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 aton 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.
On April 1, 2017, the Company received monies in exchange for a Note Payable having a Face Value of $100,000 Canadian ($70,49074,970 US at March 31,September 30, 2020) with interest payable quarterly at 9%, which Note was due April 1, 2019. The Note is convertible any time after issuance into $0.001 par value Common Stock at a price of $0.015 Canadian (approximately $0.011 US) per share. 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. In June 2018, the Company filed an action in the Superior Court of the Province of Quebec in the District of Montreal (Canada) against the holder of this Note. The complaint alleges among other things, claims of misrepresentations and misleading conduct resulting in damages to the Company in an amount of approximately $200,000 Canadian (approximately $143,000 US). The matter is currently pending. See “PART II, Item 1, Legal“Legal Proceedings”, below.
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% iswas 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 thatDuring the fair valuenine month period ended September 30, 2020, the entire principal amount of $54,000 of this convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature. Any gain orNote plus accrued interest of $9,814 was converted into 44,931,640 shares of Common Stock valued at $365,787 resulting in a loss will be recognized at conversion. This note is past due and is currently payable on demand.of $301,973.
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% iswas 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 monthsnine month period ended March 31,September 30, 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-.$17,084.
On July 26, 2019, the Company received monies in exchange for a Note Payable having a Face Value of $50,000 with interest accruing at 8% is, which became due July 26, 2020. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The Company estimates thatDuring the fair valuenine month period ended September 30, 2020, the entire principal of $50,000 of this convertible debt approximates the Face Value, so no value has been assigned to the beneficial conversion feature. Any gain orNote plus accrued interest of $4,909 was converted into 43,522,363 shares of Common Stock valued at $131,370 resulting in a loss will be recognized at conversion.of $76,461.
On September 12, 2019, the Company received monies in exchange for a Note Payable having a Face Value of $43,000 with interest accruing at 8% is due July 15, 2020. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The Company estimates thatDuring the fair valuenine month period ended September 30, 2020, the entire principal amount of $43,000 of this convertible debt approximates the Face Value, so no value has been assigned to the beneficial conversion feature. Any gain orNote plus accrued interest of $1,720 was converted into 38,855,726 shares of Common Stock valued at $117,177 resulting in a loss will be recognized at conversion.
of $72,457.
On December 14, 2019, the Company received monies in exchange for a Note Payable having a Face Value of $42,800 with interest accruing at 8% and which is due December 14, 2020. The Note is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 35% below market value. The Company estimates thatDuring the fair valuenine month period ended September 30, 2020, the entire principal amount of $42,800 of this convertible debt approximates the Face Value, so no value has been assigned to the beneficial conversion feature. Any gain orNote plus accrued interest of $1,712 was converted into 18,592,605 shares of Common Stock valued at $81,796 resulting in a loss will be recognized at conversion.of $37,284.
A Note Payable dated December 31, 2018 having a Face Value of $26,893 and accruing interest at 12% was due December 31, 2019. On December 31, 2019, the Company renewed the Note, together with accrued interest of $3,227 for a 12-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 Value of $136,744 and accruing interest at 12% was due December 31, 2019. On October 1, 2019, the holder of this note requested to convert $30,000 in principal amount into 1,500,000 shares of Common Stock, leaving a principal balance $106,744. On December 31, 2019, the Company renewed the remaining principal balance of this Note, together with accrued interest of $15,509 for a 12-month period. The new Note has a Face Value of $122,253 and accrues interest at 12%. This Note is nonconvertible and matures on December 31, 2020. During the nine month period ended September 30, 2020, a principal amount of $16,225 of this Note plus accrued interest of $9,775 was converted into 26,000,000 shares of Common Stock valued at $603,200 resulting in a loss of $577,200.
On April 17, 2020, the Company’s Canadian subsidiary received a CEBA Loan (Canada Emergency Business Account Loan) from CIBC (Canadian Imperial Bank of Commerce) in the principal amount of $40,000 Canadian ($29,352 US) as part of the Canadian government’s COVID-19 relief program. The CEBA Loan is non-interest bearing if repaid on or before December 31, 2022 (the “Termination Date”). The CEBA Loan is considered repaid in full if the borrower repays 75% of the Principal Amount on or before the Termination Date. If the CEBA Loan is not repaid in full on or before the Termination Date, the lender will automatically extend the term of the loan by three years until December 31, 2025 (the “Extension Period”). During the Extension Period, interest will be charged, and will accrue on the outstanding amount of the CEBA Loan at a fixed rate of 5% per year, calculated daily and compounded monthly. The outstanding balance of the CEBA Loan and all accrued interest will be due at the end of the Extension Period.
