Sunshine Biopharma Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the Audit Committee and Shareholders of Sunshine Biopharma Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Sunshine Biopharma Inc. (the Company) as of December 31, 2025, and the related consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for the year ended December 31, 2025 and the related notes (collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year-ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. The financial statements of Sunshine Biopharma Inc., as of December 31, 2024, were audited by other auditors whose report dated April 1, 2025, expressed an unqualified opinion on those financial statements. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provides a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audits of the consolidated financial statements that were communicated, or required to be communicated, to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which they relate. Improper Revenue Recognition As discussed in the notes to the consolidated financial statements, the Company recognizes revenues related to three services derived from the sale of pharmaceutical products, including sale of pharmaceutical products to registered pharmacy or registered wholesaler, sale of health and wellness supplements products, and commissions related to selling pharmaceutical products. The Company recognizes revenues when customer receives the requested products for the sale of pharmaceutical products and upon settlement date for the sale of the health and wellness in the amount of consideration the Company expects to receive in exchange for the products or services provided. Auditing the recognition of revenue involves significant challenge due to the inherent risk of revenue recognition. Related to sales of pharmaceutical products and health and wellness supplements, M&K tested a sample of sales transactions, formal proof of delivery, and cash collections. Related to sales commission for the sale of pharmaceutical products, M&K tested a sample of sales commission transactions, validity of commissions agreement and third-party sales data through the Company to the various parties involved. To evaluate the appropriateness and accuracy of the assessment by management, we evaluated management’s assessment in relationship to the relevant agreements. /s/ M&K CPAS, PLLC We have served as the Company’s auditor since 2025 The Woodlands, TX April 3, 2026 PCAOB ID Number 2738 24 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Sunshine Biopharma, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Sunshine Biopharma, Inc. as of December 31, 2024 and the related consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows, for the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Sunshine Biopharma, Inc. as of December 31, 2024, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to Sunshine Biopharma, Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Sunshine Biopharma, Inc. is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Bush & Associates CPA LLC We have served as the Company’s auditor since 2024. Henderson, Nevada April 1, 2025 PCAOB ID Number 6797 25 Sunshine Biopharma Inc. Consolidated Balance Sheets December 31, December 31, 2025 2024 ASSETS Current Assets: Cash and cash equivalents $ 9,123,308 $ 9,686,529 Accounts receivable 3,459,864 3,868,418 Inventory 13,472,025 11,278,105 Prepaid expenses 798,384 1,133,297 Total Current Assets 26,853,581 25,966,349 Long-Term Assets: Property & equipment 557,370 546,055 Intangible assets 1,889,370 3,019,717 Deferred tax asset – 92,234 Right-of-use-asset 778,846 936,037 Total Long-Term Assets 3,225,586 4,594,043 TOTAL ASSETS $ 30,079,167 $ 30,560,392 LIABILITIES Current Liabilities: Accounts payable & accrued expenses $ 5,664,212 $ 5,543,085 Earnout payable 295,797 295,797 Income tax payable 268,276 268,276 Current portion - right-of-use-liability 215,637 207,756 Total Current Liabilities 6,443,922 6,314,914 Long-Term Liabilities: Right-of-use-liability 596,785 744,724 Total Long-Term Liabilities 596,785 744,724 TOTAL LIABILITIES 7,040,707 7,059,638 SHAREHOLDERS' EQUITY Preferred Stock, Series B $ 0.10 par value per share; 1,000,000 shares authorized; 130,000 shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively 13,000 13,000 Common Stock, $ 0.001 par value per share; 3,000,000,000 shares authorized; 4,905,945 and 2,580,098 shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively 4,905 2,580 Capital paid in excess of par value 98,100,990 93,354,907 Accumulated comprehensive income ( 65,309 ) ( 829,959 ) Accumulated (Deficit) ( 75,015,126 ) ( 69,039,774 ) TOTAL SHAREHOLDERS' EQUITY 23,038,460 23,500,754 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 30,079,167 $ 30,560,392 See Accompanying Notes To These Consolidated Financial Statements 26 Sunshine Biopharma Inc. Consolidated Statement Of Operations and Comprehensive Loss December 31, December 31, 2025 2024 Revenue: $ 36,305,891 $ 34,874,283 Cost of Sales 24,050,214 24,204,489 Gross profit 12,255,677 10,669,794 General & Administrative Expenses: Accounting 698,083 967,614 Consulting 1,571,692 925,188 Director fees 400,000 400,000 Intangible assets impairment 1,748,247 – Legal 385,142 875,698 Marketing 1,143,929 940,278 Office 3,864,584 3,110,026 R&D 604,308 933,902 Salaries 7,265,346 7,718,677 Taxes 469,305 387,005 Depreciation & amortization 332,070 223,527 Total General & Administrative Expenses 18,482,706 16,481,915 (Loss) from operations ( 6,227,029 ) ( 5,812,121 ) Other Income (Expense): Foreign exchange gain (loss) 2,642 ( 44,082 ) Interest income 280,901 496,003 Interest expense – ( 8,774 ) Gain (Loss) on asset sale ( 10,257 ) – Total Other Income (Expense) 273,286 443,147 Net (loss) before income taxes ( 5,953,743 ) ( 5,368,974 ) Provision for income taxes 21,609 ( 234,858 ) Net (Loss) $ ( 5,975,352 ) $ ( 5,134,116 ) Other Comprehensive Income: Gain (Loss) from foreign exchange translation 764,650 ( 1,526,064 ) Comprehensive (Loss) ( 5,210,702 ) ( 6,660,180 ) (Loss) per common share (Basic) $ ( 1.44 ) $ ( 7.32 ) Weighted average common shares outstanding (Basic) 4,157,086 701,749 See Accompanying Notes To These Consolidated Financial Statements 27 Sunshine Biopharma Inc. Consolidated Statements of Cash Flows December 31, December 31, 2025 2024 Cash Flows From Operating Activities: Net (Loss) $ ( 5,975,352 ) $ ( 5,134,116 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 332,070 223,527 Disposal of tangible assets 10,257 – Stock issued for services – 12,000 Intangible assets impairment 1,748,247 – Accounts receivable ( 116,173 ) ( 2,338,195 ) Inventory ( 1,637,277 ) ( 6,006,864 ) Prepaid expenses 480,798 ( 207,167 ) Right-of-use asset 203,836 ( 341,534 ) Accounts Payable & accrued expenses ( 189,956 ) 3,983,749 Lease liability ( 187,523 ) 347,935 Earn-out payable – ( 2,252,034 ) Income tax payable – ( 812,080 ) Net Cash Flows (Used In) Operating Activities ( 5,331,073 ) ( 12,524,779 ) Cash Flows From Investing Activities: Purchase of intangible assets ( 661,815 ) ( 322,258 ) Purchase of equipment ( 174,491 ) ( 1,657,055 ) Net Cash Flows (Used In) Investing Activities ( 836,306 ) ( 1,979,313 ) Cash Flows From Financing Activities: Proceeds from public offering net (common stock) 1,828,596 8,522,411 Exercise of warrants 2,919,812 3,558,812 Purchase of treasury stock – ( 3,139,651 ) Net Cash Flows Provided by Financing Activities 4,748,408 8,941,572 Cash and Cash Equivalents at Beginning of Period 9,686,529 16,292,347 Net (decrease) in cash and cash equivalents ( 1,418,971 ) ( 5,562,520 ) Foreign currency translation adjustment 855,750 ( 1,043,298 ) Cash and Cash Equivalents at End of Period $ 9,123,308 $ 9,686,529 Supplementary Disclosure of Cash Flow Information: Cash paid for income taxes $ – $ 582,483 Cash paid for interest $ – $ 8,126 Stock issued for services $ – $ 12,000 See Accompanying Notes To These Consolidated Financial Statements 28 Sunshine Biopharma Inc. Consolidated Statements of Shareholders' Equity Number of Common Shares Common Capital Paid in Excess Number of Preferred Shares Preferred Comprehensive Accumulated Issued Stock of Par Value Issued Stock Income Deficit Total Balance December 31, 2024 2,580,098 $ 2,580 $ 93,354,907 130,000 $ 13,000 $ ( 829,959 ) $ ( 69,039,774 ) $ 23,500,754 Exercise of warrants 1,137,443 1,137 2,918,675 2,919,812 Underwritten offering, net of issuance costs 1,188,404 1,188 1,827,408 – 1,828,596 Net (loss) 764,650 ( 5,975,352 ) ( 5,210,702 ) Balance at December 31, 2025 4,905,945 $ 4,905 $ 98,100,990 130,000 $ 13,000 $ ( 65,309 ) $ ( 75,015,126 ) $ 23,038,460 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 Underwritten offering, net of issuance costs 13,214 13 8,522,398 8,522,411 Exercise of warrants 2,552,872 2,554 3,556,260 3,558,812 Repurchase of warrants ( 3,139,651 ) ( 3,139,651 ) Net (loss) ( 1,526,064 ) ( 5,134,116 ) ( 6,660,180 ) Balance at December 31, 2024 2,580,098 $ 2,580 $ 93,354,907 130,000 $ 13,000 $ ( 829,959 ) $ ( 69,039,774 ) $ 23,500,754 See Accompanying Notes To These Consolidated Financial Statements 29 Sunshine Biopharma Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 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 transaction, the Company changed its name to Sunshine Biopharma Inc. and began operating as a pharmaceutical company. Sunshine Biopharma has two wholly owned subsidiaries: (i) Nora Pharma Inc. (“Nora Pharma”), a Canadian corporation with a portfolio of pharmaceutical products consisting of 71 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”) supplements. The Company operates the two subsidiaries as a single business segment. Sales of the OTC supplements represent less than 3% of the Company’s total annual sales. The Company is not subject to material customer concentration risks as it sells its products directly to pharmacies in several Canadian Provinces. However, Provincial governments in Canada reimburse patients for their prescription drug expenditures to various degrees under drug reimbursement programs, making generic drugs prices highly dependent on government policies which may change over time. The most recent negotiations between the pan-Canadian Pharmaceutical Alliance (“pCPA”), the entity that negotiates drug prices on behalf of the government, and the Canadian Generic Pharmaceutical Association (“CGPA”) 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. On February 10, 2024, the Canadian federal government joined the generic drug reimbursement program as a payor under the Pharmacare Act. This development further strengthened the Canadian generic drug market, which is the Company’s current focus. In addition, the Company is engaged in the development of the following proprietary drugs: · K1.1 mRNA, a lipid nano-particle (LNP) targeted for liver cancer · SBFM-PL4, a protease inhibitor for treatment of Coronavirus infections 30 Note 2 – Summary of Significant Accounting Policies This summary of significant accounting policies is presented to assist the reader in understanding the Company's financial statements. The consolidated financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to Generally Accepted Accounting Principles in the United States (“GAAP”) and have been consistently applied in the preparation of the financial statements. PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, Nora Pharma Inc. and Sunshine Biopharma Canada Inc., both wholly owned. All intercompany accounts and transactions have been eliminated in consolidation. USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant estimates and assumptions made by management are valuation of equity instruments, depreciation of property and equipment, and deferred tax asset valuation. Actual results could differ from those estimates as the current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. TRADE ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS Trade accounts receivable are stated at net realizable value. The majority of customers are not extended credit and therefore time to maturity for receivables is short. On a periodic basis, management evaluates its trade accounts receivable and determines whether to record an allowance for doubtful accounts. Management analysis for the periods ended December 31, 2024 and 2025 determined that no allowance for doubtful accounts needed to be recorded. A receivable is considered past due if the Company has not received payments based on agreed-upon terms. The Company generally does not require any security or collateral to support its receivables. As of December 31, 2025 and 2024, the balances of accounts receivable were $ 3,459,864 and $ 3,868,418 , respectively. INVENTORY VALUATION The Company’s inventory is comprised of finished goods. Inventory is valued at the lower of cost and net realizable value. Cost is determined using the first in, first out method. Net realizable value is the estimated selling price in the ordinary course of business, less the costs necessary to make the sale. The cost of inventory includes the