Ainos(AIMD) - 2019 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION This section presents unaudited consolidated financial statements, highlighting significant declines in assets, revenue, and increased net losses, raising going concern doubts Item 1. Financial Statements Unaudited consolidated financial statements show significant asset and revenue declines, increased net losses, and going concern uncertainties Consolidated Balance Sheets Consolidated Balance Sheet Highlights (Unaudited) | Metric | June 30, 2019 ($) | December 31, 2018 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | 723,441 | 1,276,654 | | Total current assets | 797,978 | 1,303,234 | | Total assets | 944,997 | 1,463,700 | | Total liabilities | 705,343 | 733,621 | | Total stockholders' equity | 239,654 | 730,079 | Consolidated Statements of Operations Statement of Operations Summary (Unaudited) | Metric | Six Months Ended June 30, 2019 ($) | Six Months Ended June 30, 2018 ($) | | :--- | :--- | :--- | | Revenues | 4,682 | 56,840 | | Gross margin | 1,401 | 12,794 | | Total operating expenses | 847,003 | 552,991 | | Operating loss | (845,602) | (540,197) | | Net loss | (844,965) | (542,550) | | Basic and diluted net loss per share | (0.02) | (0.02) | Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended June 30 (Unaudited) | Metric | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (539,076) | (389,433) | | Net cash used in investing activities | (1,637) | (2,108) | | Net cash used in financing activities | (12,500) | (195,000) | | Net change in cash | (553,213) | (586,541) | | Cash and cash equivalents at end of period | 723,441 | 1,393,474 | Notes to Consolidated Financial Statements - The company operates through three divisions: Pharmaceutical (low-dose oral interferon), Medical (diabetes technology and medical product distribution), and Consumer (nutraceuticals and food supplements)[9] - The financial statements have been prepared on a going concern basis, but the company's history of losses, lack of sustained operating income, and dependence on financing raise substantial doubt about its ability to continue as a going concern[11][14] - As of June 30, 2019, the company had $475,856 in convertible notes payable to its Chairman and CEO, Dr. Stephen T. Chen. A portion of this debt was converted to common stock subsequent to the balance sheet date[18][19][21] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, liquidity, and strategy, highlighting revenue decline, increased losses, and financing needs Overview - The company's core technology is a low-dose oral interferon lozenge. However, clinical trials and commercialization plans are on hold because its long-time manufacturer is no longer producing interferon, and ABI is actively seeking a new cGMP source[30][33] - ABI is diversifying its business to generate new revenue streams through a Medical Division (developing pulsatile insulin therapy for diabetes, distributing TissueAid™ wound closure products) and a Consumer Products Division (nutraceuticals)[36][38][39][40] - The company is focusing on Asian markets, using its Taiwan branch office as an operational hub for expansion in Taiwan, Hong Kong, and China[36][41] Results of Operations Financial Performance Comparison: Six Months Ended June 30 | Metric | 2019 ($) | 2018 ($) | Change | | :--- | :--- | :--- | :--- | | Revenue | 4,682 | 56,840 | -92% | | Gross Profit | 1,401 | 12,794 | -89% | | SG&A Expenses | 794,493 | 552,991 | +44% | | Operating Loss | (845,602) | (540,197) | +57% | | Net Loss | (844,965) | 524,229 | +61% | - The increase in SG&A expenses was primarily due to costs associated with stock compensation programs, professional accounting fees, and expanded international operations[52][53] Liquidity and Capital Resources - Cash and cash equivalents decreased from $1,275,654 at December 31, 2018, to $723,441 at June 30, 2019[57] - The company estimates it needs between $5 million and $6 million in financing to support its core technology and expand its new Medical and Consumer Products divisions[57] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exempt from market risk disclosures due to its status as a smaller reporting company - The company is exempt from this disclosure requirement due to its status as a smaller reporting company[64] Item 4. Controls and Procedures Management concluded disclosure controls were ineffective due to material weaknesses, with remediation efforts underway - The CEO and CFO concluded that the company's disclosure controls and procedures were not effective[65] - Identified material weaknesses include: (a) insufficient personnel with technical accounting knowledge and (b) a lack of proper segregation of duties due to the company's small size[68] - Remediation plans include engaging a managerial accounting service provider and hiring additional personnel with technical accounting expertise[66][69] PART II: OTHER INFORMATION This section provides other required information, including legal proceedings, unregistered equity sales, and other disclosures Item 1. Legal Proceedings The company reports no active or pending legal proceedings or claims as of the filing date - The company reports no active or pending legal proceedings[70] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued unregistered shares for $50,000, with proceeds used for general corporate purposes and debt repayment - From January 1, 2019, the company issued 200,000 shares for proceeds of $50,000[72] - The proceeds were used for general corporate purposes, including R&D, SG&A, and debt repayment[72] Other Items (Items 3, 4, 5, 6) The company reported no senior security defaults, inapplicable mine safety disclosures, and no other information or exhibits - The company reported no defaults upon senior securities, inapplicable mine safety disclosures, no other information, and no exhibits[73]