Sunshine Biopharma, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. The company develops drug candidates and sells nutritional supplements; reported product revenue came from supplements. Financial statements are unaudited.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $150,307 | $52,874 | $272,952 | $92,932 |
| Gross profit | $75,624 | $34,359 | $138,424 | $55,897 |
| Gross margin | 50.3% | 65.0% | 50.7% | 60.1% |
| Operating loss | $(695,796) | $(388,598) | $(1,919,160) | $(1,664,244) |
| Net loss | $(538,872) | $(2,879,054) | $(1,775,106) | $(9,064,180) |
| Operating cash flow | — | $(1,878,010) | $(916,207) |
- At June 30, cash and cash equivalents were $41.73 million; current assets were $41.99 million and current liabilities $104,684.
- Total liabilities were $104,684, with no notes payable outstanding; the company had $1.9 million of notes payable at December 31, 2021.
- Financing activities provided $41.56 million in the first half, principally from three equity financings. Cash increased by $39.68 million to $41.73 million.
Changes versus comparable periods
- Revenue rose about 184% in Q2 and 194% in the first half, which management attributed to new advertising campaigns. Cost of sales grew faster than revenue in both periods, lowering gross margins.
- Operating losses widened as general and administrative expenses rose to $771,420 in Q2 and $2.06 million in the first half. First-half increases included advertising, office, accounting, legal and consulting costs; R&D expense was $407,595 versus $358,546.
- Net losses narrowed substantially year over year, largely because 2021 included large losses on debt conversions ($2.30 million for Q2 and $7.21 million for the first half). The improvement does not reflect improved operating results.
- Common shares outstanding increased from 2.59 million at year-end 2021 to 18.89 million at June 30, 2022, reflecting offerings and warrant exercises. The company also issued substantial additional warrants.
Outlook, commentary and risks
- Management estimated existing cash would fund operations, expanded R&D and the supplement business for the next 24 months, but cautioned the estimate may not be accurate. The company said it expects to need additional capital and has no committed sources; financing may not be available on acceptable terms or at all.
- Management stated operating revenue is not adequate to fully implement its business plan. No revenue or earnings guidance was provided.
- Drug programs remain at development stages. For SBFM-PL4, planned work includes further laboratory studies and testing in infected mice; an agreement with the University of Arizona covers research on three PLpro inhibitors and provides options to negotiate licenses. For Adva-27a, planned steps include manufacturing, IND-enabling studies, regulatory filing and Phase I trials; success and any licensing or sale are not assured. The company planned K1.1 mRNA xenograft studies within approximately 12 months.
- Management cited continuing uncertainty from COVID-19 and potential adverse effects on business activity and fundraising. The filing reports no material legal proceedings or off-balance-sheet arrangements. Management concluded disclosure controls were effective at a reasonable-assurance level and reported no material change in internal controls.
Investor facts to verify
- Whether cash deployment and operating burn remain consistent with management’s 24-month funding estimate.
- Progress, costs and timelines for SBFM-PL4, Adva-27a and K1.1, including any clinical or regulatory milestones.
- Warrant terms, exercises and potential dilution; the filing lists 9,725,690 April Warrants outstanding at June 30, 2022, alongside other outstanding warrants.
- Whether supplement revenue growth can be sustained and gross margins recovered amid higher manufacturing costs and advertising spend.
- The extent to which reported net-loss improvement reflects prior-year debt-conversion losses rather than changes in ongoing operations.