purchase price and other costs directly attributable to the acquisition of the finished goods. The Company regularly reviews inventories to determine if the carrying value exceeds net realizable value and, when determined necessary, an allowance to reduce the carrying value to net realizable value is recorded. The net realizable value is calculated based on a combination of factors, including (i) aging, (ii) historical sell-through patterns, and (iii) product-specific considerations. Write-downs are recorded within cost of goods sold and are not subsequently reversed. As of December 31, 2025 and 2024, there were allowances for obsolescence of $ 475,153 and $ 0 , respectively. CASH AND CASH EQUIVALENTS For the Balance Sheets and Statements of Cash Flows, all highly liquid investments with maturity of 90 days or less are considered to be cash equivalents. The Company had a cash balance of $ 9,123,308 and $ 9,686,529 as of December 31, 2025 and December 31, 2024, respectively. At times such cash balances may be in excess of the FDIC limit of $ 250,000 in the U.S. or the $ 100,000 CAD (approximately $ 73,000 USD) limit in Canada. At December 31, 2025, the Company had deposits totaling approximately $7 million in the U.S and $2 million in Canada. 31 PROPERTY AND EQUIPMENT Property and equipment are reviewed for recoverability when events or changes in circumstances indicate that its carrying value may exceed future undiscounted cash inflows. As of December 31, 2025 and 2024, the Company had not identified any such impairment. Repairs and maintenance are charged to operations when incurred and improvements and renewals are capitalized. Property and equipment are stated at cost. Depreciation is calculated according to the following methods at the following annual rates and period for financial reporting purposes and accelerated methods for tax purposes. Their estimated useful lives are as follows: Schedule of estimated useful lives Office Equipment: Straight-line and Declining balance method 5-7 Years / 20% Computer Equipment: Declining balance method 55% Laboratory Equipment: Straight-line method 5 Years Vehicles: Straight-line and Declining balance method 5 Years / 30% INTANGIBLE ASSETS Intangible assets are amortized over their estimated useful lives according to the following methods at the following annual rates and period: Schedule of intangible assets estimated useful lives Licenses: Straight-line method 5 Years Website: Declining balance method 55% Intangible assets are tested for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. The carrying amount of a long-lived asset is not recoverable when it exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposal. In such a case, an impairment loss must be recognized and is equivalent to the excess of the carrying amount of a long-lived asset over its fair value. INTELLECTUAL PROPERTY RIGHTS - PATENTS AND LICENSES The cost of patents and licenses acquired is capitalized and is amortized over the remaining life of the patents or licenses. The Company evaluates recoverability of identifiable intangible assets whenever events or changes in circumstances indicate that intangible assets carrying amount may not be recoverable. Such circumstances include but are not limited to: (i) a significant decrease in the market value of an asset, (ii) a significant adverse change in the extent or manner in which an asset is used, or (iii) an accumulation of cost significantly in excess of the amount originally expected for the acquisition of an asset. The Company measures the carrying amount of such assets against the estimated undiscounted future cash flows associated with it. BASIC AND DILUTED NET GAIN (LOSS) PER SHARE The Company computes gain or loss per share in accordance with ASC 260 – Earnings per Share . ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average common shares outstanding. Diluted net income (loss) per share is calculated by dividing net income (loss) by the weighted-average common shares outstanding during the period using the treasury stock method or the two-class method, whichever is more dilutive. As the Company incurred net losses for the years ended December 31, 2025 and 2024, no potentially dilutive securities were included in the calculation of diluted earnings per share as the impact would have been anti-dilutive. Accordingly, diluted EPS information is not included in this report. 32 INCOME TAXES In accordance with ASC 740 – Income Taxes , the provision for income taxes is computed using the asset and liability method. The liability method measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts on the financial statements. The resulting deferred tax assets or liabilities have been adjusted to reflect changes in tax laws as they occur. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized. The Company expects to recognize the financial statement benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a “more-likely-than-not” threshold, the amount to be recognized in the financial statements will be the benefit expected to be realized upon settlement with the tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. As of December 31, 2025, the Company had no uncertain tax positions. The Company recognizes interest and penalties, if any, related to uncertain tax positions as general and administrative expenses. The Company currently has no federal or state tax examinations nor has it had any federal or state examinations since its inception. To date, the Company has not incurred any interest or tax penalties. For Canadian and U.S. tax purposes, the Company’s 2022 through 2024 tax years remain open for examination by the tax authorities under the normal three-year statute of limitations. FUNCTIONAL CURRENCY The U.S. dollar is the functional currency of the Company which is operating in the United States. The functional currency for the Company's Canadian subsidiaries is the Canadian dollar. The Company translates its Canadian subsidiaries' financial statements into U.S. dollars as follows: · Assets and liabilities are translated at the exchange rate in effect as of the financial statement date. · Income statement accounts are translated using the weighted average exchange rate for the period. The Company includes translation adjustments from currency exchange and the effect of exchange rate changes on intercompany transactions of a long-term investment nature as a separate component of shareholders’ equity. There are currently no transactions of a long-term investment