On April 27, 2020, the Company received a Paycheck Protection Program loan in the principal amount of $50,655 from the US Small Business Administration as part of the US government’s COVID-19 relief program. This loan accrues interest at the rate of 1% per annum. The Company is obligated to make payments of principal and interest totaling $2,133 each month commencing on November 27, 2020, with any remaining balances due and payable on or before April 27, 2022. The proceeds derived from this loan may only be used for payroll costs, interest on mortgages, rent and utilities (“Admissible Expenses”). In addition, the Paycheck Protection Program provides for conditional loan forgiveness if the Company utilizes at least 75% of the proceeds from the loan to pay Admissible Expenses. As of the date of this Report, all of the proceeds from this loan have been utilized for Admissible Expenses and the Company believes that it will qualify for forgiveness of the entire amount of the loan.
On June 1, 2020, the Company received monies in exchange for a Note Payable having a Face Value of $42,000 with interest accruing at 8% is due June 1, 2021. The Note is convertible after 180 days from issuance into 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.
On June 9, 2020, the Company received monies in exchange for a Note Payable having a Face Value of $37,000 with interest accruing at 8% is due June 9, 2021. The Note is convertible after 180 days from issuance into 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.
On July 7, 2020, the Company received monies in exchange for a Note Payable having a Face Value of $48,000 with interest accruing at 8% is due July 7, 2021. The Note is convertible after 180 days from issuance into 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.
On July 27, 2020, the Company received monies in exchange for a Note Payable having a Face Value of $102,000 with interest accruing at 8% is due July 27, 2021. The Note is convertible after 180 days from issuance into Common Stock at a price 30% 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.
On August 14, 2020, the Company received monies in exchange for a Note Payable having a Face Value of $67,000 with interest accruing at 8% is due August 14, 2021. The Note is convertible after 180 days from issuance into Common Stock at a price 30% 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.
On September 14, 2020, the Company received monies in exchange for a Note Payable having a Face Value of $250,000 with interest accruing at 5% is due September 14, 2022. The Note is convertible after 180 days from issuance into Common Stock at a price equal to $0.30 per share. The Company estimates that the fair value of this convertible debt approximates the Face Value, so no value has been assigned to the beneficial conversion feature. Any gain or loss will be recognized at conversion.
On September 24, 2020, the Company received monies in exchange for a Note Payable having a Face Value of $50,000 with interest accruing at 5% is due September 24, 2022. The Note is convertible after 180 days from issuance into Common Stock at a price equal to $0.30 per share. 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.
The Company assessed the conversion features of the notes above for derivative accounting consideration, per ASC 815, and determined that the embedded conversion features should not be classified as a derivative because the exercise price of the convertible notes does not exceed the market value of the company's shares on the conversion date.
At March 31,September 30, 2020 and December 31, 2019, total accrued interest on Notes Payable was $32,654$31,677 and $21,077, respectively.
Note 4 – Notes Payable - Related Party
Outstanding Notes Payable at March 31,September 30, 2020 held by related parties consist of the following:
A Note Payable dated December 31, 2018 held by the CEO of the Company having a Face Value of $117,535 Canadian ($86,118 US) and accruing interest at 12% was due December 31, 2019. On December 31, 2019, the Company renewed the Note together with accrued interest of $14,104 Canadian ($10,845 US) and cash advances made to the Company of $36,473 Canadian ($28,044 US) for a 12-month period. The new Note, which was converted to USD, now has a face Value of $128,269 US. This new Note is nonconvertible, accrues interest at 12% per annum and has a maturity date of December 31, 2020.
Note 5 – Shareholders’ Equity
Effective February 1, 2019, the Company completed a reverse stock split whereby 1 share of Common Stock was issued for every 20 shares of Common Stock then issued and outstanding, reducing the issued and outstanding shares of Common Stock from 1,713,046,242 to 85,652,400. The Company’s authorized capital of Common Stock remained as previously established at 3,000,000,000 shares.
Effective April 6, 2020, the Company completed a second reverse stock split whereby 1 share of Common Stock was issued for every 20 shares of Common Stock then issued and outstanding, reducing the issued and outstanding shares of Common Stock from 1,193,501,925 to 59,675,417. The number of authorized Common Shares remained as previously established at 3,000,000,000 shares.
The Company's financial statements reflect both of these reverse stock splits on a retroactive basis.
