Sunshine Biopharma Inc. 10-Q

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, 2025. 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 have two wholly owned subsidiaries: (i) Nora Pharma Inc. (“Nora Pharma”), a Canadian corporation, through which we currently have 60 generic prescription drugs on the market in Canada, and (ii) Sunshine Biopharma Canada Inc. (“Sunshine Canada”), a Canadian corporation through which we develop and sell OTC supplements. In addition, we are conducting a proprietary drug development program which is comprised of (i) K1.1 mRNA, an LNP encapsulated mRNA targeted for liver cancer, and (ii) SBFM-PL4, a protease inhibitor for treatment of SARS Coronavirus infections. Commercial Operations Our commercial operations are focused on the procurement of rights to generic pharmaceutical products for sale, currently in Canada and ultimately around the world. We seek to secure such rights through various types of strategic arrangements, including: · In-licensing and Supply Agreements: Nora Pharma acquires the rights to import, market, sell and distribute the products in Canada by purchasing the drug dossiers from strategic partners. Nora Pharma then files the dossiers with Health Canada to obtain regulatory approval prior to marketing. The approval process at Health Canada takes on average of 12 months. The products are sold under Nora Pharma label. · Cross-licensing: Nora Pharma acquires the rights to import, market, sell and distribute the products in Canada by receiving an authorization letter from pharmaceutical partners. The partners’ products are already approved in Canada but we are still required to obtain our own approval from Health Canada, which takes on average 45-60 days. The products are sold under Nora Pharma label. · Distribution Agreements: Nora Pharma acquires the rights to market, sell and distribute the products in Canada by signing distribution agreements with various pharmaceutical partners. The partners’ products are already approved by Health Canada. The products are sold under the partners’ label. 15 Generic drugs are pharmaceutically equivalent to the brand name drugs. They contain identical medicinal ingredients in the same amounts as the brands. Generic medications, however, may have different non-medicinal ingredients than the brand name drugs, but the generic developer must show that these do not affect the safety, efficacy, or quality of the drug compared to the brand. When a generic drugs company wants to sell a generic drug in Canada, it must file a generic drug submission with Health Canada. The submission is called an Abbreviated New Drug Submission (ANDS). The submission is reviewed by scientists and health care experts at Health Products and Food Branch (HPFB) of Health Canada. All generic drug submissions go through the same process as the brand name drug submissions. If the evaluation shows that the generic drug meets all regulatory requirements (including patent and data protection considerations), Health Canada will issue a Notice of Compliance (NOC) and a Drug Identification Number (DIN) to the applicant. The NOC and DIN signal the drug's official approval in Canada and permit the applicant to market the drug in Canada. Once a company obtains the NOC and DIN for a drug, then it begins the process with Pan-Canadian Pharmaceutical Alliance (pCPA) to have the drug listed on the provincial and territorial formularies and federal government drug benefit plans. We currently have the following generic prescription drugs on the market in Canada: Drug* Therapeutic Area Brand Alendronate Osteoporosis Fosamax® Amlodipine Cardiovascular Norvasc® Apixaban Cardiovascular Eliquis® Aripiprazole Antipsychotic Abilify® Atorvastatin Cardiovascular Lipitor® Azithromycin Antibacterial Zithromax® Betahistine Vertigo Serc® Bilastine Allergy Blexten® Candesartan Hypertension Atacand® Candesartan HCTZ Hypertension Atacand Plus® Celecoxib Anti-inflammatory Celebrex® Cetirizine Allergy Reactine® Ciprofloxacin Antibiotic Cipro® Citalopram Central nervous system Celexa® Clindamycin Antibiotic Dalacin® Clopidogrel Cardiovascular Plavix® Dapagliflozin Diabetes Forxiga® Docusate Gastrointestinal Colace® Donepezil Central nervous system Aricept® Doxycycline Antibacterial Vibramycin® Duloxetine Central nervous system Cymbalta® Dutasteride Urology Avodart® Escitalopram Central nervous system Cipralex® Ezetimibe Cardiovascular Ezetrol® 16 Finasteride Urology Proscar® Fluconazole Antifungal Diflucan® Fluoxetine Central nervous system Prozac® Gabapentin Central nervous system Neurontin® Hydroxychloroquine Antimalarial Plaquenil® Letrozole Oncology Femara® Levetiracetam Central nervous system Keppra® Lurasidone Antipsychotic Latuda® Metformin Diabetes Glucophage® Mirtazapine Central nervous system Remeron® Montelukast Allergy Singulair® Olanzapine Central nervous system Zyprexa® Olanzapine ODT Central nervous system Zyprexa® 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® Prucalopride Women's Health Resotran® Quetiapine Central nervous system Seroquel® Quetiapine XR Central nervous system Seroquel XR® Ramipril Cardiovascular Altace® Rizatriptan ODT Central nervous system Maxalt® ODT Rosuvastatin Cardiovascular Crestor® Sertraline Central nervous system Zoloft® Sildenafil Urology Viagra® Tadalafil Urology Cialis® Telmisartan Cardiovascular Micardis® Telmisartan HCTZ Cardiovascular Micardis Plus® Topiramate Anticonvulsant Topamax® Ursodiol Cholelithiasis Urso® Varenicline Smoking cessation Champix® Zolmitriptan Central nervous system Zomig® Zopiclone Central nervous system Imovane® * Our distribution agreements were terminated effective December 31, 2025, reducing the drugs we have on the market from 71 to 60. 