nature, nor any gains or losses from non-U.S. currency transactions. CONCENTRATION OF CREDIT RISKS Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents and trade receivables. The Company places its cash equivalents with high credit quality financial institutions. FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS The Company applies the provisions of accounting guidance, ASC 825 – Financial Instruments . ASC 825 requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of December 31, 2025 and 2024, the fair value of cash, accounts receivable and notes receivable, accounts payable, accrued expenses, and other payables approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates. 33 The Company defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). · Level 1 – Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. · Level 2 – Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. · Level 3 – Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. NOTES PAYABLE Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method. The Company had no notes payable as of December 31, 2025 and 2024. REVENUE RECOGNITION Over 97% of the Company’s revenues are derived from the sale of pharmaceutical products. Pharmaceutical products can only be sold to a specific customer that is either a registered pharmacy or a registered wholesaler. The Company therefore sells only to customers registered with Health Canada, the Canadian equivalent of the FDA. Contracts are drawn up between the wholesalers and the Company for all indirect sales. In the case of direct sales to pharmacies, purchase orders are used instead of contracts. A purchase order, forecast, or other written instructions to purchase any of the Company’s products placed by the customer constitutes an irrevocable offer to purchase. The customer is responsible for ensuring that the terms of any such order are complete and accurate. The purchase order is only deemed to be accepted when the Company (in its sole discretion) accepts the purchase order and delivers on the purchase. The acceptance of any purchase order can be full or partial, at the sole discretion of the Company. No variations to these conditions are binding on the Company unless agreed to in writing between the customer and the Company. No significant judgments are made in connection with any contracts as the price is already determined, the collection is reasonably assured, and performance obligation is fulfilled when the customer receives the goods. The Company is not required to apply any specific judgments, estimations, or assumptions to determine the price of its products. 34 Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has been transferred to a customer are accounted for as a fulfillment cost and are included in cost of revenues. The amount invoiced for each product is fixed at the Company’s current price list on the date of shipping and known in advance by the customer and does not vary. The Company fulfills its performance obligation when the customer receives the requested products. When the products leave the Company's warehouse, the transport to the customer is insured and the transfer of ownership to the customer takes place when the customer receives the goods. At this point, the Company issues an invoice for the products and remits the applicable sales taxes (GST and QST) to the appropriate governmental agency. The revenue is recognized when the invoice is issued. Unless otherwise agreed to and signed by both parties, payment terms are within 30 days from the date of the invoice. The collection is reasonably assured because of the nature of the Company’s customers. The Company is conducting sales only in Canada. Prices are listed in Canadian dollars and may vary from one Province or Territory to another within Canada. All products sold by the Company are labelled and approved for sale in Canada only and are not intended for export outside of Canada. In the event of any breach by the Company of any product warranty (whether by reason of defective materials, production faults or otherwise), the Company’s liability is limited to, at Company’s option, (i) replacement of the product(s) in question, or (ii) reimbursement of the purchase price. The Company carries product liability insurance and is not liable for products’ failure to comply with the warranty of products if the failure or damage arises because of the customer’s negligence, deliberate damage, misuse or failure to store the products in conditions per Health Canada specifications. The Company is not liable (whether in contract, in tort or otherwise) for any (i) indirect, special or consequential loss or damage, or (ii) loss of profit, goodwill, business or revenue (in each case whether direct or indirect). These conditions also apply to any replacement products supplied by the Company. The Company warrants to the customer that, at the time of delivery, the products are compliant with all mandatory quality standards required by applicable regulatory and legal requirements. In return, the customer is required to warrant to the Company that it holds all relevant permits and approvals required under applicable laws to purchase, store, distribute, sell and use the Company’s products. Visible defects or damages must be reported to the Company in writing immediately, but no later than five (5) business days after receipt of the products. Hidden defects must be reported to the Company in writing immediately, but no later than five (5) business days after the customer becomes aware of such defects. The Company is not be deemed to be in breach of the terms or otherwise liable to customer for any delay in performance or non-performance of its obligations due to circumstances beyond its control, including but not limited to, acts of God, floods, droughts, earthquakes or other natural disasters, terrorist attacks, wars, preparations for war, armed conflicts, civil commotions or riots, epidemics or pandemics, fires, strikes, lockouts, shortages of material or labor, breakdown or damage to machinery or equipment, accidents, any law or governmental order or other regulations or action taken by a governmental entity, or default of any third party suppliers or provider of services or products, or any causes not within the Company’s control. 