Ainos, Inc 10-K for FY2020
Ainos, Inc. (AIMD)
10-K
2021-03-30
For: 2020-12-31
View Original
Added on
April 12, 2026
About this 10-K
Ainos, Inc filed this 10-K on March 30, 2021, covering the fiscal year ended December 31, 2020 (FY2020).
Headline figures
Fiscal year ended December 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $16.56K
- up 41.2% from $11.73K a year earlier
- Net loss
- $1.45M
- compared with a net loss of $1.58M a year earlier
U.S.
Securities and Exchange Commission
Washington, D.C.
20549
FORM 10-K
(Mark
One)
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[ X
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Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the
Fiscal Year Ended December 31, 2020
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[
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Transition
Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 [No Fee Required]
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Commission File Number 0-20791
AMARILLO
BIOSCIENCES, INC.
(Exact
name of registrant as specified in its charter)
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TEXAS
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75-1974352
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(State
or other jurisdiction of incorporation or
organization)
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(IRS
Employer Identification No.)
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4134 Business Park Drive, Amarillo, Texas
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79110-4225
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(Address
of principal executive offices)
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Zip
Code
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Issuer’s
telephone number, including area code:
(806) 376-1741
Securities
registered under Section 12(b) of the Exchange Act.
None.
Securities
registered under Section 12(g) of the Exchange Act.
Common
Stock, Par Value $.01
Indicate by check mark whether the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. [
]Yes [√ ]No
Indicate by check mark whether the issuer is not required to file
reports pursuant to Section 13 or 15(d) of the Exchange Act. [ ]Yes
[√ ]No
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange
Act of 1934 during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
[√]Yes [ ]No
Indicate by check mark if there is no disclosure of delinquent
filers in response to Item 405 of Regulation S-K (Sec. 229.405 of
this chapter) is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
[√]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule
12b-2 of the Exchange Act.
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Large accelerated filer [ ]
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Accelerated filer [ ]
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Non-accelerated filer [ ]
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Smaller reporting company [√]
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Emerging growth company [ ]
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. [ ]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [√]
No
As of
December 31, 2020, there were issued and outstanding 42,066,172
shares of the registrant’s common stock, par value $0.01,
which is the only class of common or voting stock of the
registrant. As of that date, the aggregate market value of
22,305,240 shares of common stock held by non-affiliates of the
registrant was approximately $3,791,891 (based on the closing price
of $0.17 for the common stock on the OTC BB.AMAR December 31,
2020). Shares of common stock held by officers, directors and each
shareholder owning ten percent or more of the outstanding common
stock have been excluded in that such persons may be deemed to be
affiliates.
The
number of shares of the Registrant’s common stock issued and
outstanding as of March 30, 2021 was 42,066,172.
PART
I
The following contains forward-looking statements that involve
risks and uncertainties. The Company’s actual results could
differ materially from those discussed in the forward-looking
statements as a result of certain factors, including those set
forth in “Management’s 2021 Plan of Operations”
as well as those discussed elsewhere in this Form 10-K. The
following discussion should be read in conjunction with the
Financial Statements and the Notes thereto included elsewhere in
this Form 10-K.
ITEM
1.
BUSINESS.
Overview
Amarillo
Biosciences, Inc. (the "Company” or “the
Company”) is a Texas corporation formed in 1984 engaged in
developing biologics for the treatment of human and animal
diseases. Our current focus is research aimed at the treatment of
human disease indications, particularly influenza, hepatitis C,
thrombocytopenia, and other indications using interferon (IFN)
alpha that is administered in a proprietary low-dose non-injectable
form. In addition to its core technology the Company is working to
expand the Company’s current focus into a diversified
healthcare business portfolio in order to generate new revenue
streams.
The
Company presently owns eight issued patents with two
patents pending. This collection consists of patents with claims
that encompass method of use or treatment, and/or composition of
matter and manufacturing as well as design utility and/or
invention. Of the eight issued patents, four patents are related to
the low-dose oral delivery of interferon, one patent is for a
product promoting oral health, and three patents are associated
with treatment of metabolic disorders.
The
Company primarily operates three business units: the Medical,
Pharmaceutical, and Consumer Product Divisions. Historically, the
Company has focused on R&D involving low-dose, orally
administered lozenges containing the natural immune system
activator interferon-alpha as a treatment for a variety of disease
indications. The Company owns a proprietary library of over thirty
years of scientific and clinical data on the human and animal
applications of low-dose oral interferon. Through the
Pharmaceutical Division, the Company seeks to out-license or
leverage in other ways its core technology by forming partnerships
to develop current and new discoveries and commercialize the
resulting products.
An
integral part of the company’s operating strategy is to
create multiple revenue streams through the implementation of
programs (including but not limited to in-licensing) of medical and
healthcare products and therapeutics. The Medical Division and
Consumer Products Division facilitate the enhancement of these
revenue streams. These programs will be the catalysts that allow
the Company to enter markets in Taiwan, Hong Kong, China, and other
Asian countries for the distribution of new medical and healthcare
products.
2
Over
the past several years the Company has focused its research efforts
towards the development of a novel pulsatile insulin pump infusion
therapy in Taiwan that consists of delivering insulin intravenously
in pulses, as opposed to the typical subcutaneous route of
administration, in order to more closely imitate how the pancreas
secretes insulin in healthy non-diabetics. The Company plans to
offer an innovative and comprehensive diabetes treatment that
provides solutions to all stages of diabetes from pre-diabetes
through late-stage diabetes with advanced complications. The
Company intends to target Taiwan first as an R&D base and
demonstration platform in Greater China, and subsequently establish
a licensing platform for clinics in Greater China. The Consumer
Product Division is presently focused on sales of liposomal
nutraceuticals and food supplements that include Vitamin C,
Glutathione, CoQ10, Curcumin/Resveratrol, DHA, and a
Multi-Vitamin.
The
Company maintains a representative branch office in Taiwan –
Amarillo Biosciences, Inc. (the “Taiwan Branch”) to
increase the Company's presence in Taiwan and to serve as an
operational hub to access growing Asian markets.
Injectable
high-dose interferon is FDA-approved to treat some neoplastic,
viral and autoimmune diseases. Many patients experience
moderate to severe side-effects causing them to discontinue
injectable interferon therapy. Our core technology is primarily
based on low-dose non-injectable interferon-alpha that is delivered
into the oral cavity as a lozenge in low doses. The lozenge
dissolves in the mouth where interferon binds to surface (mucosal)
cells in the mouth and throat, resulting in activation of hundreds
of genes in the peripheral blood that stimulate the immune
system. Human studies have shown that oral interferon is
safe and effective against viral and neoplastic diseases. Oral
interferon is given in concentrations 10,000 times less than that
usually given by injection. The Company’s low-dose
formulation results in almost no side effects, in contrast to high
dose injectable interferon, which causes adverse effects in at
least 50% of recipients.
