U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
Form 10-Q
 
Quarterly Report Under
the Securities Exchange Act of 1934
 
For Quarter Ended:  September 30, 2016
 
Commission File Number:  000-52898
 
SUNSHINE BIOPHARMA INC.
(Exact name of small business issuer as specified in its charter)
 
Colorado
 
20-5566275
(State of other jurisdiction of incorporation)
 
(IRS Employer ID No.)
 
469 Jean-Talon West
3rd Floor
Montreal, Quebec, Canada H3N 1R4
(Address of principal executive offices)
 
(514) 764-9698
(Issuer’s Telephone Number)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes  No 
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   No 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
Accelerated filer
 
 
 
 
Non-accelerated filer
Smaller reporting company
(Do not check if a smaller reporting company)
 
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   No
 
The number of shares of the registrant’s only class of common stock issued and outstanding as of November 14, 2016, was 686,399,858 shares.
 

 
 
 
TABLE OF CONTENTS
 
PART I.
FINANCIAL INFORMATION
 
 
 
  Page No.
 
 
 
Item 1.
Financial Statements
3
 
Unaudited Consolidated Balance Sheet as of September 30, 2016
3
 
Unaudited Consolidated Statement of Operations for the three and nine month Period Ended September 30, 2016
4
 
Unaudited Consolidated Statement of Cash Flows for the nine month Period Ended September 30, 2016 and 2015
5
 
Notes to Unaudited Consolidated Financial Statements
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations/Plan of Operation.
14
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
20
Item 4.
Controls and Procedures.
21
 
 
 
 
PART II
 
 
OTHER INFORMATION
 
 
 
 
Item
 
 
 
 
 
Item 1.
Legal Proceedings
22
Item 1A.
Risk Factors
22
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
22
Item 3.
Defaults Upon Senior Securities
22
Item 4.
Mine Safety Disclosures
22
Item 5.
Other Information
22
Item 6.
Exhibits
23
 
Signatures
  24
 
 
 
 
2
 
 
Sunshine Biopharma, Inc.
 
 
 
 
 
 
Consolidated Balance Sheet
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
Audited
 
 
 
September 30,
 
 
December 31,
 
 
 
2016
 
 
2015
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
  $ 21,789  
  $ 50,798  
Receivables and prepaid expenses
    1,006  
    3,111  
 
       
       
Total Current Assets
    22,795  
    53,909  
 
       
       
Equipment (net of $1,360and $479 depreciation resepctively)
    5,777  
    4,314  
Patents (net of $48,060 and $3,772 amortization respectively)
    570,750  
    615,038  
 
       
       
TOTAL ASSETS
  $ 599,322  
  $ 673,261  
 
       
       
 
       
       
 
       
       
LIABILITIES AND SHAREHOLDERS' EQUITY
       
       
 
       
       
Current liabilities:
       
       
 
       
       
Notes payable
    248,994  
    305,178  
Notes payable - related party
    -  
    835,394  
Accounts payable
    19,280  
    46,591  
Accounts payable - related party
    -  
    80,487  
Accrued expenses
    -  
    -  
Interest payable
    8,406  
    2,656  
 
       
       
Total current liabilities
    276,680  
    1,270,306  
 
       
       
TOTAL LIABILITIES
    276,680  
    1,270,306  
 
       
       
COMMITMENTS AND CONTINGENCIES
       
       
 
       
       
SHAREHOLDERS' EQUITY (DEFICIT)
       
       
 
       
       
Preferred stock, Series A $0.10 par value per share;
       
       
 Authorized 850,000 Shares; Issued
       
       
 and outstanding -0- shares.
    -  
    -  
 
       
       
Preferred stock, Series B $0.10 par value per share;
       
       
 Authorized 500,000 Shares; Issued
       
       
 and outstanding 500,000 shares.
    50,000  
    50,000  
 
       
       
Common Stock, $0.001 per share;
       
       
 Authorized 3,000,000,000 Shares; Issued
       
       
 and outstanding 636,025,383 and 198,265,118 at
       
       
September 30, 2016 and December 31, 2015 respectively
    636,025  
    198,265  
 
       
       
Capital paid in excess of par value
    11,088,339  
    8,235,217  
 
       
       
Accumulated other comprehensive income
    1,769  
    740  
 
       
       
Accumulated (Deficit)
    (11,453,491 )
    (9,081,267 )
 
       
       
TOTAL SHAREHOLDERS' EQUITY (DEFICIT)
    322,642  
    (597,045 )
 
       
       
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
  $ 599,322  
  $ 673,261  
 
See Accompanying Notes To These Financial Statements.
 
3
 
 
Sunshine Biopharma, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
Unaudited Consolidated Statement Of Operations and Comprehensive Loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
Unaudited
 
 
Unaudited
 
 
Unaudited
 
 
 
3 Months
 
 
3 Months
 
 
9 Months
 
 
9 Months
 
 
 
Ended
 
 
Ended
 
 
Ended
 
 
Ended
 
 
 
September 30,
 
 
September 30,
 
 
September 30,
 
 
September 30,
 
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue:
  $ -  
  $ -  
  $ -  
  $ 1,708  
 
       
       
       
       
General & Administrative Expenses
       
       
       
       
 
       
       
       
       
Accounting
    46,311  
    2,700  
    59,280  
    60,260  
Amortization & depreciation
    14,963  
    -  
    45,169  
    -  
Consulting
    24,054  
    6,011  
    156,477  
    107,432  
Generic drug license fees
    11,442  
    -  
    19,203  
    -  
Legal
    9,483  
    26,104  
    53,272  
    103,346  
Licenses
    -  
    64,986  
    -  
    259,094  
Office
    4,832  
    3,187  
    16,764  
    8,911  
Officer & director renumeration
    376  
    -  
    255,719  
    50,000  
Research & development
    -  
    8,657  
    32,793  
    8,657  
Stock Transfer Fee
    1,548  
    1,408  
    6,997  
    10,043  
Travel
    3,007  
    -  
    11,337  
    -  
 
       
       
       
       
Total G & A
    116,016  
    113,053  
    657,011  
    607,743  
 
       
       
       
       
(Loss) from operations
    (116,016 )
    (113,053 )
    (657,011 )
    (606,035 )
 
       
       
       
       
Other Income (expense):
    -  
       
       
       
Forign exchange gain
    -  
    204  
       
    204  
Interest expense
    (12,129 )
    (9,755 )
    (29,080 )
    (49,186 )
Gain on interest forgiveness
    381  
       
    381  
    9,465  
Litigation settlement proceeds
    -  
       
    25,000  
    -  
Debt release
    7,790  
       
    7,790  
       
Loss on debt conversions
    (1,465,646 )
    (80,211 )
    (1,719,304 )
    (359,677 )
 
       
       
       
       
Total Other (Expense)
    (1,469,604 )
    (89,762 )
    (1,715,213 )
    (399,194 )
 
       
       
       
       
