018.
March 31, 2019.
Liquidity and Capital Resources
As of June 30,March 31, 2019, we had cash or cash equivalents of $37,277.$10,808.
Net cash used in Operating Activitiesoperating activities was $281,423$31,034 during the sixthree month period ended June 30, 2019,March 31, 2020, compared to $225,883$233,959 for the sixthree month period ended June 30, 2018.March 31, 2019. We anticipate that overhead costs and other expenses will increase in the future as we move forward with our Proprietary Drug Development activities and expansion of our Generic Pharmaceuticals and Dietary Supplements operations as discussed above.
Cash flows provided by Financing Activitiesfinancing activities were $219,428$-0- for the sixthree month periods ended March 31, 2019, compared to $214,656 during the three months ended March 31, 2019. Cash flows used in investing activities were $-0- for both, the three month period ended June 30, 2019, compared to $263,191 duringMarch 31, 2020 and the six months ended June 30, 2018. Cash Flows used in Investing Activities were $12,976 for the sixsame three month period ended June 30, 2019 compared to $102,659 during the same six month period in 2018.2019.
During the sixthree months ended June 30, 2019,March 31, 2020, we issued a total of 18,635,02124,355,427 shares of $0.001 par valueour Common Stock valued at $122,379 for the conversion of outstanding notes payable, reducing the debt by $83,000$66,500 and interest payable by $3,841$4,486 and generating a loss on conversion of $65,094.$51,393.
During the sixthree month period ended March 31, 2019, we issued a total of 184,829 shares of our Common Stock valued at $47,308 for the conversion of outstanding notes payable, reducing debt by $25,000 and interest payable by $-0- and generating a loss on conversion of $22,308.
During the three months ended June 30, 2019,March 31, 2020, we did not sell any of our capital stock for cash or entered into the followingany new debt arrangements:arrangements.
We are not generating adequate revenues from our operations to fully implement our business plan as set forth herein. As a result, our future success will depend on the future availability of financing, among other things. Such financing will be required to enable us to expandactualize our Dietary Supplements businessProprietary Drug Development program and further develop our Generic Pharmaceuticals operations and Proprietary Drug Development program.Dietary Supplements plans. We intend to raise funds through private placements of our Common Stock and/or debt financing. We estimate that we will require approximately $7 million (approximately $2($2 million for the Generic Pharmaceuticals and Dietary Supplements and Generic Pharmaceuticals operations and approximately $5 million for the Proprietary Drug Development program) to fully implement our business plan in the future and there are no assurances that we will be able to raise this capital. Our inability to obtain sufficient funds from external sources when needed will have a material adverse effect on our plan of operation, results of operations and financial condition.condition Our plan is to fund our Proprietary Drug Development Program through the sales of Generic Drugs and Dietary Supplements if we are unable to find any additional financing. There are also no assurances that we will generate sufficient revenues and profits from our products sales program to accomplish these objectives..
Our cost of operations is expected to increase as we move forward with implementation of our business plan. We do not have sufficient funds to cover the anticipated increase in the relevant expenses. We need to raise additional capital in order to continue our existing operations and finance our expansion plans for the next year. If we are successful in raising additional funds, we expect our operations and business efforts to continue and expand. There are no assurances this will occur.
Subsequent Events
On JulyApril 16, 20, and 23, 2019and May 5, and 13, 2020, the holder of a note payable dated October 23, 2018September 12, 2019 elected to convert a total of $15,000$43,000 in principal and $894$1,720 in accrued interest into an aggregate of 8,150,89738,855,726 shares of Common Stock leaving a principal balance of $45,000.$-0-.
On July 25, 2019May 5, 2020 the holder of a note payable dated January 10, 2019December 24, 2018 elected to convert $8,500a total of $12,000 in principal and $1,999 in accrued interest into 4,358,97414,357,856 shares of Common Stock leaving a principal balance of $32,160 and accrued and unpaid interest of $1,693.
$13,000.
Off Balance Sheet Arrangements
None
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
Disclosure Controls and Procedures – Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Report.