Governmental
or FDA approval is required for low-dose oral interferon. We
believe that our technology is sound and can be commercialized for
various indications. Due to lack of appropriate interferon supply
in the market over the past several years, we have been
unsuccessful at such commercialization to date. However, as a
result of Covid-19, Chinese government health authorities have
recommended use of anti-AIDS drugs and interferon. The Company
believes this has brought renewed attention in the importance of
incorporating low-dose interferon as a treatment to help stem the
pandemic. In light of these circumstances, the Company is uniquely
positioned to potentially develop safe, low-dose
interferon.
While
the pharmaceutical industry is creating and marketing new and
effective anti-viral medications, there still exists opportunities
to develop and commercialize low-dose interferon as a safer
anti-viral treatment for influenza, hepatitis, and other conditions
caused by viruses such as genital warts and canker sores.
Interferon also has powerful cytotoxic effects which in combination
with its immune stimulating activities could play a role in the
rapidly expanding field of cancer immunotherapy. Other demonstrated
effects of interferon offer opportunities to commercialize low-dose
interferon for the treatment of Thrombocytopenia and chronic cough
in lung diseases such as COPD and Idiopathic Pulmonary Fibrosis
(IPF). The Company has the opportunity to capitalize on its
relationship channels in the Asian markets to explore sources of
raw materials, capital, production facilities, and to target a
significant and growing sales market.
Recent Business Expansion Opportunity
On
December 24, 2020, the Company entered into a Securities Purchase
Agreement (“Ainos Agreement”) with Ainos, Inc., a
Cayman Islands corporation (“Purchaser”) and certain
principal shareholders of the Company including (i) Stephen T.
Chen, individually and as Trustee of the Stephen T. Chen and
Virginia M. Chen Living Trust, dated April 12, 2018, (ii) Virginia
M. Chen, individually and as Trustee of the Stephen T. Chen and
Virginia M. Chen Living Trust, dated April 12, 2018, and (iii) Hung
Lan Lee (collectively, “Principal
Shareholders”).
3
Pursuant
to the Ainos Agreement, upon the closing of the transactions
contemplated thereby (the “Closing”), the Company will
acquire certain patent assets (the “Patent Assets”) by
issuing 100,000,000 shares of common stock (the
“Shares”) valued at $0.20 to Purchaser. The
Patent Assets encompass technologies relating to development and
manufacturing of point-of-care testing rapid test kit products that
include diagnostics for COVID-19 (SARS CoV2 Antigen Rapid Test),
pneumonia, vaginal infection and helicobacter pylori (H. pylori)
bacterial infection. The Company anticipates that the Shares
issued to the Purchaser will represent approximately 70.39% of the
issued and outstanding shares of common stock of the Company and
effect a change of control in the Company at the Closing. The
Ainos Agreement provides for certain registration rights to the
Purchaser regarding the Shares.
The
Closing is conditioned on the Company (1) obtaining shareholder
approval for, among other things: (i) the adoption of the Ainos
Agreement and approval of the transactions contemplated by the
Agreement; (ii) the amendment of the Company’s charter
documents to (A) increase the number of authorized shares of common
stock to 300,000,000 shares, and (B) rename the Company to
“Ainos, Inc.” or any other corporate name designated by
Purchaser and (iii) the expansion of the number of directors on the
Company’s Board of Directors (“Company Board”)
and the election of directors as designated by the Purchaser
(collectively, the “Company Actions Required for
Closing”); and (2) file with the Securities and Exchange
Commission (the “SEC”)_a proxy statement or information
statement, which shall include the recommendation of the Company
Board that the Company’s shareholders approve the Ainos
Agreement and authorize the transactions contemplated thereby (the
“Company Board Recommendation”).
The
Ainos Agreement contains certain customary termination rights that
are (i) in favor of each of the Company and Purchaser, including by
mutual agreement or for uncured breach by the other party and (ii)
in favor of Purchaser, including if there is a change of the
Company Board Recommendation or, if the Closing has not been
consummated by the end of day on the forty-fifty day after the date
of the Ainos Agreement, subject to certain limitations. The Ainos
Agreement contains customary representations, warranties and
covenants, including covenants obligating the Company to continue
to conduct its business in the ordinary course and to cooperate in
seeking regulatory approvals, as needed.
Under
the Ainos Agreement, the Principal Shareholders agree to be
responsible jointly and severally with the Company for the
Company’s indemnification obligations provided in the Ainos
Agreement and to cause their controlled entities to enter into
joinder agreements to be bound by the terms and conditions of the
Agreement as a Principal Shareholder prior to the
Closing.
The
foregoing description of the Ainos Agreement is not complete and is
qualified in its entirety by the text of the agreement, which is
included as Exhibit 2.1 to the Form 8-K filed by the Company with
the SEC on December 30, 2020.
On
December 18, 2020, the Company Board, and on January 25,
2021, the
holders owning a majority of the shares of common stock of the
Company as of the record date of January 22, 2021 approved the
Company Actions Required for Closing. The Company filed a
definitive information statement regarding the majority stockholder
approval of the Company Actions Required for Closing on March 19,
2021 and completed mailing of the information statements to its
shareholders on March 26, 2021. The Company expects the Closing to
occur on or after April 15, 2021, subject to the terms and
conditions of the Ainos Agreement.
4
Patents and Proprietary Rights
Since
inception, the Company has worked to build an extensive patent
portfolio for low-dose orally administered interferon. This
portfolio consists of patents with claims that encompass method of
use or treatment, and/or composition of matter and manufacturing.
As listed below, the Company presently owns eight issued
patents with two patents pending.
ACTIVE PATENTS:
"TREATMENT
OF THROMBOCYTOPENIA USING ORALLY ADMINISTERED INTERFERON" as
described and claimed in U.S. Patent No. 9,526,694 B2 issued
December 27, 2016, Owned. Expiration: April 2033.
“TREATMENT
OF THROMBOCYTOPENIA USING ORALLY ADMINISTERED INTERFERON" as
described and claimed in U.S. Patent No. 9,750,786 B2 issued
September 5, 2017, Owned. Expiration: April 2033.
“TREATMENT
OF THROMBOCYTOPENIA USING ORALLY ADMINISTERED INTERFERON" as
described and claimed in U.S. Patent No. 9,839,672 B2 issued
December 12, 2017, Owned. Expiration: April 2033.
"TREATMENT
OF THROMBOCYTOPENIA USING ORALLY ADMINISTERED INTERFERON" as
described and claimed in TAIWAN Patent No. I592165 issued July 21,
2017, Owned. Expiration: May 2033.
"COMPOSITION
AND METHOD FOR PROMOTING ORAL HEALTH" as described and claimed in
U.S. Patent No. 6,656,920 B2 issued December 2003, Owned.
Expiration: April 2021.
