Sunshine Biopharma, Inc.
See Accompanying Notes to These Financial Statements.
See Accompanying Notes to These Financial Statements.
See Accompanying Notes to These Financial Statements.
See Accompanying Notes to These Financial Statements.
Notes to Unaudited Consolidated Condensed Financial
Statements
For the Three Month Interim Periods Ended March 31, 2022 and 2021
Note 1 – Nature of Business and Basis
of Presentation
Sunshine Biopharma, Inc. (the "Company")
was originally incorporated under the name Mountain West Business Solutions, Inc. on August 31, 2006, in the State of Colorado. Until
October 2009, the Company was operating as a business consultancy firm.
Effective October 15, 2009, the Company acquired
Sunshine Biopharma, Inc. in a transaction classified as a reverse acquisition. Sunshine Biopharma, Inc. held an exclusive license to a
new anticancer drug bearing the laboratory name, Adva-27a (the “License Agreement”). Upon completion of the reverse acquisition
transaction, the Company changed its name to Sunshine Biopharma, Inc. and began operating as a pharmaceutical company focusing on the
development of the licensed Adva-27a anticancer drug.
In December 2015, the Company acquired all worldwide
issued (US Patent Number 8,236,935, and 10,272,065) and pending patents under PCT/FR2007/000697 and PCT/CA2014/000029 for the Adva-27a
anticancer compound from Advanomics Corporation, a related party, and terminated the License Agreement. In 2016, the remaining value of
these patents was impaired. The Company is however continuing development of the Adva-27a anticancer drug covered by these patents.
In December 2018, the Company launched its first
Science-Based Nutritional Supplements product, Essential 9™, an over-the-counter
tablet comprised of the nine (9) essential amino acids that the human body cannot make. Essential 9™
has been authorized for marketing by Health Canada under NPN 80089663.
On May 22, 2020, the Company filed a provisional
patent application in the United States for a new treatment for Coronavirus infections. The Company’s patent application covers
composition subject matter pertaining to small molecules for inhibition of the main Coronavirus protease, Mpro, an enzyme that is essential
for viral replication. The patent application has a priority date of May 22, 2020. On April 30, 2021, the Company 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 January 26, 2021, the Company received a Notice
of Allowances from the Canadian Intellectual Property Office for a new patent application covering Adva-27a. The newly issued patent contains
new subject matter and extends the proprietary protection of Adva-27a in Canada until 2033.
On March 9, 2021, the Company received a Notice
of Allowance from the European Patent Office for a new patent application covering Adva-27a. The newly issued patent contains new subject
matter and extends the proprietary protection of Adva-27a in Europe until 2033. The equivalent patent in the United States was issued
in 2019 (US Patent Number 10,272,065).
On October 1, 2021, the Company filed a patent
application for a potential new treatment for neurodegenerative disorders. The patent application contains experimental results showing
that certain mRNA molecules provide protective effects against oxidative stress in differentiated neuronal cells, a process that mimics
neuronal degeneration. This new patent application has a priority date of October 1, 2021.
On February 15, 2022, the Company entered
into an underwriting agreement with Aegis Capital Corp. as underwriter, for the issuance and sale in an underwritten public offering
of 1,882,353 Units, each consisting of one share of common stock and two warrants (“Tradeable Warrants”) to purchase
shares of common stock at a public offering price of $4.25 per Unit for total gross proceeds of $8,000,000
(“Offering”). We also granted the underwriter a 45-day option to purchase additional shares of common stock and/or
Tradeable Warrants in an amount equal up to 15% of the number of shares and Tradeable Warrants, respectively, sold in the Offering
solely to cover overallotments, if any.
Also on February 15, 2022, the Company’s
shares of common Stock and Tradeable Warrants began trading on Nasdaq under the ticker symbol “SBFM” for the common stock
and “SBFMW” for the Tradeable Warrants.
On February 17, 2022, the Offering closed
and the Company received net proceeds of $6,833,071. Pursuant to the Offering, the Company issued and sold an aggregate
of 1,882,353 shares of common stock and 4,102,200 Tradeable Warrants (including 337,494 Tradeable Warrants purchased at $0.01 per warrant
resulting from partial exercise of the overallotment option granted to the underwriter).
