SUNSHINE BIOPHARMA, INC. Form 10-Q
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period
ended: June 30, 2024
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number: 001-41282
SUNSHINE BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
Colorado
20-5566275
(State of other jurisdiction of incorporation)
(IRS Employer
ID No.)
333 Las Olas Way,
CU4 Suite 433
Fort Lauderdale , FL
33301
(Address of principal executive offices)
954 - 515-0810
(Issuer’s Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of Each Exchange on Which Registered
Common Stock
SBFM
The NASDAQ Stock Market LLC
Common Stock Purchase Warrants
SBFMW
The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒
No ☐
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging
growth company” in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated
filer ☐
Accelerated
filer ☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒
No
The number of shares of the registrant’s
common stock, par value $0.001, issued and outstanding as of August 16, 2024, was 1,124,341 shares.
TABLE
OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
3
Consolidated Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023
3
Consolidated Statements of Operations for the Six Months Ended June 30, 2024 and 2023 (Unaudited)
4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (Unaudited)
5
Consolidated Statement of Shareholders' Equity for the Six Months Ended June 30, 2024 and 2023 (Unaudited)
6
Notes to Unaudited Consolidated Financial Statements
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
16
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
22
Item 4.
Controls and Procedures
22
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
23
Item 1A.
Risk Factors
23
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
23
Item 3.
Defaults Upon Senior Securities
23
Item 4.
Mine Safety Disclosures
23
Item 5.
Other Information
23
Item 6.
Exhibits
23
Signatures
24
2
PART
I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Sunshine Biopharma, Inc.
Consolidated Balance Sheets
June 30,
December 31,
2024
2023
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents
$ 11,507,745
$ 16,292,347
Accounts receivable
3,973,550
2,552,362
Inventory
8,490,745
5,734,755
Prepaid expenses
1,776,480
310,591
Total Current Assets
25,748,520
24,890,055
Long-Term Assets:
Property & equipment
541,410
365,868
Intangible assets
2,447,128
1,444,259
Right-of-use-asset
563,920
646,779
Total Long-Term Assets
3,552,458
2,456,906
TOTAL ASSETS
$ 29,300,978
$ 27,346,961
LIABILITIES
Current Liabilities:
Accounts payable & accrued expenses
$ 4,930,055
$ 2,585,466
Earnout payable
–
2,547,831
Income tax payable
254,971
299,869
Current portion - right-of-use-liability
114,452
118,670
Total Current Liabilities
5,299,478
5,551,836
Long-Term Liabilities:
Deferred tax liability
48,729
48,729
Right-of-use-liability
462,906
539,035
Total Long-Term Liabilities
511,635
587,764
TOTAL LIABILITIES
5,811,114
6,139,600
SHAREHOLDERS' EQUITY
Preferred Stock, Series B $ 0.10
par value per share; 1,000,000
shares authorized; 130,000
and 10,000
shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively
13,000
1,000
Common Stock, $ 0.001 par value per share;
3,000,000,000 shares authorized; 1,170,510 and 14,012 shares issued and outstanding at June 30, 2024 and
December 31, 2023, respectively
1,171
14
Capital paid in excess of par value
89,842,503
84,415,900
Accumulated comprehensive income (loss)
( 683,050 )
696,105
Accumulated (Deficit)
( 65,683,759 )
( 63,905,658 )
TOTAL SHAREHOLDERS' EQUITY
23,489,865
21,207,361
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 29,300,978
$ 27,346,961
See
Accompanying Notes To These Financial Statements
3
Sunshine
Biopharma, Inc.
Consolidated
Statements of Operations and Comprehensive Loss (Unaudited)
3 Months Ended June 30,
6 Months Ended June 30,
2024
2023
2024
2023
Sales
$ 9,303,067
$ 5,560,865
$ 16,844,113
$ 10,454,918
Cost of sales
6,946,810
3,608,118
12,133,519
6,674,049
Gross profit
2,356,257
1,952,747
4,710,594
3,780,869
General & Administrative Expenses:
Accounting
88,394
75,281
440,400
245,031
Consulting
54,048
392,454
101,449
524,069
Director fees
100,000
100,000
200,000
200,000
Legal
223,436
145,815
445,434
259,572
Marketing
256,325
133,177
454,371
261,090
Office
713,245
419,650
1,673,636
938,768
R&D
436,235
368,565
658,268
801,490
Salaries
1,556,176
1,200,167
3,089,888
3,200,424
Taxes
145,805
96,649
221,706
160,367
Depreciation
50,870
34,877
93,488
69,587
Total General & Administrative Expenses:
3,624,533
2,966,635
7,378,640
6,660,398
(Loss) from operations
( 1,268,276 )
( 1,013,888 )
( 2,668,046 )
( 2,879,529 )
Other Income (Expense):
Foreign exchange (loss)
286,535
( 261 )
280,768
( 246 )
Interest income
143,995
203,049
288,084
416,930
Interest expense
( 245 )
( 3,331 )
( 245 )
( 7,746 )
Total Other Income (Expense)
430,285
199,457
568,607
408,938
Net (loss) before income taxes
( 837,991 )
( 814,431 )
( 2,099,439 )
( 2,470,591 )
Provision for income taxes
343,691
( 87,677 )
321,338
( 133,947 )
Net (Loss)
$ ( 494,300 )
$ ( 902,108 )
$ ( 1,778,101 )
$ ( 2,604,538 )
Comprehensive Income (Loss):
Gain (Loss) from foreign exchange translation
( 835,450 )
492,049
( 1,379,155 )
503,209
Comprehensive Income (Loss)
$ ( 1,329,750 )
$ ( 410,059 )
$ ( 3,157,256 )
$ ( 2,101,329 )
Basic (Loss) per common share
$ ( 9.94 )
$ ( 71.17 )
$ ( 43.48 )
$ ( 218.62 )
Weighted Average Common Shares Outstanding (Basic)
49,726
12,675
40,896
11,914
See Accompanying Notes To These Financial Statements
4
Sunshine
Biopharma, Inc.
