Sunshine Biopharma Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS Sunshine Biopharma, Inc. Consolidated Balance Sheets September 30, December 31, 2023 2022 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 18,846,140 $ 21,826,437 Accounts receivable 2,034,119 1,912,153 Inventory 4,517,044 3,289,945 Prepaid expenses 37,556 283,799 Total Current Assets 25,434,859 27,312,334 Property and equipment 334,922 394,249 Intangible assets 1,216,207 776,856 Right-of-use-asset 664,296 760,409 TOTAL ASSETS $ 27,650,284 $ 29,243,848 LIABILITIES Current Liabilities: Accounts payable and accrued expenses $ 2,220,870 $ 2,802,797 Earnout payable 2,547,831 3,632,000 Income tax payable 201,541 373,191 Right-of-use-liability 117,840 123,026 Total Current Liabilities 5,088,082 6,931,014 Long-Term Liabilities: Deferred tax liability 43,032 43,032 Right-of-use-liability 555,687 642,232 Total Long-Term Liabilities 598,719 685,264 TOTAL LIABILITIES 5,686,801 7,616,278 SHAREHOLDERS' EQUITY Preferred Stock, Series B $ 0.10 par value per share; 1,000,000 shares authorized; 10,000 Shares issued and outstanding 1,000 1,000 Common Stock, $ 0.001 par value per share; 3,000,000,000 shares authorized; 25,678,290 and 22,585,632 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively 25,678 22,585 Capital paid in excess of par value 84,387,890 80,841,752 Accumulated comprehensive income 204,549 161,847 Accumulated (Deficit) ( 62,655,634 ) ( 59,399,614 ) TOTAL SHAREHOLDERS' EQUITY 21,963,483 21,627,570 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 27,650,284 $ 29,243,848 The accompanying notes are an integral part of these unaudited financial statements 3 Sunshine Biopharma, Inc. Consolidated Statements of Operations and Comprehensive Loss (Unaudited) 3 Months Ended September 30, 9 Months Ended September 30, 2023 2022 2023 2022 Sales $ 5,957,668 $ 132,808 $ 16,412,586 $ 405,760 Cost of sales 3,967,412 65,783 10,641,461 200,311 Gross profit 1,990,256 67,025 5,771,125 205,449 General and Administrative Expenses: Accounting 56,350 122,913 301,381 237,773 Consulting 221,781 162,852 745,850 270,033 Director fees 100,000 100,000 300,000 200,000 Legal 133,302 146,467 392,874 403,386 Marketing 241,897 217,666 502,987 400,386 Office 544,215 76,818 1,422,058 449,730 R&D 238,012 362,500 1,039,502 770,095 Salaries 1,144,377 595,000 4,344,801 1,105,000 Taxes 52,586 – 212,953 – Depreciation 37,210 789 106,797 6,186 Total General and Administrative Expenses: 2,769,730 1,785,005 9,369,203 3,842,589 (Loss) from operations ( 779,474 ) ( 1,717,980 ) ( 3,598,078 ) ( 3,637,140 ) Other Income (Expense): Foreign exchange 40 25 ( 206 ) 45 Interest income 207,431 260,938 624,361 406,984 Debt release – – – 10,852 Interest expense ( 38,527 ) ( 2 ) ( 107,198 ) ( 12,866 ) Total Other Income (Expense) 168,944 260,961 516,957 405,015 Net (loss) before income taxes ( 610,530 ) ( 1,457,019 ) ( 3,081,121 ) ( 3,232,125 ) Provision for income taxes ( 40,952 ) – ( 174,899 ) – Net (Loss) $ ( 651,482 ) $ ( 1,457,019 ) $ ( 3,256,020 ) $ ( 3,232,125 ) Gain (Loss) from foreign exchange translation ( 460,507 ) ( 45,126 ) 42,702 ( 56,764 ) Comprehensive (Loss) $ ( 1,111,989 ) $ ( 1,502,145 ) $ ( 3,213,318 ) $ ( 3,288,889 ) Basic (Loss) per common share $ ( 0.04 ) $ ( 0.08 ) $ ( 0.133 ) $ ( 0.26 ) Weighted Average Common Shares Outstanding (Basic and Diluted) 25,690,449 18,885,632 24,507,122 12,789,733 The accompanying notes are an integral part of these unaudited financial statements 4 Sunshine Biopharma, Inc. Consolidated Statements of Cash Flows (Unaudited) September 30, September 30, 2023 2022 Cash Flows From Operating Activities: Net (Loss) $ ( 3,256,020 ) $ ( 3,232,125 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 106,794 6,186 Foreign exchange ( 374 ) 45 Debt release – ( 10,852 ) Accounts receivable ( 118,482 ) 7,776 Inventory ( 1,221,112 ) ( 163,991 ) Prepaid expenses 247,977 2,235 Accounts payable and accrued expenses ( 587,973 ) 437,267 Income tax payable ( 172,076 ) – Interest payable ( 1,084,169 ) ( 48,287 ) Net Cash Flows (Used) in Operations ( 6,085,435 ) ( 3,001,746 ) Cash