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”). 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.
Following the above
detailed transactions, we began to operate as a pharmaceutical
company focusing on development of the Adva-27a anticancer
compound. We operated under a the exclusive 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 the
Adva-27a technology. Following acquisition of the Adva-27a patents,
the exclusive license agreement with Advanomics was terminated and
Sunshine Etopo, Inc., Sunshine Biopharma Inc.’s subsidiary
holding the exclusive license with Advanomics, was
dissolved.
In July
2014, we formed a wholly owned Canadian subsidiary, Sunshine
Biopharma Canada Inc. (“Sunshine Canada”), 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
the treatment of cancer and BPH (Benign Prostatic
Hyperplasia).
With
our entry 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.
Effective August 1, 2017 we moved our principal
place of business to 6500 Trans-Canada Highway, 4th Floor,
Pointe-Claire, Quebec, Canada H9R 0A5. Our new phone
number is (514) 426-6161 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 three months ended
September 30, 2017 and 2016
For
the three months ended September 30, 2017 and 2016, we did not
generate any revenues.
General
and administrative (G&A) expenses during the three month period
ended September 30, 2017 remained relatively consistent with the
prior period in 2016. G&A expenses during the three months
ended September 30, 2017 were $113,805, compared to general and
administrative expense of $116,016 incurred during the three month
period ended September 30, 2016, a decrease of $2,211. However, the
various components of our G&A expense varied between the two
respective periods. Specifically, we incurred $46,284 in consulting
fees during the three months ended September 30, 2017, compared to
$24,054 in consulting fees incurred during the similar period in
2016. This increase was as a result of new work required for
setting up the warehouse, documentation and logistics for our
Generic Pharmaceuticals Operations. Officer and director
compensation increased by $9,983 in the three months ended
September 30, 2017, compared to the same period in 2016. In
addition, we saw an increase of $11,389 in legal expenses due to
patenting fees which were paid during the three month period ended
September 30, 2017. We also saw an increase of $1,529 and $7,317 in
office expenses and licenses, respectively. These increases were
offset by accounting costs, which dropped $43,530 during the three
months ended September 30, 2017 compared to the same period in
2016. This drop was due to a lump-sum payment that was made in the
three month period ended September 30, 2016. In addition, we saw a
decrease of $11,129 in our amortization & depreciation due to
write-downs. Also as a result of shifting our current efforts
towards the development of our Generic Pharmaceuticals Operations,
we incurred no research & development expenses during the three
months ended September 30, 2017 and 2016. See “Plan of
Operation” below.
Our
interest expense of $27,427 during the three months ended September
30, 2017 was $15,298 more than we incurred during the similar
period in 2016 due to a prepayment penalty of $15,559 incurred in
connection the early payoff of one of our notes payable (see Note 3
to the Financial Statements). Finally, we incurred no losses
arising from debt conversion during the three months ended
September 30, 2017, but incurred a loss on debt conversions of
$1,465,646 during the three months ended September 30,
2016.
As
a result, we incurred a net loss of $147,611 ($0.00 per share) for
the three month period ended September 30, 2017, compared to a net
loss of $1,585,620 (approximately $0.01 per share) during the three
month period ended September 30, 2016.
Comparison of Results of Operations for the nine months ended
September 30, 2017 and 2016
For
the nine months ended September 30, 2017 and 2016, we did not
generate any revenues.
General
and administrative expenses during the nine month period ended
September 30, 2017 were $695,013, compared to $657,011 incurred
during the nine month period ended September 30, 2016, an increase
of $38,002. Some components of our general and administrative
expense increased while others decreased during the nine month
period ended September 30, 2017, compared to the corresponding
period of 2016. The expense categories that saw an increase
included accounting fees, legal fees, and executive compensation.