“SMART DRUG INJECTION DEVICE” as described and claimed
in TAIWAN invention patent application number 108137797, Owned,
Issued: November 27, 2020, Expiration: October 18,
2039
“SMART DRUG INJECTION DEVICE” as described and claimed
in TAIWAN design utility model patent application number 108213819,
Owned, Issued: December 12, 2019, Expiration: November 11,
2038.
“SMART DRUG INJECTION DEVICE” as described and claimed
in CHINA design utility model patent application number
201921808292.6, Owned, Issued: July 28, 2020, Expiration: June 27,
2039.
“SMART DRUG INJECTION DEVICE” as described and claimed
in CHINA invention patent application number 201911024619.5,
Pending.
“SMART DRUG INJECTION DEVICE” as described and claimed
in US invention patent application number 17/069,418,
Pending.
There
are no current patent litigation proceedings involving the
Company.
Cost of Compliance with Environmental Regulations
The
Company incurred no costs to comply with environment regulations in
2020.
United States Regulation
Before
products with health claims can be marketed in the United States,
they must receive approval from the U.S. Food and Drug
Administration (“FDA”). To receive this approval, any
drug must undergo rigorous preclinical testing and clinical trials
that demonstrate the product candidate’s safety and
effectiveness for each indicated use. This extensive regulatory
process controls, among other things, the development, testing,
manufacture, safety, efficacy, record keeping, labeling, storage,
approval, advertising, promotion, sale, and distribution of
pharmaceutical products.
5
In
general, before any ethical pharmaceutical product can be marketed
in the United States, the FDA will require the following
process:
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Preclinical
laboratory and animal tests;
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Submission
of an investigational new drug application, or IND, which must
become effective before human clinical trials may
begin;
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Adequate
and well-controlled human clinical trials to establish the safety
and efficacy of the proposed drug for its intended
use;
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Pre-approval
inspection of manufacturing facilities and selected clinical
investigators;
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Submission
of a New Drug Application (NDA) to the FDA; and
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FDA
approval of an NDA, or of an NDA supplement (for subsequent
indications or other modifications, including a change in location
of the manufacturing facility).
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Substantial
financial resources are necessary to fund the research, clinical
trials, and related activities necessary to satisfy FDA
requirements or similar requirements of state, local, and foreign
regulatory agencies. At such time as the Company undertakes to
commercialize any of its products, all necessary preclinical
testing, clinical trials, data review, and approval steps will be
judiciously executed to insure that the product satisfies all
regulatory requirements at all levels.
505(b)(2)
The
Company has historically followed and will continue to follow the
traditional approval process for New Drugs as set out in Section
505(b)(1) of the Federal Food, Drug, and Cosmetic Act. If an
alternative path to FDA approval for new or improved formulations
of previously approved products is scientifically and economically
feasible and beneficial to the Company and the public, the Company
may choose to follow this alternative path as established by
section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act. This
section of the Act permits the applicant to rely on certain
preclinical or clinical studies conducted for an approved product
as some of the information required for approval and for which the
applicant has not obtained a right of reference. The process of
approval under 505(b)(2) will be followed as judiciously as
505(b)(1) or any regulation.
Orphan Drug Designation
Under
the Orphan Drug Act, the FDA may grant orphan drug designation to
drugs intended to treat a rare disease or condition, which is
generally a disease or condition that affects fewer than 200,000
individuals in the United States. The Company may choose to seek
approval for a product satisfying the definition of an Orphan Drug
if that product can be used to treat such an indication. Orphan
drug designation does not convey any advantage in or shorten the
duration or rigidity of the regulatory review and approval process.
Similarly,
substantial financial resources are necessary to fund the research,
design, testing, fabrication and related activities necessary to
satisfy FDA requirements or similar requirements of state, local,
and foreign regulatory agencies for medical devices. The Company
may seek to obtain FDA clearance for the sales, marketing, and use
of its novel pulsatile insulin pump for the U.S. market after
obtaining FDA approvals under one of the following regulatory
approvals:
Premarket Notification 510(k)
Each person who intends to market in the U.S., a Class I, II, and
III device intended for human use, for which a Premarket Approval
application (“PMA”) is not required, must submit a
510(k) to FDA unless the device is exempt from 510(k) requirements
of the Federal Food, Drug, and Cosmetic Act (the “FD&C
Act”) and does not exceed the limitations of exemptions in .9
of the device classification regulation chapters (e.g., 21 CFR
862.9, 21 CFR 864.9).
6
If the
Company’s novel pulsatile insulin pump is determined to be
similar to one already cleared for the U.S. market, the Company
will seek FDA clearance under 510(k) at least 90 days before the
device is marketed. A
510(k) application requires demonstration of substantial
equivalence to another legally U.S. marketed device. Substantial
equivalence means that the new device is as safe and effective as
the predicate. Documented laboratory testing among other
submissions will be required and if the Company’s device
features significant alterations from predecessor devices the
Company may be required to present results from clinical
trials.
Premarket Approval (PMA)
Alternatively,
if the Company’s device is deemed to be completely new to the
U.S. market or classified as a Class
III device, the
Company will be required to apply for PMA approval. The Medical Device Amendments of 1976
to the FD&C Act established three regulatory classes for
medical devices. The three classes are based on the degree of
control necessary to assure that the various types of devices are
safe and effective. The most regulated devices are in Class III.
The amendments define a Class III device as one that supports or
sustains human life or is of substantial importance in preventing
impairment of human health or presents a potential, unreasonable
risk of illness or injury
Under Section 515 of the FD&C Act, all devices placed into
Class III are subject to premarket approval requirements. Premarket
approval by FDA is the required process of scientific review to
ensure the safety and effectiveness of Class III
devices.
Foreign Regulation
In
addition to regulations in the United States, a variety of foreign
regulations govern clinical trials and commercial sales and
distribution of products in foreign countries. Whether or not the
Company obtains FDA approval for a product, the Company must obtain
approval of a product by the comparable regulatory authorities of
foreign countries before the Company can commence clinical trials
or market the product in those countries. The approval process
varies from country to country, and the time may be longer or
shorter than that required for FDA approval. The requirements
governing the conduct of clinical trials, product licensing,
pricing and reimbursement vary greatly from country to
country.
The
policies of the FDA and foreign regulatory authorities may change
and additional government regulations may be enacted which could
prevent or delay regulatory approval of investigational drugs or
approval of new diseases for existing products and could also
increase the cost of regulatory compliance. It is not possible to
predict the likelihood, nature or extent of adverse governmental
regulation that might arise from future legislative or
administrative action, either in the United States or
abroad.
Research and Development
During
the year ended December 31, 2020, the Company incurred $40,389 of
which $40,000 was paid in stock and $389 in cash, towards research,
development and IP protection related activities associated
entirely with the development of a proprietary pulsatile insulin
treatment. Other than corporate administrative and professional
accounting fees related to maintaining public listing requirements,
a significant portion, if not all, of the Company’s Selling,
General & Administrative expenses were also allocated towards
the research and development of the Company’s pulsatile
insulin treatment pump.
