Business Context and Reporting Period
Company: Sunshine Biopharma Inc. (formerly Mountain West Business Solutions, Inc.)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2010 (Transitional report following fiscal year change from July 31 to December 31).
Business Overview: A development-stage pharmaceutical company focused on the research, development, and commercialization of cancer treatments. The company operates via a reverse acquisition completed in October 2009. Its lead compound, Adva-27a (difluoro-etoposide), is a multi-purpose anti-tumor compound currently in preclinical stages with plans for Phase I clinical trials.
Key Financial Metrics
| Metric | Year Ended Dec 31, 2010 | Inception (Aug 17, 2009) to Dec 31, 2009 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(537,382) | $(1,201,130) |
| Accumulated Deficit | $(1,738,512) | $(1,201,130) |
| Cash and Cash Equivalents | $162,391 | $112,116 |
| Total Assets | $207,624 | $112,116 |
| Total Liabilities | $11,404 | $14,314 |
| Net Cash Used in Operating Activities | $(348,325) | $(536,884) |
| Net Cash Provided by Financing Activities | $398,600 | $649,000 |
Capital Structure: As of December 31, 2010, the company had 30,691,342 shares of Common Stock and 850,000 shares of Series A Convertible Preferred Stock outstanding. The company raised $398,600 in 2010 via a private placement of common stock.
Material Changes vs. Prior Period
- Expense Composition: General and administrative expenses decreased from $1,201,130 in the 2009 period to $537,382 in 2010. The 2009 period included a significant one-time write-down of intangible assets totaling $945,976, which was not present in 2010.
- License Fees: The company incurred $250,000 in license fees in 2010, compared to $0 in the prior period.
- Consulting Fees: Consulting fees increased significantly to $145,302 in 2010 from $2,055 in the prior period.
- Stock Issuances: In 2010, the company issued shares for services and cash, including a reversal of 1,625,000 shares previously issued for services in June 2010.
Guidance, Outlook, Risks, and Contingencies
Going Concern: The independent auditor has issued a report with an explanatory paragraph regarding substantial doubt about the company's ability to continue as a going concern. The company lacks sufficient cash to meet obligations and sustain operations beyond the near term without additional funding.
Outlook and Plan of Operation:
- The company anticipates entering Phase I clinical trials for Adva-27a (breast and prostate cancer) by mid-to-late 2012, subject to securing financing.
- A Research Agreement was executed on January 17, 2011, with the State University of New York at Binghamton to conduct preclinical and Phase I trials. Funding for this agreement is contingent on securing grants or other financing.
- Management estimates a need for approximately $7.5 million in debt or equity capital to fully implement the business plan.
Risks and Contingencies:
- Financing Risk: No definitive agreements are in place to provide full funding for clinical trials. Failure to raise capital will force a reduction in operations or scale-back of development.
- Regulatory Risk: No FDA filings have been made. Approval is not guaranteed, and the process is lengthy and costly.
- Related Party Transactions: The company relies on technology licensed from Advanomics Corporation, where the CEO is a principal shareholder. Office space is provided rent-free by the licensor.
- Stock Liquidity: The stock is classified as a "penny stock" (trading below $5.00), which limits liquidity and imposes strict broker-dealer requirements.
Investor Verification Checklist
- Cash Runway: Verify current cash balance against the estimated $7.5 million required for clinical trials and the timeline for potential funding.
- Going Concern Status: Confirm if the company has secured the financing necessary to avoid the "substantial doubt" noted by auditors.
- Clinical Trial Agreements: Review the specific terms and funding conditions of the January 2011 agreement with SUNY Binghamton.
- Related Party Dependencies: Assess the risks associated with the exclusive license from Advanomics and the rent-free office arrangement.
- Stock Dilution: Monitor future equity issuances, as the CEO and directors currently control approximately 72% of voting securities, and further capital raises will likely dilute existing shareholders.