The increase of $46,452 in legal fees during the nine months ended
September 30, 2017, was due to patenting costs associated with
office actions on pending patent applications. Officer and director
compensation increased by $146,020 in the nine months ended
September 30, 2017, compared to the same period in 2016. The $7,516
increase in accounting fees was due to a general increase in
business activities. These increases were offset by decreases in
consulting fees, license fees and research & development
expenses incurred during the nine months ended September 30, 2017,
compared to the similar period in 2016. The decrease of $2,084 in
consulting fees, $36,472 in license fees and $32,793 in research
& development expenses were a result of the shifting of our
activities towards the development of our Generic Pharmaceuticals
Operations. In addition, we saw a decrease of $40,311 in our
amortization & depreciation due to write-downs. See “Plan
of Operation” below.
We
incurred $46,169 in interest expense during the nine months ended
September 30, 2017, compared to $29,080 in interest expense during
the similar period in 2016. However, we incurred $76,929
in losses arising from debt conversion during the nine months ended
September 30, 2017, compared to $1,719,304 in losses from debt
conversion during the similar period in 2016, a decrease of
$1,642,375 as a result of a smaller amount of convertible notes
outstanding. We also received $25,000 from the settlement of
litigation in 2016 that we did not receive during the nine months
ended September 30, 2017.
As
a result, we incurred a net loss of $828,757 ($0.00 per share) for
the nine month period ended September 30, 2017, compared to a net
loss of $2,372,224 (approximately $0.01 per share) during the nine
month period ended September 30, 2016.
Because
we did not generate any revenues since our inception, following is
our Plan of Operation.
Plan of Operation
Since
inception, we have been operating as a pharmaceutical company
focused on the research, development and commercialization of
proprietary drugs for the treatment of various forms of
cancer. In July 2014, we formed Sunshine Biopharma
Canada Inc., a Canadian wholly owned subsidiary, for the purposes
of conducting generic pharmaceuticals business in Canada and
elsewhere around the world. During 2016, we intensified our
activities in the generic pharmaceuticals area as we continued to
pursue our proprietary anticancer drug development efforts.
Accordingly, we have become a fully integrated pharmaceutical
company offering generic and proprietary drugs for the treatment of
cancer and other acute and chronic indications. Below we describe
our Generic Pharmaceuticals Operations followed by our Proprietary
Drug Development Program.
Generic Pharmaceuticals Operations
In
2016, our Canadian wholly owned subsidiary, Sunshine Biopharma
Canada Inc. (“Sunshine Canada”), 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 AstraZeneca) 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 in the SEC
filing of the respective owner of the registered trademark are as
follows:
●
Arimidex®
$232M in 2016
●
Propecia®
$183M in 2015
On June
12, 2017, Sunshine Canada submitted an application to Health Canada
for the procurement of a Drug Establishment License
(“DEL”), a requirement for the Company’s drug
handling and pharmaceutical operations. Health Canada has assigned
the Company DEL Application No. 3-002475 and File No. 17938.
Sunshine Canada is currently awaiting Health Canada to set a date
for physical inspection of our warehouse and drug management
operations which we have set up at the facility of our strategic
alliance partner, Atlas Pharma Inc. In addition, Sunshine Canada is
currently in the process of preparing the documentation for filing
applications for a Drug Identification Number (“DIN”)
for each of its four (4) generic products, SBI-Anastrozole,
SBI-Letrozole, SBI-Bicalutamide and SBI-Finasteride. We cannot
estimate the timing for our obtaining the DEL and the DIN’s
due to variables involved that are out of our control. The Figure
below shows our 30-Pill blister pack of Anastrozole.
We
currently have twenty three (23) additional Generic Pharmaceuticals
under review for in-licensing. While no assurances can be provided,
when completed, this will bring our Generic Products portfolio to a
total of twenty seven (27). We believe that a larger product
portfolio provides us with more opportunities and a greater reach
into the marketplace. We hope to further build our generics
portfolio of “SBI” label Generic Pharmaceuticals over
time.
Various
publicly available sources indicate that the worldwide sales of
generic pharmaceuticals are approximately $200 billion per year. In
the United States and Canada, the sales of generic pharmaceuticals
are approximately $50 billion and $5 billion, respectively. The
generic pharmaceuticals business is fairly competitive and there
are several multinational players in the field including Teva
(Israel), Novartis - Sandoz (Switzerland), Hospira (USA), Mylan
(Netherlands), Sanofi (France), Fresenius Kabi (Germany) and Apotex
(Canada). While no assurances can be provided, with our offering of
Canadian approved products we believe that we will be able to
access at least a small percentage of the generic pharmaceuticals
marketplace.