On February 18, 2022, the Company entered into
a research agreement with the Arizona Board of Regents on behalf of the University of Arizona (the “University of Arizona”).
Pursuant to the research agreement, the University of Arizona agreed to use reasonable efforts to perform a research project focused on
determining the in vivo safety, pharmacokinetics, and dose selection properties of three University of Arizona owned PLpro inhibitors,
followed by efficacy testing in mice infected with SARS-CoV-2, in consideration for certain milestone payments to be made by the Company.
Under the agreement, the University of Arizona granted the Company a first option to negotiate for a commercial, royalty-bearing license
for all intellectual property invented or authored by University of Arizona personnel under the research project.
On February 22, 2022, the Company redeemed 990,000
shares of the Series B Preferred Stock from the CEO of the Company at a redemption price equal to the stated value of $0.10 per share.
On March 14, 2022, the
Company completed a private placement wherein the Company sold (i) 2,301,353
shares of its Common Stock together with Investor Warrants to purchase up to 2,301,353 shares of Common Stock, and (ii) 1,302,251
pre-funded warrants (“Pre-Funded Warrants”) with each Pre-Funded Warrant exercisable for one share of Common Stock,
together with Investor Warrants to purchase up to 1,302,251 shares of Common Stock. Each share of Common Stock and accompanying Investor
Warrant were sold together at a combined offering price of $2.22, and each Pre-Funded Warrant and accompanying Investor Warrant were
sold together at a combined offering price of $2.219. The Company received approximately $8 million in gross proceeds, and $6,781,199
in net proceeds in this offering.
Impact of Coronavirus (COVID-19) Pandemic
In March 2020, the World Health Organization declared
Coronavirus and its associated disease, COVID-19, a global pandemic. Conditions surrounding the Coronavirus outbreak have been and are
continuing to evolve rapidly. Government authorities in the U.S. and around the world have implemented emergency measures to mitigate
the spread of the virus. The outbreak and related mitigation measures have had and will continue to have a material adverse impact on
the world economies and the Company's business activities. It is not possible for the Company to predict the duration or magnitude of
the adverse conditions of the outbreak and their effects on the Company’s business or ability to raise funds. No adjustments have
been made to the amounts reported in the Company's financial statements as a result of this matter.
Basis of Presentation of Unaudited Financial
Information
The unaudited financial statements of the Company
for the three month periods ended March 31, 2022 and 2021 have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation
S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring
adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of
operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The
balance sheet information as of December 31, 2021 was derived from the audited financial statements included in the Company's financial
statements as of and for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the Securities
and Exchange Commission (the “SEC”) on March 21, 2022. These financial statements should be read in conjunction with that
report.
Reverse Stock Splits
Effective February 1, 2019, the Company completed
a 20 to 1 reverse split of its common stock.
Effective April 6, 2020, the Company completed
another 20 to 1 reverse split of its common stock (the “Second Reverse Stock Split”).
Effective February 9, 2022, the Company completed
a 1 for 200 reverse split of its common stock (the “Third Reverse Stock Split”).
The Company's financial statements reflect the
First, Second, and Third Reverse Stock Split on a retroactive basis for all periods presented and for all references to common stock,
unless specifically stated otherwise.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12
“Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This guidance removes certain exceptions to the general
principles in Topic 740 and provides consistent application of U.S. GAAP by clarifying and amending existing guidance. The effective date
of the new guidance for public companies is for fiscal years beginning after December 15, 2020 and interim periods within those fiscal
years. Early adoption is permitted. The Company is currently evaluating the timing of adoption and impact of the updated guidance on its
financial statements.
Note 2 – Notes Payable
The Company’s Notes Payable at December
31, 2021 consisted of the following:
On April 20, 2021, the Company received monies
in exchange for a Note Payable having a Face Value of $500,000 with interest accruing at 5% due April 20, 2023. The Note was convertible
after 180 days from issuance into common stock at a price equal to $0.30 per share. On February 17, 2022, the Company paid off the entire
principal balance of this Note, together with accrued interest of $20,753 by making a cash payment of $520,753.