35 LEASES The Company recognizes and measures its leases in accordance with ASC 842 – Leases . The Company is a lessee in a non-cancellable operating lease for office space. The Company determines if an arrangement is a lease, or contains a lease, at inception of a contract and when the terms of an existing contract are changed. The Company recognizes a lease liability and a right-of-use (ROU) asset at the commencement date. The lease liability is initially and subsequently recognized based on the present value of its future lease payments. Variable payments are included in the future lease payments when those variable payments depend on an index or a rate. The discount rate is the implicit rate if it is readily determinable or otherwise the Company uses its incremental borrowing rate. The implicit rates of the Company's lease are not readily determinable and accordingly, the Company uses its incremental borrowing rate based on the information available at the commencement date for all leases. The Company’s incremental borrowing rate for a lease is the 6% interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and in a similar economic environment. The ROU asset is subsequently measured throughout the lease term at the remaining amount (i.e. present value of the remaining lease payments), plus unamortized initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received, and any impairment recognized. Lease cost for lease payments is recognized on a straight-line basis over the lease term. The Company has elected, for all underlying classes of assets, not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less at lease commencement, and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. The Company recognizes the lease cost associated with its short-term leases on a straight-line basis over the lease term. Under the available practical expedient, we account for the lease and non-lease components as a single lease component for all classes of underlying assets as both a lessee and lessor. Further, we elected a short-term lease exception policy on all classes of underlying assets, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less). RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS ASU 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures, enhances the transparency and decision usefulness of income tax disclosures. Adjustments to the annual disclosure of income taxes include: (1) a tabular rate reconciliation comprised of eight specific categories, (2) incomes taxes paid, disaggregated between significant national, state, and foreign jurisdictions, (3) eliminates requirements to disclose the nature and estimate of reasonably possible changes to unrecognized tax benefits in the next 12 months or that an estimated range cannot be made, and (4) adds a requirement to disclose income (or loss) from continuing operations before income tax expense (or benefit) by national and foreign, and income tax expense (or benefit) from continuing operations disaggregated between national, state and foreign. The ASU 2023-09 is effective for public business entities for fiscal years beginning on or after December 15, 2024, and for all other entities for fiscal years beginning on or after December 31, 2025, with early adoption permitted. The amendments in ASU 2023-09 were adopted by the Company on a prospective basis. There was no material change to the Company's financial statements reporting as a result of adopting ASU 2023-09 . ASU 2024-03 – Income Statement (Reporting Comprehensive Income) Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , requires disaggregation of specific expense categories in the notes to the financial statements and a qualitative description of the remaining expense amounts not separately disaggregated. This standard is effective for annual reporting periods beginning after December 15. 2026, and requires prospective application with the option to apply it retrospectively. We intend to adopt this standard in our Annual Report on Form 10-K for the year ending December 31. 2027. The Company has implemented all other new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations. 36 Note 3 – 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 which was paid in cash ($ 14,346,637 ) and by the issuance of 1,850 shares of the Company’s common stock valued at $ 4,514,000 or $2,440.00 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. As part of the consideration 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 fiscal year ended December 31, 2023, the Company paid an earnout amount of $ 1,426,914 CAD (approximately $ 1,036,500 USD) for the fiscal year ended December 31, 2022. On April 22, 2024, the Company paid another earnout amount of $ 3,093,878 CAD (approximately $ 2,247,400 USD) for the fiscal year ended December 31, 2023. As of December 31, 2025, the remaining earnout balance was $ 479,208 CAD ($ 295,797 USD). This remaining earnout amount is currently in dispute following dismissal of Mr. Chamoun by the Company on April 14, 2025 (See Note 17). Note 4 – Intangible Assets Intangible assets consisted of the following: Schedule of intangible assets Year Ended December 31, 2024 Balance as of December 31, 2023 $ 1,444,259 License fees additions 1,651,617 Balance at December 31, 2024 3,095,876 Less: accumulated amortization ( 76,159 ) Intangible assets, net at December 31, 2024 $ 3,019,717 Year Ended December 31, 2025 Balance as of December 31, 2024 $ 3,019,717 License fees additions 774,355 Balance at December 31, 2025 3,794,072 Less: impairment* ( 1,748,247 ) Less accumulated amortization ( 156,455 ) Intangible assets, net at December 31, 2025 $ 1,889,370 * The impairment was a result of the determination by the Company that certain product licenses could not be commercialized The amortization amounts of intangible assets for 2025 and 2024 were $ 37,758 and $ 77,009 , respectively. As of December 31, 2025, the estimated amortization expense of the Company’s intangible assets for each of the next five years is as follows: Schedule of estimated amortization expense 2026 $ 212,414 2027 212,414 2028 212,414 2029 212,414 2030 58,093 37 Note 5 – Plant, Property and Equipment Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment begins in the month when the asset is placed into service and is provided using the straight-line method for financial reporting purposes at rates based on the estimated useful lives of the assets. Estimated useful lives range from three to twenty years. Property, plant and equipment consist of the following: Schedule of plant property and equipment Year Ended December 31, 2025 2024 Equipment $ 335,464 $ 336,880 Computer equipment 69,139 53,531 Furniture and fixtures 45,462 50,686 Leasehold improvements 92,706 88,306 Vehicles 