As part
of a subscription agreement, we have an obligation to pay a royalty
of 5% of net sales on one of our generic products (Anastrozole) for
a period of three (3) years from the date of the first sale of that
product.
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 us
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
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 “Part I, Item 1 – Business -
Intellectual Property.”
Summary of Adva-27a Preclinical Studies
Adva-27a is a
GEM-difluorinated C-glycoside derivative of Podophyllotoxin.
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. Etoposide
is one of the most widely used anticancer drugs. Adva-27a and
Etoposide are similar in that they both attack the same target in
cancer cells, namely the DNA unwinding enzyme, Topoisomerase II.
Unlike Etoposide, and other anti-tumor drugs currently in use,
Adva-27a is able to destroy Multidrug Resistant Cancer cells.
Adva-27a is the only compound known today that is capable of
destroying Multidrug Resistant Cancer. In addition, Adva-27a has
been shown to have distinct and more desirable biological and
pharmacological properties compared to Etoposide. In side-by-side
studies using Multidrug Resistant Breast Cancer cells and Etoposide
as a reference, Adva-27a showed markedly improved cell killing
activity (see Figure below). Our preclinical studies to date have
shown that:
●
Adva-27a is
effective at killing different types of Multidrug Resistant cancer
cells, including Pancreatic Cancer Cells (Panc-1), Breast Cancer
Cells (MCF-7/MDR), Small-Cell Lung Cancer Cells (H69AR), and
Uterine Sarcoma Cells (MES-SA/Dx5).
●
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 publication which is entitled “Adva-27a, a
Novel Podophyllotoxin Derivative Found to Be Effective Against
Multidrug Resistant Human Cancer Cells” [ANTICANCER RESEARCH
32: 4423-4432 (2012)] 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:
●
GMP Manufacturing
of 2 kilogram for use in IND-Enabling Studies and Phase I Clinical
Trials
●
Regulatory Filing
(Fast-Track Status Anticipated)
●
Phase I Clinical
Trials (Pancreatic Cancer and in parallel Multidrug Resistant
Breast Cancer)
GMP
Manufacturing
In
November 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. In June 2015 we
received a sample of the pilot manufacturing run for evaluation.
Our laboratory analyses showed that, while the sample meets the
required biological specifications, the amount of material
generated (the “Yield”) by the pilot run was found to
be significantly lower than planned. 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 manufacturing agreement
we have with them. 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.
See “Part I, Item 3 – Legal
Proceedings.”
Clinical Trials
Adva-27a’s
initial indication will be pancreatic cancer for which there are
currently little or no treatment options available. We have
concluded an agreement with McGill University’s Jewish
General Hospital in Montreal, Canada to conduct Phase I clinical
trials for this indication. 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-2018 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 Near-Term Opportunities” below.
Potential Near-Term 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
indication 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 revenues in the near-term.
In
addition, 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 at a
significant premium. 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
complete the requisite additional clinical trials towards a
potential full marketing approval, of which there can be no
assurance.
A Space-Filling Model of Our Anticancer Compound,
Adva-27a
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 321,305,415 shares of our
Common Stock once we increase our authorized capital such that
these shares can be issued. In July 2016 we increased
our authorized capital and issued the 321,305,415 Common shares to
Advanomics thereby completing all aspects of the patent purchase
arrangements and securing direct ownership of all worldwide patents
and rights pertaining to Adva-27a.
In
addition, in 2016 we signed Cross Referencing Agreements with a
major pharmaceutical company for four (4) prescription generic
drugs for the treatment of Breast Cancer, Prostate Cancer and
Enlarged Prostate. These agreements give us the right to register
the four (4) generic products, Anastrozole, Letrozole, Bicalutamide
and Finasteride in Canada under our own label and obtain a DIN for
each in order to be able to place them on the market.