On June 17, 2020, the Company filed an amendment to its Articles of Incorporation (the “Amendment”) with the Secretary of State for the State of Colorado, to eliminate the Series “A” Preferred Shares consisting of Eight Hundred and Fifty Thousand (850,000) shares, par value $0.10 per share, and the designation thereof, which shares were returned to the status of undesignated shares of Preferred Stock. In addition, the Amendment also increased the number of authorized Series “B” Preferred Shares from Five Hundred Thousand (500,000) to One Million (1,000,000) shares.
Also on June 17, 2020, the Company issued Five Hundred Thousand (500,000) shares of Series “B” Preferred Stock in favor of Dr. Steve N. Slilaty, the Company’s CEO, in consideration for the COVID-19 treatment technology he developed. The Series “B” Preferred Stock is non-convertible, nonredeemable, non-retractable and has a superior liquidation value of $0.10 per share. Each share of Series “B” Preferred Stock is entitled to 1,000 votes per share.
During the threenine months ended March 31,September 30, 2020, the Company issued a total of 24,355,427269,099,306 shares of $0.001 par value Common Stock valued at $1,831,816 for the conversion of outstanding notes payable, reducing the debt by $66,500$373,269 and interest payable by $4,486$42,233 and generating a loss on conversion of $51,393.$1,416,313.
The Company declared no dividends through March 31,September 30, 2020.
Note 6 – Related Party Transactions
In addition to the related party transaction detailed in NoteNotes 4 and 5 above, the Company paid its Officers and Directors cash compensation totaling $3,830$24,600 and $40,2013,751 for the three months and $80,430 and $43,952 for the nine months ended March 31,September 30, 2020 and 2019, respectively. The Company also paid its Officers and Directors non-cash compensation in the form of shares of Common Stock valued $-0- and $74,100 for the three month periods ended September 30, 2020 and 2019 and $-0- and $74,100 for the nine month periods ended September 30, 2020 and 2019, respectively.
Note 7 – Financing Agreement
On September 8, 2020, the Company executed a Financing Agreement with RB Capital Partners, Inc., La Jolla, CA, who has agreed to provide the Company with a minimum of $2 million in convertible debt financing over the next three to six months pursuant to the terms and conditions included in relevant Promissory Notes (the “Promissory Notes”). The Promissory Notes will bear interest at the rate of 5% per annum and will be fully convertible into shares of shares of the Company’s Common Stock at a conversion price equal to the market value of the Company’s Common Stock on the applicable conversion date or $0.30 per share, whichever is greater. The Promissory Notes will have a maturity date of two years from the date of issuance and must be fully converted on or before the maturity date. The Company has the right under these Promissory Notes to pay off all or any part of the Promissory Notes at any time without penalty.
On September 14 and 24, 2020, the Company received $250,000 and $50,000, respectively in funding under this agreement (see “Note 3 – Notes Payable” above).
Note 78 – Subsequent Events
On AprilOctober 16 20, and 23, and May 5, and 13,November 4, 2020, the holder of a note payableNote Payable dated September 12,December 31, 2019 elected to convert a total of $43,000$28,000 in principal and $1,720 in accrued interest into 38,855,72628,000,000 shares of Common Stock leaving a principal balance of $-0-.$78,028.
On May 5,October 20, 2020, the holderCompany received monies in exchange for a Note Payable having a Face Value of a note payable dated December 24, 2018 elected to convert a total of $12,000 in principal and $1,999 in accrued$250,000 with interest accruing at 5% is due October 20, 2022. The Note is convertible after 180 days from issuance into 14,357,856 shares of Common Stock leavingat a principal balance of $13,000.
price equal to $0.30 per share.
ITEMITEM 2.MANAGEMENT’SMANAGEMET’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS
The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.
Overview and HistoryHistory
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 signed licensing agreements for four (4) generic prescription drugs for the treatment of breast cancer, prostate cancer and BPH (Benign Prostatic Hyperplasia).
In January 2018, we acquired all of the issued and outstanding shares of Atlas Pharma Inc. (“Atlas”), a Health Canada certified company dedicated to chemical analysis of pharmaceutical and other industrial samples. Effective April 1, 2019, we re-assigned all of our stock in Atlas back to the original owner in exchange for the Atlas related debt. See “Discontinued Analytical Chemistry Services Operations” below 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 dietarynutritional supplement which we trademarked Essential 9tm™. This dietarynew supplement is an over-the-counter tablet comprised of the nine amino acids which the human body cannot make. Essential 9tm™ has been authorized for marketing by Health Canada under NPN 80089663. On March 12, 2019, Essential 9tm™ became available for sale on Amazon.ca and shortly thereafter on March 23, 2019 we recorded our first revenues of Essential 9tm sales.Amazon.com.