Flows From Investing Activities: Reduction in Right-of-use asset 97,498 – Purchase of intangible assets ( 19,804 ) – Purchase of equipment ( 464,614 ) – Net Cash Flows (Used) in Investing Activities ( 386,920 ) – Cash Flows From Financing Activities: Common stock issued 4,089,218 43,560,363 Exercise of warrants 1,156 – Purchase of treasury stock ( 541,143 ) ( 99,000 ) Lease liability ( 93,125 ) – Payments of notes payable – ( 1,900,000 ) Net Cash Flows Provided by Financing Activities 3,456,106 41,561,363 Cash and Cash Equivalents at Beginning of Period 21,826,437 2,045,167 Net increase (decrease) in cash and cash equivalents ( 3,016,249 ) 38,559,617 Effect of exchange rate changes on cash – ( 105,617 ) Foreign currency translation adjustment 35,952 56,764 Cash and Cash Equivalents at End of Period $ 18,846,140 $ 40,555,931 Supplementary Disclosure of Cash Flow Information: – – Cash paid for interest $ – $ 61,151 Cash paid for income taxes $ – $ – The accompanying notes are an integral part of these unaudited financial statements 5 Sunshine Biopharma, Inc. Consolidated Statement of Shareholders' Equity (Unaudited) Number Of Common Shares Common Capital Paid in Excess of Par Number Of Preferred Shares Preferred Comprehensive Accumulated Issued Stock Value Issued Stock Income Deficit Total Three Month Period Ended September 30, 2023 Balance at June 30, 2023 25,746,302 $ 25,746 $ 84,422,143 10,000 $ 1,000 $ 665,056 $ ( 62,004,152 ) $ 23,109,793 Repurchase stock ( 68,012 ) ( 68 ) ( 34,253 ) – – – – – Net (loss) – – – – – ( 460,507 ) ( 651,482 ) ( 1,111,989 ) Balance at September 30, 2023 25,678,290 $ 25,678 $ 84,387,890 10,000 $ 1,000 $ 204,549 $ ( 62,655,634 ) $ 21,963,483 Nine Month Period Ended September 30, 2023 Balance December 31, 2022 22,585,632 $ 22,585 $ 80,841,752 10,000 $ 1,000 $ 161,847 $ ( 59,399,614 ) $ 21,627,570 Repurchase of common stock ( 513,723 ) ( 514 ) ( 540,629 ) – – – – – Common stock and pre-funded warrants issued in a private offering 2,450,000 2,451 4,086,767 – – – – 4,089,218 Exercise of warrants 1,156,381 1,156 – – – – – 1,156 Net (loss) – – – – – 42,702 ( 3,256,020 ) ( 3,213,318 ) Balance at September 30, 2023 25,678,290 $ 25,678 $ 84,387,890 10,000 $ 1,000 $ 204,549 $ ( 62,655,634 ) $ 21,963,483 Three Month Period Ended September 30, 2022 Balance at June 30, 2022 18,885,632 $ 18,886 $ 76,331,451 10,000 $ 1,000 $ ( 34,777 ) $ ( 34,430,280 ) $ 41,886,280 Net (loss) – – – – – ( 45,126 ) ( 1,457,019 ) ( 1,502,145 ) Balance at September 30, 2022 18,885,632 $ 18,886 $ 76,331,451 10,000 $ 1,000 $ ( 79,903 ) $ ( 35,887,299 ) $ 40,384,135 Nine Month Period Ended September 30, 2022 Balance December 31, 2021 2,595,620 $ 2,596 $ 32,787,379 1,000,000 $ 100,000 $ ( 23,139 ) $ ( 32,655,174 ) $ 211,662 Common stock and pre-funded warrants issued in public offering 6,656,526 6,657 30,360,528 – – – – 30,367,185 Exercise of warrants 9,633,486 9,633 13,183,544 – – – – 13,193,177 Preferred stock purchased from related party – – – ( 990,000 ) ( 99,000 ) – – ( 99,000 ) Net (loss) – – – – – ( 56,764 ) ( 3,232,125 ) ( 3,288,889 ) Balance at September 30, 2022 18,885,632 $ 18,886 $ 76,331,451 10,000 $ 1,000 $ ( 79,903 ) $ ( 35,887,299 ) $ 40,384,135 The accompanying notes are an integral part of these unaudited financial statements 6 Sunshine Biopharma, Inc. Notes to Unaudited Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 Note 1 – Description of Business The Company was originally incorporated under the name Mountain West Business Solutions, Inc. on August 31, 2006, in the State of Colorado. Effective October 15, 2009, the Company acquired Sunshine Biopharma, Inc. in a transaction classified as a reverse acquisition. Upon completion of the reverse acquisition transaction, the Company changed its name to Sunshine Biopharma, Inc. and began operating as a pharmaceutical company. In addition to conducting its own drug development activities, Sunshine Biopharma operates two wholly owned subsidiaries: (i) Nora Pharma Inc. (“Nora Pharma”), a Canadian corporation with a portfolio of pharmaceutical products consisting of 51 generic