While
no assurances can be provided, we are also planning to expand our
product line through acquisitions and/or in-licensing as well as
in-house research and development.
Liquidity and Capital Resources
As
of September 30, 2017, we had cash or cash equivalents of
$188,086.
Net cash used in operating activities was $334,038
during the nine month period ended September 30, 2017, compared to
$282,988 for the nine month period ended September 30,
2016. We anticipate that overhead costs and other
expenses will increase in the future as we move forward with our
proprietary drug development activities and our
offering of
generic pharmaceutical products as
discussed above.
Cash
flows from financing activities were $456,541 for the nine month
periods ended September 30, 2017, compared to $255,293 during the
nine months ended September 30, 2016. Cash flows used by
investing activities were $-0- and $2,343 for the nine month
periods ended September 30, 2017 and 2016,
respectively.
During
the nine months ended September 30, 2017, we issued a total of
149,336,640 shares of our Common Stock. Of these, 42,528,125 shares
valued at $128,451 were issued upon conversion of outstanding notes
payable, reducing our debt by $48,500 and interest payable by
$3,022 and generating a loss on conversion of $76,929. The
remaining 106,808,515 shares were issued as follows:
●
6,000,000 shares
valued at $15,000 Canadian ($14,400 US), which funds were paid
directly to a firm engaged to conduct a valuation of our
assets;
●
34,000,000 shares
for cash of $85,000 Canadian ($63,912 US);
●
10,000,000 shares
valued at $42,000 for accounting services provided during
2017;
●
42,000,000 shares
of our Common Stock valued at $0.008 per share ($336,000) were
issued to the members of our Board of Directors for services
rendered to us in 2017;
●
11,004,167 shares
of our Common Stock valued at $56,700 were issued for the purchase
of laboratory equipment;
●
3,804,348 shares of
our Common Stock valued at $35,000 were issued for services
rendered to us in July and August 2017;
In
addition, during the nine months ended September 30, 2017, we
engaged in the following debt transactions:
●
A Note payable
dated July 1, 2016, having a face value of $55,000 and a principal
balance of $48,500 at December 31, 2016, was fully converted
together with $3,022 of accrued interest into $0.001 par value
Common Stock during the nine month period ended September 30, 2017.
In connection with this conversion, 42,528,125 shares of $0.001 par
value Common Stock valued at $128,451 were issued generating a loss
of $76,929 on conversion.
●
On February 10,
2017, we received monies in exchange for a convertible note payable
having a face value of $50,000.
●
On April 1, 2017,
we received monies in exchange for a convertible note payable
having a face value of $100,000 Canadian (approximately $75,190
US).
●
On April 26, 2017,
we received monies in exchange for a convertible note payable
having a face value of $65,000.
●
On August 3, 2017,
we received monies in exchange for a convertible note payable
having a face value of $80,000.
●
On August 4, 2017,
we issued payment in the amount of $67,422 to pay off a note
payable having a principal amount of $50,000, accrued interest of
$1,863 and prepayment penalty of $15,559. The note had a maturity
date of November 20, 2017.
●
On August 21, 2017,
we received monies in exchange for a convertible note payable
having a face value of $83,000.
●
On September 22,
2017, we received monies in exchange for a convertible note payable
having a face value of $62,000.
We are not generating revenue from our operations, and our ability
to implement our business plan as set forth herein will depend on
the future availability of financing. Such financing will be
required to enable us to further develop our generic
pharmaceuticals business and proprietary drug development program.
We intend to raise funds through private placements of our Common
Stock and/or debt financing. We estimate that we will require
approximately $6 million ($1 million for the generic pharmaceutical
operations and $5 million for the proprietary drug development
program) to fully implement our business plan in the future and
there are no assurances that we will be able to raise this
capital.
