Sunshine Biopharma Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion should be read in conjunction with our financial statements and the related notes included in this report. This discussion contains forward-looking statements. Please see “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements. Results of Operations Comparison of Results of Operations for the fiscal years ended December 31, 2024 and 2023 During our fiscal year ended December 31, 2024, we generated revenues of $34,874,283, compared to revenues of $24,092,787 in 2023. The increase of approximately $10.8 million was the result of expansion of Nora Pharma sales efforts in the Province of Quebec as well as entry into the Provinces of Ontario, Alberta and British Columbia. Another contributing factor was the increased number of products offered by Nora Pharma, which increased by 5 during 2024. The cost of sales in 2024 and 2023 for generating these revenues was $24,204,489 (69.4%) and $15,753,616 (65.4%), respectively. The 4% increase in the cost of sales in 2024 was due to higher professional allowances incurred on the sale of products outside the Province of Quebec. In the Province of Quebec, professional allowances are capped by government regulations. General and administrative (“G&A”) expenses for our fiscal year ended December 31, 2024, were $16,481,915, compared to $13,124,470 during our fiscal year ended December 31, 2023, an increase of $3,357,445. This relatively modest increase occurred in connection with Nora Pharma’s expansion of sales operations. We had interest income of $496,003 in 2024, compared to interest income of $811,974 in 2023. The decrease was due to reduced interest rates and less cash on hand in 2024. As a result, we incurred a net loss of $5,134,116 for the year ended December 31, 2024, compared to a net loss of $4,506,044 for the year ended December 31, 2023. Liquidity and Capital Resources As of December 31, 2024, we had cash and cash equivalents of $9,686,529. During the fiscal years ended December 31, 2023 and 2024, we received aggregate proceeds of $3,558,812 in connection with warrant exercises. On May 16, 2023, we completed a private placement of common stock and warrants for gross proceeds of approximately $5 million. We received net proceeds of approximately $4.1 million from the private placement. On February 11, 2024, we redeemed all of the April Warrants and all of the May Investor Warrants for an aggregate purchase price of $3,139,651. On February 15, 2024, we completed an underwritten public offering and in connection therewith, we issued an aggregate of 35,714 shares of common stock and received net proceeds of $8,522,411. On January 3, 2025, we issued 127,443 shares of common stock upon the exercise of 127,443 Series B Warrants and received $355,298 in net proceeds. Cash flows used in investing activities were $2,320,847 during the year ended December 31, 2024, compared to $656,150 during our fiscal year ended December 31, 2023. The reason for the increase was due to the acquisition of intangible assets and equipment for Nora Pharma operations. Net cash flows provided by financing activities were $9,289,507 in 2024, compared to $3,425,587 in 2023. The increase was primarily due to a larger financing event in 2024 than in 2023 and the exercise of more warrants in 2024 than in 2023. Net cash used in operations was $12,531,180 in 2024, compared to $8,775,111 in 2023. The increase was due to expansion of Nora Pharma’s operations and increase in inventory. 20 We believe our existing cash 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 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 pharmaceutical 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 are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Leases We follow the guidance in ASC 842 “ Accounting for Leases ,” as amended, which requires us to evaluate the lease agreements we enter into to determine whether they represent operating or capital leases at the inception of the lease. Our wholly owned subsidiary, Nora Pharma, currently occupies a 23,500 square foot facility located at 1565 Boulevard Lionel-Boulet, Varennes, Quebec, Canada, J3X 1P7 pursuant to a lease agreement that expires in January 2030, with an option to extend for 5 years. This site is composed of 18,500 square feet of warehouse space and 5,000 square feet of executive office space. The facility houses all administrative, marketing, quality control, regulatory affairs, and other operations personal, as well as a Health Canada licensed warehouse space. We pay monthly rent of $27,250 CAD (approximately $19,900 USD), including taxes. We treat this lease as an operating lease but account for liabilities and benefits resulting therefrom. Recently Adopted Accounting Standards We have adopted all new accounting standards impacting operations. Off-Balance Sheet Arrangements We have not entered into any off-balance sheet arrangements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required for a smaller reporting company. 21