On July 6, 2021, the Company received monies in
exchange for a Note Payable having a Face Value of $900,000 with interest accruing at 5%, due July 6, 2023. The Note was convertible after
180 days from issuance into common stock at a price equal to $0.30 per share. On February 17, 2022, the Company paid off the entire principal
balance of this Note, together with accrued interest of $27,863 by making a cash payment of $927,863.
On August 18, 2021, the Company received monies
in exchange for a Note Payable having a Face Value of $500,000 with interest accruing at 5%, due August 18, 2023. The Note was convertible
after 180 days from issuance into common stock at a price equal to $0.30 per share. On February 17, 2022, the Company paid off the entire
principal balance of this Note, together with accrued of $12,534 by making a cash payment of $512,534.
As of March 31, 2022, the Company had no outstanding
notes payable.
At March 31, 2022 and December 31, 2021, total
accrued interest on Notes Payable was $-0- and $48,287, respectively.
Note 3 – Shareholders’ Equity
On February 17, 2022, the Company’s public
offering closed and the Company received net proceeds of $6,833,071 from the offering. Pursuant to the offering, the Company issued and
sold an aggregate of 1,882,353 shares of common stock and 4,102,200 Tradeable Warrants (including 337,494 Tradeable Warrants resulting
from partial exercise of the overallotment option granted to the underwriter).
On February 22, 2022, the Company redeemed 990,000
shares of Series B Preferred Stock from the CEO of the Company at a redemption price equal to the stated value of $0.10 per share.
On March 14, 2022, the Company completed a private
placement and received gross proceeds of approximately $8 million before deducting transaction related expenses payable by the Company.
The net proceeds to the Company from this private placement were $6,781,199. In connection with this private placement, the
Company issued (i) 2,301,353 shares of its common stock together with investor warrants (“Investor Warrants”) to purchase
up to 2,301,353 shares of common stock, and (ii) 1,302,251 pre-funded warrants (“Pre-Funded Warrants”) with each Pre-Funded
Warrant exercisable for one share of common stock, together with Investor Warrants to purchase up to 1,302,251 shares of common stock.
Each share of common stock and accompanying Investor Warrant were sold together at a combined offering price of $2.22, and each Pre-Funded
Warrant and accompanying Investor Warrant were sold together at a combined offering price of $2.219. The Pre-Funded Warrants were immediately
exercisable, at a nominal exercise price of $0.001, and may be exercised at any time until all of the Pre-Funded Warrants are exercised
in full. The Investor Warrants have an exercise price of $2.22 per share (subject to adjustment as set forth in the warrant), were exercisable
upon issuance and will expire five years from the date of issuance.
The Company declared no dividends through March
31, 2022
Note 4 – Warrants
The Company accounts for issued warrants either as a liability or equity
in accordance with ASC 480-10 or ASC 815-40. Under ASC 480-10, warrants are considered a liability if they are mandatorily redeemable
and they require settlement in cash, other assets, or a variable number of shares. If warrants do not meet liability classification under
ASC 480-10, the Company considers the requirements of ASC 815-40 to determine whether the warrants should be classified as a liability
or as equity. Under ASC 815-40, contracts that may require settlement for cash are liabilities, regardless of the probability of the occurrence
of the triggering event. Liability-classified warrants are measured at fair value on the issuance date and at the end of each reporting
period. Any change in the fair value of the warrants after the issuance date is recorded in the consolidated statements of operations
as a gain or loss. If warrants do not require liability classification under ASC 815-40, in order to conclude warrants should be classified
as equity, the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity
under ASC 815-40 or other applicable GAAP standard. Equity-classified warrants are accounted for at fair value on the issuance date with
no changes in fair value recognized after the issuance date.
