Filing summary
Entity and period: The supplied filing is Amarillo Biosciences, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2016—not a filing identified as Ainos, Inc. Investors should verify the issuer before relying on this summary.
Business context
The company described itself as a biopharmaceutical research and development business focused on low-dose, orally administered human interferon, with interests in licensing, partnerships, and other health-related products. It reported $4,400 of ginseng sample sales; it had no sales of dietary supplements or ACM during the quarter.
Financial performance
| Metric | Q1 2016 | Q1 2015 |
|---|---|---|
| Revenue | $4,400 | $0 |
| Cost of revenue / gross margin | $5,100 / $(700) | $0 / $0 |
| SG&A | $120,579 | $111,818 |
| Research and development | $0 | $0 |
| Operating loss | $(121,279) | $(111,818) |
| Net loss | $(121,641) | $(112,089) |
| Basic and diluted loss per share | $(0.01) | $(0.01) |
The gross margin was negative, approximately 16% of revenue. SG&A increased 8%, which management attributed mainly to higher professional fees; net loss increased about 9%.
Cash, liquidity, and debt
- Cash rose to $264,184 at March 31, 2016, from $21,138 at year-end 2015.
- Operating cash flow was positive $1,663, compared with cash used of $73,011 in Q1 2015. Investing activities used $8,617, principally for patents; financing provided $250,000 from a private stock offering. The resulting net increase in cash was $243,046.
- Current assets were $266,161 and current liabilities were $692,274, a working-capital deficit of $426,113. Total liabilities were $692,274; all reported liabilities were current.
- Related-party notes payable totaled $384,555. A separate $150,000 Yang Group secured claim had a first payment due September 1, 2015 that remained unpaid, although the filing said no demand had been made. The company was discussing possible debt-for-stock exchanges.
- A $144,426 related-party payable was reclassified as a convertible note. The note offering allowed conversion at $0.168 per share and was payable on demand. The filing also describes $75,000 of related-party advances repaid after quarter-end.
Outlook, risks, and unusual items
Management stated that the company had not achieved operating income, relied primarily on debt and equity financing, and faced substantial doubt about its ability to continue as a going concern. It estimated post-reorganization financing needs of $1.0 million to $1.6 million and cautioned that failure to obtain acceptable financing could force it to cease operations. Management said meaningful revenue from commercialization efforts was not expected before the fourth quarter of 2017, or possibly later.
- The sole source of human interferon had discontinued production. Finding a replacement, conducting trials, and obtaining regulatory approval could be costly and time-consuming; some patents were due to expire within two years and others within three to five years.
- The company relied on third parties for manufacturing and distribution. Higher raw-material costs also made its oral-health product less attractive to manufacture and sell.
- Management estimated $500,000 to $800,000 could be needed to commercialize existing intellectual property, with similar funding potentially required for new product lines.
- During the quarter, the company received $250,000 for common shares in a private placement; the shares had not been issued as of March 31. It subsequently reported $434,375 in additional stock sales on April 25, also with shares not yet issued. Its convertible-note and common-stock private placements were ongoing.
- The filing reported an accumulated deficit of $718,259 and said the financial statements included no adjustments that might result from the going-concern uncertainty. It also cited limited trading liquidity and penny-stock rules as risks.
Important facts to verify
- Confirm the issuer identity: the supplied filing names Amarillo Biosciences, Inc., while the request metadata names Ainos, Inc.
- Verify current cash needs, availability and terms of future financing, and the status of the company’s going-concern assessment.
- Confirm the status and terms of related-party balances, including the overdue $150,000 payment, convertible note, and post-quarter repayment of the $75,000 advance.
- Check whether the private-placement shares were subsequently issued and reconcile the offering proceeds and share counts.
- Assess whether a replacement interferon supply, product commercialization, clinical work, and regulatory approvals are feasible before relevant patents expire.