Sunshine Biopharma, Inc. — Q1 2016 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three months ended March 31, 2016. Sunshine Biopharma is a development-stage pharmaceutical company focused on cancer drug research and development, including Adva-27a, and is pursuing a generic pharmaceuticals business through its Canadian subsidiary. It reported no revenue.
Financial results and liquidity
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expense | $69,682 | $124,825 |
| Operating loss | $69,682 | $124,825 |
| Interest expense | $6,954 | $169,542 |
| Loss on debt conversions | $253,658 | $0 |
| Net loss | $305,294 | $294,367 |
| Operating cash used | $81,598 | $112,996 |
| Financing cash provided | $164,128 | $118,275 |
Cash was $123,337 at March 31, up from $50,798 at December 31, 2015. Total assets were $830,600, including $600,010 of net patents. Current liabilities were $1,185,988, resulting in a working capital deficit of $959,496. Total liabilities exceeded assets, and shareholders’ equity was a deficit of $355,388. Current notes payable totaled $1,104,536, including $835,394 due to a related party; all reported liabilities were classified as current. No revenue or gross margin was reported. Basic loss per share was shown as $0.00, rounded in the filing.
Changes and notable items
- G&A expense fell by $55,143, mainly because the prior-year period included a $50,000 license fee; legal and consulting costs also declined. The company recorded $15,244 of depreciation and amortization in Q1 2016.
- Net loss increased by $10,927 despite lower operating costs and interest expense, principally because of the $253,658 loss recorded on debt conversions.
- The company issued 34,611,235 common shares during the quarter: 17,611,235 for debt and accrued interest, 7,000,000 for approximately $79,128 of cash, and 10,000,000 valued at $100,000 for services. Outstanding shares were 232,876,353 at quarter-end. The filing reports 268,876,353 shares outstanding on May 9, 2016, including a subsequent April issuance of 36,000,000 shares to directors for prior services.
- In amendments to related-party patent purchases, the stated purchase price was reduced from $17,142,499 to $618,810, with the replacement notes automatically convertible into an aggregate 321,305,415 shares once authorized share capacity is increased. The notes were secured by the patents; the filing describes the transactions as eliminating the original cash-payment obligations.
Outlook, risks, and other disclosures
Management stated that approximately $5 million in debt and/or equity financing would be needed to implement its business plan and that no financing commitment had been secured as of the report date. The company warned that recurring losses and negative operating cash flows raise substantial doubt about its ability to continue as a going concern; continued operations depend on additional financing, which could be dilutive or costly.
Adva-27a development remains contingent on funding. Planned next steps include GMP manufacturing, IND-enabling studies, regulatory filing, and Phase I trials for pancreatic cancer and multidrug-resistant breast cancer. Management anticipated trials in mid-to-late 2017, subject to financing and manufacturing progress. A prior manufacturing pilot produced materially lower yield than expected, and there is no assurance the issue or schedule will be resolved. The company also planned to obtain a Canadian Drug Establishment License and pursue generic-pharmaceutical contracts, but reported no assurance of licensing, contracts, revenue, or profits. The filing provides no formal financial guidance.
Management reported effective disclosure controls as of March 31, 2016, with no material change in internal control over financial reporting during the quarter. The company reported no material legal proceedings. The filing describes significant related-party ties: company executives also hold positions with Advanomics, and Advanomics provides office space rent-free.
Most important facts for investors to verify
- Whether the company can secure the stated financing need and fund operations given its cash balance, working capital deficit, and going-concern warning.
- The terms, share authorization requirements, and potential dilution from the related-party patent notes and other convertible debt.
- Whether Adva-27a manufacturing yield, regulatory preparation, and clinical trial milestones are achievable on management’s stated timeline.
- Whether the Canadian subsidiary obtains the required license and executes commercial contracts that could produce revenue.
- The final share count and timing of subsequent share issuances, including the 36 million director shares disclosed after quarter-end.