     Net (loss)
  $ (1,585,620 )
  $ (202,815 )
  $ (2,372,224 )
  $ (1,005,229 )
 
       
       
       
       
Basic (Loss) per common share
  $ 0.00  
  $ 0.00  
  $ (0.01 )
  $ (0.01 )
 
       
       
       
       
Weighted Average Common Shares Outstanding
    581,464,440  
    130,069,136  
    353,977,067  
    109,827,383  
 
       
       
       
       
Net Income (Loss)
  $ (1,585,620 )
  $ (202,815 )
  $ (2,372,224 )
  $ (1,005,229 )
Other comprehensive income:
       
       
       
       
Gain from foreign exchange translation
    (305 )
    (3,234 )
    1,029  
    1,123  
Comprehensive (Loss)
    (1,585,925 )
    (206,049 )
    (2,371,195 )
    (1,004,106 )
 
       
       
       
       
Basic (Loss) per common share
  $ 0.00  
  $ 0.00  
  $ (0.01 )
  $ (0.01 )
 
       
       
       
       
Weighted Average Common Shares Outstanding
    581,464,440  
    130,069,136  
    353,977,067  
    109,827,383  
 
See Accompanying Notes To These Financial Statements.

 
4
 
 
Sunshine Biopharma, Inc.
 
 
 
 
 
 
Unaudited Consolidated Statement Of Cash Flows
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
Unaudited
 
 
 
9 Months
 
 
9 Months
 
 
 
Ended
 
 
Ended
 
 
 
September 30,
 
 
September 30,
 
 
 
2016
 
 
2015
 
Cash Flows From Operating Activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Gain (Loss)
  $ (2,372,224 )
  $ (1,005,229 )
 
       
       
Adjustments to reconcile net loss to net cash used in
       
       
 operating activities:
       
       
 
       
       
Depreciation and amortization (Equipment and Patents)
    45,169  
    -  
Stock issued for licenses, services, and other assets
    419,500  
    116,500  
Stock issued for payment interest
    6,520  
    6,406  
Debt forgiveness
    (1,313 )
       
Loss on debt conversion
    1,719,304  
    359,677  
Stock issued for payment of expenses
    -  
    9,160  
(Increase) In accounts receivable
    -  
    -  
(Increase) decrease in prepaid expenses
    2,105  
    (11,411 )
Increase (decrease) in Accounts Payable & accrued expenses
    (107,799 )
    (129 )
Increase in interest payable
    5,750  
    175  
 
       
       
Net Cash Flows (used) in operations
    (282,988 )
    (524,851 )
 
       
       
Cash Flows From Investing Activities:
       
       
 
       
       
 
       
       
Purchase of equipment
    (2,343 )
    -  
 
       
       
Net Cash Flows (used) in Investing activities
    (2,343 )
    -  
 
       
       
Cash Flows From Financing Activities:
       
       
 
       
       
Proceed from note payable
    131,150  
    232,840  
Note payable used to pay expenses
       
    -  
Note payable used to pay origionation fees & interest
    20,015  
    36,140  
Sale of common stock
    104,128  
    236,550  
 
       
       
Net Cash Flows provided by financing activities
    255,293  
    505,530  
 
       
       
 
       
       
Net Increase (Decrease) In Cash and cash equivalents
    (30,038 )
    (19,321 )
Foreign currency translation adjustment
    1,029  
    1,123  
Cash and cash equivalents at beginning of period
    50,798  
    143,423  
 
       
       
Cash and cash equivalents at end of period
  $ 21,789  
  $ 125,225  
 
       
       
Supplementary Disclosure Of Cash Flow Information:
       
       
 
       
       
Stock issued for services, licenses and other assets
  $ 419,500  
  $ 116,500  
Stock issued for note conversions including interest
  $ 2,767,254  
  $ 576,735  
Cash paid for interest
  $ -  
  $ -  
Cash paid for income taxes
  $ -  
  $ -  
 
See Accompanying Notes To These Financial Statements.
 
 
5
 
Sunshine Biopharma, Inc.
Notes To Unaudited Consolidated Financial Statements
For The Three and Nine Month Interim Periods Ended September 30, 2016
 
Note 1 – Description of Business
 
Mountain West Business Solutions, Inc. (“MWBS”) was incorporated on August 31, 2006 in the State of Colorado. Sunshine Etopo, Inc. (formerly Sunshine Biopharma, Inc.) was incorporated in the State of Colorado on August 17, 2009. Effective October 15, 2009, MWBS was acquired by Sunshine Etopo, Inc. in a transaction classified as a reverse acquisition. MWBS concurrently changed its name to Sunshine Biopharma, Inc. Sunshine Etopo, Inc. has been inactive and was recently dissolved.
 
In July 2014, the Company formed a wholly owned Canadian subsidiary, Sunshine Biopharma Canada Inc. The financial statements represent the consolidated activity of Sunshine Biopharma, Inc. and Sunshine Biopharma Canada Inc. (hereinafter together referred to as the "Company"). The Company was formed for the purposes of conducting research, development and commercialization of drugs for the treatment of various forms of cancer. The Company may also engage in any other business that is permitted by law, as designated by the Board of Directors of the Company.
 
The Company’s wholly owned Canadian subsidiary, Sunshine Biopharma Canada Inc. (“Sunshine Canada”) was formed for the purposes of offering generic pharmaceutical products in Canada and elsewhere around the globe. Sunshine Canada has recently signed licensing agreements for four (4) generic prescription drugs for treatment of cancer and BPH (Benign Prostatic Hyperplasia). In addition, Sunshine Canada is currently evaluating several other generic products for in-licensing and is working on securing a Drug Establishment License (“DEL”) and a Drug Identification Number (“DIN”) per product from Health Canada. Once the DEL and the DIN’s are secured, Sunshine Canada will begin its generic pharmaceuticals marketing and sales program in Canada and overseas.
 
During the last three month period the Company has continued to raise money through stock sales and borrowings.
 
The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company’s generics business and proprietary drug development program.
 
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 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 wholly owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.
 

 
6
 
 
Sunshine Biopharma, Inc.
Notes To Unaudited Consolidated Financial Statements
For The Three and Nine Month Interim Periods Ended September 30, 2016
 
USE OF ESTIMATES
 
The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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.
CASH AND CASH EQUIVALENTS
 
For the Balance Sheets and Statement 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 $21,789 and $50,798 as of September 30, 2016 and December 31, 2015, respectively. At times such cash balances may be in excess of the FDIC limit of $250,000.
 
EARNINGS PER SHARE
 
The Company has adopted the FASB ASC Topic 260 regarding earnings / loss per share, which provides for calculation of “basic” and “diluted” earnings / loss per share. Basic earnings / loss per share includes no dilution and is computed by dividing net income / loss available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings / loss per share reflect the potential dilution of securities that could share in the earnings of an entity similar to fully diluted earnings / loss per share.
 
Other than the Notes Payable specified under Note 5 below, there were no potentially dilutive instruments outstanding during the interim period ended September 30, 2016 or the year ended December 31, 2015.
 