7
The
better focus the Company’s research and development efforts,
the Company elected to terminate or not extend the following
licensing agreements and transactions:
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A License Agreement
by and between the Company and The Texas A&M University System,
dated as of March 22, 1998 and amended by that certain Amendment
No. 1, dated as of September 28, 1998. The Licensor licensed to the
Company certain intellectual property rights under U.S. Patent
Number 4,497,795 entitled “Appetite and Feed/Gain”,
Continuation-in-Part Patent Application filed January 4, 1985
entitled “Method of Using Interferon in Low Dosage to
Regulate Appetite and Efficiency of Food Utilization”, U.S.
Patent Application Serial Number 814,317 filed December 30, 1985
entitled “Low Dosage of Interferon to Enhance Vaccine
Efficiency”, U.S. Patent Application Serial Number 044,317
filed April 30, 1987 entitled “Improved Method of
Administering Interferon”, and U.S. Patent Application Serial
Number 927,834 filed November 6, 1986 entitled “Treatment of
Immune-Resistant Disease” (the “Texas A&M
University Patent License Agreement”). The subject license
expired in 2019 and the Company elected not to extend or renew the
license.
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Term Sheet for
Cooperative Development and Licensing Venture between the Company
and Xiamen Weiyang Pharmaceutical Co., Ltd. dated July 19, 2019
(“Xiamen Term Sheet”). The Xiamen Term Sheet expired as
of October 19, 2019 and ABI has issued a notification of expiration
dated December 22, 2020.
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Memorandum of
Understanding between the Company and Leadtek Research, Inc. dated
June 30, 2020 (“Leadtech MOU”). The Term Sheet expires
as of December 31, 2020 and ABI has issued a notification of
expiration dated December 22, 2020.
Employees
The
Company currently has two full-time employees and two part-time
employees. Of these four employees, two are executive officers and
two work in administrative capacities.
Stephen T. Chen: Chairman, Chief Executive Officer (CEO), President
and Chief Operating Officer (COO), and Chief Financial Officer
(CFO). Dr. Chen was named Chairman of the Board in February 2012,
and he has been a director of the Company since February 1996. He
currently executes the management functions as not only Chairman,
but as CEO, President, COO, and CFO.
Bernard Cohen: Vice President - Administration (VP-Admin). Mr.
Cohen holds BBA and MPA degrees from West Texas A&M University.
He is a long time Amarillo resident with over thirty years of
management experience. Mr. Cohen has been with the Company since
October 2009. Mr. Cohen works with Ms. Shelton, providing the
reporting necessary for the Company’s various SEC filings,
and ordinary-course internal bookkeeping and accounting
services.
Chrystal Shelton: Office Manager & Administration. Ms. Shelton
has been with the Company since 1987. In addition to handling
routine office administration, Ms. Shelton is responsible for
accounting, form, and formatting of SEC filings. She is an integral
part of the reporting process and interacts with outside
professionals who assist the Company in its various compliance
measures.
Maggie Wang: Director of Business Development. Ms. Wang has an
extensive background in business development and marketing of
consumer products in Asian countries. Ms. Wang is also the branch
manager for the Taiwan Branch.
Consultants
From time to time, the Company engages consultants as needed for
specific areas of responsibility. Presently, the Company has
engaged the following consultants: John Junyong Lee, Esq. - Chief
Legal Counsel, Dr. Yung-Hsiang Hung - Director-Medical Division;
Jenny Chiu- Legal and Regulatory Consultant; and Mr. Lawrence Lin-
Executive Advisor. On December 18, 2020, the Board of Directors
nominated and approved the appointment of Mr. John Junyong Lee as
the Company corporate secretary, filling the position vacated by
the former secretary, Mr. Edward L. Morris, Esq. upon his
retirement.
8
ITEM
1A.
RISK
FACTORS.
Please
carefully consider the following discussion of significant factors,
events, and uncertainties that make an investment in our securities
risky. The events and consequences discussed in these risk factors
could, in circumstances we may or may not be able to accurately
predict, recognize, or control, have a material adverse effect on
our business, growth, reputation, prospects, financial condition,
operating results (including components of our financial results),
cash flows, liquidity, and stock price. These risk factors do not
identify all risks that we face; our operations could also be
affected by factors, events, or uncertainties that are not
presently known to us or that we currently do not consider to
present significant risks to our operations. In addition, the
global economic climate amplifies many of these risks.
We Face Intense Competition
The
pharmaceutical industry is an expanding and rapidly changing
industry characterized by intense competition. The Company believes
that our ability to compete will be dependent in large part upon
our ability to successfully operate business lines, continue
recapitalization, and steadily enhance and improve our core
technology products. In order to do so, we must effectively utilize
and expand our research and development capabilities and, once
developed, quickly convert new technology into products and
processes, which can then be commercialized. Competition is based
primarily on scientific and technological superiority, technical
support, availability of patent protection, access to adequate
capital, the ability to develop, acquire and market products and
processes successfully, the ability to obtain governmental
approvals and the ability to serve the particular needs of
commercial customers. Corporations and institutions with greater
resources therefore, have a significant competitive
advantage.
Our
potential competitors include entities that develop and produce
therapeutic agents and/or medical devices for treatment of human
and animal disease. These include numerous public and private
academic and research organizations and pharmaceutical and
biotechnology companies pursuing production of, among other things,
biologics from cell cultures, genetically engineered drugs and
natural and chemically synthesized drugs. Many of these potential
competitors have substantially greater capital resources, research
and development capabilities, manufacturing and marketing
resources. Competitors may succeed in developing products or
processes that are more effective or less costly or that gain
regulatory approval prior to our products. The Company expects that
the number of competitors and potential competitors will increase
as more anti-viral and cytotoxic products receive commercial
marketing approvals from the FDA or analogous foreign regulatory
agencies. Any of these competitors may be more successful in
manufacturing, marketing and distributing its
products.
Our Expansion Places a Significant Strain on our Management,
Operational, Financial, and Other Resources
Increasing
our product and service offerings will require scaling our
management, financial and research and development resources. The
complexity of the current focus of our business on innovative
biotechnologies and treatments can place significant strain on our
management, personnel, operations, systems, technical performance,
financial resources, and internal financial control and reporting
functions, and our expansion increases these factors. Failure to
manage growth effectively could damage our reputation, limit our
growth, and negatively affect our operating results.
Our Expansion into New Products, Services, Technologies, and
Geographic Regions Subjects Us to Additional Risks
We may
have limited or no experience in our newer market segments, and our
customers may not adopt our product or service offerings. These
offerings, which can present new and difficult technology
challenges, may subject us to claims if customers of these
offerings experience service disruptions or failures or other
quality issues. In addition, profitability, if any, in our newer
activities may not meet our expectations, and we may not be
successful enough in these newer activities to recoup our
investments in them. Failure to realize the benefits of amounts we
invest in new technologies, products, or services could result in
the value of those investments being written down or written
off.
