Filing summary
Issuer and period: The supplied filing identifies the registrant as Amarillo Biosciences, Inc. (ABI), a Texas healthcare and biotechnology company, and covers the fiscal year ended December 31, 2019—not a standalone 2019 fourth quarter. The filing does not explain its relationship to Ainos, Inc.; verify issuer identity before relying on this summary. The 10-K was signed March 30, 2020.
Financial performance and position
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | $11,731 | $77,724 |
| Gross profit | $2,959 | $12,847 |
| Gross margin | 25.2% | 16.5% |
| Research and development expense | $52,510 | $32,591 |
| Selling, general and administrative expense | $1,530,862 | $1,314,932 |
| Operating loss | $(1,580,413) | $(1,334,676) |
| Net loss | $(1,581,298) | $(1,338,639) |
| Net loss per share | $(0.04) | $(0.04) |
| Cash and cash equivalents at year-end | $409,039 | $1,276,654 |
| Net cash used in operating activities | $(909,476) | $(1,009,198) |
Revenue was from consumer-product sales, primarily liposomal nutraceuticals. Revenue declined about 85% year over year, while net loss increased about 18%. The company reported a 2019 monthly burn rate of approximately $72,300 and working capital of $(308,014), versus positive working capital of $569,613 in 2018.
At year-end, total assets were $596,626, total liabilities were $753,308, and stockholders’ equity was a deficit of $156,682. Current liabilities included $444,581 of convertible notes, all reported as current; the notes are unsecured and due on demand. Most were payable to CEO Stephen Chen. Year-end common shares outstanding were 40,516,351, compared with 39,117,524 in 2018.
Business, changes and outlook
ABI’s historical focus is low-dose oral interferon. Its other activities include development of pulsatile insulin infusion therapy, distribution of wound-care products in Taiwan, and consumer nutraceuticals. The company reported five issued patents and a history of more than 100 preclinical and human studies, including two Phase 3 trials.
Management shifted significant research effort toward a proprietary pulsatile insulin treatment. ABI says it completed development of a dedicated infusion pump and was pursuing patents and medical-device classifications, including FDA 510(k) clearance. The filing does not report clearance or commercial approval. Management also described plans to target Taiwan and potentially expand into China, and cited possible renewed interest in interferon amid the novel coronavirus outbreak; these are plans and expectations, not established revenue or guidance.
Interferon clinical and commercialization work is on hold until ABI finds a new cGMP supplier. A replacement source may require comparability studies and further clinical trials. Management estimated short-term project-development financing needs of $3 million to $5 million and said additional capital is needed to support operations. No quantified revenue or earnings guidance is provided.
ABI approved private placements in 2019: one offering authorized up to $6 million and closed December 17, but the filing does not clearly state the amount raised; a second authorized up to $3 million and had received $100,000 by year-end for shares issued in 2020. Additional equity could dilute existing holders. Options and warrants also create potential dilution.
Risks, contingencies and unusual items
- Going concern: The auditor highlighted the absence of significant revenue, recurring operating losses, and the need for financing, concluding these conditions raise substantial doubt about ABI’s ability to continue as a going concern. The financial statements include no adjustments for the outcome of this uncertainty.
- Internal controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2019, citing inadequate technical accounting resources and lack of segregation of duties. No independent auditor attestation on internal controls was provided.
- Financing and related parties: ABI depended on debt and equity funding. The CEO had substantial related-party notes and deferred compensation and expense reimbursements; additional convertible notes were issued in January 2020. These arrangements may add liabilities or dilute shareholders.
- Execution and regulation: Product development, clinical trials, manufacturing supply, patents, and FDA and foreign regulatory approvals are uncertain. ABI competes with better-resourced companies.
- Other items: The company reported no pending litigation. Its auditor gave an unqualified opinion on the financial statements, while expressly drawing attention to the going-concern uncertainty.
Key facts for investors to verify
- Confirm that this Amarillo Biosciences, Inc. 10-K is the intended filing for the Ainos, Inc. request; the filing itself does not establish that connection.
- Check subsequent financing, cash balances, and operating cash burn against the disclosed $3 million to $5 million funding need and going-concern warning.
- Verify the status of a qualified interferon supplier, required comparability studies and trials, and regulatory progress for the pulsatile insulin pump.
- Confirm proceeds from the 2019-1 and 2019-2 private placements and the shares issued after year-end, including potential dilution from notes, options, warrants, and accrued compensation.
- Review the material weaknesses and whether management’s planned remediation improved accounting expertise and segregation of duties.