INCOME TAXES
 
The Company follows the asset and liability method of accounting for deferred income taxes. The asset and liability method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between financial accounting and tax bases of assets and liabilities. The Company accounts for income taxes pursuant to ASC 740. There was no increase in liabilities for unrecognized tax benefits as a result of this implementation. The Company recognizes accrued interest related to unrecognized tax benefits in interest expense and penalties in general and administrative expense.
 

 
7
 
 
Sunshine Biopharma, Inc.
Notes To Unaudited Consolidated Financial Statements
For The Three and Nine Month Interim Periods Ended September 30, 2016
FOREIGN CURRENCY
 
The Company has a wholly owned subsidiary in Canada and the functional currency for that subsidiary is Canadian dollars. However, the reporting currency for the Company is in U.S. dollars. To come to this conclusion the Company considered the direction of ASC section 830-10-55.
 
Selling Price and Market – As an office is located in Canada; the Company is performing consulting services to Canadian based customers on a limited basis. The Company has not had any product sales but anticipates the majority of its customers will pay in U.S. dollars. This indicates the functional currency is U.S. dollars.
 
Financing – The Company’s financing has been generated largely in U.S. dollars from the United States. This indicates the functional currency is U.S. dollars.
 
Expenses – The majority of expense are paid in U.S. dollars. The expenses generated in PRC are paid by a monthly or weekly cash transfer from the U.S. when the expenses are due, resulting in very little foreign currency exposure. This indicates the functional currency is U.S. dollars.
 
Intercompany Transactions – The Company has a few transactions each month between the U.S. and Canadian office. This indicates the functional currency is U.S. dollars.
 
REVENUE RECOGNITION
 
Since inception, the Company has been focused on the research, development and commercialization of drugs for the treatment of various forms of cancer. Following its recent entry into the generic pharmaceuticals business, the Company has become a fully integrated pharmaceutical company offering generic and proprietary drugs for the treatment of cancer and other acute and chronic indications. The Company intends to recognize revenues from the sales of generic pharmaceuticals, if or when they occur, at the times the funds from such sales are received. In the event the Company provides consulting services in the future, revenues from such services will be recognized when the services are rendered and invoiced.
 
AMORTIZATION AND DEPRECIATION
 
Equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses. Depreciation is calculated on a declining balance method over the estimated useful lives. The Company’s equipment consists of computer, furniture and laboratory equipment.
 
Patents are stated at cost of acquisition and amortized over the shorter of the term of the patent life, 20 years, or the remaining life of the underlying patents.
 
 
 
8
Sunshine Biopharma, Inc.
Notes To Unaudited Consolidated Financial Statements
For The Three and Nine Month Interim Periods Ended September 30, 2016
 
 
GOING CONCERN
 
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Since inception, the Company has had recurring operating losses and negative operating cash flows. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
 
The Company’s continuation as a going concern is dependent on its ability to obtain additional financing to fund operations, implement its business model, and ultimately, to attain profitable operations. The Company will need to secure additional funds through various means, including equity and debt financing or any similar financing. There can be no assurance that the Company will be able to obtain additional debt or equity financing, if and when needed, on terms acceptable to the Company, or at all. Any additional equity or debt financing may involve substantial dilution to the Company’s stockholders, restrictive covenants or high interest costs. The Company’s long-term liquidity also depends upon its ability to generate revenues and achieve profitability.
 
The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
 
See the Notes in the 2015 Form 10-K audited consolidated financial statements for a complete summary of the Company’s significant accounting policies.
 
Note 3 – Unaudited Financial Information
 
The unaudited financial information included for the three and nine month interim periods ended September 30, 2016 was taken from the books and records of the Company without audit. However, such information reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to reflect properly the results of the interim periods presented. The results of operations for the three and nine month interim periods ended September 30, 2016 are not necessarily indicative of the results expected for the fiscal year ending December 31, 2016.
 
Note 4 – Notes Payable
 
A Note Payable having a face value of $19,142 and a maturity date of December 31, 2016 was entered into on December 31, 2015. This Note accrues interest at a rate of 12% per annum and became convertible after December 31, 2015 into $0.001 par value Common Stock at a price 35% below market value.
 
A Note payable having a principal balance of $83,000 as of December 31, 2015 was fully converted, together with $3,320 of accrued interest thereon, into $0.001 par value Common Stock during the three month period ended March 31, 2016. In connection therewith, 9,906,049 shares of $0.001 par value Common Stock valued at $146,658 were issued generating a loss of $63,658 on conversion.
 

 
9
 
 
Sunshine Biopharma, Inc.
Notes To Unaudited Consolidated Financial Statements
For The Three and Nine Month Interim Periods Ended September 30, 2016
A Note payable having a face value of $203,036 with interest of 12% was due June 30, 2016. This Note was convertible after December 31, 2015 into $0.001 par value Common Stock at a price 35% below market value. During the six month period ended June 30, 2016, a total of $38,036 in principal was converted into $0.001 par value Common Stock, leaving a principal balance of $165,000. In connection with this conversion, 7,705,186 shares of $0.001 par value Common Stock valued at $231,156 were issued, generating a loss of $193,120 on conversion. On July 1, 2016, the Company executed a new note payable having a face value of $174,852 comprised of the principal amount of this Note ($165,000.00) plus all accrued interest accrued thereon ($9,852.00). The new note is due on March 31, 2017. It also accrues interest at 12% and is convertible at a price 35% below market value.
 
A Note payable having a face value of $85,000 executed on February 18, 2016, was fully converted, together with $3,400 of accrued interest thereon, into $0.001 par value Common Stock during the nine month period ended September 30, 2016. In connection therewith, 27,538,058 shares of $0.001 par value Common Stock valued at $172,436 were issued generating a loss of $84,033 on conversion.
 
On June 30, 2016, the Company received net proceeds of $49,150 in exchange for a note payable executed on July 1, 2016 having a face value of $55,000 and accruing interest at the rate of 10% per annum. The Note, due on April 1, 2017, is convertible after 180 days from issuance into $0.001 par value Common Stock at a price 40% below market value. The Company estimates that the fair value of this convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature.
 
At September 30, 2016 and December 31, 2015, accrued interest on Notes Payable was $8,406 and $2,656, respectively.
 
Note 5 – Notes Payable Related Entity
 
On October 8, 2015, the Company acquired U.S. Patent Number 8,236,935 (the “Patent”) for the anticancer compound, Adva-27a, which includes all rights to this intellectual property within the United States in exchange for an interest-free note payable for $4,320,000 with annual payments of $360,000 due and payable on or before December 31 commencing in 2016 and continuing until paid in full. The note was collateralized by the Patent. Pursuant to an amended agreement effective December 28, 2015, this note was cancelled and replaced with a new note having a face value of $210,519, comprised of $155,940 in principal amount which is the seller’s (Advanomics Corporation, a related party, book value of the Patent plus $54,579 as an adjustment for the currency exchange difference. See Note 12 below. This new, interest-free note was automatically convertible into 80,968,965 shares of the Company’s $0.001 par value Common Stock upon the Company completing an increase in its authorized capital such that a sufficient number of Common Shares is available for issuance. On July 6, 2016, the Company amended its Articles of Incorporation, increasing its authorized capital to 3,000,000,000 shares of $0.001 par value Common Stock and on July 8, 2016 the Company issued 80,968,965 shares of $0.001 par value Common Stock to Advanomics Corporation in exchange for cancellation of this note.