prescription drugs on the market in Canada, and (ii) Sunshine Biopharma Canada Inc. (“Sunshine Canada”), a Canadian corporation which develops and sells nonprescription over-the-counter (“OTC”) products. In addition to the 51 generic prescription drugs currently on the market in Canada, the Company has 32 additional generic prescription drugs scheduled to be launched in 2024 and 2025 in Canada. The Company has determined that it has two reportable segments: · Prescription Generic Pharmaceuticals (“Generic Pharmaceuticals”) · Nonprescription Over-The-Counter Products (“OTC Products) Through December 31, 2022 and as of September 30, 2023, sales from the Generic Pharmaceuticals segment represented approximately 97 % of total revenues of the Company while the remaining approximately 3 % was generated from the sale of OTC Products. Based on these results, the Company deems segmentation reporting to be immaterial at September 30, 2023. The Company is not subject to material customer concentration risks as it sells its products directly to pharmacies in several Canadian Provinces. Provincial governments in Canada reimburse patients for their prescription drugs expenditures to various degrees under drug reimbursement programs, making generic drugs prices highly dependent on government regulations which may change over time. The most recent negotiations between the pan-Canadian Pharmaceutical Alliance and the Canadian Generic Pharmaceutical Association have resulted in updated generic pricing for certain products which took effect on October 1, 2023. The updated prices are valid for three years and the agreement contains an option to extend for an additional two years. In addition, the Company is engaged in the development of the following proprietary drugs: · Adva-27a, a small chemotherapy molecule for treatment of pancreatic cancer (IND-enabling studies were paused on November 2, 2023 due to unfavorable results. See Note 13 – Subsequent Events ) · K1.1 mRNA, a lipid nano-particle (LNP) targeted for liver cancer · SBFM-PL4, a protease inhibitor for treatment of Coronavirus infections 7 Note 2 – Basis of Presentation The unaudited financial statements of the Company for the nine months periods ended September 30, 2023 and 2022 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2022, was derived from the audited financial statements included in the Company's financial statements as of and for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 4, 2023. These financial statements should be read in conjunction with that report. Note 3 – Private Placement On May 16, 2023, the Company completed a private placement pursuant to a securities purchase agreement with a single institutional investor for gross proceeds of approximately $ 5 million, before deducting fees to the placement agent and other offering expenses payable by the Company. The net proceeds received by the Company were $ 4,089,218 . In connection with the private placement, the Company issued (i) 2,450,000 shares of common stock, (ii) 3,502,381 pre-funded warrants (the “May Pre-Funded Warrants”), and (iii) investor warrants (the “May Investor Warrants”) to purchase up to 11,904,762 shares of common stock at $0.59 per share. Each share of common stock and accompanying two May Investor Warrants were sold together at a combined offering price of $0.84 and each May Pre-Funded Warrant and accompanying two May Investor Warrants were sold together at a combined offering price of $0.839. The May Pre-Funded Warrants are immediately exercisable at a nominal exercise price of $0.001, and may be exercised at any time until all of the May Pre-Funded Warrants are exercised in full. The May Investor Warrants which have an exercise price of $0.59 per share (subject to adjustment as set forth therein), are exercisable upon issuance and will expire five and a half years from the date of issuance. As of September 30, 2023, a total of 1,156,381 May Pre-Funded Warrants and no May Investor Warrants have been exercised. The net proceeds received from the exercise of May Pre-Funded Warrants were $ 1,156 . Note 4 – Acquisition of Nora Pharma Inc. On October 20, 2022, the Company acquired all of the issued and outstanding shares of Nora Pharma Inc. The purchase price for the shares was $ 18,860,637 (USD), $ 14,346,637 of which was paid in cash and the remainder was paid through the issuance of 3,700,000 shares of the Company’s common stock valued at $ 4,514,000 or $1.22 per share. Nora Pharma sells generic pharmaceutical products in Canada. Nora Pharma’s operations are authorized by a Drug Establishment License issued by Health Canada. 