Consolidated
Statements of Cash Flows (Unaudited)
June 30,
June 30,
2024
2023
Cash Flows From Operating Activities:
Net (Loss)
$ ( 1,778,101 )
$ ( 2,604,538 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
93,494
69,594
Stock issued for services
12,000
–
Accounts receivable
( 1,867,693 )
( 55,160 )
Inventory
( 2,949,128 )
( 885,243 )
Prepaid expenses
( 272,810 )
182,852
Accounts Payable & accrued expenses
2,794,798
( 1,103,502 )
Earn-out payable
( 2,547,831 )
( 1,084,169 )
Income tax payable
( 1,247,671 )
( 147,980 )
Net Cash Flows (Used In) Operating Activities
( 7,762,942 )
( 5,628,146 )
Cash Flows From Investing Activities:
Reduction in right-of-use asset
61,074
66,846
Purchase of intangible assets
( 234,569 )
( 17,645 )
Purchase of equipment
( 1,037,450 )
( 454,980 )
Net Cash Flows (Used In) Investing Activities
( 1,210,944 )
( 405,779 )
Cash Flows From Financing Activities:
Proceeds from public offering net (common stock)
8,522,411
4,089,208
Exercise of warrants
45,000
1,156
Purchase of treasury stock
( 3,139,651 )
( 506,822 )
Lease liability
( 58,194 )
( 63,870 )
Net Cash Flows Provided by Financing Activities
5,369,566
3,519,672
Cash and Cash Equivalents at Beginning of Period
16,292,347
21,826,437
Net increase (decrease) in cash and cash equivalents
( 3,604,320 )
( 2,514,253 )
Effect of exchange rate changes on cash
–
9
Foreign currency translation adjustment
( 1,180,282 )
417,298
Cash and Cash Equivalents at End of Period
$ 11,507,745
$ 19,729,491
Supplementary Disclosure of Cash Flow Information:
Cash paid for income taxes
$ 956,012
$ –
Stock issued for services
$ 12,000
$ –
See
Accompanying Notes To These Financial Statements
5
Sunshine
Biopharma, Inc.
Consolidated
Statements of Shareholders' Equity (Unaudited)
Three Months
Number Of Common
Shares
Common
Capital Paid
in Excess of Par
Treasury
Number Of Preferred
Shares
Preferred
Comprehensive
Accumulated
Periods
Issued
Stock
Value
Stock
Issued
Stock
Income
Deficit
Total
Balance
March 31, 2024
49,726
50
$ 89,843,624
$ –
130,000
$ 13,000
$ 152,400
$ ( 65,189,459 )
$ 24,819,615
Exercise of
warrants
1,120,784
1,121
( 1,121 )
–
–
–
–
–
–
Net
(loss)
–
–
–
–
–
–
( 835,450 )
( 494,300 )
( 1,329,750 )
Balance
at June 30, 2024
1,170,510
$ 1,171
$ 89,842,503
$ –
130,000
13,000
$ ( 683,050 )
$ ( 65,683,759 )
23,489,865
Balance
March 31, 2023
11,070
$ 11
$ 80,357,504
$ –
10,000
$ 1,000
$ 173,007
$ ( 61,102,044 )
$ 19,429,478
Common
stock and prefunded warrants issued in a private offering
1,225
1
4,089,217
–
–
–
–
–
4,089,218
Exercise of
warrants
578
1
1,155
–
–
–
–
–
1,156
Net
(loss)
–
–
–
–
–
–
492,049
( 902,108 )
( 410,059 )
Balance
at June 30, 2023
12,873
$ 13
$ 84,447,876
$ –
10,000
$ 1,000
$ 665,056
$ ( 62,004,152 )
$ 23,109,793
Six
Months Periods
Balance
December 31, 2023
14,012
$ 14
$ 84,415,900
$ –
10,000
$ 1,000
$ 696,105
$ ( 63,905,658 )
$ 21,207,361
Preferred
Stock issued to related party
–
–
–
–
120,000
12,000
–
–
12,000
Common
stock and pre-funded warrants issued in an underwritten offering
13,214
13
8,522,398
–
–
–
–
–
8,522,411
Exercise of
warrants
1,143,284
1,144
43,856
–
–
–
–
–
45,000
Repurchase
of warrants
–
–
( 3,139,651 )
–
–
–
–
–
( 3,139,651
Net
(loss)
–
–
–
–
–
–
( 1,379,155 )
( 1,778,101 )
( 3,157,256 )
Balance
at June 30, 2024
1,170,510
$ 1,171
$ 89,842,503
$ –
130,000
13,000
$ ( 683,050 )
$ ( 65,683,759 )
$ 23,489,865
Balance
December 31, 2022
11,293
$ 11
$ 80,864,326
$ –
10,000
$ 1,000
$ 161,847
$ ( 59,399,614 )
$ 21,627,570
Repurchase
Stock
( 223 )
–
( 506,822 )
–
–
–
–
–
( 506,822 )
Common
stock and prefunded warrants issued in a private offering
1,225
1
4,089,217
–
–
–
–
–
4,089,218
Exercise of
warrants
578
1
1,155
–
–
–
–
–
1,156
Net
(loss)
–
–
–
–
–
–
503,209
( 2,604,538 )
( 2,101,329 )
Balance
at June 30, 2023
12,873
$ 13
$ 84,447,876
$ –
10,000
$ 1,000
$ 665,056
$ ( 62,004,152 )
$ 23,109,793
See
Accompanying Notes To These Financial Statements
6
Sunshine Biopharma, Inc.
Notes to Unaudited Consolidated Financial Statements
For the Six Months Ended June 30, 2024 and 2023
Note 1 – Description of Business
The Company was 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, the Company changed its
name to Sunshine Biopharma, Inc. and began operating as a pharmaceutical company.
Sunshine Biopharma operates two wholly owned subsidiaries: (i) Nora
Pharma Inc. (“Nora Pharma”), a Canadian corporation with a portfolio of pharmaceutical products consisting of 61 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.
The Company has determined that it has two reportable segments:
·
Prescription Generic Pharmaceuticals
(“Generic Pharmaceuticals”)
·
Nonprescription Over-The-Counter
Products (“OTC Products)
Through June 30, 2024, 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 June 30, 2024.
The Company is not subject to material customer concentration risks as
it sells its products directly to pharmacies in several Canadian provinces. However, in Canada provincial governments reimburse patients
for their prescription drugs expenditures to various degrees under drug reimbursement programs, making generic drugs prices highly dependent
on governmental policies 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 may be extended 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)
·
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 consolidated financial
statements of the Company for the three and six months periods ended June 30, 2024 and 2023, 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, 2023, was derived from the audited financial statements included in the Company's financial statements as of and for
the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange
Commission (the “SEC”) on March 28, 2024. These financial statements should be read in conjunction with that report.