9
Our International Operations Expose Us to a Number of
Risks
We have
relatively little operating experience and may not benefit from any
first-to-market advantages or otherwise succeed. It is costly to
establish, develop, and maintain international operations, sales
and marketing channels, and research and development and licensing
capacity. Our international operations may not become profitable on
a sustained basis.
In
addition to risks described elsewhere in this section, our
international sales and operations are subject to a number of
risks, including:
●
local economic and
political conditions;
●
government
regulation (such as regulation of our product and service offerings
and of competition); restrictive governmental actions (such as
trade protection measures, including export duties and quotas and
custom duties and tariffs); nationalization; and restrictions on
foreign ownership restrictions on sales or distribution of certain
products or services and uncertainty regarding liability for
products, services, and content, including uncertainty as a result
of less Internet-friendly legal systems, local laws, lack of legal
precedent, and varying rules, regulations, and practices regarding
the physical and digital distribution of media products and
enforcement of intellectual property rights;
●
business licensing
or certification requirements, such as for imports, exports,
medical devices and medical treatments;
●
limitations on the
repatriation and investment of funds and foreign currency exchange
restrictions;
●
difficulty in
staffing, developing, and managing foreign operations as a result
of distance, language, and cultural differences;
●
compliance with the
U.S. Foreign Corrupt Practices Act and other applicable U.S. and
foreign laws prohibiting corrupt payments to government officials
and other third parties;
●
laws and policies
of the U.S. and other jurisdictions affecting trade, foreign
investment, loans, and taxes; and
●
geopolitical
events, including war and terrorism.
Our Commercial Agreements, Strategic Alliances, and Other Business
Relationships Expose Us to Risks
Our
business growth depends on commercial agreements, strategic
alliances, and business relationships. Under these agreements, we
provide access to our research library and clinical data as part of
licensing and sales and marketing agreements. These arrangements
are complex and require substantial infrastructure capacity,
personnel, and other resource commitments, which may limit the
amount of business we can service. We may not be able to implement,
maintain, and develop the components of these commercial
relationships, which may include research and development, clinical
trials, diagnostic software and hardware design, and engaging third
parties to perform services.
Our
licensing agreements partially dependent on the volume of the other
company’s sales. Therefore, when the other company’s
offerings are not successful, the compensation we receive may be
lower than expected or the agreement may be terminated. Moreover,
we may not be able to enter into additional or alternative
commercial relationships and strategic alliances on favorable
terms. We also may be subject to claims from businesses to which we
provide these services if we are unsuccessful in implementing,
maintaining, or developing these services.
10
We Face Significant Supply Risk
We are
exposed to significant supply risks that may adversely affect our
operating results. The Company’s long-time human interferon
producer is no longer manufacturing interferon. Plans for further
clinical trials and commercialization of a low-dose interferon
product have been placed on hold until a new source of interferon
is found. The Company is actively seeking a new manufacturing
partner and exploring sourcing options with pharmaceutical
companies that have a supply of either recombinant interferon or
natural human interferon made in a similar manner, but from a
different cell line as our previous product.
Procuring
a new source of interferon may require additional studies to
compare results to the Company’s research and further
clinical trials will have to be performed. The Company’s
inability to secure interferon supplies may adversely affect our
operating results.
Government Regulation Is Evolving and Unfavorable Changes Could
Harm Our Business
We are
subject to general business regulations and laws, as well as
regulations and laws specifically governing biologics,
pharmaceuticals, and medical devices and treatments. A large number
of jurisdictions regulate our operations, and the extent, nature,
and scope of such regulations is evolving and expanding as the
scope of our businesses expand. We are regularly subject to formal
and informal reviews and investigations by governments and
regulatory authorities under existing laws, regulations, or
interpretations or pursuing new and novel approaches to regulate
our operations. Unfavorable regulations, laws, decisions, or
interpretations by government or regulatory authorities applying
those laws and regulations, or inquiries, investigations, or
enforcement actions threatened or initiated by them, could cause us
to incur substantial costs, expose us to unanticipated civil and
criminal liability or penalties (including substantial monetary
fines), diminish the demand for, or availability of, our products
and services, increase our cost of doing business, require us to
change our business practices in a manner materially adverse to our
business, damage our reputation, impede our growth, or otherwise
have a material effect on our operations.
Claims, Litigation, Government Investigations, and Other
Proceedings May Adversely Affect Our Business and Results of
Operations
As a
company focusing on diagnostics and treatments for a wide range of
human health care needs, we may be subject to actual and threatened
claims, litigation, reviews, investigations, and other proceedings,
including proceedings by governments and regulatory authorities,
involving a wide range of issues, including patent and other
intellectual property matters, taxes, labor and employment,
competition and antitrust, privacy and data protection, product
liability, consumer protection, commercial disputes, goods and
services offered by us and by third parties, and other matters. Any
of these types of proceedings can have an adverse effect on us
because of legal costs, disruption of our operations, diversion of
management resources, negative publicity, and other factors. The
outcomes of these matters are inherently unpredictable and subject
to significant uncertainties.
ITEM
2.
DESCRIPTION OF
PROPERTY.
Our
executive and administrative offices are located at 4134 Business
Park Drive, Amarillo, Texas in a 1,800 square-foot leased facility.
The lease term, which is a semi-annual renewal, begins on January 1
of the calendar year and expires on June 30 of the calendar year.
The lease automatically renews on July 1 of the calendar year if
termination notice is not given to lessor. The rent in effect on
December 31, 2020 was $1,315 per month. The renewed lease for the
period January 1, 2021, through March 31, 2021, has a rent cost of
$1,315 per month. The monthly lease for the Company’s
similarly sized office in Taiwan was $2,548 per month or $30,579
annually for a twelve-month lease.
ITEM
3.
LEGAL
PROCEEDINGS.
There
are currently no legal proceedings involving the
Company.
11
ITEM
4.
MINE SAFETY
DISCLOSURES.
None.
PART
II
ITEM
5.
MARKET FOR THE
REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS,
AND ISSUER PURCHASES OF EQUITY SECURITIES.
Common Stock
The
shareholders have authorized 100,000,000 shares of voting common
shares for issuance. On December 31, 2020, a total of 50,783,942
shares of common stock were either issued (42,066,172), reserved
for conversion of convertible debt to stock (3,608,153), held for
future exercise of stock options (4,657,000)1 and warrants
(452,617).
On
January 6, 2020, 400,000 shares were issued at the price of $0.25
per share for the investment of $100,000 in the Company’s
2019-2 Private Placement Stock Offering. The investment funds were
received on December 31, 2019.
On
October 1, 2020, 100,000 shares were issued to UHO Wellness
Corporation (UHO) pursuant to a stock for services agreement
executed by the Company and UHO on February 13, 2020. The shares
were issued at $0.22 per share for the preparation and submission
of Taiwan and China patent applications for the Company’s
SMART technology. On December 1, 2020, the Company issued 100,000
shares at $0.18 per share to UHO when the aforementioned patents
were issued.