8 The following table summarizes the allocation of the purchase price as of October 20, 2022, the acquisition date using Nora Pharma’s balance sheet assets and liabilities: Schedule of allocation of purchase price Accounts receivable $ 1,358,121 Inventory 3,181,916 Intangible assets 659,571 Equipment & furniture 210,503 Other assets 1,105,093 Total assets 6,515,204 Liabilities assumed ( 5,981,286 ) Net assets 533,918 Goodwill 18,326,719 Total Consideration $ 18,860,637 The value of the 3,700,000 common shares issued as part of the consideration paid for Nora Pharma was determined based on the closing market price of the Company’s common shares on the acquisition date, October 20, 2022 ($1.22 per share). The Company impaired 100% of the goodwill amount in 2022 and plans to depreciate the intangible assets as detailed in Note 5 below. As part of the consideration paid for Nora Pharma, the Company agreed to a $ 5,000,000 CAD ($ 3,632,000 USD) earnout amount payable to Mr. Malek Chamoun, the Seller of Nora Pharma. The earnout is payable in the form of twenty (20) payments of $250,000 CAD for every $1,000,000 CAD increase in gross sales (as defined in the Purchase Agreement) above Nora Pharma’s June 30, 2022 gross sales, provided that his employment with the Company is not terminated pursuant to the Company’s employment agreement with him. The total earnout amount of $3,632,000 has been recorded as a salary payable. During the nine-month period ended September 30, 2023, the Company paid an earn-out amount of $ 1,084,169 leaving a balance earn-out to be paid of $ 2,547,831 at September 30, 2023. The unaudited financial information in the table below summarizes the combined results of operations of the Company and Nora Pharma for the years ended December 31, 2022 and 2021, on a pro forma basis, as though the two companies had been combined as of January 1, 2021. The unaudited pro forma financial information does not purport to be indicative of the Company's combined results of operations which would have been obtained had the acquisition taken place on January 1, 2021, nor should it be taken as indicative of future consolidated results of operations: Schedule of Pro Forma results from acquisition Pro Forma Results From Acquisition December 31, 2022 December 31, 2021 Total revenues $ 14,758,115 $ 7,927,165 Net (loss) from operations $ ( 26,192,503 ) $ ( 2,224,253 ) Net (loss) $ ( 26,164,764 ) $ ( 12,289,655 ) Basic and fully diluted (loss) per share $ ( 1.74 ) $ ( 4.70 ) Weighted average number of shares outstanding 15,056,097 2,612,061 9 Note 5 – Intangible Assets Intangible assets, net, consisted of the following at September 30, 2023: Schedule of intangible assets Balance June 30, 2023 $ 1,233,570 Dossier fee additions 13,905 Balance at September 30, 2023 1,247,475 Less accumulated amortization ( 31,268 ) Finite-lived intangible assets, net, at September 30, 2023 $ 1,216,207 Balance December 31, 2022 $ 776,856 Dossier fee additions 470,619 Balance at September 30, 2023 1,247,475 Less accumulated amortization ( 31,268 ) Finite-lived intangible assets, net, at September 30, 2023 $ 1,216,207 Amortization expense for the three months period ended September 30, 2023, and the nine months period ended September 30, 2023, amounted to $ 10,797 and $ 26,746 , respectively. As of September 30, 2023, estimated amortization expense of the Company’s intangible assets for each of the next five years is as follows: Schedule of estimated amortization expense 2024 $ 55,418 2025 55,418 2026 54,240 2027 15,599 2028 7,370 Note 6 – Reverse Stock Splits Effective February 9, 2022, the Company completed a 1 for 200 reverse split of its common stock. The Company had previously completed two 20 to 1 reverse stock splits, one in 2019 and the other in 2020. The Company’s financial statements reflect all three reverse stock splits on a retroactive basis for all periods presented and for all references to common stock, unless specifically stated otherwise. 