On April 17, 2024 and August 8, 2024, the Company completed a 1-for-100
and a 1-for-20 reverse split of its common stock, respectively (the “Reverse Splits”). The share amounts, warrants, and related
parameters specified in this report have been adjusted to reflect both Reverse Splits on a retroactive basis.
Note 3 – Underwritten Public Offering
On February 15, 2024, the Company completed an underwritten public
offering for gross proceeds of approximately $ 10 million, before deducting fees to the underwriter and other offering expenses payable
by the Company. The net proceeds received by the Company were $ 8,522,411 .
The offering consisted of 35,714 Units, consisting of (i) 13,214 Common
Units, with each Common Unit consisting of one share of common stock, one-tenth of a Series A warrant to purchase one share of common
stock (“Series A Warrant”) and two-tenths of a Series B warrant to purchase one share of common stock (“Series B Warrant”),
and (ii) 22,500 Pre-Funded Units, with each Pre-Funded Unit consisting of one pre-funded warrant to purchase one share of common stock
(“Pre-Funded Warrants”), one-tenth of a Series A Warrant and two-tenths of a Series B Warrant. The public offering price was
$280.00 per Common Unit and $278.00 per Pre-Funded Unit. The Pre-Funded Warrants have an exercise price of $2.00 per share. The Pre-Funded
Warrants are immediately exercisable and may be exercised at any time until exercised in full. The initial exercise price of each Series
A Warrant was $4,200.00 per share of common stock or pursuant to an alternative cashless exercise option. Under the alternative cashless
exercise provision, which became effective following stockholder approval in March 2024, each Series A Warrant was exercisable on a cashless
basis for two shares of common stock. The Series A Warrants were exercisable immediately and expire 30 months after the initial issuance
date. The initial exercise price of each Series B Warrant was $4,760.00 per share of common stock. The Series B Warrants are exercisable
immediately and expire 60 months after the initial issuance date.
In addition (effective following the stockholder approval), the Series
A Warrants and Series B Warrants included a provision under which, following a reverse split of the common stock, the exercise price will
be adjusted to the lowest volume weighted average price (“VWAP”) for the five trading days immediately preceding and immediately
following the date of reverse stock split, and the number of shares issuable upon exercise of the Series A Warrants or Series B Warrants
will be adjusted such that the aggregate exercise price of the Series A Warrants or Series B Warrants will remain unchanged. The Series
B Warrants do not include an alternate cashless exercise provision and can only be exercised for cash so long as the Company’s registration
statement for such warrants and underlying shares remains effective.
In addition, the Company granted the underwriter, Aegis Capital Corp.
("Aegis"), a 45-day option to purchase up to an additional 15% of the total number of shares of common stock and/or Pre-Funded
Warrants and/or Series A Warrants and/or Series B Warrants sold in the offering, solely to cover overallotments, if any. On February 15,
2024, Aegis partially exercised its over-allotment option for a total of 415 Series A Warrants and 830 Series B Warrants.
On February 13, 2024, the Company obtained stockholder approval for
(i) adjustment of the number of underlying shares and exercise price for both the Series A Warrants and the Series B warrants, and (ii)
the alternate cashless exercise provision for the Series A warrants.
8
As of June 30, 2024, all of the Pre-Funded Warrants and all of the
Series A warrants have been exercised resulting in the Company issuing 22,500 and 1,120,784 shares of common stock, respectively. In
connection with such exercises, the Company received net proceeds of $ 45,000 and $ 0 , respectively.
As of August 16, 2024, the only securities remaining
outstanding in connection with this offering are 13,612,927 Series B Warrants exercisable at $ 2.7879 per share. These warrants are subject
to further adjustments per the Series B Warrant Agreement.
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. (“Nora Pharma”), a Canadian privately held pharmaceutical company. 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 1,850 shares of the Company’s
common stock valued at $ 4,514,000 or $2,440 per share. Nora Pharma sells generic pharmaceutical products in Canada. Nora Pharma’s
operations are authorized by a Drug Establishment License issued by Health Canada.
The following table summarizes the allocation
of the purchase price as of October 20, 2022, the acquisition date using Nora Pharma’s balance sheet assets and liabilities:
Schedule of allocation of purchase price
Accounts receivable
$ 1,358,121
Inventory
3,181,916
Intangible assets
659,571
Equipment & furniture
210,503
Other assets
1,105,093
Total assets
6,515,204
Liabilities assumed
( 5,981,286 )
Net assets
533,918
Goodwill
18,326,719
Total Consideration
$ 18,860,637
The value of the 1,850 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 ($2,440 per share).
9
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) earn-out amount payable to Mr. Malek Chamoun, the Seller of Nora Pharma and its current President. 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 earn-out amount of $3,632,000 has been recorded as a salary payable. During
the fiscal year ended December 31, 2023, the Company paid an earn-out amount of $ 1,084,169
for the fiscal year ended December 31, 2022. On April 22, 2024, the Company paid an earn-out amount of $ 3,093,878
CAD (approximately $ 2,291,761
USD) for the earn-out realized in fiscal year 2023. The current remaining earn-out balance is $ 479,207
CAD (approximately $ 354,968
USD).
Note 5 – Intangible Assets
Intangible assets, net consisted of the following:
Schedule of intangible assets
June 30,
2024
December 31,
2023
Balance at beginning of the year
$ 1,444,259
776,856
Purchase of additional intangible assets (licenses)
1,077,380
710,372
Total
2,521,639
1,487,228
Less accumulated amortization
( 74,511 )
( 42,969 )
Finite-lived intangible assets, net
$ 2,447,128
$ 1,444,259
As of
June 30, 2024, the estimated amortization amounts of the Company’s intangible assets for each of the next five years are
as follows:
Schedule of estimated amortization expense
2025
$
73,257
2026
73,257
2027
73,257
2028
39,300
2029
1,889
Note 6 – Reverse Stock Splits
Effective April 17, 2024 and August 8, 2024,
the Company completed a 1-for-100 and a 1-for-20 reverse split of its common stock (the “Reverse Splits”). The Company
had previously completed three (3) reverse stock splits including a 1-for-200 on February 9, 2022, and two 1-for-20 reverse stock
splits, one in 2019 and the other in 2020. The Company’s financial statements included in this report reflect all five (5)
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 June 30, 2024, the Company had authorized 1,000,000
shares of Series B Preferred Stock. The Series B Preferred Stock is non-convertible and non-redeemable. It has a liquidation
preference equal to the stated value of $0.10, relative to the common stock and gives the holder the right to 1,000 votes per share.
