Business Context and Reporting Period
Sunshine Biopharma Inc. (formerly Mountain West Business Solutions, Inc.) filed a Form 10-Q for the quarter ended March 31, 2010. The company is a smaller reporting company and a development-stage entity. Following a merger in October 2009, the company pivoted from management consulting to a pharmaceutical focus on researching and commercializing cancer treatments, specifically the lead compound Difluoro-Etoposide (Adva-27a). The company changed its fiscal year end from July 31 to December 31 effective December 31, 2009.
Key Financial Metrics
| Metric | Three Months Ended March 31, 2010 | Inception (Aug 17, 2009) to March 31, 2010 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(84,649) | $(1,285,779) |
| General & Administrative Expenses | $84,649 | $1,285,779 |
| Cash and Cash Equivalents (Ending) | $29,141 | $29,141 |
| Total Assets | $29,141 | $112,116 |
| Total Liabilities | $15,988 | $14,314 |
| Shareholders' Equity | $13,153 | $97,802 |
| Net Cash Used in Operating Activities | $(82,976) | $(619,860) |
Capital Structure: As of April 29, 2010, there were 29,660,007 shares of common stock and 850,000 shares of preferred stock outstanding.
Material Changes and Unusual Items
- Intangible Asset Write-down: The company recorded a $50,000 write-down of intangible assets during the quarter, contributing significantly to the net loss. Cumulative write-downs since inception total $995,976.
- Business Transformation: The company completed a reverse merger/acquisition of Sunshine Etopo, Inc. in October 2009, resulting in a complete change of management and business strategy.
- Liquidity Decline: Cash balances decreased from $112,116 at the beginning of the quarter to $29,141 at period end, a reduction of approximately 74%.
- Stock Issuances: No new securities were issued during the quarter ended March 31, 2010. However, prior to this period, significant stock issuances occurred for services, licenses, and note conversions.
Guidance, Outlook, and Risks
Plan of Operation: The company intends to initiate Phase I clinical trials for Difluoro-Etoposide in Canada in 2010, with completion anticipated by late 2011. The goal is to seek limited marketing approval for "compassionate-use" for terminal cancer patients.
Capital Requirements: Management estimates a need for approximately $5 million in debt or equity capital to fully implement the business plan. As of the filing date, no agreements for this funding had been secured.
Risks and Contingencies:
- Going Concern: The company has no revenue and limited cash ($29,141). Continued operations are dependent on raising additional funds, which is not guaranteed.
- Regulatory Approval: There are no assurances that the company will obtain FDA or Health Canada approval for clinical trials or marketing.
- Financing Risk: Failure to raise capital will materially adversely affect the company's ability to continue operations or enter clinical trials.
Investor Verification Checklist
- Verify the current cash balance and runway given the $29,141 reported and the $5 million funding requirement.
- Confirm the status of discussions with investment banks and venture capitalists regarding the necessary capital raise.
- Review the terms of the exclusive license agreement with Advanomics Corporation regarding the Difluoro-Etoposide technology.
- Monitor filings for any updates on the initiation of Phase I clinical trials in Canada.
- Check for any subsequent equity issuances or debt financings that may have occurred since the March 31, 2010 period end.