507,478 353,185 Total 1,070,249 882,588 Less: Accumulated depreciation ( 512,879 ) ( 336,533 ) Plant, property and equipment, net $ 557,370 $ 546,055 Depreciation expense for the years ended December 31, 2025 and 2024 amounted to $ 176,346 and $ 146,518 , respectively. Note 6 – Inventory Inventory consists solely of finished goods purchased for resale. Inventory is stated at the lower of cost or net realizable value. Cost represents the amount paid to acquire the finished goods. The Company uses the first in, first out (FIFO) method to determine cost. Under the FIFO method, the earliest purchased units are deemed sold first, so ending inventory reflects the most recent purchase costs. The Company evaluates inventory for potential obsolescence based on a combination of factors, including (i) aging, (ii) historical sell-through patterns, and (iii) product-specific considerations. When estimated net realizable value is lower than cost, the Company records an allowance for obsolescence for the difference. Write-downs are recorded within cost of goods sold and are not subsequently reversed. Inventory is comprised of the following: Schedule of inventory Year Ended December 31, 2025 2024 Finished goods $ 13,947,178 $ 11,278,105 Allowance for obsolete inventory ( 475,153 ) – Total Inventory, net of allowance $ 13,472,025 $ 11,278,105 Note 7 – Prepaid Expenses The prepaid expenses category is comprised of the following: Schedule of prepaid expenses Year Ended December 31, 2025 2024 Prepaid taxes $ 206,242 $ 657,437 Permits and insurance 486,797 399,176 Other prepaid expenses 105,345 76,684 Total $ 798,384 $ 1,133,297 38 Note 8 – Cost of Sales Cost of Sales is accounted for in accordance with ASC 705 – Cost of Sales and Services . The Company purchases all commercial inventory as finished pharmaceutical products from third party suppliers and does not conduct internal manufacturing. These costs are capitalized into inventory in accordance with ASC 330 and recognized in Cost of Sales when control of the related inventory transfers to the customer under ASC 606 . Inventory is recorded at cost. The Company evaluates inventory for excess, expiration, and obsolescence at each reporting period. Inventory that becomes unsalable due to shelf-life limitations, regulatory changes, product discontinuation, or forecasted demand shortfalls is written down to its net realizable value, with the charge recorded in Cost of Sales. Previously recorded write downs are not reversed. The Company’s Cost of Sales category is comprised of the following: Schedule of cost of sales Year Ended December 31, 2025 2024 Finished goods $ 8,866,208 $ 8,116,534 Professional allowances 11,909,812 13,714,009 Other allowances 1,086,575 666,913 Wholesalers’ fees & discounts 650,333 1,699,286 Inventory adjustment 1,162,303 236,555 Freight 374,983 438,105 Total $ 24,050,214 $ 24,204,489 Note 9 – Reverse Stock Splits Effective April 17, 2024 and August 8, 2024, the Company completed 1-for-100 and 1-for-20 reverse splits of its common stock, respectively. The Company had previously completed three (3) reverse stock splits including a 1-for-200 reverse split on February 9, 2022, and two 1-for-20 reverse 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. Note 10 – 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, 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 per share, relative to the common stock and gives the holder the right to 1,000 votes per share. As of December 31, 2024 and 2025, 130,000 shares of Series B Preferred Stock were outstanding and held by the Company’s Chief Executive Officer. 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. 39 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 and received $ 8,522,411 in net proceeds. In connection with this offering, the Company issued 22,500 pre-funded warrants (the “2024 Pre-Funded Warrants”) exercisable at $2.00 per share, 3,986 Series A Warrants exercisable at $4,200.00 per share (subject to adjustment), or pursuant to an alternative cashless exercise provision, and 7,973 Series B Warrants exercisable at $4,760.00 per share, subject to adjustment. As of December 31, 2025, (i) all of the 2024 Pre-Funded Warrants have been exercised resulting in the Company receiving net proceeds of $45,000, (ii) all of the Series A Warrants have been exercised pursuant to the alternative cashless provision resulting in the Company receiving $0 in proceeds, and (iii) 15,577,965 Series B Warrants remained outstanding and their exercise price had been adjusted to $2.07 as a result of two reverse stock splits and a financing event which were conducted subsequent to their issuance. The Series B Warrants expire in February 2029. 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. In April and May 2024, the Company issued 1,120,784 shares of common stock in connection with the cashless exercise of all of the Series A Warrants and received $ 0 in proceeds. On August 16, 2024, the Company issued 150,285 shares of common stock in connection with the rounding up of fractional shares following the reverse stock splits of April 17, 2024 and August 8, 2024. In August and September 2024, the Company issued 678,865 shares of common stock in connection with the exercise of 678,865 Series B Warrants and received aggregate net proceed of $ 1,895,610 . In November and December 2024, the Company issued 580,438 shares of common stock in connection with the exercise of 580,438 Series B Warrants and received aggregate net proceeds of $ 1,618,203 . On January 3, 2025, the Company issued 127,443 shares of common stock upon the exercise of 127,443 Series B Warrants and received $ 355,298 in net proceeds. On April 2, 2025, the Company issued 660,000 shares of common stock upon the exercise of 660,000 Series B Warrants and received $ 1,840,014 in net proceeds. On April 3, 2025, the Company issued an aggregate of 1,188,404 shares of common stock in connection with a registered direct offering and received $ 1,828,596 in net proceeds. On October 16, 2025, the Company issued 350,000 shares of common stock upon the exercise of 350,000 Series B Warrants and received net proceeds of $ 724,500 . As of December 31, 2025 and 2024, the Company had 4,905,945 and 2,580,098 shares of common stock issued and outstanding, respectively. The Company has declared no dividends since inception. 