Effective February 1, 2019, we completed a 20 to 1 reverse split of our $0.001 par value Common Stock reducing the issued and outstanding shares of Common Stock from 1,713,046,242 to 85,652,400 (the “First Reverse Stock Split”). The number of authorized shares of our $0.001 par value Common Stock remained at 3,000,000,000 shares.
In November 2019, we received Health Canada approval for a new Calcium-Vitamin D supplement. Health Canada issued NPN 80093432 through which it authorized us to manufacture and sell the new Calcium-Vitamin D supplement under the brand name Essential Calcium-Vitamin Dtm.
Effective April 6, 2020, we completed another 20 to 1 reverse split of our $0.001 par value Common Stock, reducing the issued and outstanding shares of Common Stock from 1,193,501,925 to 59,675,417 (the “Second Reverse Stock Split”). The authorized capital of our Common Stock remained as previously established at 3,000,000,000 shares. Except in the paragraphs describing the reverse stock splits, all references in this Report to our Common Stock as well as the price per share of Common Stock are presented on a post First and Second Reverse Stock Splits basis.
On May 22, 2020, we filed a patent application in the United States for a new treatment for Coronavirus infections, including COVID-19. Our patent application covers composition subject matter pertaining to small molecules for inhibition of the main Coronavirus protease (Mpro), an enzyme that is essential for viral replication. The small molecules covered by the patent application were computer modelled and designed by Dr. Steve N. Slilaty, our CEO. The patent application has a priority date of May 22, 2020.
On June 17, 2020, we filed an amendment to our Articles of Incorporation (the “Amendment”) with the Secretary of State for the State of Colorado, to eliminate the Series “A” Preferred Shares consisting of Eight Hundred and Fifty Thousand (850,000) shares, par value $0.10 per share, and the designation thereof, such shares to be returned to the status of undesignated shares of Preferred Stock. In addition, the Amendment also increased the number of authorized Series “B” Preferred Shares from Five Hundred Thousand (500,000) to One Million (1,000,000) shares.
Also on June 17, 2020, our Board of Directors authorized the issuance of Five Hundred Thousand (500,000) shares of our Series “B” Preferred Stock in favor of Dr. Steve N. Slilaty, our CEO and a director, in consideration for his development of a new treatment for Coronavirus infections, including COVID-19. The Series “B” Preferred Stock is non-convertible, non-redeemable, non-retractable and has a superior liquidation value of $0.10 per share. Each share of Series “B” Preferred Stock is entitled to 1,000 votes per share.
Our principal place of business is located at 6500 Trans-Canada Highway, 4th Floor, Pointe-Claire, Quebec, Canada H9R 0A5. Our phone number is (514) 426-6161 and our website address is www.sunshinebiopharma.com.
We have not been subject to any bankruptcy, receivership or similar proceeding.
Plan of Operation
Despite the fact that we now are generating revenues, we have elected to include a Plan of Operation to discuss our ongoing research and development activities relating to our proprietary drug development operations, as well as, our other business activities.
Proprietary Drug Development Operations
Coronavirus Treatment
Viruses carry minimal genetic information as they rely, for the most part, on host cellular machinery to multiply. Coronavirus has a positive-sense RNA genome consisting of approximately 30,000 nucleotides, a genome size that places Coronavirus among the larger sized viruses. A positive-sense RNA genome is effectively a messenger RNA which allows the virus to express its genes immediately upon gaining entry into the host cell without the need for any prior replication or transcription steps as is the case with negative-sense RNA or DNA viruses. This is part of what makes Coronavirus a highly aggressive pathogen. Many of the causative agents of serious human diseases are positive-sense RNA viruses, including Hepatitis C, Zeka, Polio, West Nile, Dengue, Cardiovirus, and many others. Some positive-sense RNA viruses, such as the rhinoviruses that cause the common cold, are less clinically serious but they are responsible for widespread morbidity on a yearly basis.
The initial genome expression products of Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2), the causative agent of COVID-19, are two large polyproteins, referred to as pp1a and pp1ab. These two polyproteins are cleaved at 13 specific sites by the main Coronavirus virus encoded protease (Mpro or 3CLpro) to generate a number of mature viral proteins essential for viral replication. Mpro represents an attractive anti-viral drug development target as it plays a central role in the early stages of viral replication. The crystal structure of Mpro shows the presence of an active site Cysteine (Cys145) and a coordinated active site Histidine (His41), both of which are essential for the enzyme’s proteolytic activity. The following is a summary of the development to date of our Coronavirus Treatment project:
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On May 22, 2020, we filed a patent application in the United States for a new treatment for Coronavirus infections. Our patent application covers composition subject matter pertaining to small molecules for inhibition of the Coronavirus main protease (Mpro), an enzyme that is essential for viral replication. The small molecules covered by the patent application were computer modelled and designed by Dr. Steve N. Slilaty, our CEO. The patent application has a priority date of May 22, 2020.