 
10
 
 
Sunshine Biopharma, Inc.
Notes To Unaudited Consolidated Financial Statements
For The Three and Nine Month Interim Periods Ended September 30, 2016
On December 28, 2015 the Company acquired the worldwide issued and pending patents under PCT/FR2007/000697 and PCT/CA2014/000029 (the “Patents”) for the anticancer compound, Adva-27a, which include all worldwide rights to this intellectual property in exchange for a note payable for $12,822,499, with interest accruing at 2% per year beginning January 1, 2016 and quarterly payments of $70,000 plus interest commencing the end of March 2016 and continuing until December 2020 when the entire principal balance and all accrued interest will be due. The note was collateralized by the Patents. Pursuant to an amended agreement, effective December 28, 2015, this note was cancelled and replaced with a new convertible note having a face value of $624,875, comprised of $462,870 in principal amount which is the seller’s (Advanomics Corporation, a related party, book value of the Patents, plus a $162,005 amount as an adjustment for the currency exchange difference. See Note 12 below. This new, interest-free note is automatically convertible into 240,336,451 shares of $0.001 par value Common Stock upon the Company completing an increase in its authorized capital such that a sufficient number of Common Shares are available for issuance. On July 6, 2016, the Company amended its Articles of Incorporation, increasing its authorized capital to 3,000,000,000 shares of $0.001 par value Common Stock and on July 8, 2016 the Company issued 240,336,451 shares of $0.001 par value Common Stock to Advanomics Corporation in exchange for cancellation of this note.
 
During the period ended September 30, 2016, a total of $835,394 in related party principal amount of debt was converted into 321,305,416 shares of $0.001 par value Common Stock leaving a principal balance of $-0-. In connection with this conversion, the Common Stock issued was valued at $2,217,007 generating a loss of $1,381,613 on conversion.
 
Note 6 – Issuance of Common Stock
 
During the nine months ended September 30, 2016, the Company issued a total of 437,760,265 shares of $0.001 par value Common Stock. Of these 366,454,709 shares valued at $2,767,254 were issued upon conversion of outstanding notes payable, reducing the debt by $1,041,430 and interest payable by $6,520 and generating a loss on conversion of $1,719,304.
 
In addition, the Company issued 7,000,000 shares of $0.001 par value Common Stock for $105,000 Canadian (approximately $79,128 US) and 5,555,556 shares of $0.001 par value Common Stock for $25,000.
 
The Company also issued 10,000,000 shares of $0.001 par value Common Stock to an unrelated party for services valued at $100,000 or $0.01 per share, the market value of the shares at the time of issuance. These services are for a two year period but were fully expensed during the period ended September 30, 2016.
 
In addition, the Company issued 5,750,000 shares of $0.001 par value Common Stock to an unrelated party for services valued at $43,700 or $0.0076 per share, the market value of the shares at the time of issuance.
 
The Company also issued 7,000,000 shares of $0.001 par value Common Stock to an unrelated party for services valued at $23,800 or $0.0034 per share, the market value of the shares at the time of issuance.
 
 
 
11
Sunshine Biopharma, Inc.
Notes To Unaudited Consolidated Financial Statements
For The Three and Nine Month Interim Periods Ended September 30, 2016
 
 
In addition, the Company issued 36,000,000 shares of $0.001 par value Common Stock for services rendered to the Company by its Directors valued at $252,000 or $0.007 per share, the market value of the shares at the time of issuance
 
The Company declared no dividends through September 30, 2016.
  
Note 7 – Issuance of Series “B” Preferred Stock
 
During the year ended December 31, 2015, the Company authorized 500,000 shares of $0.10 par value Series “B” Preferred Stock. The Series “B” Preferred Stock is non-convertible, non-redeemable and non-retractable. It has superior liquidation rights to the Common Stock at $0.10 per share and gives the holder the right to 1,000 votes per share. All 500,000 shares of Series “B” Preferred Stock were issued to the CEO of the Company in exchange for services valued at $50,000.
 
Note 8 – Earnings (Loss) Per Share
 
Earnings (loss) per share is computed using the weighted average number of Common Shares outstanding during the period. The Company has adopted ASC 260 (formerly SFAS128), “Earnings per Share”.
 
Note 9 -- Generic Drugs Licenses
During the nine month period ended September 30, 2016, the Company entered into Generic Drugs License Agreements for the following four Generic Drugs:
Anastrozole (brand name Arimidex® by AstraZenica) for treatment of Breast Cancer
Letrozole (brand name Femara® by Novartis) for treatment of Breast Cancer
Bicalutamide (brand name Casodex® by AstraZenica) for treatment of Prostate Cancer
Finasteride (brand name Propecia® by Merck) for treatment of Benign Prostatic Hyperplasia
 
The cost of these Licenses has been fully expensed. The Company determined it was appropriate to fully expense these costs when incurred.
 
 
12
Sunshine Biopharma, Inc.
Notes To Unaudited Consolidated Financial Statements
For The Three and Nine Month Interim Periods Ended September 30, 2016
 
 
Note 10 – Financial Statements
For a complete set of footnotes, reference is made to the Company’s Report on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission and the audited consolidated financial statements and notes included therein.
 
Note 11 – Income Taxes
 
Deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses and other items. Loss carryovers are limited under the Internal Revenue Code should a significant change in ownership occur.
 
At the year ended December 31, 2015 the Company had approximately $11,453,491 in unused federal net operating loss carryforwards, which begin to expire principally in the year 2026. A deferred tax asset at each date of approximately $4,421,048 resulting from the loss carry forwards has been offset by a 100% valuation allowance. The change in the valuation allowance for the periods ended September 30, 2016 and December 31, 2015 was approximately $912,955 and $843,206, respectively.
 
Note 12 – Related Party Transactions
 
Certain members of the Company’s management, including Dr. Steve N. Slilaty, the Company’s President, CEO and a Director/shareholder and Camille Sebaaly, the Company’s CFO, Secretary and a Director/shareholder, hold similar positions with Advanomics Corporation, the seller of the Adva-27a patents recently acquired by the Company (see Note 5).
 
Note 13 – Litigation Settlement Proceeds
 
In February 2015 the Company filed an action in the Circuit Court of the 11th Judicial Circuit for Miami-Date County, Florida related to a convertible note that we issued to the defendant. This matter was settled during the first calendar quarter of 2016. The Company received a one-time payment of $25,000 as part of the terms of settlement.
 