During the three months ended March 31, 2022,
the Company completed two financing events, and in connection therewith, it issued warrants as follows:
Warrants
issued with financing
TYPE | |
NUMBER | |
EXERCISE PRICE | | |
EXPIRY DATE |
Pre-Funded Warrants | |
1,302,251 | |
$ | 0.001 | | |
Unlimited |
Tradeable Warrants | |
4,102,200 | |
$ | 2.22* | | |
February 2027 |
Investor Warrants | |
3,603,604 | |
$ | 2.22 | | |
March 2027 |
*The Tradeable Warrants had an initial exercise
price of $4.25, subject to adjustment. Upon the closing of the Company’s private placement on March 14, 2022, the exercise price
of the Tradeable Warrants was reduced to $2.22, in accordance with the terms thereof.
During the three months ended March 31, 2022,
a total of 370,452 Tradeable Warrants were exercised resulting in aggregate proceeds of $822,403 received by the Company.
The Company’s outstanding warrants at March
31, 2022 consisted of the following:
Schedule
of outstanding warrants
TYPE | |
NUMBER | |
EXERCISE PRICE | | |
EXPIRY DATE |
Pre-Funded Warrants | |
1,302,251 | |
$ | 0.001 | | |
Unlimited |
Tradeable Warrants | |
3,731,748 | |
$ | 2.22 | | |
February 2027 |
Investor Warrants | |
3,603,604 | |
$ | 2.22 | | |
March 2027 |
Note 5 – Net Loss Per Common
Share
Basic net loss per share is calculated by dividing
the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for common
stock equivalents.
Diluted net loss per share is calculated by dividing
the net loss by the weighted-average number of shares of common stock outstanding during the period, considering common stock equivalents.
In March 2022, the Company issued and sold Pre-Funded
Warrants to purchase 1,302,251 shares of common stock at a nominal exercise price of $0.001 per share (see Note 3). During the three months
ended March 31, 2022, none of these warrants were exercised. As of March 31, 2021, there are 1,302,251 Pre-Funded Warrants outstanding.
The shares of common stock into which the Pre-Funded Warrants may be exercised are considered outstanding for the purposes of computing
earnings per share, because the shares may be issued for little or no consideration, they are fully vested and they are immediately exercisable
upon their issuance date.
In February 2022, the Company issued 4,102,200
Tradeable Warrants pursuant to the Company’s public offering (see Note 3). In March 2022, the Company issued 3,603,604 Investor Warrants
in a private placement (see Note 3). 370,452 Tradeable Warrants were exercised as of March 31, 2022, leaving 3,731,748 Tradeable Warrants
outstanding. These warrants are dilutive and included in the diluted earnings per share.
Note 6 – Management Compensation
The Company paid its Officers cash
compensation totaling $320,000 and
$109,927 for
the three months ended March 31, 2022 and 2021, respectively. Of these amounts attributable to
the Company’s CEO, $60,000 and
$50,000 was
paid to Advanomics Corporation (now known as TRT Pharma Inc.), a company controlled by the CEO of the Company. In addition,
the Company issued 300,000 shares
of common stock valued at $918,000 to
its Officers during the three months ended March 31, 2021. The value of these shares was based upon the closing price of the
Company’s common stock of $3.06 on the issuance date.
Note 7 – Subsequent Events
On April 28, 2022, the Company completed a private
placement with certain accredited institutional investors for aggregate gross proceeds of approximately $19.5 million. The Company received
net proceeds of $16,752,917 from this private placement. In connection with the private placement, the Company issued and sold (i) 2,472,820
shares of its common stock, (ii) non-tradeable warrants to purchase up to 9,725,690 shares of common stock, and (iii) 2,390,025 pre-funded
warrants with each pre-funded warrant exercisable for one share of common stock. Each share of common stock and accompanying two warrants
were sold together at a combined offering price of $4.01, and each pre-funded warrant and accompanying two warrants were sold together
at a combined offering price of $4.009. The warrants have an exercise price of $3.76 and a term equal to five years from the issuance
date.
During April 2022, a total of 1,302,251 Pre-Funded
Warrants, 2,768,055 Tradeable Warrants, and 2,802,703 Investor Warrants were exercised resulting in aggregate net proceeds of $12,368,385
received by the Company.