These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our CEO and CFO to allow timely decisions regarding required disclosure.
Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were not effective as of June 30, 2019,March 31, 2020, at reasonable assurance level, for the following reasons:
| ● | Ineffective control environment and lack of qualified full-time CFO who has SEC experience to focus on our financial affairs; |
| ● | Lack of qualified and sufficient personnel, and processes to adequately and timely identify making any and all required public disclosures; |
| ● | Deficiencies in the period-end reporting process and accounting policies; |
| ● | Inadequate internal controls over the application of new accounting principles or the application of existing accounting principles to new transactions; |
| ● | Inadequate internal controls relating to the authorization, recognition, capture, and review of transactions, facts, circumstances, and events that could have a material impact on the Company’s financial reporting process; |
| ● | Deficient revenue recognition policies; |
| ● | Inadequate internal controls with respect to inventory transactions; and |
| ● | Improper and lack of timely accounting for accruals such as prepaid expenses, accounts payable and accrued liabilities. |
Our Board of Directors has assigned a priority to the short-term and long-term improvement of our internal control over financial reporting. We are reviewing various potential solutions to remedy the processes that would eliminate the issues that may arise due to the absence of separation of duties within the financial reporting functions. Additionally, the Board of Directors will work with management to continuously review controls and procedures to identified deficiencies and implement remediation within our internal controls over financial reporting and our disclosure controls and procedures.
We believe that our financial statements presented in this quarterly report on Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.
Inherent Limitations – Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.
Changes in Internal Control over Financial Reporting – There were no changes in our internal control over financial reporting during the sixthree month period ended June 30, 2019,March 31, 2020, which were identified in conjunction with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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. AsOn March 6, 2020, the Superior Court in the District of Montreal granted our motion and the date of this report we are awaiting a courttwo proceedings were linked. A date for the hearings to commence.commence was subsequently set for April 7, 2020, however due to the ongoing 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 have there been any claims threatened.
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
During the sixthree months ended June 30, 2019,March 31, 2020, we issued a total of 18,635,02124,355,427 shares of $0.001 par valueour Common Stock valued at $122,379 for the conversion of outstanding notes payable, reducing the debt by $83,000$66,500 and interest payable by $3,841$4,486 and generating a loss on conversion of $65,094. In addition,$51,393.
During the three month period ended March 31, 2019, we issued 1,000,000a total of 184,829 shares of our Common Stock valued at $238,000 or $0.238 per share as part$47,308 for the conversion of the acquisitionoutstanding notes payable, reducing debt by $25,000 and interest payable by $-0- and generating a loss on conversion of Atlas Pharma Inc. which we divested effective April 1, 2019.$22,308.
We relied upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, to issue these shares.
Other than reduction of debt from the conversion of the outstanding convertible notes payable described above, and acquisition of Atlas Pharma Inc., we did not receive any direct proceeds from the issuance of these shares. The proceeds from the convertible notes payable were used for the acquisition of Atlas Pharma Inc. and working capital.
None.
Not Applicable.
None.
| Exhibit No. | Description | |
| Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
| Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
| Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS | XBRL Instance Document* | |
| 101.SCH | XBRL Schema Document* | |
| 101.CAL | XBRL Calculation Linkbase Document* | |
| 101.DEF | XBRL Definition Linkbase Document* | |
| 101.LAB | XBRL Label Linkbase Document* | |
| 101.PRE | XBRL Presentation Linkbase Document* |
______________________
* Pursuant to Rule 406T of Regulation S-T, these interactive data files are not deemed filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act or Section 18 of the Securities Exchange Act and otherwise not subject to liability.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on August 14, 2019.May 18, 2020.
| SUNSHINE BIOPHARMA, INC. | |||
| By: | s/ Dr. Steve N. Slilaty | ||
| Dr. Steve N. Slilaty, | |||
| Principal Executive Officer | |||
| By: | s/ Camille Sebaaly | ||
Camille Sebaaly, Principal Financial Officer and | |||
| Principal Accounting Officer | |||