As of June 30, 2024, 130,000
shares of Series B Preferred Stock were 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 941 shares
of common stock and 20,051 warrants to purchase shares of common stock (the “Tradeable Warrants”).
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 from $4,440 to $220.00. 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) 1,150 shares of its common stock together
with investor warrants (“Investor Warrants”) to purchase up to 1,150 shares of common stock, and (ii) 651 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 6,511 shares of common stock. Each share of common stock and accompanying Investor Warrant was sold together at a combined
offering price of $4,440.00 and each Pre-Funded Warrant and accompanying Investor Warrant were sold together at a combined offering price
of $4,438.00. The Pre-Funded Warrants were immediately exercisable, at an exercise price of $2.00, 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 $4,440.00 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) 1,236 shares of its common
stock together with warrants (“April Warrants”) to purchase up to 2,472 shares of common stock, and (ii) 1,195 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 2,390 shares of common stock. Each share of common stock and accompanying two April Warrants were sold together
at a combined offering price of 8,020.00 and each Pre-Funded Warrant and accompanying two April Warrants were sold together at a combined
offering price of $8,018.00. The Pre-Funded Warrants were immediately exercisable, at an exercise price of $2.00, 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 $7,520.00 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.
11
On October 20, 2022, the Company issued 1,850 shares of common stock
as part of the acquisition of Nora Pharma. These shares were valued at $ 4,514,000 , or 2,440.00 per share.
On January 19, 2023, the Company announced a stock repurchase program
of up to $ 2 million (“Stock Repurchase Program”). During the six months ended June 30, 2023, the Company repurchased a total
of 2,228 shares of common stock at an average price of $2,274.20 per share for a total cost of $ 506,822 . The 2,228 repurchased common
shares were cancelled and returned to treasury reducing the number of issued and outstanding shares from 11,292 to 9,064.
On May 16, 2023, the Company completed a private placement pursuant
to a securities purchase agreement with an 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) 1,225 shares of common stock, (ii) 1,751 pre-funded warrants (the “May
Pre-Funded Warrants”), and (iii) investor warrants (the “May Warrants”) to purchase up to 5,952 shares of common stock. Each share of common stock and accompanying two May Warrants were sold together at a combined offering price of
$1,680.00 and each May Pre-Funded Warrant and accompanying two May Warrants were sold together at a combined offering price of $1,678.00.
The May Pre-Funded Warrants are immediately exercisable, at an exercise price of $2.00, and may be exercised at any time until all of
the May Pre-Funded Warrants are exercised in full. The May Warrants have an exercise price of $1,180.00 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 2023, the Company issued a total of 5,396 shares of common
stock in connection with warrant exercises for aggregate net proceeds of $ 13,196,681 .
In July 2023, the Company repurchased a total of 34 shares of common
stock under the Stock Repurchase Program announced on January 19, 2023, at an average price of $1,009.20 per share for a total cost of
$ 34,321 . In October 2023, the 34 repurchased common shares were cancelled and returned to treasury reducing the number of issued and outstanding
shares from 12,873 to 12,839.
On November 16, 2023, the Company issued 1,173 shares of common stock
and received net proceeds of $ 2,346 in connection with the exercise of all 1,173 remaining May Pre-Funded Warrants at an exercise price
of $2.00 per share.
On February 8, 2024, the Company issued 20,000 shares of Series B Preferred
Stock to the Company’s CEO for a purchase price of $ 0.10 per share.
On February 15, 2024, the Company completed an underwritten public
offering and in connection therewith it issued an aggregate of 35,714 shares of common stock, of which 22,500 shares were issued in connection
with pre-funded warrant exercises.
On March 4, 2024, the Company issued 100,000 shares of Series B Preferred
Stock to the Company’s CEO for a purchase price of $ 0.10 per share.
As of June 30, 2024 and December 31,
2023, the Company had a total of 1,170,510 and 14,012
shares of common stock issued and outstanding, respectively.
The Company has declared no dividends since inception.
12
Note 8 – Warrants
The Company accounts for issued warrants either as a liability or equity
in accordance with ASC 480-10 or ASC 815-40. Under ASC 480-10, warrants are considered a liability if they are mandatorily redeemable
and they require settlement in cash, other assets, or a variable number of shares. If warrants do not meet liability classification under
ASC 480-10, the Company considers the requirements of ASC 815-40 to determine whether the warrants should be classified as a liability
or as equity. Under ASC 815-40, contracts that may require settlement for cash are liabilities, regardless of the probability of the occurrence
of the triggering event. Liability-classified warrants are measured at fair value on the issuance date and at the end of each reporting
period. Any change in the fair value of the warrants after the issuance date is recorded in the consolidated statements of operations
as a gain or loss. If warrants do not require liability classification under ASC 815-40, in order to conclude warrants should be classified
as equity, the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity
under ASC 815-40 or other applicable GAAP standard. Equity-classified warrants are accounted for at fair value on the issuance date with
no changes in fair value recognized after the issuance date.
In 2022, 2023, and during the six months ended
June 30, 2024, the Company completed five (5) financing events, and in connection therewith, it issued warrants as follows:
Schedule
of warrants issued with financing
Type
Number
Exercise Price
Expiry Date
2022 Pre-Funded Warrants
1,846
$ 2.00
Unlimited
Tradeable Warrants
2,051
$ 4,440.00
February
2027
Investor Warrants
1,801
$ 4,440.00
March
2027
April Warrants
4,862
$ 7,520.00
April
2027
May Pre-Funded Warrants
1,751
$ 2.00
Unlimited
May Investor Warrants
5,952
$ 1,180.00
November
2028
2024 Pre-Funded Warrants
22,500
$ 2.00
Unlimited
Series A Warrants
3,986 *
$ 4,200.00 *
August
2026
Series B Warrants
7,973 *
$ 4,760.00 *
February
2029
_______________________
*
Subject to adjustments per the Series A and Series B
Warrant Agreements.
As of June 30, 2024, all of the 2022 Pre-Funded Warrants, all of the
May Pre-Funded Warrants, all of the 2024 Pre-Funded Warrants, a total of 1,569 Tradeable Warrants, 1,401 Investor Warrants, and all of
the Series A Warrants were exercised resulting in aggregate proceeds of $ 13,241,681 received by the Company.