Note 14 – Subsequent Events
 
On October 14, 2016, the Company issued 10,000,000 shares of $0.001 par value Common Stock to an unrelated party for financial consulting services valued at $41,000 or $0.0041 per share.
 
On October 18, 2016, the holder of the convertible note having a face value of $174,852 elected to convert $74,852 in principal amount into 40,374,475 shares of $0.001 par value Common Stock, leaving a principal balance of $100,000.
 
 
13
 
 
PART I.
 
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. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.
 
Overview and History
 
We were incorporated in the State of Colorado on August 31, 2006 under the name “Mountain West Business Solutions, Inc.”  Until October 2009, our business was to provide management consulting with regard to accounting, computer and general business issues for small and home-office based companies. Effective October 15, 2009, we executed an agreement to acquire Sunshine Biopharma, Inc., a Colorado corporation, in exchange for the issuance of 21,962,000 shares of our Common Stock and 850,000 shares of Convertible Preferred Stock, each convertible into twenty (20) shares of our Common Stock. As a result of this transaction we changed our name to “Sunshine Biopharma, Inc. and our officers and directors resigned their positions with us and were replaced by our current management. The majority of the Common Shares and all of the Convertible Preferred Shares we issued for this transaction were issued to Advanomics Corporation, a privately held Canadian company (“Advanomics”). As a result of the issuance of this stock, Advanomics became a related party. On December 21, 2011, Advanomics exercised its right to convert the 850,000 shares of Series “A” Preferred Stock it held in our Company into 17,000,000 shares of Common Stock.
 
We operated under a technology license agreement with Advanomics until December 2015, at which time we acquired all of the worldwide right to the technology and became direct owner of all issued and pending patents pertaining to our technology. See “Plan of Operation – Intellectual Property” below .
 
Our principal place of business is located at 469 Jean-Talon West, 3 rd Floor, Montreal, Quebec, Canada H3N 1R4.  Our phone number is (514) 764-9698 and our website address is  www.sunshinebiopharma.com .
 
We have not been subject to any bankruptcy, receivership or similar proceeding.
 
Results Of Operations
 
Comparison of Results of Operations for the nine months ended September 30, 2016 and 2015
 
For the nine months ended September 30, 2016 and 2015, we did not generate any significant revenue.
 
General and administrative (“G&A”) expenses during the nine month period ended September 30, 2016 were $657,011, compared to G&A expense of $607,743 incurred during the nine month period ended September 30, 2015, an increase of $49,268. While this overall increase is not very large, some of the individual items in our G&A expenses saw a significant increase or decrease during the nine month period ended September 30, 2016. Specifically, we saw an increase in our executive compensation of $205,719. This increase was a result of stock issued to each of our officers and directors during the second quarter of 2016. All of the executive compensation paid during both 2016 and 2015 arose from the issuance of shares of our Common or Preferred Stock. We also incurred $49,045 in additional consulting fees as a result of stock based payments to consultants we engaged to provide services related to our Generic Pharmaceuticals Business. In addition, we saw a $24,136 increase in research and development expense during the nine months ended September 30, 2016, compared to no R&D expenditure during the similar period in 2015. We also incurred $19,190 in additional office and travel expenses during the nine months ended September 30, 2016. In addition, we incurred $45,169 in amortization and depreciation during the nine months ended September 30, 2016 which we did not incur during the same period in 2015. This amount of amortization and depreciation is largely related to the patents we purchased in 2015. Finally, we saw an increase of $19,203 in generic drugs licenses expenses which we did not have in the same period in 2015. This expense is the result of new generic drugs license agreements we signed during the period ended September 30, 2016. See Note 9 of the Financial Statements. These increases were offset by our no longer being required to pay a license fee, which saved $259,094 because we acquired the patent rights which were previously the subject of the license fee. See “Plan of Operation – Intellectual Property” below, as well as a decrease of $50,074 in legal fees as the litigation we were involved in was settled in exchange for a $25,000 payment made to us during the nine month period ended September 30, 2016.
 
 
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  We also incurred $29,080 in interest expense during the nine months ended September 30, 2016, compared to $49,186 in interest expense during the similar period in 2015 as a result of decreased borrowings.  However, we incurred $1,719,304 in losses arising from debt conversion during the nine months ended September 30, 2016, compared to $359,677 on losses from debt conversion during the nine months ended September 30, 2015, a difference of $1,359,627. Although we retired over $1,000,000 in convertible debt (including the related party debt in the amount of $835,394 for the patents purchased in 2015) during the nine month period ended September 30, 2016, we do not anticipate that we will fund our operations using convertible debt financing moving forward. We also negotiated the release of $7,790 of outstanding debt during the nine months ended September 30, 2016
 
As a result, we incurred a net loss of $2,372,224 (approximately $0.01 per share) for the nine month period ended September 30, 2016, compared to a net loss of $1,005,229 (approximately $0.01 per share) during the nine month period ended September 30, 2015.
 
Comparison of Results of Operations for the three months ended September 30, 2016 and 2015
 
General and administrative expenses during the three month period ended September 30, 2016 were $116,016, compared to general and administrative expense of $113,053 incurred during the three month period ended September 30, 2015, an increase of $2,963. While this increase was not overly significant, the various components of our general and administrative expense varied significantly from prior results of operations.
 
Specifically, licensing fees decreased from $64,986 to nil during the three months ended September 30, 2016 compared to the similar period in 2015 because we acquired the patent rights which were previously the subject of the license fee. See “Plan of Operation – Intellectual Property” below. Research and development costs also decreased by $8,657, as our management concentrated on developing our newly launched Generics Pharmaceuticals Business. See “Plan of Operation” below.  Legal fees decreased by $16,621 because we were no longer involved in any litigation. Offsetting these decreases were increases in generic drugs licensing fees, accounting fees, consulting fees and amortization and depreciation expenses. We incurred $11,442 in generic drugs licenses expenses which we did not incur in the same period in 2015. This expense is the result of new generic drugs license agreements we signed during the period ended September 30, 2016. See Note 9 of the Financial Statements. We also incurred $43,611 in increased accounting fees during the three months ended September 30, 2016, compared to the similar period in 2015 because we used stock based compensation to pay for all of 2016 bookkeeping and tax related services. The stock issued in connection with these services was expensed at market value during the three month period ended September 30, 2016. Similarly, consulting fees increased by $18,043 during the three months ended September 30, 2016 compared to the similar period in 2015 for services related to financing and development of the Generic Pharmaceuticals Business. Finally, we incurred $14,963 in amortization and depreciation expenses during the three months ended September 30, 2016 which we did not incur during the same period in 2015, largely related to the patents we acquired in 2015.
 
We also incurred $12,129 in interest expense during the three months ended September 30, 2016, compared to $9,755 in interest expense during the similar period in 2015 as a result of decreased borrowings.  However, we incurred $1,465,646 in losses arising from debt conversion during the three months ended September 30, 2016, compared to $80,211 during the corresponding period in 2015. We also negotiated the release of $7,790 of outstanding debt during the three months ended September 30, 2016.
 