10 Note 7 – Capital Stock The Company’s authorized capital is comprised of 3,000,000,000 shares of common stock, par value $ 0.001 , and 30,000,000 shares of preferred stock, $ 0.10 par value. As of December 31, 2022 and September 30, 2023, the Company had authorized 1,000,000 shares of Series B Preferred Stock. The Series B Preferred Stock is non-convertible, non-redeemable and non-retractable. It has superior liquidation rights to the common stock at $0.10 per share and gives the holder the right to 1,000 votes per share. As of September 30, 2023 and December 31, 2022, 10,000 shares of Series B Preferred Stock are outstanding and held by the Company’s chief executive officer. On February 17, 2022, the Company completed a public offering and received net proceeds of $ 6,833,071 from the offering. Pursuant to the public offering, the Company issued and sold an aggregate of 1,882,353 shares of common stock and 4,102,200 warrants to purchase shares of common stock (the “Tradeable Warrants”). On February 22, 2022, the Company redeemed 990,000 shares of Series B Preferred Stock from the CEO of the Company at a redemption price equal to the stated value of $0.10 per share. The remaining 10,000 shares of Series B Preferred Stock could not be voted pursuant to a warrant agent agreement relating to the Tradeable Warrants (the “Warrant Agent Agreement”). On October 12, 2023, the Company held a special meeting of the holders of the outstanding Tradeable Warrants in which the holders of the majority of the outstanding Tradeable Warrants approved an amendment to the Warrant Agent Agreement to eliminate the provision that prohibited the Company’s CEO from exercising his voting rights under the Series B Preferred Stock, as well as to lower the exercise price of the Tradeable Warrants to $ 0.11 . The Company entered into the amendment to the Warrant Agent Agreement on October 18, 2023. On March 14, 2022, the Company completed a private placement and received net proceeds of $ 6,781,199 . In connection with this private placement, the Company issued (i) 2,301,353 shares of its common stock together with investor warrants (“Investor Warrants”) to purchase up to 2,301,353 shares of common stock, and (ii) 1,302,251 pre-funded warrants (“Pre-Funded Warrants”) with each Pre-Funded Warrant exercisable for one share of common stock, together with Investor Warrants to purchase up to 1,302,251 shares of common stock. Each share of common stock and accompanying Investor Warrant was sold together at a combined offering price of $2.22 and each Pre-Funded Warrant and accompanying Investor Warrant were sold together at a combined offering price of $2.219. The Pre-Funded Warrants were immediately exercisable, at a nominal exercise price of $0.001, and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. The Investor Warrants have an exercise price of $2.22 per share (subject to adjustment as set forth in the warrant), are exercisable upon issuance and will expire five years from the date of issuance. On April 28, 2022, the Company completed another private placement and received net proceeds of $ 16,752,915 . In connection with this private placement, the Company issued (i) 2,472,820 shares of its common stock together with warrants (“April Warrants”) to purchase up to 4,945,640 shares of common stock, and (ii) 2,390,025 pre-funded warrants (“Pre-Funded Warrants”) with each Pre-Funded Warrant exercisable for one share of common stock, together with April Warrants to purchase up to 4,780,050 shares of common stock. Each share of common stock and accompanying two April Warrants were sold together at a combined offering price of $4.01 and each Pre-Funded Warrant