13
On February 11, 2024, the Company redeemed all of the April Warrants
and all of the May Investor Warrants for an aggregate purchase price of $ 3,139,651 .
The Company’s outstanding warrants as of August 16, 2024 consisted
of the following:
Schedule
of warrants outstanding
Type
Number
Exercise Price
Expiry Date
Tradeable Warrants
481
$ 220.00
February
2027
Investor Warrants
400
$ 4,440.00
March
2027
Series B Warrants
13,612,927 *
$ 2.7879 *
February
2029
_____________________
*
As adjusted and subject to further adjustments per the Series B Warrant Agreements.
Note 9 – Earnings Per Share
The following table sets forth the computation of basic and diluted
net income per share for the quarters ended June 30:
Schedule of earnings per share computation
2024
2023
Net
gain (loss) attributable to common stock
$ ( 494,300 )
$ ( 902,108 )
Basic weighted average
outstanding shares of common stock
49,726
12,675
Dilutive
common share equivalents
–
–
Dilutive
weighted average outstanding shares of common stock
49,726
12,675
Net
gain (loss) per share attributable to common stock
$ ( 9.94 )
$ ( 71.17 )
Note 10 – Lease
The Company has obligations as a lessee for office and warehouse 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 include fixed payments plus a variable payment. The Company’s 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 June 30, 2024, were as follows:
Schedule of lease information
Operating lease
ROU asset
$ 563,920
Operating lease liability
- Short-term
$ 114,452
Operating lease liability
- Long-term
$ 462,906
Remaining lease term
5 years 6
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 June 30, 2024 are as follows:
Schedule of maturities of lease liabilities
2024
$ 56,479
2025
$ 114,859
2026
$ 108,790
2027
$ 102,470
2028
$ 96,517
Thereafter
$ 98,243
Note 11 – Management and Director
Compensation
The Company paid its officers cash compensation
totaling $ 1,120,356 and $ 225,000 , and $ 1,382,842 and $ 1,045,000 for the three and six months periods ended June 30, 2024 and 2023, respectively.
Of the $1,382,842 amount, $ 400,000 was paid to Advanomics Corporation, a company controlled by the CEO of the Company.
The Company paid its directors aggregate cash
compensation totaling $ 100,000 for
each of the three months periods ended June 30, 2024 and 2023, and $ 200,000
for each of the six months periods ended June 30, 2024 and 2023.
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.
Our
income tax (expense) / benefit of $ 343,691 and $ 321,338 for the three and six months ended June 30, 2024, respectively, is primarily
due to operations outside of the United States and changes in valuation allowance related to certain deferred tax assets generated or
utilized in the applicable period.
Our
income tax (expense) / benefit $ ( 87,677 ) and $ ( 133,947 ) for the three and six months ended June 30, 2023, respectively, is primarily
due to operations outside of the United States and changes in valuation allowance related to certain deferred tax assets generated or
utilized in the applicable period.
Deferred
tax assets are regularly reviewed for recoverability by jurisdiction and valuation allowances are established based on historical and
projected future taxable losses and the expected timing of the reversal of existing temporary differences. The Company as recorded valuation
allowances against the majority of its deferred tax assets of June 30, 2024, and the Company expects to maintain these valuation allowances
until there is sufficient evidence that future earnings can be achieved, which is uncertain at this time.
The
Company's consolidated financial statements contain various tax related entries the same being due to the operations of the two Canadian
subsidiaries and are in compliance with Canadian tax laws.
Note 13 – Subsequent Events
Effective August 8, 2024, the Company completed
a 1-for-20 reverse split of its common stock (the “Reverse Split”). As a result of the Reverse Split, the exercise price of
Series B Warrants adjusted to $2.7879 per share and the number of Series B Warrants adjusted to 13,612,927. All share amounts, warrants,
and related parameters specified in this report have been adjusted to reflect the Reverse Split.
Subsequent to June 30, 2024, the Company issued 53,831 shares of
common stock upon the exercise of 53,831 Series B Warrants and received $150,075 in net proceeds.
15
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in
conjunction with our consolidated financial statements and notes thereto included herein. This discussion includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities
Exchange Act of 1934, as amended, or the Exchange Act. The statements regarding Sunshine Biopharma, Inc. contained in this Report that
are not historical in nature, particularly those that utilize terminology such as “may,” “will,” “should,”
“likely,” “expects,” “anticipates,” “estimates,” “believes” or “plans,”
or comparable terminology, are forward-looking statements based on current expectations and assumptions, and entail various risks and
uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Important
factors known to us that could cause such material differences are identified in this report and in our annual report on Form 10-K for
the year ended December 31, 2023. We undertake no obligation to correct or update any forward-looking statements, whether as a result
of new information, future events or otherwise, except as may be required under applicable law. You are advised, however, to consult
any future disclosures we make on related subjects in future reports we file with the SEC.
About Sunshine Biopharma
We are a pharmaceutical company offering and researching life-saving
medicines in a wide variety of therapeutic areas, including oncology and antivirals. We operate two wholly owned subsidiaries: (i) Nora
Pharma Inc. (“Nora Pharma”), a Canadian corporation with a portfolio consisting of 61 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, we are conducting a proprietary drug development program
which is comprised of (i) K1.1 mRNA targeted for liver cancer, (ii) SBFM-PL4, PLpro protease inhibitor for SARS Coronavirus infections,
and (iii) Adva-27a for pancreatic cancer. Development of the latter has been paused pending further analysis of unfavorable in vitro results
obtained in the second half of 2023. See “Drugs in Development” below.
History
We were incorporated in the State of Colorado on August 31, 2006, and
on October 15, 2009, we acquired Sunshine Biopharma, Inc. in a transaction classified as a reverse acquisition. Sunshine Biopharma, Inc.
held an exclusive license to a new anticancer drug bearing the laboratory name, Adva-27a (the “License Agreement”). Upon completion
of the reverse acquisition, we changed our name to Sunshine Biopharma, Inc. and began operating as a pharmaceutical company.
In December 2015, we acquired all worldwide issued (US Patent Number
8,236,935, and 10,272,065) and pending patents under PCT/FR2007/000697 and PCT/CA2014/000029 for the Adva-27a anticancer compound and
terminated the License Agreement. Development of Adva-27a has recently been paused pending further analysis of unexpected in vitro results
obtained in the latter part of 2023. See “Drugs in Development” below.