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In August 2020, we completed the synthesis of four different potential inhibitors of Coronavirus protease. These compounds are based on the technology described in our patent application filed on May 22, 2020.
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In September 2020, we completed the screening of our four compounds and subsequently identified a lead Anti-Coronavirus drug candidate (SBFM-PL4). The screening which pinpointed the lead compound was performed at the University of Georgia, College of Pharmacy under the leadership of Dr. Scott D. Pegan, Director of the Center for Drug Discovery and Interim Associate Head of Pharmaceutical and Biomedical Sciences.
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In October 2020, we expanded our collaboration with Dr. Scott Pegan group by entering into a research agreement with the University of Georgia to further develop our Anti-Coronavirus lead compound, SBFM-PL4. We will proceed by conducting the in vitro studies followed by cell culture assays and assessment in Coronavirus infected mice before entering human clinical trials.
Adva-27a Anticancer Drug
Since inception, our proprietary drug development activities have been focused on the development of a small molecule called Adva-27a for the treatment of aggressive forms of cancer. A Topoisomerase II inhibitor, Adva-27a has been shown to be effective at destroying Multidrug Resistant Cancer cells including Pancreatic Cancer cells, Breast Cancer cells, Small-Cell Lung Cancer cells and Uterine Sarcoma cells (Published in ANTICANCER RESEARCH, Volume 32, Pages 4423-4432, October 2012). Sunshine Biopharma is direct owner of all issued and pending worldwide patents pertaining to Adva-27a including U.S. Patents Number 8,236,935 and 10,272,065.
Figure 1
Adva-27a is a GEM-difluorinated C-glycoside derivative of Podophyllotoxin (see Figure 1). Another derivative of Podophyllotoxin called Etoposide is currently on the market and is used to treat various types of cancer including leukemia, lymphoma, testicular cancer, lung cancer, brain cancer, prostate cancer, bladder cancer, colon cancer, ovarian cancer, liver cancer and several other forms of cancer. Etoposide is one of the most widely used anticancer drugs. Adva-27a and Etoposide are similar in that they both attack the same target in cancer cells, namely the DNA unwinding enzyme, Topoisomerase II. Unlike Etoposide however, Adva-27a is able to penetrate and destroy Multidrug Resistant Cancer cells. Adva-27a is the only compound known today that is capable of destroying Multidrug Resistant Cancer. In addition, Adva-27a has been shown to have distinct and more desirable biological and pharmacological properties compared to Etoposide. In side-by-side studies using Multidrug Resistant Breast Cancer cells and Etoposide as a reference, Adva-27a showed markedly greater cell killing activity (see Figure 2).
Figure 2
Our preclinical studies to date have shown that:
● | 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). |
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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. |
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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. |
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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. |
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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). |
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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. |
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Adva-27a has shown excellent pharmacokinetics profile as indicated by studies done in rats.
● | Adva-27a does not inhibit tubulin assembly. |
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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 |
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GMP Manufacturing of 2 kilogram for use in IND-Enabling Studies and Phase I Clinical Trials
● | Regulatory Filing (Fast-Track Status Anticipated) |
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Regulatory Filing (Fast-Track Status Anticipated)
● | Phase I Clinical Trials (Pancreatic Cancer Indication) |
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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 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; |
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Anastrozole (brand name Arimidex® by AstraZeneca) for treatment of Breast Cancer;
● | Letrozole (brand name Femara® by Novartis) for treatment of Breast Cancer; |
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Letrozole (brand name Femara® by Novartis) for treatment of Breast Cancer;
● | Bicalutamide (brand name Casodex® by AstraZeneca) for treatment of Prostate 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) |
●
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 for our obtaining either the DIN’s or the DEL due to variables involved that are out of our control. Figure 4 shows our 30-Pill blister pack of Anastrozole.
Figure 4
We currently have a number of additional Generic Pharmaceuticals under review for in-licensing. While no assurances can be provided that we will acquire the rights to any additional generic drugs, we believe that a larger product portfolio will provide us with more opportunities and a greater reach into the marketplace.