As a result, we incurred a net loss of $1,585,620 (approximately $0.00 per share) during the three month period ended September 30, 2016, compared to a net loss of $202,815 (approximately $0.00 per share) during the three month period ended September 30, 2015.
 
Because we did not generate any significant revenues during our prior two fiscal years, following is our Plan of Operation.
 
Plan of Operation
 
Until recently, we have been operating as a pharmaceutical company focused on the research, development and commercialization of drugs for the treatment of various forms of cancer.  Following our recent entry and expansion into the generic pharmaceuticals business, we have become a fully integrated pharmaceutical company offering generic and proprietary drugs for the treatment of cancer and other acute and chronic indications. In what follows, we describe our generic pharmaceuticals operations followed by our proprietary drug development activities.
 
 
15
 
 
Generic Pharmaceuticals Operations
 
On July 25, 2014, we formed Sunshine Biopharma Canada Inc. (“Sunshine Canada”), a Canadian wholly owned subsidiary for the purposes of conducting generic pharmaceuticals business in Canada and elsewhere around the globe. Sunshine Canada recently signed Cross Referencing Agreements with a major pharmaceutical company for four prescription generic drugs for the treatment of Breast Cancer, Prostate Cancer and Enlarged Prostate. We will market and sell these new pharmaceutical products under our own Sunshine Biopharma label. These four generic products are as follows:
 
Anastrozole (brand name Arimidex® by AstraZenica) for treatment of Breast Cancer
Letrozole (brand name Femara® by Novartis) for treatment of Breast Cancer
Bicalutamide (brand name Casodex® by AstraZenica) for treatment of Prostate Cancer
Finasteride (brand name Propecia® by Merck) for treatment of BPH (Benign Prostatic Hyperplasia)
 
Worldwide sales of the brand name version of these products as reported by the respective owner of the registered trademark are as follows:
 
Arimidex® $250M in 2015
Femara® $380M in 2014
Casodex® $267M in 2015
Propecia® $183M in 2015
 
Sunshine Canada is currently in the process of securing a Drug Identification Number (“DIN”) for each of these products from Health Canada. The Company is also working on finding an appropriate facility and obtaining a Drug Establishment License (“DEL”) from Health Canada. Upon receipt of the DEL and DIN’s, we will be able to accept orders for our own label SBI-Anastrozole, SBI-Letrozole, SBI-Bicalutamide and SBI-Finasteride. While no assurances can be provided, we hope to build a much larger portfolio of “SBI” label Generic Pharmaceuticals over time.
 
While no assurances can be provided and subject to the availability of adequate financing, of which there is no assurance, we anticipate that profits from the sales of Generic Products will be used to finance our proprietary drug development program, including Adva-27a, our flagship anticancer compound. In addition to near-term revenue generation, building the generics business infrastructure and securing the proper permits will render Sunshine Canada appropriately positioned for the marketing and distribution of our proprietary Adva-27a drug candidate, provided that Adva-27a is approved for such marketing and distribution, of which there can be no assurance.
 
Proprietary Drug Development Operations
 
Since inception, our proprietary drug development activities have been focused on the development of a small molecule called Adva-27a for the treatment of aggressive cancers. A Topoisomerase II inhibitor, Adva-27a has been shown to be effective at destroying Multidrug Resistant cancer cells including Pancreatic Cancer cells, Breast Cancer cells, Small-Cell Lung Cancer cells and Uterine Sarcoma cells (Published in ANTICANCER RESEARCH, Volume 32, Pages 4423-4432, October 2012). Sunshine Biopharma is direct owner of all issued and pending worldwide patents pertaining to Adva-27a including U.S. Patent Number 8,236,935 (See “Intellectual Property” below).
 
Adva-27a Preclinical Studies
 
Adva-27a is a GEM-difluorinated C-glycoside derivative of Podophyllotoxin, targeted for various forms of cancer.  If we are successful in our current financing efforts, Adva-27a is expected to enter Phase I clinical trials for pancreatic cancer and, in parallel, multidrug resistant breast cancer in late 2017. See “Clinical Development Path” and “Clinical Trials” below.  Another derivative of Podophyllotoxin called Etoposide is currently on the market and is used to treat various types of cancer including leukemia, lymphoma, testicular cancer, lung cancer, brain cancer, prostate cancer, bladder cancer, colon cancer, ovarian cancer, liver cancer and several other forms of cancer.  Like Etoposide, Adva-27a is a Topoisomerase II inhibitor; however, unlike Etoposide and other anti-tumor drugs currently in use, Adva-27a is able to destroy Multidrug Resistant cancer cells.  Adva-27a is a new chemical entity and has been shown to have distinct and more desirable biological properties compared to Etoposide.  Most notably, Adva-27a is very effective against Multidrug Resistant breast cancer cells while Etoposide has no activity against this aggressive form of cancer (see Figure 1).  In other side-by-side studies against Etoposide as a reference, Adva-27a showed markedly improved cell killing activity in various other cancer types. Our preclinical studies to date have shown that:
 
Adva-27a is effective at killing different types of Multidrug Resistant cancer cells, including:
°
Breast Cancer Cells (MCF-7/MDR)
°
Small-Cell Lung Cancer Cells (H69AR)
°
Uterine Sarcoma Cells (MES-SA/Dx5)
°
Pancreatic Cancer Cells (Panc-1)
 
16
 
Adva-27a is unaffected by P-Glycoprotein, the enzyme responsible for making cancer cells resistant to anti-tumor drugs.
Adva-27a has excellent clearance time (half-life = 54 minutes) as indicated by human microsomes stability studies and pharmacokinetics data in rats.
Adva-27a clearance is independent of Cytochrome P450, a mechanism that is less likely to produce toxic intermediates.
Adva-27a is an excellent inhibitor of Topoisomerase II with an IC50 of only 13.7 micromolar (this number has recently been reduce to 1.44 micromolar as a result of resolving the two isomeric forms of Adva-27a).
Adva-27a has shown excellent pharmacokinetics profile as indicated by studies done in rats.
Adva-27a does not inhibit tubulin assembly.
  
These and other preclinical data have been published in ANTICANCER RESEARCH, a peer-reviewed International Journal of Cancer Research and Treatment.  The manuscript entitled “Adva-27a, a Novel Podophyllotoxin Derivative Found to Be Effective Against Multidrug Resistant Human Cancer Cells” appeared in print in the October 2012 issue of the journal [ANTICANCER RESEARCH  32 : 4423-4432 (2012)].  A copy of the full manuscript as it appeared in the journal is available on our website at  www.sunshinebiopharma.com .
 