In early 2020, we initiated a new R&D project focused on the development
of a treatment for COVID-19 and on May 22, 2020, we filed a provisional patent application in the United States for the new coronavirus
treatment. The patent application covers composition subject matter pertaining to small molecules for inhibition of the main Coronavirus
protease, Mpro. On April 30, 2021, we filed a PCT application containing new research results and extending coverage to include the Coronavirus
Papain-Like protease, PLpro.
In June 2021, we initiated another R&D project in which we set
out to determine if certain mRNA molecules can be used as anticancer agents. The data obtained for mRNA molecules bearing the laboratory
name K1.1 became the subject of a new patent application filed in April 2022.
On October 20, 2022, we acquired Nora Pharma Inc. (“Nora Pharma”),
a Canadian generic pharmaceuticals company based in the greater Montreal area. Nora Pharma has 46 employees and operates in a 23,500 square
foot facility certified by Health Canada. Nora Pharma currently has 61 generic prescription drugs on the market in Canada and is planning
to launch 32 additional generic prescription drugs in 2024 and 2025.
16
Products on the Market
Through Nora Pharma we currently have the following generic prescription
drugs on the market in Canada:
Drug
Action/Indication
Reference
Brand
Abiraterone*
Oncology
Zytiga®
Alendronate
Osteoporosis
Fosamax®
Amlodipine
Cardiovascular
Norvasc®
Apixaban
Cardiovascular
Eliquis®
Aripiprazole
Antipsychotic
Abilify®
Atorvastatin
Cardiovascular
Lipitor®
Azithromycin
Antibacterial
Zithromax®
Candesartan
Hypertension
Atacand®
Candesartan HCTZ
Hypertension
Atacand Plus®
Celecoxib
Anti-inflammatory
Celebrex®
Cetirizine
Allergy
Reactine®
Clobetasol*
Anti-inflammatory
Clobex®
Ciprofloxacin
Antibiotic
Cipro®
Citalopram
Central nervous system
Celexa®
Clindamycin
Antibiotic
Dalacin®
Clopidogrel
Cardiovascular
Plavix®
Dapagliflozin
Diabetes
Forxiga®
Daptomycin*
Antibacterial
Cubicin®
Dasatinib*
Oncology
Sprycel®
Donepezil
Central nervous system
Aricept®
Duloxetine
Central nervous system
Cymbalta®
Dutasteride
Urology
Avodart®
Ertapenem*
Antibacterial
Invanz®
Escitalopram
Central nervous system
Cipralex®
Ezetimibe
Cardiovascular
Ezetrol®
Finasteride
Urology
Proscar®
Flecainide
Cardiovascular
Tambocor®
Fluconazole
Antifungal
Diflucan®
Fluoxetine
Central nervous system
Prozac®
Hanzema®*
Dermatology
Toctino®
Hydroxychloroquine
Antimalarial
Plaquenil®
Lacosamide
Central nervous system
Vimpat®
Letrozole
Oncology
Femara®
Levetiracetam
Central nervous system
Keppra®
Mirtazapine
Central nervous system
Remeron®
Metformin
Diabetes
Glucophage®
Montelukast
Allergy
Singulair®
Olmesartan
Cardiovascular
Olmetec®
Olmesartan HCTZ
Cardiovascular
Olmetec Plus®
Pantoprazole
Gastroenterology
Pantoloc®
Paroxetine
Central nervous system
Paxil®
Perindopril
Cardiovascular
Coversyl®
Pravastatin
Cardiovascular
Pravachol®
Pregabalin
Central nervous system
Lyrica®
Progesterone*
Women's Health
Prometrium®
Quetiapine
Central nervous system
Seroquel®
Quetiapine XR
Central nervous system
Seroquel XR®
Ramipril
Cardiovascular
Altace®
Rivaroxaban*
Cardiovascular
Xarelto®
Rizatriptan ODT
Central nervous system
Maxalt® ODT
________________
*Sold through distribution agreements
17
In addition to the 61 drugs currently on the market, we have 32 additional
drugs scheduled to be launched in 2024 and 2025. These new drugs will address various human health areas including cardiovascular, oncology,
gastroenterology, central nervous system, diabetes, urology, endocrinology, anti-infective, and anti-inflammatory. Among the new drugs
to be launched in 2024 is NIOPEG®, a biosimilar of NEULASTA®. Like NEULASTA®, NIOPEG® is a long-acting form of recombinant
human granulocyte colony-stimulating factor (filgrastim). It is indicated to decrease the incidence of infection in patients with non-myeloid
malignancies receiving anti-neoplastic therapy. Nora Pharma received Health Canada marketing approval for NIOPEG® on April 17, 2024.
NIOPEG® is anticipated to be on the market in Canada in October 2024.
We believe the addition of these new products to our existing portfolio
will strengthen our presence in the Canadian $9.7 billion a year generic drugs market and provide us with greater access to pharmacies
as we become more of a go-to supplier for every-day and specialty medicines.
Drugs in Development
The following table summarizes our proprietary drugs in development:
Drug
Candidate
Therapeutic
Area
Development
Stage
Adva-27a (Small Molecule)
Oncology (Pancreatic Cancer)
Paused*
K1.1 (mRNA LNP)
Oncology (Liver Cancer)
Animal Testing
SBFM-PL4 (Small Molecule)
Antiviral (SARS Coronavirus)
Animal Testing
_____________
*See “ Adva-27a Anticancer Compound ”
below
Adva-27a Anticancer Compound
Adva-27a is a small molecule designed for the treatment of aggressive
forms of cancer. A Topoisomerase II inhibitor, Adva-27a has been shown to be effective at destroying Multidrug Resistant Cancer cells
including Pancreatic Cancer cells, Breast Cancer cells, Small-Cell Lung Cancer cells and Uterine Sarcoma cells (Published in ANTICANCER
RESEARCH, Volume 32, Pages 4423-4432, October 2012). We are the direct owner of all patents pertaining to Adva-27a including U.S. Patents
Number 8,236,935 and 10,272,065.
In December 2022, we entered into a research
agreement with the Jewish General Hospital (“JGH”), to conduct the IND-enabling studies of Adva-27a (the “Research
Agreement”). In August 2023, we were informed by the JGH that the laboratory test results of the Adva-27a molecule
were not favorable. After conclusion of an internal review of the laboratory results on November 2, 2023, we provided notice to JGH
of termination of the Research Agreement. We have paused the IND-enabling studies of Adva-27a pending a review of the results and
the possibility of chemical modification of the compound to address the suboptimal performance of the molecule in certain
studies.