On
December 30, 2020, 54,780 common shares were issued to the
Company’s legal consultant as part of the engagement contract
for services for the fiscal year 2020. The total amount of the
stock was $14,440. Also on December 30, 2020, 158,528 shares were
issued to the Company’s executive consultant for advisory
services rendered as part of the engagement contract for 2019 and
2020. The total amount of the stock was $42,000.
On
December 30, 2020, Dr. Stephen T. Chen, Ph.D., CEO, received
651,701 as compensation in the amount of $175,000 for 2019 and
2020. Also on December 30, 2020, Bernard Cohen, VP, received 78,203
shares as compensation of $21,000 for 2019 and 2020. Dr. Celee
Spidel, former Medical Liaison, received 6,309 common shares for
compensation of $2,250 for 2019.
On May
11, 2020, the Company’s Board of Directors unanimously
approved a Consent Resolution enacting the 2020-1 Private Placement
Memorandum and Subscription of Non-Distributive Intent (PPM
Offering) (2020-1 Private Placement Package). The offering was
approved for the sale of a maximum of 5,208,334 common shares to
raise an aggregate amount not to exceed $1,000,000. The stated use
of proceeds was for commercialization of technologies and operating
expenses. The offering was to be completed not later than July 31,
2020.
On
November 30, 2020, the Company Board of Directors approved the
extension of the 2020-1 Private Placement Package until March 31,
2021. With the exception of the new closing date, all terms and
conditions of the 2021-1 Private Placement Package remain the
same.
On
December 18, 2020, the Company Board of Directors approved an
increase in the amount of authorized shares for issuance from 100
million common shares to 300 million common shares contingent upon
transaction close of the Securities Purchase Agreement with Ainos,
Inc. Pursuant to this Agreement, the Company will acquire Patent
Assets by issuing 100,000,000 shares of common stock valued at
$0.20 to Ainos, Inc.
_______________
12
The
Company did not pay any dividends to its common stock shareholders
in 2020 and has no plans to do so in the immediate
future.
Amarillo
Biosciences, Inc. uses the services of American Stock Transfer and
Trust Company as the Company’s transfer agent.
Preferred Stock
The
shareholders have authorized 10,000,000 shares of preferred stock
shares for issuance. No Preferred Equity was outstanding as of
December 31, 2020, and none is outstanding as of the Balance Sheet
date of this report.
Stock
Options and Warrants
On
September 26, 2018, the Company’s Board of Directors adopted
the Amarillo Biosciences, Inc., 2018 Employee Stock Option Plan
(the “2018-ESOP”). The 2018-ESOP provides for the grant
of Qualified Incentive Stock Options to the Company’s
employees. The Board, in its adoption of the 2018-ESOP, directed
the Officers to submit the 2018-ESOP to the shareholders for
ratification and approval at the next scheduled shareholders
meeting. Failure of the ratification and approval of the 2018-ESOP
within one year of the effective date renders the qualified options
to become nonqualified options for purposes of the U.S Internal
Revenue Code. The 2018-ESOP is administered by the Board of
Directors of the Company or by a committee of directors appointed
by the Board of Directors of the Company (the “Stock Option
Committee”) as constituted from time to time. The maximum
number of shares of Common Stock which may be issued under the
2018-ESOP is six million (6,000,000) common stock shares which will
be reserved for issuance subject to options.
The
option price per share of Common Stock deliverable upon the
exercise of an Incentive Stock Option is 100% of the fair market
value of a share of Common Stock on the date the Incentive Stock
Option is granted. The option price is $0.38 per share and the
options are exercisable during a period of ten (10) years from the
date of grant, where the options vest 20% annually over five (5)
years, commencing one (1) year from date of grant. If an option
grantee owns or controls over ten percent (10%) of the outstanding
stock, then pursuant to Section 424(d) of the Code, the option
price becomes 110% of fair market value, $0.418; the term of
exercise becomes five (5) years from ten (10); and the vesting
period decreases from five (5) years to four (4)
years.
Since
approval of the “2018-ESOP” on September 26, 2018
through the date this document was filed, no stockholders meeting
has been convened. As a result of the stockholders not having
ratified the “2018-ESOP”, the qualified options
automatically became non-qualified options on September 26, 2019.
All other terms and conditions of the plan remain the
same.
On
September 26, 2018, the Company’s Board of Directors adopted
the Amarillo Biosciences, Inc., 2018 Officers, Directors,
Employees, and Consultants Nonqualified Stock Option Plan (the
“2018-NQSOP”). The 2018-NQSOP provides for the grant of
Nonqualified Incentive Stock Options to the Company’s
employees. The 2018-NQSOP is administered by the Board of Directors
of the Company or by the Stock Option Committee as constituted from
time to time. The maximum number of shares of Common Stock which
may be issued under the 2018-NQSOP is twenty million (20,000,000)
common stock shares which will be reserved for issuance subject to
options. The option price for the Nonqualified Options is $0.38
exercisable for a period of ten (10) years, with a vesting period
of five (5) years at 20% per year commencing one (1) year from date
of grant. There are no changes in terms or conditions for
shareholders who own or control over ten percent (10%) of the
outstanding stock.
On
December 18, 2020, the Board of Directors approved the termination
of the 2008 Stock Incentive Plan that was previously approved by
the board on May 23, 2008 and replaced it with the 2018 company
stock option plans that were adopted on September 26,
2018.
13
Equity
Compensation Plan Information:
|
Stock Plans
1
|
|
Issue Date
Range
|
Total Options
Authorized
|
Options
Issued
|
Options
Remaining
|
|
Amarillo
Biosciences, Inc., 2018 Employee Stock Option Plan2,
3
|
|
9/26/18 –
9/26/28
|
6,000,000
|
850,000
|
5,150,000
|
|
Amarillo
Biosciences, Inc., 2018 Officers, Directors, Employees, and
Consultants Nonqualified Stock Option Plan2
|
|
9/26/18 –
9/26/28
|
20,000,000
|
3,807,000
|
16,193,000
|
1 The Board of Directors has approved all stock, stock
option and stock warrant issuances.
2 Details of the option plans are also disclosed in
Financial Statements footnote 8, Stock Options and Stock
Plans.
3 On September 26, 2019, all Qualified Options became
non-qualified options since the 2018-ESOP was not ratified by the
Company’s shareholders.
For
both qualified and nonqualified stock options when the options are
exercised, the Company Common Stock shares would be issued pursuant
to Rule 144A meaning that the shares cannot be traded or otherwise
exchanged for a minimum period of six months from issue
date.