17 In addition to the 60 drugs currently on the market, we have 22 additional drugs in our pipeline including 12 we anticipate launching during the remainder of 2026. These additional drugs will address various human health areas including cardiovascular, oncology, gastroenterology, central nervous system, diabetes, urology, endocrinology, anti-infective, and anti-inflammatory. We believe the addition of these products to our existing portfolio will strengthen our presence in the Canadian $11.2 billion a year generic drug market ( IMARC Group ) and provide us with greater access to pharmacies as we become more of a go-to supplier for every-day and specialty medicines. Research and Development The following table summarizes our proprietary drugs in development: Drug Candidate Therapeutic Area/Indication Development Stage K1.1 (mRNA LNP) Oncology (Liver Cancer) Animal Testing SBFM-PL4 (Small Molecule) Antiviral (SARS Coronavirus Infections) Animal Testing 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 side effects. These new mRNA molecules, bearing the laboratory name K1.1, were adapted for delivery into patients using a lipid nanoparticle (LNP) technology similar to the one employed in the COVID-19 mRNA vaccines. On April 20, 2022, we filed a provisional patent application in the United States covering our K1.1 mRNA molecules. The patent application was converted into a PCT Application on October 18, 2024 and published by the United States Patent and Trademark Office (“USPTO”) on September 4, 2025. In November 2022, we concluded an agreement with a specialized commercial partner for the purposes of formulating our K1.1 mRNA molecules into specific lipid nanoparticles for use in test animals including xenograft mice. The initial results of our animal testing indicated that our K1.1 mRNA-LNP constructs were effective at reducing the size of liver cancer tumors in xenograft 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. 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. 18 Our Anti-Coronavirus research effort has been focused on developing an inhibitor of PLpro and, on May 22, 2020, we filed a provisional patent application in the United States covering composition subject matter pertaining to small molecules for inhibition of the Coronavirus PLpro as well as Mpro. Our provisional patent application, entitled Inhibitors of Coronavirus Protease , was converted into a PCT patent application on April 30, 2021. On December 23, 2025, we received a Notice of Allowance from the USPTO for our PCT patent application. On May 7, 2026, we received an Issue Notification from the USPTO indicating that the patent will be issued on May 12, 2026. In addition, the Issue Notification confirms that the patent is eligible for an extension of 706 days and will therefore expire on April 6, 2043. 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 since broadened our objective to include the development of a 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. Our current lead compound has been found to be active at sub micromolar concentrations against PLpro and exhibited antiviral activity in SRAS-CoV-2 infected cells as well as in cells infected with several different variants of concern. In addition, our compound had favorable pharmacokinetics properties in rodent species and exhibited preferred drug accumulation in the lungs over plasma. The compound was found to be orally active in a K18-human-ACE2 transgenic mouse model and to significantly reduce virus load in the lungs of infected animals in a dose-dependent manner without gross toxicities. In August 2024, we published these and other research results related to this project in the Journal of Medicinal Chemistry ( J. Med. Chem. 2024, 67, 13681−13702 ). A copy of this article is available on our website at: www.sunshinebiopharma.com/scientific-publications. Additional research results on our lead compound have recently been submitted for publication in the Journal of Medicinal Chemistry and the research article has been peer-reviewed and is currently in press. Intellectual Property On May 22, 2020, we filed a provisional patent application in the United States for a new treatment for Coronavirus infections. Our patent application, entitled Inhibitors of Coronavirus Protease , 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 December 23, 2025, we received a Notice of Allowance from the USPTO for our PCT patent application. On May 7, 2026, we received an Issue Notification from the USPTO indicating that the patent will be issued on May 12, 2026. In addition, the Issue Notification confirms that the patent is eligible for an extension of 706 days and will therefore expire on April 6, 2043. 