 
Clinical Development Path
 
The early stage preclinical studies for our lead compound, Adva-27a, were successfully completed and the results have been published in ANTICANCER RESEARCH  32 : 4423-4432 (2012).  We have been delayed in our implementation of our clinical development program due to lack of funding.  Our fund raising efforts are continuing and as soon as adequate financing is in place we will continue our clinical development program of Adva-27a by conducting the next sequence of steps comprised of the following.  There are no assurances we will be successful in our fund raising efforts:
 
GMP Manufacturing of 2 kilogram for use in IND-Enabling Studies and Phase I Clinical Trials
IND-Enabling Studies
Regulatory Filing (Fast-Track Status Anticipated)
Phase I Clinical Trials (Pancreatic Cancer and Multidrug Resistant Breast Cancer)
  
 
17
 
 
GMP Manufacturing
 
On November 14, 2014, we entered into a Manufacturing Services Agreement with Lonza Ltd. and Lonza Sales Ltd. (hereinafter jointly referred to as “Lonza”), whereby we engaged Lonza to be the manufacturer of our Adva-27a anticancer drug (the “Lonza Agreement”).  Lonza is one of the world’s leading and most-trusted manufacturers of pharmaceutical ingredients.  Headquartered in Basel, Switzerland, Lonza has more than 40 major manufacturing facilities worldwide.  The Lonza Agreement was effective November 10, 2014, has a term of 5 years, and may be extended or terminated earlier as provided in the Lonza Agreement.
 
In June 2015 we received a sample of the scale-up manufacturing process for evaluation and confirmation of adherence to specifications.  Based upon our laboratory analyses, the sample meets all of the required chemical, physical and biological specifications.  The amount of material (the “Yield”) generated by this pilot run was found to be significantly lower than anticipated and we are currently working towards finding possible solutions to increase the Yield and define a path forward. During the course of our discussions concerning the problem of the low Yield, Lonza informed us that they required us to pay them $687,818 prior to moving forward with any activity pertaining to the agreement we have with them for the manufacturing of our compound. We have repeatedly indicated to Lonza that a clear path defining exactly how the extremely low yield issue would be addressed is imperative prior to us making any payments. As of the date of this report, neither party has changed its position .  
 
Clinical Trials
 
Adva-27a’s initial indication will be pancreatic cancer and multidrug resistant breast cancer for which there are currently little or no treatment options available.  In June 2011 we concluded an agreement with McGill University’s Jewish General Hospital in Montreal, Canada to conduct Phase I clinical trials for these two indications.  All aspects of the planned clinical trials in Canada will employ FDA standards at all levels.  Subject to obtaining the necessary financing, we now anticipate that Phase I clinical trials will commence in mid to late 2017 and we estimate that it will take 18 months to complete, at which time we expect to receive limited marketing approval for “compassionate-use” under the FDA and similar guidelines in Canada. See “Potential Future Opportunities” below.
 
Potential Future Opportunities
 
According to the American Cancer Society, nearly 1.5 million new cases of cancer are diagnosed in the U.S. each year.  Given the terminal and limited treatment options available for the pancreatic cancer and multidrug resistant breast cancer indications we are planning to study, we anticipate being granted limited marketing approval (“compassionate-use”) for our Adva-27a following receipt of funding and a successful Phase I clinical trial.  There are no assurances that either will occur.  Such limited approval will allow us to make the drug available to various hospitals and health care centers for experimental therapy and/or “compassionate-use”, thereby generating some revenues in the near-term.
 
We believe that upon successful completion of Phase I Clinical Trials we may receive one or more offers from large pharmaceutical companies to buyout or license our drug.  However, there are no assurances that our Phase I Trials will be successful, or if successful, that any pharmaceutical companies will make an acceptable offer to us.  In the event we do not consummate such a transaction, we will require significant capital in order to manufacture and market our new drug.
 
Intellectual Property
 
Effective October 8, 2015, we executed a Patent Purchase Agreement (the “October Purchase Agreement”), with Advanomics, a related party, pursuant to which we acquired all of the right, title and interest in and to U.S. Patent Number 8,236,935 (the “US Patent”) for our anticancer compound, Adva-27a.  On December 28, 2015, we executed a second Patent Purchase Agreement (the “December Purchase Agreement”), with Advanomics, pursuant to which we acquired all of the right, title and interest in and to all of the remaining worldwide rights covered by issued and pending patents under PCT/FR2007/000697 and PCT/CA2014/000029 (the “Worldwide Patents”) for our anticancer compound, Adva-27a.
 
Effective December 28, 2015, we entered into amendments (the “Amendments”) of these Purchase Agreements pursuant to which the total purchase price was reduced from $17,142,499 to $618,810, the book value of this intellectual property on the financial statements of Advanomics.  Further, the Amendments provided for automatic conversion of the promissory notes representing the new purchase price into an aggregate of 321,305,416 shares of our Common Stock once we increase our authorized capital such that these shares can be issued.  The October and December Purchase Agreements and Amendments thereof provide us with direct ownership of all worldwide patents and rights pertaining to Adva-27a.
 
 
18
 
 
Our Lead Anti-Cancer Compound, Adva-27a, in 3D
 
 
Liquidity and Capital Resources
 
As of September 30, 2016, we had cash or cash equivalents of $21,789.
 
Net cash used in operating activities was $282,988 during the nine month period ended September 30, 2016, compared to $524,851 for the nine month period ended September 30, 2015.  We anticipate that overhead costs in current operations will increase in the future as we move forward with our Generic Pharmaceuticals and Proprietary Drug Developments operations discussed above.
 
Cash flows from financing activities were $255,293 for the nine month periods ended September 30, 2016, compared to $505,530 during the nine months ended September 30, 2015.  Cash flows used by investing activities were $2,343 for the nine months ended September 30, 2016, compared to $0 for the nine month periods ended September 30, 2015.
 
At September 30, 2016, we had issued and outstanding 636,025,383 shares of our Common Stock. During the nine months ended September 30, 2016, we issued a total of 437,760,265 shares of our Common Stock. Of these, 366,454,709 shares valued at $2,767,254 were issued pursuant to conversion of outstanding convertible notes payable, reducing debt by $1,041,430 and interest payable by $6,520 and generating a loss on conversion of $1,719,304 for the period.
 
On July 1, 2016, we issued 5,750,000 shares of our $0.001 par value Common Stock in exchange for services.
 
On July 1, 2016, we executed a Convertible Promissory Note payable having a face value of $55,000.00. The proceeds from this Note were received by us on September 30, 2016 and were recorded in our Financial Statements included in this report as a current liability.
 
On July 1, 2016, we executed a Convertible Promissory Note payable having a face value of $174,852, comprised of the principal amount ($165,000.00) and all accrued interest ($9,852.00) on the Convertible Promissory Note payable that matured on September 30, 2016. See Note 4 to Financial Statements.
 
On July 6, 2016, we amended our Articles of Incorporation, increasing our authorized capital to 3,000,000,000 shares of Common Stock, $0.001 par value per share, and 30,000,000 shares of Preferred Stock, $0.10 par value per share.
 