40 Note 11 – 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, 2024, and 2025, the Company completed six (6) financing events, and in connection therewith, it issued warrants as follows: Schedule of warrants issued with financing Issuance Date/Type Number Exercise Price Expiry Date Feb 17, 2022 (“Tradeable Warrants”)* 2,051 $ 4,440.00 February 2027 Mar 14, 2022 (“2022 Pre-Funded Warrants”) 1,846 $ 2.00 Unlimited Mar 14, 2022 (“Investor Warrants”) 1,801 $ 4,440.00 March 2027 Apr 28, 2022 (“April Warrants”) 4,862 $ 7,520.00 April 2027 May 16, 2023 (“May Pre-Funded Warrants”) 1,751 $ 2.00 Unlimited May 16, 2023 (“May Investor Warrants”) 5,952 $ 1,180.00 November 2028 Feb 15, 2024 (“2024 Pre-Funded Warrants”) 22,500 $ 2.00 Unlimited Feb 15, 2024 (“Series A Warrants”) 3,986 ** $ 4,200.00 ** August 2026 Feb 15, 2024 (“Series B Warrants”) 7,973 ** $ 4,760.00 ** February 2029 Apr 03, 2025 (“2025 Pre-Funded Warrants”) 260,000 $ 0.001 Unlimited * These warrants trade under the ticker symbol SBFMW ** Subject to adjustment 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 . As of December 31, 2025, all of the 2022 Pre-Funded Warrants, all of the May Pre-Funded Warrants, all of the 2024 Pre-Funded Warrants, all of the 2025 Pre-Funded Warrants, a total of 1,569 Tradeable Warrants, 1,401 Investor Warrants, all of the Series A Warrants, and 2,269,303 Series B Warrants (as adjusted) were exercised resulting in aggregate net proceeds of $ 18,136,992 received by the Company. The Company’s outstanding warrants as of December 31, 2025 consisted of the following: Schedule of warrants outstanding Type Number Exercise Price Expiry Date Tradeable Warrants* 482 $ 220.00 February 2027 Investor Warrants 400 $ 4,000.00 March 2027 Series B Warrants 15,227,962 ** $ 2.07 ** February 2029 * These warrants trade under the ticker symbol SBFMW ** As adjusted following the financing event of April 3, 2025 and subject to further adjustment of the number of warrants and exercise price upon certain corporate actions such that the aggregate exercise price of the warrants remains unchanged 41 Note 12 – Earnings Per Share The following table* sets forth the computation of basic net income (loss) per share: Schedule of computation of basic and diluted net income per share Year Ended December 31, 2025 2024 Net gain (loss) attributable to common stock $ ( 5,975,352 ) $ ( 5,134,116 ) Weighted average outstanding shares of common stock (Basic) 4,157,086 701,749 Net gain (loss) per share attributable to common stock (Basic) $ ( 1.44 ) $ ( 7.32 ) * Diluted net gain (loss) per share is not included in this table as the Company incurred net losses for the years ended December 31, 2025 and 2024 and inclusion of dilutive instruments would have an anti-dilutive effect. Note 13 – Income Taxes The components of the provision for income taxes were as follows: Schedule of provision for income taxes Year Ended December 31, 2025 2024 Current: Federal – – State – 50 Foreign ( 73,330 ) ( 90,434 ) Total Current ( 73,330 ) ( 90,384 ) Deferred: Federal – – State – – Foreign 94,939 ( 144,474 ) Total Deferred 94,939 ( 144,474 ) Total Income Tax Expense / (Benefit) 21,609   ( 234,858 ) 42 The Company’s effective tax rate differs from the federal statutory rate as follows: Schedule of income tax expense Year Ended December 31, 2025 2024 Pre-Tax Book Income ( 1,250,286 ) 21.00 % ( 1,121,714 ) 20.89 % State and Local Income Taxes 44,533 ( 0.75 %) 40 0.00 % Effect of Rates Different than Statutory 151,341 ( 2.54 %) 62,181 ( 1.16 %) Other Foreign Taxes – 0.00 % ( 119,181 ) 2.22 % Permanent Adjustments 54,987 ( 0.92 % ) 56,092 ( 1.04 %) Change in Valuation Allowance 1,107,342 ( 18.60 %) 569,920 ( 10.62 %) Rate Change – 0.00 % 149,237 ( 2.78 %) Prior Year True up ( 86,308 ) 1.45 % 156,540 ( 2.92 %) Other – – % 12,027 ( 0.22 %) Total 21,609 ( 0.36 %) ( 234,858 ) 4.37 % The components of the net deferred tax assets were as follows: Schedule of components of net deferred tax assets Year Ended December 31, 2025 2024 Deferred Tax Assets: Net Operating Loss, Credits and Carryforwards 7,785,678 6,460,638 Fixed Assets 2,818 – Intangibles 622,658 614,734 Research and Development 25,327 25,327 Other deferred tax assets – 95,935 Lease Liability 9,232 252,407 Valuation Allowance ( 8,445,713 ) ( 6,967,294 ) Total Deferred Tax Assets – 481,747 Deferred Tax Liabilities: Other deferred tax liabilities – ( 67 ) Fixed Assets – ( 141,396 ) Intangibles – – Right-of-Use Assets – ( 248,050 ) Total Deferred Tax Liabilities – ( 389,513 ) Net Deferred Tax Liability – 92,234 43 As of December 31, 2025, the Company has federal, state, foreign and provincial net operating loss carryforwards of approximately $ 26 million, $ 16.1 million, $ 4.3 million, and $ 3.3 million, respectively. Of the federal net operating loss forwards, approximately $ 9.4 million have expiration dates from 2027 to 2037. The remainder can be carried forward indefinitely but limited to 80% of taxable income. The foreign and provincial net operating loss carryforwards have a carryforward period of 20 years. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. In making this determination, management considers all available positive and negative evidence affecting specific deferred assets, including the Company's past and anticipated future performance, the reversal of deferred tax liabilities, the length of carry­back and carry-forward periods, and the implementation of the tax planning strategies. Objective positive evidence is necessary to support a conclusion that a valuation allowance is not needed for all or a portion of deferred tax assets when significant negative evidence exists. Cumulative losses in recent years are the most compelling form of negative evidence considered by management in making this determination. For the years ended December 31, 2025 and 2024, management has determined that based on all available evidence, a valuation allowance of $ 8.4 million and $ 7.0 , respectively is appropriate. The Company’s evaluation of uncertain tax matters was performed for tax years ended through December 31, 2025. Generally, the Company is subject to U.S. audit for the years ended December 31, 2024, 2023, and 2022 and may be subject to examination for amounts relating to net operating loss carryforwards generated in periods prior to December 31, 2024. The company is subject to Canada audit for the years ended December 31, 2024, 2023, 2022 and 2021 for Sunshine Biopharma Canada Inc and subject to Canada audit for the years ended December 31, 2024, 2023 and 2022 and June 30, 2022 for Nora Pharma Inc and may be subject to examination for amounts relating to net operating loss carryforwards generated in periods prior to December 31, 2024. On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the U.S. