Business context and reporting period
Important issuer mismatch: The supplied filing is for Cactus Ventures, Inc., not Actinium Pharmaceuticals, Inc. It is a Form 10-Q for the quarter ended September 30, 2012, with financial results presented for the nine months ended September 30, 2012 and 2011. The interim financial statements are unaudited.
Cactus describes itself as an inactive Nevada shell company seeking a merger or other business combination. It reported no operating business, employees, or acquisition negotiations as of the filing date.
Financial results and position
- Revenue: $0 for the nine-month periods in both 2012 and 2011; no gross profit.
- Expenses and earnings: Nine-month expenses were $15,624 in 2012 versus $8,471 in 2011. Interest expense was $4,040 versus $3,593. The company recorded a net loss of $19,664 in 2012, compared with net income of $12,936 in 2011, which included a $25,000 gain related to a retained deposit. Loss per share was $0.01 in 2012; reported earnings per share were $0.01 in 2011.
- Third quarter: Revenue was $0 in both years. The three-month loss was $3,717 in 2012 versus $3,514 in 2011.
- Assets and liquidity: Total assets and cash were $0 at September 30, 2012. Current liabilities were $31,136, creating a reported working-capital deficiency of $31,136.
- Debt and liabilities: Total liabilities were $103,993, including $72,857 in notes payable to related parties, $30,046 in accrued interest, and $1,090 in accrued legal fees. Shareholders’ deficit was $103,993.
- Cash flow: Operating activities used $14,840 during the nine months; related-party financing provided $14,690. Cash declined from $150 at year-end 2011 to $0. Margins are not meaningful because the company had no sales.
Changes, outlook, and risks
The nine-month result shifted from 2011 income to a 2012 loss, principally because the prior-year period included the $25,000 deposit-related gain. Expenses also increased year over year.
Management estimated expenses of approximately $20,000 over the next 12 months and expected advances from its president to fund operations, but provided no assurance that funding would be available. It stated that additional capital might be sought through officer advances, stock sales, or debt financing. Any business combination could require a significant share issuance and dilute existing shareholders.
The filing states that the working-capital and shareholders’ deficits raise substantial doubt about the company’s ability to continue as a going concern. Continuation depends on raising funds and implementing a business plan; the statements include no adjustments for a possible failure to continue. The company reported no acquisition negotiations or specific target. A 2011 letter of intent expired and the contemplated transaction was abandoned.
Important facts to verify
- Confirm the correct issuer: the supplied filing names Cactus Ventures, Inc., not Actinium Pharmaceuticals, Inc.
- Assess whether management can obtain the anticipated related-party funding given zero cash, no assets, and the going-concern warning.
- Verify the terms, maturity, and repayment status of the $72,857 related-party notes and the $30,046 accrued interest; the supplied text does not provide clear terms.
- Consider potential dilution and transaction costs if the company pursues a merger or other business combination.