and accompanying two April Warrants were sold together at a combined offering price of $4.009. The Pre-Funded Warrants were immediately exercisable, at a nominal exercise price of $0.001, and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. The April Warrants have an exercise price of $3.76 per share (subject to adjustment as set forth in the warrant), are exercisable upon issuance and will expire five years from the date of issuance. On October 20, 2022, the Company issued 3,700,000 shares of common stock as part of the acquisition of Nora Pharma. These shares were valued at $ 4,514,000 , or $1.22 per share. 11 On January 19, 2023, the Company announced a stock repurchase program of up to $ 2 million (“Stock Repurchase Program”). During the six months ended June 30, 2023, the Company repurchased a total of 445,711 shares of common stock at an average price of $1.1371 per share for a total cost of $ 506,822 . The 445,711 repurchased common shares were cancelled and returned to treasury reducing the number of issued and outstanding shares from 22,585,632 to 22,139,921. On May 16, 2023, the Company completed a private placement pursuant to a securities purchase agreement with a single institutional investor for gross proceeds of approximately $ 5 million, before deducting fees to the placement agent and other offering expenses payable by the Company. The net proceeds received by the Company were $ 4,089,218 . In connection with the private placement, the Company issued (i) 2,450,000 shares of common stock, (ii) 3,502,381 pre-funded warrants (the “May Pre-Funded Warrants”), and (iii) investor warrants (the “May Investor Warrants”) to purchase up to 11,904,762 shares of common stock at $0.59 per share. Each share of common stock and accompanying two May Investor Warrants were sold together at a combined offering price of $0.84 and each May Pre-Funded Warrant and accompanying two May Investor Warrants were sold together at a combined offering price of $0.839. The May Pre-Funded Warrants are immediately exercisable, at a nominal exercise price of $0.001, and may be exercised at any time until all of the May Pre-Funded Warrants are exercised in full. The May Investor Warrants which have an exercise price of $0.59 per share (subject to adjustment as set forth therein), are exercisable upon issuance and will expire five and a half years from the date of issuance. In 2022 and the first six months of 2023, the Company issued a total of 10,789,867 shares of common stock in connection with warrant exercises for aggregate net proceeds of $ 13,194,335 . In July 2023, the Company repurchased a total of 68,012 shares of common stock on the open market under the Stock Repurchase Program announced on January 19, 2023, at an average price of $0.5046 per share for a total cost of $ 34,321 . In October 2023, the 68,012 repurchased common shares were cancelled and returned to treasury reducing the number of issued and outstanding shares from 25,746,302 to 25,678,290. As of September 30, 2023 and December 31, 2022, the Company has a total of 25,678,290 and 22,585,632 shares of common stock issued and outstanding, respectively. The Company has declared no dividends since inception. Note 8 – Warrants The Company accounts for issued warrants either as a liability or equity in accordance with ASC 480-10 or ASC 815-40. Under ASC 480-10, warrants are considered a liability if they are mandatorily redeemable and they require settlement in cash, other assets, or a variable number of shares. If warrants do not meet liability classification under ASC 480-10, the Company considers the requirements of ASC 815-40 to determine whether the warrants should be classified as a liability or as equity. Under ASC 815-40, contracts that may require settlement for cash are liabilities, regardless of the probability of the occurrence of the triggering event. Liability-classified warrants are measured at fair value on the issuance date and at the end of each reporting period. Any change in the fair value of the warrants after the issuance date is recorded in the consolidated