K1.1 Anticancer mRNA
In June 2021, we initiated a new research project in which we set out
to determine if certain mRNA molecules can be used as anti-cancer agents. The data collected to date have shown that a selected group
of mRNA molecules are capable of destroying cancer cells in vitro including multidrug resistant breast cancer cells (MCF-7/MDR), ovarian
adenocarcinoma cells (OVCAR-3), and pancreatic cancer cells (SUIT-2). Studies using non-transformed (normal) human cells (HMEC cells)
showed that these mRNA molecules had little cytotoxic effects. These new mRNA molecules, bearing the laboratory name K1.1, are readily
adaptable for delivery into patients using the mRNA vaccine technology. In April 2022, we filed a provisional patent application in the
United States covering the subject mRNA molecules.
In November 2022, we concluded an agreement with a specialized commercial
partner for the purposes of formulating our K1.1 mRNA molecules into lipid nanoparticles (“LNP”) for use to conduct xenograft
mice studies. The initial results of our xenograft mice studies indicate that our K1.1 mRNA-LNP is effective at reducing the size of liver
cancer xenograft tumors in mice. We are currently seeking to confirm these results by conducting additional xenograft experiments on a
broader scale and in more detailed dose-response studies.
18
SBFM-PL4 SARS Coronavirus Treatment
The initial genome expression products following infection by Betacoronavirus,
the causative agent of COVID-19, are two large polyproteins, referred to as pp1a and pp1ab. These two polyproteins are cleaved at 15 specific
sites by two virus encoded proteases, called Mpro and PLpro, to generate 16 different non-structural proteins essential for viral replication.
Mpro and PLpro represent attractive anti-viral drug development targets as they play a central role in the early stages of viral replication.
PLpro is of particular interest as a therapeutic target in that, in addition to processing essential viral proteins, it is also responsible
for suppression of the human immune system making the virus more life-threatening. PLpro is present only in Betacoronaviruses, the subgroup
of Coronaviruses represented by the highly pathogenic SARS-CoV, MERS-CoV, and SARS-CoV-2.
Our Anti-Coronavirus research effort has been focused on developing
an inhibitor of PLpro and, on May 22, 2020, we filed a patent application in the United States covering composition subject matter pertaining
to small molecules for inhibition of the Coronavirus PLpro as well as Mpro.
In February 2022, we expanded our PLpro inhibitors research effort
by entering into a research agreement with the University of Arizona for the purposes of conducting research focused on determining the
in vivo safety, pharmacokinetics, and dose selection properties of three University of Arizona owned PLpro inhibitors, to be followed
by efficacy testing in mice infected with SARS-CoV-2 (the “Research Project”). Under the agreement, the University of Arizona
granted us a first option to negotiate a commercial, royalty-bearing license for all intellectual property developed by University of
Arizona under the Research Project. In addition, we and the University of Arizona have entered into an option agreement (the “Option
Agreement”) whereby we were granted a first option to negotiate a royalty-bearing commercial license for the underlying technology
of the Research Project. On September 13, 2022, we exercised our options, and on February 24, 2023, we entered into an exclusive worldwide
license agreement with the University of Arizona for all of the technology related to the Research Project.
We have recently broadened our objective to include the development
of an injectable drug candidate of first-in-class PLpro inhibitor to treat SARS-CoV2 and potentially SARS-CoV and MERS-CoV infection in
patients who could not use Paxlovid, Molnupiravir, or Remdesivir, due to concerns about drug interactions and possible ‘rebound’
infections and other side effects.
Intellectual Property
We are the sole owner of all rights pertaining to Adva-27a. These patent
rights are covered by PCT/FR2007/000697 and PCT/CA2014/000029. The patent applications filed under these two PCT's have been issued in
the United States under US Patent Number 8,236,935 and 10,272,065.
On May 22, 2020, we filed a provisional patent application in the United
States for a new treatment for Coronavirus infections. Our patent application covers composition subject matter pertaining to small molecules
for inhibition of the main Coronavirus protease, Mpro, an enzyme that is essential for viral replication. The patent application has a
priority date of May 22, 2020. On April 30, 2021, we filed a PCT application containing new research results and extending coverage to
include the Coronavirus Papain-Like protease, PLpro. The priority date of May 22, 2020 has been maintained in the newly filed PCT application.
On April 20, 2022, we filed a provisional patent application in the
United States covering mRNA molecules capable of destroying cancer cells in vitro. The patent application contains composition and utility
subject matter pertaining to the structure and sequence of the relevant mRNA molecules.
Effective February 24, 2023, we became the exclusive, worldwide licensee
of the University of Arizona for three (3) patents related to small molecules which inhibit the Coronavirus protease, PLpro.
19
Our wholly owned subsidiary, Nora Pharma, owns 152 DIN’s issued
by Health Canada for prescription drugs currently on the market in Canada. These DIN’s were secured through in-licenses or cross-licenses
from international manufacturers of generic pharmaceutical products.
In addition, we are the owner of four (4) NPN’s issued by Health
Canada including (i) NPN 80089663 which authorizes us to manufacture and sell our in-house developed OTC product, Essential•9, (ii)
NPN 80093432 which authorizes us to manufacture and sell the OTC product, Calcium-Vitamin D under the brand name Essential Calcium-Vitamin
D, (iii) NPN 80125047 which authorizes us to manufacture and sell the OTC product, L-Citrulline, and (iv) NPN 80127436 which authorizes
us to manufacture and sell the OTC product, Taurine.
Results of Operations
Comparison of
results of operations for the three months ended June 30, 2024 and 2023
During the three months ended June 30, 2024, we
generated $9,303,067 in sales, compared to $5,560,865 for the three months ended June 30, 2023, an increase of $3,742,202, or 67%. The
increase is attributable to expanded marketing and sales efforts by our wholly owned subsidiary, Nora Pharma. The direct cost for generating
these sales was $6,946,810 (75%) for the three months ended June 30, 2024, compared to $3,608,118 (65%) for the three months ended June
30, 2023. The increase in the cost of goods sold in 2024 is due to increased cost of manufacturing of the generic prescription drugs.
Our gross profit grew to $2,356,257 for the three months ended June 30, 2024, compared to $1,952,747 for the three months ended June 30,
2023.