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. The patent application was converted into a PCT Application on October 18, 2024 and published by the USPTO on September 4, 2025. 19 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. Our wholly owned subsidiary, Nora Pharma, owns 200 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. Nora Pharma also owns the rights to sell 10 generic prescription drugs in Canada through distribution agreements with various international partners under which Nora Pharma acts as distributor and receives a percentage of sales. In addition, we own 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, (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. On September 30, 2025, we received official trademark registration from the United States Patent and Trademark Office (Registration No. 7,963,385) for “Sunshine Biopharma Inc.” and Design. On April 15, 2026, we received official trademark registration from the Canadian Intellectual Property Office of Canadian trademark registration (Registration No. LMC/TMA 1,402,862) for “Sunshine Biopharma Inc.” and Design. Results of Operations Comparison of results of operations for the three months ended March 31, 2026 and 2025 During the three months ended March 31, 2026, we generated $8,088,765 in sales, compared to $8,901,341 for the three months ended March 31, 2025, a decrease of $812,576 (9.1%). The decrease is largely a result of termination of our distribution agreements effective December 31, 2025. The direct cost for generating these sales was $5,907,775 (73.0%) for the three months ended March 31, 2026, compared to $6,170,915 (69.3%) for the three months ended March 31, 2025. Our gross profit for the three months ended March 31, 2026 was $2,180,990 (27.0%), compared to $2,730,426 (30.7%) for the three months ended March 31, 2025, a decrease of $549,436. General and administrative expenses during the three-month period ended March 31, 2026 were $3,576,587, compared to $4,026,176 during the three-month period ended March 31, 2025, a decrease of $449,589. The decrease was the net result of decreases in certain expense categories against modest increases in others. For example, while there was an increase in legal fees by $61,877 and salaries by $183,038, there was a decrease in accounting fees by $117,950, consulting fees by $222,139, marketing expenses by $148,138, office expenses by $54,270, and R&D by $183,038. Overall, we incurred a loss of $1,395,597 from our operations for the three months ended March 31, 2026, compared to a loss of $1,295,750 from our operations in the three-month period ended March 31, 2025. We had interest income of $48,426 during the three months ended March 31, 2026, compared to interest income of $75,367 during the three months ended March 31, 2025, as a result of having less cash on hand. In addition, we had a one-time payment of $103,320 in the three months ended March 31, 2026 which we did not have in the three months ended March 31, 2025. This amount was allocated to us as part of a settlement of a class-action lawsuit against BF Borgers CPA PC, our previous auditor whom we terminated in May 2024. As a result, we incurred a net loss of $1,243,869 ($0.25 per share) for the three months ended March 31, 2026, compared to a net loss of $1,179,771 ($0.44 per share) for the three-month period ended March 31, 2025. 20 Liquidity and Capital Resources As of March 31, 2026, we had cash and cash equivalents of $6,913,013. Net cash used in operating activities was $2,072,100 during the three months ended March 31, 2026, compared to $1,695,002 during the three-month period ended March 31, 2025. The increase was largely a result of an increase in Nora Pharma’s accounts receivable. Cash flows used in investing activities were $104,518 for the three months ended March 31, 2026, compared to $212,017 for the three months ended March 31, 2025. The decrease was the result of fewer purchases of equipment and intangible assets (drug licenses) by Nora Pharma. Cash flows provided by financing activities were $0 during the three months ended March 31, 2026, compared to $355,297 during the three months ended March 31, 2025. The decrease was a result of no warrant exercises taking place during the three months ended March 31, 2026, compared to $355,297 in warrant exercises during the three months ended March 31, 2025. We are currently generating revenue of approximately $8 million per quarter and incurring a quarterly deficit of approximately $1.2 million. Our attention is currently focused on increasing sales and streamlining operations to reduce expenses. We believe these measures could bring us to breakeven and make us less dependent on the capital markets for financing. Our existing cash on hand together with cash we generate from sales will be sufficient to fund our operations for the next 17 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 for expansion of our generic pharmaceuticals sales operations and further research and development. 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, 2025, including our financial statements and notes thereto included therein as filed with the SEC on April 3, 2026. 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. 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.