Sunshine Biopharma, Inc. — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013; comparisons are with fiscal 2012. This is an annual report, not a quarterly report. Sunshine Biopharma is a development-stage pharmaceutical company focused on cancer drug research and development.
Financial performance and position
| Metric | 2013 | 2012 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $1,936,077 | $706,680 |
| Net loss | $2,491,483 | $707,952 |
| Basic loss per share | $0.04 | $0.01 |
| Net cash used in operations | $564,398 | $393,054 |
| Cash at year-end | $31,240 | $132,638 |
- Operating expenses rose by $1,229,397. Financial consulting fees increased to $1,186,610 from $316,375; licensing fees rose to $475,000 from $250,000; and research and development costs increased to $137,400 from $1,829.
- The 2013 net loss also included a $548,951 noncash beneficial-conversion-feature charge related to convertible notes. The notes were converted into common shares in March 2013.
- At December 31, 2013, total assets were $31,240, total liabilities were $38,950, and shareholders’ equity was negative $7,710. Current liabilities included $12,500 of notes payable, $23,809 of accounts payable, and $2,641 of interest payable. The filing reports a working-capital deficit.
- Cash used in investing activities was $0; financing activities provided $463,000. No cash interest or income taxes were paid in 2013.
- Margins are not meaningful because the company reported no revenue. The accumulated deficit was $5,494,149.
Business developments, outlook, and risks
- The principal asset is Adva-27a, a preclinical anticancer compound licensed exclusively from Advanomics Corporation. The company describes preclinical activity against multidrug-resistant cancer cells; the candidate had not entered human trials, and no regulatory filing had been made as of the report.
- The company planned GMP manufacturing, IND-enabling studies, regulatory filing, and Phase I trials for multidrug-resistant breast cancer and, in parallel, pancreatic cancer. Timing statements vary: the filing refers to trials during 2014, mid-to-late 2015, and late 2015. It anticipated trial completion by late 2016, subject to financing and successful development.
- Management estimated that approximately $5 million of debt and/or equity financing would be needed to implement the business plan. No financing agreement or strategic funding arrangement had been secured as of the report date. Subsequent to year-end, the company reported issuing seven notes totaling $503,000.
- The independent auditor’s report includes a going-concern paragraph: significant operating losses and limited resources raise substantial doubt about the company’s ability to continue as a going concern. The filing says available cash was insufficient to sustain planned activities and the company expected no near-term product revenue.
- Potential commercialization, including any compassionate-use access, depends on funding, successful trials, and regulatory approval; none is assured. The company may need substantial additional capital, which could dilute shareholders or require it to license or surrender rights.
- Advanomics is the licensor and a related party; CEO and director Dr. Steve Slilaty is an officer, director, and principal shareholder of Advanomics. The license amendment replaced a proposed $9.7 million share-purchase obligation with annual licensing fees of $360,000 plus specified R&D reimbursement. Advanomics also provided office space rent-free.
- The company had three employees, no product-liability insurance, no sales and marketing organization, no independent directors, and no board committees. It reported that management considered disclosure controls and internal control over financial reporting effective; the auditor did not attest to internal-control effectiveness.
- Common shares outstanding were 60,299,061 at year-end and 62,175,728 on March 18, 2014. Trading was limited, the stock was classified as a penny stock, and the company did not expect to pay dividends.
Most important facts for investors to verify
- Whether the reported post-year-end $503,000 note financing was completed, its terms, and how it affects liquidity and potential dilution.
- Current cash runway, obligations, and whether the company can fund the approximately $5 million development plan.
- Adva-27a development status, trial start timing, required regulatory steps, and the basis for management’s preclinical claims.
- The related-party license fee and reimbursement obligations, and the company’s ability to meet them.
- Share issuance and conversion details, including the beneficial-conversion-feature accounting and subsequent share-count changes.
- Reconcile the filing’s varying Phase I timing statements and its descriptions of convertible-note issuance and conversion dates.