A
summary of option activity for the years ended December 31, 2019
and December 31, 2020 are presented below.
|
Date
|
Number of
Options 1Qualified*
|
Number of
Options Nonqualified
|
Weighted Average
Exercise Price
|
Weighted Average
Remaining Contractual Term
|
Aggregate
Intrinsic Value
|
|
Balance December
31, 2018
|
950,000
|
3,995,000
|
$0.38
|
9
years -
|
-
|
|
Exercised
|
-
|
-
|
-
|
-
|
-
|
|
Expired or
Forfeited
|
100,000
|
188,000
|
$0.38
|
-
|
-
|
|
Balance December
31, 2019
|
850,000
|
3,807,000
|
$0.38
|
8
years -
|
-
|
|
Granted
2020
|
-
|
-
|
-
|
-
|
|
|
Exercised
|
-
|
-
|
-
|
-
|
-
|
|
Expired or
Forfeited
|
|
|
$0.38
|
-
|
-
|
|
Balance December
31, 2020
|
850,000
|
3,807,000
|
$0.38
|
7
years -
|
|
|
Vested as of
December 31, 2020
|
390,000
|
1,522,800
|
$0.38
|
7
years -
|
|
* There
is one stock owner over 10% currently holding 500,000 qualified
options. The exercise price for this option-holder would be $0.418
with an exercise period of 5 years and a vesting period of 4 years
at 25% per year.
1 Because the plan was
not ratified by the Company’s shareholders, the qualified
options became non-qualified on September 26, 2019. These totals
remain separated since the two different plans are still in
existence.
The
Company used the Black-Scholes option pricing model to value the
option awards with the following assumptions applied: (1)
Volatility – 276%; (2) Term – 5 years was chosen
although the full option term is 10 years to be more commensurate
with the 5-year vesting portion of the plan; (3) Discount –
2.96%.
As of
December 31, 2020, there is $924,180 in unrecognized option expense
that will be recognized over the next 2.75 years.
Directors,
officers, employees and consultants did not exercise any options in
2019 or 2020.
14
On
November 30, 2020, the Company’s Board of Directors approved
an extension of the consulting agreement and pre-existing warrant
certificate between the Company and i2China Management Group, LLC,
originally dated April 15, 2018. The warrant is effective from
November 25, 2020, until November 25, 2025 at 5:00 P.M. Central
Standard Time. The warrant entitles the consultant to purchase
452,617 shares of common stock at an exercise price of
$0.272 per
share. The warrant was valued at $70,608 and will be expensed over
sixty (60) months. The Company used the Black-Scholes option
pricing model to value the warrants with the following assumptions
applied: (1) Volatility – 201%; (2) Term – 5 years (3)
Discount Rate – 0.39%.
No
warrants were exercised in 2019 or 2020.
Insurance
As of
December 31, 2020, the Company has an outstanding balance of
$15,344.13 for a financing agreement for the periodic payment of
Directors & Officers Liability Insurance premium for 2020
– 2021. The terms of the agreement are as follows: Payee
– Bank Direct Capital Finance; Effective Date – June
29, 2020; Total Premiums - $67,687; Cash Down Payment - $27,675
(Insurica Insurance Management Network/Amarillo); Amount Financed -
$40,012; Annual Percentage Rate – 6.00%; Finance Charge -
$905; Total Payments - $40,918; Periodic Payment - $5,115; Number
of Payments – 8 (eight); First Payment July 29, 2020. The
Company also paid $5,000 for D&O coverage for Taiwan
operations. This policy is administered by an agency in
Taiwan.
The
Company pays $639 annually for Property and Casualty Insurance
coverage administered through Insurica Management Network. The
insurance carrier for the property and casualty coverage is The
Hartford. Additionally, the Company has a General Liability Policy
administered by Insurica Management Network for an annual premium
of $708.
Convertible Notes Payable and Other Related Party Notes
Payable
As of
December 31, 2020 and 2019, the amount of convertible debt of the
Company’s balance sheet was $953,001 and $444,581,
respectively. This amount consisted of the following convertible
promissory notes payable to Dr. Stephen T. Chen, Chairman, CEO,
President, and CFO as shown in the table below.
|
Note
#.
|
Conversion
Rate
|
Interest
Rate3
|
December 31,
2020
Principal
Amount4
|
December 31,
2019
Principal
Amount
|
|
Note 1 -
Chen
|
$0.1680
|
0.75%
|
$114,026
|
$114,026
|
|
Note 2 -
Chen
|
$0.1875
|
0.65%
|
$262,500
|
$262,500
|
|
Note 3.19 -
Chen
|
$0.2500
|
1.85%
|
$39,620
|
$39,620
|
|
Note 4.19 -
Chen
|
$0.2500
|
1.61%
|
$14,879
|
$12,435
|
|
Note 5.19 –
i2China
|
$0.2500
|
1.85%
|
$16,000
|
$16,000
|
|
Note 6.20 -
Chen
|
$0.2500
|
1.85%
|
$216,600
|
$-
|
|
Note 7.20 -
Chen
|
$0.2500
|
1.60%
|
$23,366
|
$-
|
|
Note 8.20a –
i2China5
|
$0.2500
|
1.85%
|
$48,000
|
$-
|
|
Note 8.20b –
i2China6
|
$0.2500
|
1.85%
|
$84,000
|
$-
|
|
Note 9.21 -
Chen7
|
N/A
|
0.13%
|
$134,010
|
$-
|
|
Total
Convertible Notes – Related Party
|
$953,001
|
$444,581
|
||
3 Interest on all Related Party notes is assessed
using the short-term or medium-term Applicable Federal Rate (AFR).
Applicable Federal Rate is-the minimum
interest rate that the Internal Revenue Service (IRS) allows for
private loans. The IRS publishes a monthly set of
interest rates that the agency considers the minimum
market rate for loans, whereas, interest rates less than
the AFR would have tax implications.
5 On November 30, 2020, the Company’s Board
of Directors approved an extension of the consulting agreement and
pre-existing warrant certificate between the Company and i2China
Management Group, LLC, originally dated April 15, 2018.
Compensation stated in the updated agreement increased the monthly
retainer from $8,000 to $15,000 per month retroactive as of January
1, 2020. The retainer increase was $7,000 per month and was
retroactively deferred and added to Convertible promissory note
#8.20. The retroactive retainer totaled $84,000 and was added to
the unpaid balance of the note, $48,000, bringing the total unpaid
balance as of December 31, 2020 to $132,000.
7 Dr. Chen loaned operating funds to the Company in
2020 on an open-ended basis. There will be a promissory note
executed in 2021. The note will not be convertible and interest
will be accrued at the short-term AFR rate.
15
Dr.
Stephen T. Chen, Chairman, CEO, President, and CFO, and i2China
Management Group, LLC, the Company’s management consultant,
elected to defer cash compensation during a period of development
and fundraising. The parties received convertible promissory notes
in consideration of the deferrals.
