PART I [Item 1. Business](index=2&type=section&id=ITEM%201.%20BUSINESS.) The company develops low-dose oral interferon but faces a critical manufacturing halt while diversifying its business post-bankruptcy - The company's core business is developing biologics, with a focus on low-dose oral natural human interferon alpha for various conditions[7](index=7&type=chunk) - Post-bankruptcy, ABI restructured into **three business units**: Medical, Pharmaceutical, and Consumer Product Divisions to diversify revenue streams[10](index=10&type=chunk)[12](index=12&type=chunk) - A major operational hurdle is the **cessation of manufacturing by its long-time interferon supplier**, halting further clinical trials and commercialization[18](index=18&type=chunk) - ABI is expanding into Asian markets by establishing a Taiwan branch to distribute new medical products like TissueAid™ and develop diabetes therapies[12](index=12&type=chunk)[15](index=15&type=chunk) - The company owns or licenses **six issued patents**, primarily related to its low-dose oral interferon technology[8](index=8&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) [Item 2. Description of Property](index=7&type=section&id=ITEM%202.%20DESCRIPTION%20OF%20PROPERTY.) The company leases an 1,800 square-foot office facility in Amarillo, Texas under an annually renewed agreement - ABI leases an **1,800 square-foot** office facility at 4134 Business Park Drive, Amarillo, Texas[39](index=39&type=chunk) - The lease is renewed annually, with a monthly rent of **$1,120** as of December 31, 2018[39](index=39&type=chunk) [Item 3. Legal Proceedings](index=7&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS.) The company is not currently involved in any legal proceedings - There are **currently no legal proceedings** involving the Company[39](index=39&type=chunk) [Item 4. Submission of Matters to a Vote of Security Holders](index=8&type=section&id=ITEM%204.%20SUBMISSION%20OF%20MATTERS%20TO%20A%20VOTE%20OF%20SECURITY%20HOLDERS) No matters were submitted to a vote of security holders during the reporting period - No matters were submitted to a vote of security holders[40](index=40&type=chunk) PART II [Item 5. Market for Registrant's Common Equity and Related Shareholder Matters](index=8&type=section&id=ITEM%205.%20MARKET%20FOR%20THE%20REGISTRANT'S%20COMMON%20EQUITY%20AND%20RELATED%20SHAREHOLDER%20MATTERS%2C%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES.) This section details the company's equity structure, new stock option plans, and significant related-party transactions with the CEO - As of December 31, 2018, there were **39,117,524 common shares outstanding**, with an additional 8,855,831 shares reserved for issuance[41](index=41&type=chunk) - In September 2018, the company adopted two new stock option plans authorizing a total of **26,000,000 shares**[47](index=47&type=chunk)[49](index=49&type=chunk) Convertible Notes Payable to Related Party (Dr. Stephen T. Chen) | Date | 2018 Balance | 2017 Balance | | :--- | :--- | :--- | | Dec 31 | $513,356 | $886,481 | - During 2018, Dr. Chen converted **$178,125** of his convertible notes into **950,000 common shares** and received cash repayments for other notes[45](index=45&type=chunk)[63](index=63&type=chunk) - Effective July 1, 2018, the company acquired all voting interests of ACTS Global, a related party, in exchange for **539,447 shares** of ABI common stock[45](index=45&type=chunk)[71](index=71&type=chunk) [Item 7. Management's Discussion and Analysis (MD&A)](index=13&type=section&id=ITEM%207.%20MANAGEMENT%20DISCUSSION%20AND%20ANALYSIS%20OR%20PLAN%20OF%20OPERATION%3A) The financial review shows a significant revenue decline and a widened net loss in 2018, driven by increased SG&A expenses Fiscal Year Comparison (2018 vs. 2017) | Metric | 2018 | 2017 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $77,724 | $250,928 | -69.0% | | Gross Profit | $12,847 | $190,612 | -93.3% | | SG&A Expenses | $1,314,932 | $770,375 | +70.7% | | Net Loss | ($1,338,639) | ($617,375) | +117.0% | Liquidity Position (as of Dec 31) | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Cash | $1,276,654 | $2,038,150 | | Working Capital | $569,613 | $261,412 | - The company's monthly cash burn rate in 2018 was approximately between **$65,000 and $75,000**[80](index=80&type=chunk) - Management estimates short-term project development financing needs to be between **$3,000,000 and $5,000,000**[80](index=80&type=chunk) [Item 9A. Controls and Procedures](index=15&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES.) Management concluded that disclosure controls were ineffective due to material weaknesses in internal control over financial reporting - Management concluded that as of December 31, 2018, the company's disclosure controls and procedures were **not effective**[87](index=87&type=chunk) - **Material weaknesses** in internal control were identified, including insufficient personnel with GAAP knowledge and a lack of proper segregation of duties[90](index=90&type=chunk) - Management's remediation plan is to hire additional qualified personnel as funds become available[93](index=93&type=chunk) PART III [Item 10. Directors, Executive Officers, and Corporate Governance](index=17&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%2C%20AND%20CORPORATE%20GOVERNANCE.) This section provides biographical details for the company's leadership team and notes the current inactivity of its Audit Committee - The executive officers are Dr. Stephen Chen (Chairman, CEO, President) and Bernard Cohen (Vice President, CFO)[94](index=94&type=chunk)[95](index=95&type=chunk) - The Board of Directors consists of **five members**: Stephen T. Chen, Yasushi Chikagami, Daniel Fisher, Nicholas Moren, and Edward L. Morris[78](index=78&type=chunk)[94](index=94&type=chunk) - The company does not currently have an active Audit Committee but anticipates it will resume its function as the company