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. ASC Topic 740, Income Taxes, requires the tax effects of changes in tax rates and laws to be recognized in the period in which the legislation is enacted. Those effects, both current tax and deferred tax, are reported as part of continuing operations. The Company is currently assessing the impact of OBBBA on its Consolidated Financial Statements but currently does not believe that the OBBBA will have a material impact on the Company's income tax expense. Note 14 – Leases 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. 44 Amounts reported on the balance sheet as of December 31, 2025 were as follows: Schedule of lease information Operating lease ROU asset $ 778,846 Operating Lease liability - Short-term $ 215,637 Operating lease liability - Long-term $ 596,785 Remaining lease term 4 years 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. Maturities of lease liabilities under non-cancellable operating leases at December 31, 2025 are as follows: Schedule of maturities of lease liabilities 2026 $ 215,637 2027 $ 204,428 2028 $ 193,794 2029 $ 183,705 Thereafter $ 14,858 Note 15 – Segment Reporting The Company operates as one operating segment, which is also its one reportable segment, as the Chief Executive Officer, acting as the Chief Operating Decision Maker (“CODM”), evaluates financial performance and allocates resources on a consolidated, enterprise-wide basis. The Company’s operations are managed as an integrated pharmaceutical business focused on the research, development, and commercialization of prescription drugs and supplements. Although the Company conducts activities through multiple legal entities — including Sunshine Biopharma Inc. (U.S.), Sunshine Biopharma Canada Inc. (Canada), and Nora Pharma Inc. (Canada) — these entities operate under a unified management structure with shared economic characteristics, common product development objectives, and centralized decision making. As such, they do not meet the criteria for separate operating segments under ASC 280 – Segment Reporting . In accordance with ASU 2023-07 , the Company provides the following information regarding its single reportable segment: · Measure of Segment Profit (Loss): The CODM evaluates performance using consolidated operating income (loss), which is consistent with the amounts presented in the accompanying consolidated financial statements. · Significant Segment Expenses: Research and development expenses, and supply chain costs, selling and marketing expenses, and general and administrative expenses are all incurred and reviewed on a consolidated basis. · Other Segment Items: Interest income, interest expense, foreign exchange gains and losses, and other non-operating items are also managed and reviewed on a consolidated basis. · Reconciliation: As the Company has only one reportable segment, no additional reconciliation to consolidated totals is required beyond what is presented in the consolidated statements of operations. The Company’s operations are conducted primarily in Canada and substantially all long-lived assets are located in this jurisdiction. Revenues are generated from customers located in Canada. 45 Note 16 – Management and Director Compensation The Company paid its officers cash compensation totaling $ 1,425,942 and $ 1,850,243 for the years ended December 31, 2025 and 2024, respectively. Of these amounts attributable to the Company’s CEO, $ 0 and $ 800,000 , respectively was paid to Advanomics Corporation, a company controlled by the CEO of the Company. In addition, the Company’s CEO was paid $12,000 in 2024 through the issuance of 120,000 shares of Series B Preferred Stock valued at $12,000. The Company paid its five directors cash compensation of $80,000 each, totaling $ 400,000 for each of the years ended December 31, 2025 and 2024. Note 17 – Legal Matters On April 14, 2025, the Company terminated the employment of Mr. Malek Chamoun, president of the Company’s wholly owned Canadian subsidiary, Nora Pharma. On April 17, 2025, the Company received a demand letter (the “Demand Letter”) from the attorneys of Mr. Chamoun requesting that the Company pay to Mr. Chamoun $7,307,025 CAD (approximately $5,300,000 USD) within five (5) days. In response to the Demand Letter, the Company issued a letter on May 1, 2025 advising that the demands contained in the Demand Letter, including the sum of $7,307,025 CAD (approximately $5,300,000 USD), are completely unfounded and that it intends to defend itself vigorously. No provision or accrual was made in the financial statements for any litigation liability or legal expense which the Company may incur in connection with this alleged claim. Note 18 – Subsequent Events On January 16, 2026, the Company received a demand letter from the attorneys of Mr. Andrew Telsey, the Company’s former legal counsel, asserting that the Company and Mr. Telsey executed an employment agreement and demanding payment of $3,645,750 from the Company based on the Company’s alleged termination of the purported employment agreement without cause. The Company believes this demand is without merit and has never executed an employment agreement with Mr. Telsey. On that basis, among other factors, the Company filed a complaint against Mr. Telsey on February 6, 2026 in the circuit court of the 7 th judicial district in Broward County, Florida seeking a declaratory judgment providing that (i) the purported employment agreement is of no legal effect and is not binding upon the Company, (ii) no monies are owed by the Company to Mr. Telsey under the purported employment agreement, (iii) the Company should be awarded its attorney’s fees and costs, and (iv) the Company should be awarded such other relief as the court deems just and proper. On March 30, 2026, the court granted the Company’s motion for entry of default and entered a default and final judgment in favor of the Company. Pursuant to the court’s order, the court declared that the purported employment agreement is of no legal effect and not binding on the Company, because the Company never executed the agreement, the Company did not breach the purported employment agreement, and no monies are owed by the Company to Mr. Telsey under the purported employment agreement. The court retained jurisdiction on the issues of entitlement and amount of attorney’s fees and costs to the Company as the prevailing party. 46 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.