Various publicly available sources indicate that the worldwide sales of generic pharmaceuticals are approximately $200 billion per year. In the United States and Canada, the sales of generic pharmaceuticals are approximately $50 billion and $5 billion, respectively. The generic pharmaceuticals business is fairly competitive and there are several multinational players in the field including Teva (Israel), Novartis - Sandoz (Switzerland), Hospira (USA), Mylan (Netherlands), Sanofi (France), Fresenius Kabi (Germany) and Apotex (Canada). While no assurances can be provided, with our offering of Canadian approved products we believe that we will be able to access at least a small percentage of the generic pharmaceutical marketplace.
DietaryNutritional 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 dietarynutritional 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 and Amazon.ca. Figure 5 below shows our 60-Tablet Essential 9tm product.
Figure 5
In November 2019, we received Health Canada approval for another dietarynutritional 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 proper functioning of the immune system, 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.early 2021.
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 Nine Months ended September 30, 2020 and 2019
During the nine months ended September 30, 2020, we generated revenues of $43,397 from the sale of products generated by our Nutritional Supplements Operations, compared to revenues of $10,565 during the comparable period in 2019, an increase of $32,832. The 2019 revenues only reflected six months of sales as the products from our Nutritional Supplements Operations were launched in March 2019. The cost of sales for these revenues was $15,384 during the nine months ended September 30, 2020, compared to $6,865 during the nine months ended September 30, 2019.
General and Administrative Expenses during the nine months ended September 30, 2020 was $261,569, compared to $394,746 during the nine months ended September 30, 2019, a decrease of $133,177. The reason for this decrease was due to our continuing effort to reduce expenses across the board. In terms of specific expense categories that contributed to the decrease were executive compensation which decreased by $54,122 and consulting fees which decreased by $62,507.
We incurred $1,416,313 in losses arising from debt conversion during the nine months ended September 30, 2020, compared to $185,814 in losses from debt conversion during the similar period in 2019. This large increase was due to the specific structure of our convertible debt combined with recent volatility in our stock price. We also incurred $62,669 in interest expense during the nine months ended September 30, 2020, compared to $92,486 in interest expense during the similar period in 2019. The decrease was a result of a more rapid rate of conversion by our debt holders. In addition, we incurred $582,237 in losses from discontinued operations during the nine month ended September 30, 2019 as a result of the sale of Atlas Pharma Inc. and termination of our Analytical Chemistry Services Operations. We did not incur this loss during the similar period in 2020.
As a result, we incurred a Net Loss of $1,700,298 ($0.01 per share) during the nine month period ended September 30, 2020, compared to a net loss of $1,263,673 ($0.15 per share) during the nine month period ended September 30, 2019.
Comparison of Results of Operations for the Three Months Ended March 31,September 30, 2020 and 2019
During the three months ended March 31,September 30, 2020, we generated $11,102$17,150 in revenues, compared to $206$7,326 in revenues for the same three months period of 2019, an increase of $10,896.$9,824. All of these revenues were generated from our new DietaryNutritional Supplements Operations which we launched in March 2019. The direct cost of sales for generating these revenues was $3,883$6,340 for the period ended March 31,September 30, 2020, compared to $112$5,293 for the same period in 2019. Our gross profit increased to $7,219$10,810 for the period ended March 31,September 30, 2020, compared to a gross profit of $94$2,033 for the same period in 2019.
General and Administrative expenses during the three month period ended March 31,September 30, 2020 were $44,918,$78,098, compared to General and Administrative expense of $122,303$204,673 incurred during the three month period ended March 31,September 30, 2019, a decrease of $77,385. Nearly all categories$126,575. The majority of our General and Administrative expenses sawthis decrease was due to a decrease during the three month period ended March 31, 2020, compared to the same period in 2019. Specifically, the decreases included accounting feesexecutive compensation by $17,000,$66,000 and a decrease in consulting fees by $9,352, legal fees by $8,932, office expenses by $5,086,$44,399. These and officer and director compensation by $36,371. Theseother decreases wereare part of a cost-cuttingour ongoing effort we initiated into reduce expenses across the beginning of 2020 and plan to continue going forward. Overall,board. On the whole, we incurred a loss of $37,699$78,098 from our operations in the three month period ended March 31,September 30, 2020, compared to a loss of $122,209$204,673 in the similar period of 2019, an $84,510 improvement.2019.
In the area of other expenses, weWe incurred $16,356$22,094 in interest expense during the three months ended March 31,September 30, 2020, compared to $46,297$27,847 in interest expense during the similar period in 2019 due to reduced borrowings.as a result of increased debt. In addition, we incurred $51,393$608,899 in losses arising from debt conversion during the three months ended March 31,September 30, 2020, compared to $22,308$120,720 in losses from debt conversion during the similar period in 2019.