General
and administrative expenses during the three-month period ended June 30, 2024, were $3,624,533, compared to $2,966,635 during the three-month
period ended June 30, 2023, an increase of $657,898. The increase was due to increases in legal fees ($77,621), marketing ($123,148),
office expense ($293,595), R&D ($67,670), and salaries ($356,009). The increase in salaries was due to the hiring of two (2) new
employees and a bonus paid to the CEO of the Company. The only expense category that saw a decrease was consulting, which was reduced
by $338,406. Overall, we incurred a loss of $1,268,276 from our operations for the three months ended June 30, 2024, compared to a loss
of $1,013,888 from our operations in the three-month period ended June 30, 2023.
In
addition, we had interest income of $143,995 during the three months ended June 30, 2024, compared to net interest income of $203,049
during the three months ended June 30, 2023, as a result of less interest earned on cash on hand.
As
a result, we incurred a net loss of $494,300 ($9.94 per share) for the three months ended June 30, 2024, compared to a net loss of $902,108
($71.17 per share) for the three-month period ended June 30, 2023.
Comparison of results of operations
for the six months ended June 30, 2024 and 2023
During the six months ended June 30 2024, we generated
revenues of $16,844,113, compared to revenue of $10,454,918 for the six months ended June 30, 2023, an increase of $6,389,195, or 61%.
The increase is attributable to increased sales generated by our wholly owned subsidiary, Nora Pharma. The direct cost for generating
these revenues was $12,133,519 for the six months ended June 30, 2024 (72%), compared to $6,674,049 (64%) for the six months ended June
30, 2023. The increase in the cost of goods sold in 2024 is due to an increase in the cost of manufacturing of generic prescription drugs.
Our gross profit increased to $4,710,594 for the six months ended June 30, 2024, compared to a gross profit of $3,780,869 for the same
period in 2023.
General
and administrative expenses during the six-month period ended June 30, 2024, were $7,378,640, compared to $6,660,398 during the six-month
period ended June 30, 2023, an increase of $718,242. The increase was a result of increases in accounting ($195,369), legal ($185,862),
marketing ($193,281), and office costs ($734,868). The three expense categories that saw a decrease were salaries ($110,536), consulting
($422,620) and R&D ($143,222). Overall, we incurred a loss of $2,668,046 from our operations in the six-month period ended June 30,
2024, compared to a loss from operations of $2,879,529 in the similar period of 2023.
In
addition, we had interest income of $288,084 during the six months ended June 30, 2024, compared to interest income of $416,930 during
the six months ended June 30, 2023. The decrease was due to the Company having less cash on hand.
As
a result, we incurred a net loss of $1,778,101 ($43.48 per share) for the six-month period ended June 30, 2024, compared to a net loss
of $2,604,538 ($218.62 per share) for the six-month period ended June 30, 2023.
20
Liquidity and Capital Resources
As of June 30, 2024, we had cash and cash equivalents of $11,507,745.
Net cash used in operating activities was $7,762,942
during the six months ended June 30, 2024, compared to $5,628,146 during the six-month period ended June 30, 2023. The increase was a
result of increased business activities by Nora Pharma.
Cash flows used in investing activities were $1,210,944
for the six months ended June 30, 2024, compared to $405,779 for the six months ended June 30, 2023. The increase was the result of cash
invested in Nora Pharma to finance increase in inventory and expansion of product line.
Cash flows provided by financing activities were
$5,369,566 during the six months ended June 30, 2024, compared to $3,519,672 during the six months ended June 30, 2023. The increase was
primarily a result of the approximately $10 million financing event completed in February 2024, compared to an approximately $5 million
financing event completed in May 2023.
We are not generating adequate revenues from our operations to fully
implement our business plan as set forth herein. We believe our existing cash on hand will be sufficient to fund our pharmaceuticals sales
operations and research and development activities for the next 24 months. There is no assurance our estimates will be accurate. We currently
have no committed sources of capital and we anticipate that we will need to raise additional capital in the future, including for further
research and development activities and possibly clinical trials, as well as expansion of our generic pharmaceuticals operations. Additional
capital may not be available on terms acceptable to us, or at all.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results
of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts
of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate
our estimates based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or conditions.
For a detailed list of significant accounting policies, please see
our annual report on Form 10-K for the fiscal year ended December 31, 2023, including our financial statements and notes thereto included
therein as filed with the SEC on March 28, 2024.
Recently Adopted Accounting Standards
In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit
Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update
to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) which amends the effective date
of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim
and annual periods in fiscal years beginning after December 15, 2022. The Company believes the adoption will modify the way the Company
analyzes financial instruments, but it does not anticipate a material impact on results of operations. The Company is in the process of
determining the effects adoption will have on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815
– 40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics
of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU2020-06 amendments
are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted,
but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is
evaluating the impact of this guidance on its unaudited consolidated financial statements.
Off Balance-Sheet Arrangements
None.
21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company and are not required to provide
the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and
Procedures
Our management, with the participation of our Chief Executive Officer
and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.
These controls are designed to ensure that information required to
be disclosed in the reports we file or submit pursuant to the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and
communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.
Based on this evaluation, our management, including our CEO and CFO
concluded that our disclosure controls and procedures were effective as of June 30, 2024, at reasonable assurance levels.
Changes in Internal Control Over Financial
Reporting
There were no changes in our internal control over financial reporting
during the quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
22
PART
II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not party to, and our property is not the subject of, any material
legal proceedings.
ITEM 1A. RISK FACTORS
We are a smaller reporting company and are not required to provide
the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
During the quarter ended June 30, 2024,
no director or officer of the Company adopted
or terminated
a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in
Item 408(a) of Regulation S-K.
ITEM 6. EXHIBITS
Exhibit
No.
Description
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2022 *
32.1
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
101
Inline XBRL Document Set
for the financial statements and accompanying notes in Part I, Item 1, of this Quarterly Report on Form 10-Q.*
104
Inline XBRL for the cover
page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.*
__________________
* Filed herewith.
** Furnished herewith.
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on August 16, 2024.
SUNSHINE BIOPHARMA, INC.
By:
/s/ Dr. Steve N. Slilaty
Dr. Steve N. Slilaty
Chief Executive Officer (principal executive officer)
By:
/s/ Camille Sebaaly
Camille Sebaaly
Chief Financial Officer (principal financial and accounting officer)
24
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.