statements of operations as a gain or loss. If warrants do not require liability classification under ASC 815-40, in order to conclude warrants should be classified as equity, the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP standard. Equity-classified warrants are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date. 12 In 2022 and during the first nine months of 2023, the Company completed four financing events, and in connection therewith, it issued warrants as follows: Schedule of warrants issued with financing Type Number Exercise Price Expiry Date Pre-Funded Warrants 3,692,276 $ 0.001 Unlimited Tradeable Warrants 4,102,200 $ 2.22 * February 2027 Investor Warrants 3,603,604 $ 2.22 March 2027 April Warrants 9,725,690 $ 3.76 April 2027 May Pre-Funded Warrants 3,502,381 $ 0.001 Unlimited May Investor Warrants 11,904,762 $ 0.59 November 2028 * The Tradeable Warrants had an initial exercise price of $4.25, subject to adjustment. Upon the closing of the Company's private placement on March 14, 2022, the exercise price of the Tradeable Warrants was reduced to $2.22, in accordance with the terms thereof. As of September 30, 2023, all of the Pre-Funded Warrants and a total of 3,138,507 Tradeable Warrants, 2,802,703 Investor Warrants, and 1,156,381 May Pre-Funded Warrants were exercised resulting in aggregate proceeds of $ 13,194,335 received by the Company. The Company’s outstanding warrants at September 30, 2023 consisted of the following: Schedule of outstanding warrants Type Number Exercise Price Expiry Date Pre-Funded Warrants None $ 0.001 Unlimited Tradeable Warrants 963,693 $ 2.22 * February 2027 Investor Warrants 800,901 $ 2.22 March 2027 April Warrants 9,725,690 $ 3.76 April 2027 May Pre-Funded Warrants 2,346,000 $ 0.001 Unlimited May Investor Warrants 11,904,762 $ 0.59 November 2028 * On October 12, 2023, the Company held a special meeting of the holders of its outstanding Tradeable Warrants in which a majority of the holders approved an amendment to the Warrant Agent Agreement to reduce the exercise price of the Tradeable Warrants to $0.11 per warrant. The amendment was executed on October 18, 2023. Note 9 – Net Loss Per Common Share Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, taking into consideration common stock equivalents. 13 In February 2022, the Company issued 4,102,200 Tradeable Warrants pursuant to the Company’s Public Offering. In March and April 2022, the Company issued 3,603,604 Investor Warrants and 9,725,690 April Warrants pursuant to two private placements. In May 2023, the Company issued 11,904,762 May Investor Warrants pursuant to two private placements. As of September 30, 2023, 3,138,507 Tradeable Warrants and 2,802,703 Investor Warrants were exercised, leaving 963,693 Tradeable Warrants, 800,901 Investor Warrants, 9,725,690 April Warrants, and 11,904,762 May Investor Warrants outstanding. These warrants are dilutive and were included in the diluted earnings per share. In March and April 2022, the Company issued and sold Pre-Funded Warrants to purchase an aggregate of 3,692,276 shares of common stock at a nominal exercise price of $0.001 per share. During the nine months ended September 30, 2023, all of these warrants were exercised and therefore had no remaining dilutive effect. In May 2023, the Company issued and sold May Pre-Funded Warrants to purchase an aggregate of 3,502,381 shares of common stock at a nominal exercise price of $0.001 per share. During the nine months ended September 30, 2023, 1,156,381 of these warrants were exercised leaving 2,346,000 outstanding. These warrants were not included in the calculation of weighted average outstanding shares as they would be ant-dilutive. Note 10 – Lease The Company has obligations as a lessee for office space with initial non-cancellable terms in excess of one year. The Company classified the lease as an operating lease. The lease contains a renewal option for a period of five years. Because the Company is certain to exercise the renewal option, the optional period is included in determining the lease term, and associated payments under the