Sunshine Biopharma Inc. quarterly report, Q3 FY2013

Sunshine Biopharma, Inc. — Form 10-Q Summary

Reporting period: Quarter ended September 30, 2013; financial statements are unaudited. Sunshine Biopharma is a development-stage pharmaceutical company focused on cancer drug research and development.

Financial performance and position

MetricPeriod / dateReported amount
RevenueNine months ended September 30, 2013$0
General and administrative expensesNine months ended September 30, 2013$1,250,667
Net lossNine months ended September 30, 2013$1,805,698; basic loss per share $0.03
Net lossThree months ended September 30, 2013$178,058; less than $0.01 per share
Operating cash usedNine months ended September 30, 2013$524,651
Cash and cash equivalentsSeptember 30, 2013$70,987
Total assets / liabilitiesSeptember 30, 2013$71,604 / $23,529
Shareholders’ equitySeptember 30, 2013$48,075
Note payable / interest payableSeptember 30, 2013$12,500 / $2,266

Gross margin is not applicable because the company reported no revenue. The filing does not present a clear cash-runway estimate. Working capital was $48,075, calculated from reported current assets and current liabilities.

Changes versus comparable periods

  • Nine-month G&A increased by $732,244 from $518,423 in 2012. The company attributed the increase principally to financial consulting fees ($779,610 versus $307,375), licensing fees ($375,000 versus $100,000), and research and development expense ($23,400 versus $1,829).
  • Nine-month net loss increased to $1,805,698 from $519,189. In addition to higher operating expenses, 2013 included a $548,951 noncash beneficial conversion feature expense and $6,080 of interest expense, compared with $766 of interest expense in 2012.
  • For the third quarter alone, G&A fell to $177,683 from $376,406 in 2012, and net loss improved to $178,058 from $376,781.
  • Cash declined by $61,651 during the first nine months, from $132,638 at year-end 2012 to $70,987. Financing provided $463,000; investing cash flows were zero.
  • Common shares outstanding increased from 51,416,092 at December 31, 2012 to 56,839,061 at September 30, 2013. The company issued shares for services and converted notes during the period.

Outlook, risks, and other notable items

  • The lead candidate, Adva-27a, is being developed for multidrug-resistant breast cancer. The company reported completing early preclinical studies and planned GMP manufacturing, IND-enabling studies, regulatory filing, and Phase I trials.
  • Phase I trials were anticipated for mid-to-late 2014, subject to financing; the company anticipated trial completion by late 2015. These are forward-looking expectations, not assured outcomes.
  • Management estimated that approximately $5 million in debt and/or equity capital would be needed to implement its business plan. It had no financing commitment as of the report date and stated that it lacked funds for anticipated increases in expenses and clinical development.
  • The company reported no revenue since inception. Its ability to continue development and operations depends on obtaining external financing; failure to do so could materially harm its plans and financial condition.
  • Convertible notes were converted into common shares in March 2013. The $548,951 beneficial conversion feature was recorded as interest expense and additional paid-in capital. A separate $12,500 note payable remained outstanding at quarter-end and accrued interest at 12%.
  • Management concluded disclosure controls were effective at a reasonable-assurance level and reported no material changes in internal control over financial reporting. The company reported no material legal proceedings and no defaults upon senior securities.

Important facts for investors to verify

  • Whether the company subsequently secured the estimated $5 million needed to fund its operating and clinical-development plans.
  • Whether Adva-27a advanced through manufacturing, IND-enabling work, regulatory filing, and clinical trials on the stated timetable.
  • The remaining note’s terms, repayment status, and accrued interest, and how the company funded subsequent cash needs.
  • The accounting and share-issuance details for the note conversion: the filing gives differing converted-share counts in its notes (2,590,426 and 2,590,428).
  • The extent to which consulting, licensing, and other expenses included stock-based or otherwise noncash charges; these were material to reported losses and cash-flow reconciliation.