On July 8, 2016, we issued 321,305,416 shares of our $0.001 par value Common Stock to Advanomics Corporation (“Advanomics”), a related party, in exchange for cancellation of the two notes payable in the aggregate principal amount of $835,394 applicable to our acquisition of the patent rights discussed above and in Note 5 to our Financial Statements.
 
We also issued 7,000,000 shares of Common Stock for $105,000 Canadian (approximately $79,128 US) to finance our Generic Pharmaceuticals operations and 5,555,556 shares of Common Stock for $25,000 to pay for our filing expenses.
 
 
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In addition, we issued, 10,000,000 shares of $0.001 par value Common Stock to an unrelated party for services valued at $100,000 or $0.01 per share. These services are for a two year period but were fully expensed during the period ended June 30, 2016.
 
We also issued 36,000,000 shares of our Common Stock for services rendered to us by our current directors, valued at $252,000 or $0.007 per share.
 
We are generating only nominal revenue from our operations, and our ability to implement our business plan for the future will depend on the future availability of financing. Such financing will be required to enable us to continue our Generic Pharmaceuticals business and Proprietary Drug Development operations. We intend to raise funds through private placements of our Common Stock and through short-term borrowing. We estimate that we will require approximately $5 million in debt and/or equity capital to fully implement our business plan in the future and there are no assurances that we will be able to raise this capital. While we have engaged in discussions with various investment banking firms and venture capitalists to provide us these funds, as of the date of this report we have not reached any agreement with any party that has agreed to provide us with the capital necessary to effectuate our business plan. Our inability to obtain sufficient funds from external sources when needed will have a material adverse effect on our plan of operation, results of operations and financial condition.
 
Our cost to continue operations as they are now conducted is nominal, but these are expected to increase as we advance our Generic Pharmaceuticals business and we commence Phase I clinical trials. We do not have sufficient funds to cover the anticipated increase in these expenses. We need to raise additional funds in order to continue our existing operations and advance our plans to expand our operations for the next year. If we are successful in raising additional funds, our Generic Pharmaceuticals business and Proprietary Drug Development efforts will continue and expand.
 
Subsequent Events
 
On October 14, 2016, we issued 10,000,000 shares of $0.001 par value Common Stock to an unrelated party for financial consulting services.
 
On October 18, 2016, the holder of the convertible note having a face value of $174,852 elected to convert $74,852 in principal amount into 40,374,475 shares of $0.001 par value Common Stock, leaving a principal balance of $100,000.
 
Inflation
 
Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the nine month period ended September 30, 2016.
 
Critical Accounting Estimates
 
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated 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. The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
 
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 pursuant to Regulation S-K.
 
 
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ITEM 4. CONTROLS AND PROCEDURES.
 
Disclosure Controls and Procedures  -  Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report.
 
These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
 
Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2016, at the reasonable assurance level. We believe that our consolidated financial statements presented in this Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.
 
Inherent Limitations  -   Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.
 
Changes in Internal Control over Financial Reporting  - There were no changes in our internal control over financial reporting during the nine month period ended September 30, 2016, which were identified in conjunction with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
 
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PART II. OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
 
In June 2015 we received a sample of the scale-up manufacturing process for evaluation and confirmation of adherence to specifications.  Based upon our laboratory analyses, the sample meets all of the required chemical, physical and biological specifications.  The amount of material (the “Yield”) generated by this pilot run was found to be significantly lower than anticipated and we are currently working towards finding possible solutions to increase the Yield and define a path forward. During the course of our discussions concerning the problem of the low Yield, Lonza informed us that they required us to pay them $687,818 prior to moving forward with any activity pertaining to the agreement we have with them for the manufacturing of our compound. We have repeatedly indicated to Lonza that a clear path defining exactly how the extremely low yield issue would be addressed is imperative prior to us making any payments. As of the date of this report, neither party has changed its position .  
 
Other than the above, we are not party to any material legal proceedings, nor have any such actions been threatened against us.
 
ITEM 1A. RISK FACTORS
 
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
During the nine months ended September 30, 2016, we issued a total of 437,760,265 shares of $0.001 par value Common Stock. Of these, 366,454,709 shares valued at $2,767,254 were issued upon conversion of outstanding notes payable, reducing debt by $1,041,430 and interest payable by $6,520 and generating a loss on conversion of $1,719,304. We relied upon the exemption from registration provided by Regulation D promulgated under the Securities Act of 1933, as amended, to issue these shares. The proceeds of these loans were used to acquire patents and for working capital.
 
In addition, we issued 7,000,000 shares of $0.001 par value Common Stock for $105,000 Canadian (approximately $79,128 US) and 5,555,556 shares of $0.001 par value Common Stock for $25,000. We used these funds for working capital.
 
We also issued 10,000,000 shares of $0.001 par value Common Stock to an unrelated party for services valued at $100,000 or $0.01 per share, the market value of the shares at the time of issuance. These services are for a two year period but were fully expensed during the period ended September 30, 2016.
 
In addition, we issued 5,750,000 shares of $0.001 par value Common Stock to an unrelated party for services valued at $43,700 or $0.0076 per share, the market value of the shares at the time of issuance.
 
Wey also issued 7,000,000 shares of $0.001 par value Common Stock to an unrelated party for services valued at $23,800 or $0.0034 per share, the market value of the shares at the time of issuance.
 
In addition, we issued 36,000,000 shares of $0.001 par value Common Stock for services rendered to the Company by our Directors valued at $252,000 or $0.007 per share, the market value of the shares at the time of issuance.
 
Except as otherwise indicated, herein, we relied upon the exemption from registration provided by Section 4(a)(2) promulgated under the Securities Act of 1933, as amended, to issue the aforesaid shares.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
None
 
ITEM 4. MINE SAFETY DISCLOSURE
 
Not Applicable
 
ITEM 5. OTHER INFORMATION
 
None
 
 
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ITEM 6. EXHIBITS
 
Exhibit No.
 
Description
 
 
 
 31.1
 
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
 31.2
 
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
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Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
101.INS
 
XBRL Instance Document*
101.SCH
 
XBRL Schema Document*
101.CAL
 
XBRL Calculation Linkbase Document*
101.DEF
 
XBRL Definition Linkbase Document*
101.LAB
 
XBRL Label Linkbase Document*
101.PRE
 
XBRL Presentation Linkbase Document*
 
 
 
______________________  
* Pursuant to Rule 406T of Regulation S-T, these interactive data files are not deemed filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act or Section 18 of the Securities Exchange Act and otherwise not subject to liability.
 
 
 
 
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SIGNATURES
 
Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on November 14, 2016.
 
 
SUNSHINE BIOPHARMA, INC.
 
 
 
 
 
 
By:
s/ Dr. Steve N. Slilaty
 
 
 
Dr. Steve N. Slilaty,
 
 
 
Principal Executive Officer
 
 
 
 
 
 
 
 
 
 
By:
s/ Camille Sebaaly
 
 
 
Camille Sebaaly,
Principal Financial Officer and
 
 
 
Principal Accounting Officer
 
 
 
 
 
 
 
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