renewal option are included in the lease payments. The Company’s lease does not include termination options for either party to the lease or restrictive financial or other covenants. Payments due under the lease contract include fixed payments plus a variable Payment. The Company’s office space lease requires it to make variable payments for the Company’s proportionate share of building’s property taxes, insurance, and common area maintenance. These variable lease payments are not included in lease payments used to determine lease liability and are recognized as variable costs when incurred. Amounts reported on the balance sheet as of September 30, 2023 were as follows: Schedule of lease information Operating lease ROU asset $ 664,296 Operating Lease liability - Short-term $ 117,840 Operating lease liability - Long-term $ 555,687 Remaining lease term 6 years 3 months Discount rate 6 % Amounts disclosed for ROU assets obtained in exchange for lease obligations and reductions of ROU assets resulting from reductions of lease obligations include amounts reduced from the carrying amount of ROU assets resulting from deferred rent. 14 Maturities of lease liabilities under non-cancellable operating leases at September 30, 2023 are as follows: Schedule of maturities of lease liabilities 2023 $ 30,124 2024 116,090 2025 116,277 2026 110,134 2027 103,736 Thereafter 197,166 Note 11 – Management and Director Compensation The Company paid its officers cash compensation totaling $ 245,000 and $ 362,500 and $ 1,290,000 and $ 770,095 for the three and nine-month periods ended September 30, 2023 and 2022, respectively. The Company paid its directors cash compensation totaling $ 100,000 and $ 300,000 and $ 100,000 and $ 200,000 for the three and nine-month periods ended September 30, 2023 and 2022, respectively. Note 12 – Income Taxes In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon currently known facts and circumstances and applies that rate to its year-to-date earnings or losses. The Company’s effective tax rate is based on expected income and statutory tax rates and takes into consideration permanent differences between financial statement and tax return income applicable to the Company in the various jurisdictions in which the Company operates. The effect of discrete items, such as changes in estimates, changes in rates or tax status, and unusual or infrequently occurring events, is recognized in the interim period in which the discrete item occurs. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the result of new judicial interpretations or regulatory or tax law changes. The Company’s interim effective tax rate, inclusive of discrete items, for the nine-month periods ended September 30, 2023 and 2022 was 26.83 %. Note 13 – Subsequent Events On October 12, 2023, the Company held a special meeting of the holders of its outstanding Tradeable Warrants in which the holders of the majority of the outstanding Tradeable Warrants approved an amendment to the Warrant Agent Agreement to (i) reduce the exercise price of the Tradeable Warrants to $0.11, subject to further adjustment as provided therein, and (ii) eliminate the provision that prohibits the Company’s CEO from exercising his voting rights under his Series B Preferred Stock. In December 2022, the Company had entered into a research agreement with the Jewish General Hospital (“JGH”), Montreal, Canada to conduct IND-enabling studies of the Company’s anticancer drug candidate, Adva-27a (the “Research Agreement”). In August 2023, the Company was advised by JGH that the lab results on testing of the Adva-27a molecule were not favorable. After conclusion of an internal review of the lab results on November 2, 2023, the Company provided notice of termination of the Research Agreement, which will become effective on December 2, 2023, pursuant to the terms of the Research Agreement. The Company has now paused the IND-enabling studies of Adva-27a pending a review of the possibility of chemical modification of the compound to address the suboptimal performance of the molecule in certain studies. 15