progresses[103](index=103&type=chunk) [Item 11. Executive Compensation](index=19&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION.) Executive compensation was restructured in 2018, significantly increasing the cash and stock awards for top officers Executive Compensation Summary (2018) | Name and Principal Position | Salary | Stock Compensation | | :--- | :--- | :--- | | Dr. Stephen T. Chen, CEO | $240,000 | $100,000 | | Mr. Bernard Cohen, CFO | $70,000 | $12,000 | - The Board of Directors approved a restructuring of the compensation packages for Dr. Chen and Mr. Cohen, effective as of January 1, 2018[108](index=108&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management](index=20&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) CEO Dr. Stephen T. Chen is the largest beneficial owner, and insiders collectively hold over 28% of the company's stock Beneficial Owners of More Than 5% | Name | Percent of Class Owned | | :--- | :--- | | Stephen T Chen & Virginia M Chen Living Trust | 22.21% | | Hung Lan Lee | 9.43% | | ANXON International Inc. | 5.80% | - All directors and executive officers as a group beneficially own **12,076,650 shares**, representing **28.48%** of the class[116](index=116&type=chunk) [Item 13. Certain Relationships and Related Transactions](index=22&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS.) The company outlines its policy for future related-party transactions to ensure they are conducted at arm's length - The company states that all future transactions with related parties will be on terms **no less favorable** than could be obtained from independent third parties[119](index=119&type=chunk) - No new related party arrangements are disclosed in this section, as all current arrangements have been disclosed elsewhere[120](index=120&type=chunk) [Item 14. Principal Accounting Fees and Services](index=22&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES.) The company reports a year-over-year increase in audit fees paid to its independent accounting firm Audit Fees | Year | Amount | | :--- | :--- | | 2018 | $42,250 | | 2017 | $32,250 | Financial Statements and Notes [Report of Independent Registered Public Accounting Firm](index=25&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor's report expresses substantial doubt about the company's ability to continue as a going concern - The auditor's report explicitly raises **"substantial doubt about its ability to continue as a going concern"** due to recurring losses and lack of revenues[130](index=130&type=chunk) [Consolidated Financial Statements](index=27&type=section&id=Consolidated%20Financial%20Statements) Financial statements show deteriorating operational performance with a widening net loss, offset by an improved equity position Consolidated Balance Sheet Data (as of Dec 31) | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,276,654 | $2,038,150 | | Total Assets | $1,463,700 | $2,293,834 | | Total Liabilities | $733,621 | $1,823,039 | | Total Stockholders' Equity | $730,079 | $470,795 | Consolidated Statement of Operations Data (Year Ended Dec 31) | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Revenues | $77,724 | $250,928 | | Operating Loss | ($1,334,676) | ($579,763) | | Net Loss | ($1,338,639) | ($617,375) | | Net Loss per Share | ($0.04) | ($0.03) | Consolidated Statement of Cash Flows Data (Year Ended Dec 31) | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,009,198) | ($484,568) | | Net cash provided by financing activities | $254,979 | $2,437,689 | | Net change in cash | ($761,496) | $1,904,025 | [Notes to Consolidated Financial Statements](index=31&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes reiterate the going concern uncertainty and detail the consolidation of a VIE, related-party transactions, and new stock option plans [Note 1. Organization and Summary of Significant Accounting Policies](index=31&type=section&id=Note%201.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note details the 'going concern' uncertainty, the consolidation of ACTS Global as a VIE, and the adoption of ASC 606 - The financial statements were prepared on a going concern basis, but management notes that recurring losses raise **substantial doubt** about this assumption[146](index=146&type=chunk)[148](index=148&type=chunk) - Effective January 1, 2018, the company consolidated ACTS Global Healthcare, Inc. as a **Variable Interest Entity (VIE)**[142](index=142&type=chunk) - The company adopted **ASC Topic 606** (Revenue from Contracts with Customers) on January 1, 2018, with no material impact to reported revenues[156](index=156&type=chunk) [Note 4. Convertible Notes Payable – Related Party](index=37&type=section&id=Note%204.%20Convertible%20Notes%20Payable%20%E2%80%93%20Related%20Party) This note details the significant reduction in convertible notes payable to the CEO through repayments and stock conversions Change in Convertible Notes Payable to Related Party | Date | Balance | | :--- | :--- | | Dec 31, 2017 | $886,481 | | Dec 31, 2018 | $513,356 | - During 2018, Dr. Chen was repaid **$195,000** in principal and converted **$178,125** of principal into **950,000 common shares**[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) [Note 9. Stock Option and Stock Plans](index=41&type=section&id=Note%209.%20Stock%20Option%20and%20Stock%20Plans) The company adopted two new stock option plans authorizing 26 million shares, creating a significant future compensation expense - On September 26, 2018, the company adopted two new stock option plans authorizing a total of **26 million common shares** for issuance[204](index=204&type=chunk)[205](index=205&type=chunk) - A total of **4,945,000 options** were granted on September 26, 2018, with an exercise price of **$0.38**[210](index=210&type=chunk) - As of December 31, 2018, there is **$1,775,222 in unrecognized option expense** that will be recognized over the next 4.75 years[210](index=210&type=chunk)