As a result, we incurred a net loss of $94,259$698,595 ($0.00 per share) for the three month period ended March 31,September 30, 2020, compared to a net loss of $202,542$350,241 ($0.050.04 per share) during the three month period ended March 31,September 30, 2019.
Liquidity and Capital Resources
As of March 31, 2019, September 30, 2020, we had cash or cash equivalents of $10,808.$488,708.
Net cash used in operating activities was $31,034$233,627 during the threenine month period ended March 31, September 30, 2020, compared to $233,959$367,959 for the threenine month period ended March 31, September 30, 2019. We anticipate that overhead costsresearch and otherdevelopment and overhead expenses will increase in the future as we move forward with our expanded Proprietary Drug Development activities and expansion of our Generic Pharmaceuticals and DietaryNutritional Supplements operations discussed above.
Cash flows provided by financing activities were $-0-$683,643 for the threenine month periods ended March 31, September 30, 2019, compared to $214,656$352,100 during the threenine months ended March 31, September 30, 2019. Cash flows used in investing activities were $-0-$800 for both, the threenine month period ended March 31, September 30, 2020, andcompared to $14,416 during the same threenine month period ended in September 30, 2019.
During the threenine months ended March 31,September 30, 2020, we issued a total of 24,355,427269,099,306 shares of our Common Stock valued at $122,379$1,831,816 for the conversion of outstanding notes payable, reducing the debt by $66,500$373,269 and interest payable by $4,486$42,233 and generating a loss on conversion of $51,393.$1,416,313.
During the threenine month period ended March 31,September 30, 2019, we issued a total of 184,8297,883,683 shares of our Common Stock valued at $47,308$443,481 for the conversion of outstanding notes payable, reducing debt by $25,000$241,160 and interest payable by $-0-$11,402 and generating a loss on conversion of $22,308.$185,814.
During the threenine months ended March 31,September 30, 2020, we did not sell any of our capital stock for cash orcash; however, we entered into anythe following new debt arrangements.arrangements:
On April 17, 2020, our Canadian subsidiary received a CEBA Loan (Canada Emergency Business Account Loan) from CIBC (Canadian Imperial Bank of Commerce) in the principal amount of $40,000 Canadian ($29,352 US) as part of the Canadian government’s COVID-19 relief program. The CEBA Loan is non-interest bearing if repaid on or before December 31, 2022 (the “Termination Date”). The CEBA Loan is considered repaid in full if the borrower repays 75% of the Principal Amount on or before the Termination Date. If the CEBA Loan is not repaid in full on or before the Termination Date, the lender will automatically extend the term of the loan by three years until December 31, 2025 (the “Extension Period”). During the Extension Period, interest will be charged, and will accrue on the outstanding amount of the CEBA Loan at a fixed rate of 5% per year, calculated daily and compounded monthly. The outstanding balance of the CEBA Loan and all accrued interest will be due at the end of the Extension Period.
On April 27, 2020, we received a Paycheck Protection Program loan in the principal amount of $50,655 from the US Small Business Administration as part of the US government’s COVID-19 relief program. This loan accrues interest at the rate of 1% per annum. We are obligated to make payments of principal and interest totaling $2,133 each month commencing November 27, 2020, with any remaining balances due and payable on or before April 27, 2022. The proceeds derived from this loan may only be used for payroll costs, interest on mortgages, rent and utilities (“Admissible Expenses”). In addition, the Paycheck Protection Program provides for conditional loan forgiveness if we utilize at least 75% of the proceeds from the loan to pay Admissible Expenses. As of the date of this Report, all of the proceeds from this loan have been utilized for Admissible Expenses and we believe that we will qualify for forgiveness of the entire amount of the loan.
On June 1, 2020, we received monies in exchange for a Note Payable having a Face Value of $42,000 with interest accruing at 8% is due June 1, 2021. The Note is convertible after 180 days from issuance into Common Stock at a price 35% below market value.
On June 9, 2020, we received monies in exchange for a Note Payable having a Face Value of $37,000 with interest accruing at 8% is due June 9, 2021. The Note is convertible after 180 days from issuance into Common Stock at a price 35% below market value.
On July 7, 2020, we received monies in exchange for a Note Payable having a Face Value of $48,000 with interest accruing at 8% is due July 7, 2021. The Note is convertible after 180 days from issuance into Common Stock at a price 35% below market value.
On July 27, 2020, we received monies in exchange for a Note Payable having a Face Value of $102,000 with interest accruing at 8% is due July 27, 2021. The Note is convertible after 180 days from issuance into Common Stock at a price 30% below market value.