Relevant thereto, e
ffective August 29,
2017, we executed an Investment Banking Agreement (the “IB
Agreement”) with Jitney Trade Inc. (“Jitney”), a
Canadian licensed broker-dealer, headquartered in Montreal with
offices in Toronto and Vancouver (Canada). Per the IB Agreement,
Jitney has agreed to act as our exclusive placement agent in a
proposed financing of up to $10 million Canadian in equity on a
“best efforts” basis. In addition, Jitney will aid us
and act as our sponsor in connection with the listing of our Common
Shares on the TSX Venture Exchange (TSX-V) in Toronto, Canada. The
proposed equity financing will be done through a private placement
of our Common Stock with qualified investors in Canada. We will
rely upon the exemption from registration provided by Regulation S,
promulgated under the Securities Act of 1933, as amended, to engage
in the proposed offering. The proceeds will be used for
implementation of our business plan including the Generic
Pharmaceuticals operations and Clinical Development of Adva-27a,
our flagship anticancer compound.
There
are no assurances that the aforesaid financing will be completed or
that we will receive any funds from this effort. 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 move forward with
implementation of our business plan. We do not have sufficient
funds to cover the anticipated increase in the relevant expenses.
We need to raise additional funds in order to continue our existing
operations to finance our plans to expand our operations for the
next year. If we are successful in raising additional funds, we
expect our operations and business efforts to continue and expand.
There are no assurances this will occur.
Independent Valuation
We had
previously reported in our Form 10-K for our fiscal year ended
December 31, 2016 and Form 10-Q for the three months ended March
31, 2017, that pursuant to terms included in certain Subscription
Agreements with us we had undertaken to obtain a valuation report
(the “Report”) on our issued and outstanding shares by
an independent valuation firm. To comply with this obligation, on
March 9, 2017, we engaged MNP LLP (“MNP”) to provide us
with such Report.
On June
22, 2017, MNP issued its Report, which arrived at an estimated en
bloc Fair Market Value at March 31, 2017 (the Valuation Date), of
our issued and outstanding shares, in the range of $977.0 million
to $1,133.0 million.
MNP is
one of the largest public accountancy firms in Canada (www.mnp.ca).
The Montréal Valuation Practice (the “Practice”)
is engaged in the valuation of businesses, business ownership
interests, and securities and intangible assets in connection with
business combinations, distributions of listed and unlisted
securities, private placements, exchanges of shares, corporate and
financial reorganizations, going-private transactions, leveraged
buy-outs, fair value measurement of assets and liabilities for
purchase price allocation and annual impairment testing for
financial reporting pursuant to generally-accepted accounting
principles both in Canada and the United States. The Practice has
performed more than 3,000 valuations of public and private
companies throughout Canada and in the United States during the
past thirty years. Members of the Practice have also been playing
an active role in the Canadian and U.S. professional societies of
which they are accredited members, including serving on governing
boards and standards promulgating committees.
MNP is
not an insider, associate, or affiliate of our Company or any of
our affiliates, associates, or shareholders (collectively, the
“Interested Parties”). MNP does not own shares in the
Company, nor does it have any agreements, commitments, or
undertakings in respect of any future business involving any of the
Interested Parties. MNP’s professional fees for services
rendered in preparing the Report were not contingent, in whole or
in part, on the conclusions reached therein and were based strictly
on the professional time expended on the engagement at their
standard hourly rates.
The
results of this valuation have not been used in the preparation of
our financial statements.
Interim Condensed Financial Statements
The
interim unaudited condensed financial statements of the Company for
the three and nine month periods ended September 30, 2017 and 2016
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-K. 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, 2016
was derived from the audited financial statements included in the
Company's financial statements as of and for the year ended
December 31, 2016 included in the Company’s Annual Report on
Form 10-K filed with the Securities and Exchange Commission (the
“SEC”) on April 17, 2017. The financial statements
presented herein should be read in conjunction with that
report.
Subsequent Events
On
October 26, 2017, we issued payment in the amount of $85,107 to pay
off a note payable having a principal amount of $65,000, accrued
interest of $2,607 and prepayment penalty of $17,500. The note had
a maturity date of April 26, 2018.
On
October 26, 2017, we received monies in exchange for a convertible
note payable having a face value of $115,000.
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,
2017.
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.