On August 14, 2020, we received monies in exchange for a Note Payable having a Face Value of $67,000 with interest accruing at 8% is due August 14, 2021. The Note is convertible after 180 days from issuance into Common Stock at a price 30% below market value.
On September 14, 2020, we received monies in exchange for a Note Payable having a Face Value of $250,000 with interest accruing at 5% is due September 14, 2022. The Note is convertible after 180 days from issuance into Common Stock at a price of equal to $0.30 per share.
On September 24, 2020, we received monies in exchange for a Note Payable having a Face Value of $50,000 with interest accruing at 5% is due September 24, 2022. The Note is convertible after 180 days from issuance into Common Stock at a price equal to $0.30 per share.
We are not generating adequate revenues from our operations to fully implement our business plan as set forth herein. As a result, our future success will depend on the future availability of financing, among other things. Such financing will be required to enable us to actualize our Proprietary Drug Development program and further develop our Generic Pharmaceuticals operationsOperations and DietaryNutritional 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$20 million ($2 million for the Generic Pharmaceuticals and DietaryNutritional Supplements operations and $5$18 million for the recently expanded 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.
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.
On September 8, 2020, we executed a Financing Agreement with RB Capital Partners, Inc., La Jolla, CA, who has agreed to provide us with a minimum of $2 million in convertible debt financing over the next three to six months pursuant to the terms and conditions included in relevant Promissory Notes (the “Promissory Notes”). As of September 30, 2020, we have received a total of $300,000 in funding under this agreement.
The Promissory Notes will bear interest at the rate of 5% per annum and will be fully convertible into shares of our Common Stock at a conversion price equal to the market value of our Common Stock on the applicable conversion date or $0.30 per share, whichever is greater. The Promissory Notes will have a maturity date of two years from the date of issuance and must be fully converted on or before the maturity date. We have the right under these Promissory Notes to pay off all or any part of the Promissory Notes at any time without penalty.
We intend to use the proceeds from this financing for development of our recently announced Coronavirus treatment on a priority basis and the clinical development of Adva-27a, our flagship anticancer compound targeted for pancreatic cancer.
Subsequent Events
On AprilOctober 16 20, and 23, and May 5, and 13,November 4, 2020, the holder of a note payableNote Payable dated September 12,December 31, 2019 elected to convert a total of $43,000$28,000 in principal and $1,720 in accrued interest into 38,855,72628,000,000 shares of Common Stock leaving a principal balance of $-0-.$78,028.
On May 5,October 19, 2020, the holderwe received monies in exchange for a Note Payable having a Face Value of a note payable dated December 24, 2018 elected to convert a total of $12,000 in principal and $1,999 in accrued$250,000 with interest accruing at 5% is due October 19, 2022. The Note is convertible after 180 days from issuance into 14,357,856 shares of Common Stock leavingat a principal balance of $13,000.price equal to $0.30 per share.
Off Balance Sheet Arrangements
None
ITEMITEM 3. QUANTITATIVEQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
ITEMITEM 4. CONTROLSCONTROLS AND PROCEDURES.
Disclosure Controls and Procedures – Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Report.
These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our CEO 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 March 31,September 30, 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; |
●
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; |
●
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; |
●
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 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; |
●
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;
● | Deficient revenue recognition policies; |
●
Inadequate internal controls with respect to inventory transactions; and
| 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.
● | 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.
In June 2018 we filed an action in the Superior Court of the Province of Quebec in the District of Montreal (Canada) against one of our existing shareholders residing in Quebec City (Canada) arising out of a possible equity investment intended to be completed by August 2018. The complaint alleges among other things, claims of misrepresentations and misleading conduct resulting in damages to us in an amount of approximately $200,000 Canadian (approximately $154,000 US). On April 1, 2019, a note payable held by the defendant having a face value of $100,000 Canadian (approximately $76,000 US) became due and payable. We have elected not to pay the amount due and to petition the courts to link this matter to the ongoing litigation. On March 6, 2020, the Superior Court in the District of Montreal granted our motion and the two proceedings were linked. A date for the hearings to commence was subsequentlyhas been set for April 7, 2020, however due to the ongoing Coronavirus (COVID-19) Pandemic, the date has been postponed until further notice.November 16, 2020.
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.
We relied upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, to issue these shares.
Other than reduction of debt from the conversion of the outstanding convertible notes payable described above, we did not receive any direct proceeds from the issuance of these shares. The proceeds from the convertible notes payable were used for working capital.
None.
Not Applicable.
None.
* 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.
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 May 18,November 10, 2020.