On
January 1, 2020, the Company issued Note #6.20 for deferred
compensation to Dr. Stephen T. Chen, Chairman, CEO, President, and
CFO, in the amount of $216,600, the maximum amount of cash
compensation that could be deferred for 2020. The Note is payable
on January 1, 2021, or on demand and bears interest at the AFR
short-term rate of 1.85%. The note is an advancing note with a
maximum limit of $216,600 whereby the Company promises to repay the
aggregate Principal Amount advanced to date up to the stated
maximum amount at Maturity. The Company may request and the payee
shall advance up to $9,025 on the 15th and last day of each month
until the note matures. The Note may be convertible in whole or in
part at a conversion price of $0.25 per share into Amarillo
Biosciences, Inc., Common voting stock. All shares issued are to be
restricted subject to Rule 144 promulgated under the U.S.
Securities Act of 1933. The Company may prepay the Note in whole or
in part at any time without penalty.
On
January 1, 2020, the Company issued Note #7.20 to Dr. Stephen T.
Chen for deferred reimbursement of expenses advanced on behalf of
the Company for $30,000, the maximum amount of reimbursable expense
that could be deferred. The Note is payable on January 1, 2021, or
on demand and bears interest at the AFR short-term rate of 1.85%.
The note is an advancing note with a maximum limit of $30,000
whereby the Company promises to repay the aggregate Principal
Amount advanced to date up to the stated maximum amount at
Maturity. The Company may request and the payee shall advance
against the Note, until Maturity, the amount submitted on a
completed and approved reimbursement form along with documentation
of the amount to be advanced. The Note may be convertible in whole
or in part at a conversion price of $0.25 per share into Amarillo
Biosciences, Inc., Common voting stock. All shares issued are to be
restricted subject to Rule 144 promulgated under the U.S.
Securities Act of 1933. The Company may prepay the Note in whole or
in part at any time without penalty.
On
January 1, 2020, the Company issued Note #8.20 for deferred
compensation to i2China Management Group, LLC in the amount of
$48,000, and the maximum amount of cash compensation that could be
deferred in 2020. The Note is payable on January 1, 2021, or on
demand and bears interest at the AFR1 short-term rate of 1.85%. The
note is an advancing note with a maximum limit of $48,000 whereby
the Company promises to repay the aggregate Principal Amount
advanced to date up to the stated maximum amount at Maturity. The
Company may request and the payee shall advance up to $4,000 on the
last day of each month until the note matures. The Note may be
convertible in whole or in part at a conversion price of $0.25 per
share.
On
April 13, 2020, Dr. Stephen T. Chen began loaning operating funds
to the Company in 2020 on an open-ended, as needed basis. This
indebtedness will be documented as a promissory note and formally
executed in early 2021. The note will not be convertible and
interest will be accrued at the short-term AFR rate. Loans were
made for both U.S. and Taiwan operations. Following is a table
showing the loan activity through December31, 2020.
|
Office
Received
|
|
Date
Received
|
Amount
US
|
|
U.S.
|
|
4/13/2020
|
$10,000
|
|
U.S.
|
|
7/27/2020
|
$50,000
|
|
U.S.
|
|
8/10/2020
|
$25,000
|
|
U.S.
|
|
11/2/2020
|
$15,000
|
|
Taiwan8
|
|
11/5/2020
|
$14,010
|
|
U.S.
|
|
12/15/2020
|
$10,000
|
|
U.S.
|
|
12/22/2020
|
$10,000
|
|
|
|
Total
|
$134,010
|
_______________
16
The
notes are unsecured. All shares issued on conversion are to be
restricted subject to Rule 144 promulgated under the U.S.
Securities Act of 1933. The Company may prepay the notes in whole
or in part at any time without penalty. The convertible notes due
to Dr. Chen are related party notes.
Other
Related Party Transactions
Other
than the aforementioned common stock and convertible note activity,
there were no related party transactions that occurred during the
period from January 1, 2020 to December 31, 2020.
ITEM
6.
SELECTED FINANCIAL
DATA.
This
item is not applicable to smaller reporting companies.
ITEM
7.
MANAGEMENT
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
The
following discussion should be read in conjunction with our
financial statements and the notes thereto which appear elsewhere
in this report. The results shown herein are not necessarily
indicative of the results to be expected in any future periods.
This discussion contains forward-looking statements based on
current expectations, which involve uncertainties. Actual results
and the timing of events could differ materially from the
forward-looking statements as a result of a number of factors.
Readers should also carefully review factors set forth in other
reports or documents that we file from time to time with the
Securities and Exchange Commission.
Overview. The Company has been (and is) engaged in the
business of biopharmaceutical research and development. Its primary
focus historically has been the development of low-dose, orally
administered interferon. The Company holds or licenses various
patents.
The Company’s goal is to expand the reach of its research,
development, and marketing of biopharmaceutical, biotechnical,
health and life science related products and services. The
Company will continue to leverage its core technology going forward
by applying thirty-five years of scientific and clinical data to
establish low dose interferon-alpha lozenges as a therapeutic agent
for conditions such as influenza, hepatitis C, and various causes
of thrombocytopenia just to name a few. The Company is committed to
expanding its business operations to encompass a wide variety of
licensing, partnerships, and development opportunities in the
aforementioned sectors. This commitment extends not only to the
U.S., but to Greater China and other Asian countries.
Assets, Liquidity, and Capital. The Company holds various patents and related
intellectual property, which are described earlier in this
document.
As of
December 31, 2020, the Company had available cash of $22,245
compared to a cash position of $409,039 on December 31, 2019. The
Company had working capital of $(1,022,155) at the end of fiscal
year 2020, whereas in 2019, working capital was $(308,014). The
gross burn rate in 2020 was approximately $119,053 per month
compared with the gross burn rate for 2019, $130,020. The Company
continued to develop and establish new revenue streams to
eventually maintain a profitable going concern. Two major areas of
focus are to (1) leverage the Company’s core technology,
low-dose non-injectable interferon, through licensing ventures and
(2) develop business lines to extend the Company’s reach into
biotech, bio-pharmaceutical, health care products and life sciences
businesses. The Company seeks to monetize its existing and any
newly developed intellectual property and estimates its short-term
project development financing needs to be between $3,000,000 and
$5,000,000 depending upon project negotiated terms and structuring
yet to be determined.
Pending Litigation. To the best
of management’s knowledge, the Company does not believe that
there is any pending litigation against the
Company.
17
Comparison of results for the fiscal year ended December 31, 2020,
to the fiscal year ended December 31, 2019.
Revenues. There was an increase in liposomal Nutraceutical
sales of $4,832, 41.19%, for 2020 ($16,563) over 2019 ($11,731).
COGS increased $2,505, 28.56%, for 2020 ($11,277) over 2019
($8,772). The activity for 2020 resulted in a Gross Profit of
$5,286 which was an increase of $2,327, 78.64%, over the 2019 Gross
Profit of $2,959. As a percent of sales, gross profit for 2020 was
31.91% as compared to 2019 showing a 25.22% gross profit as a
percent of sales.
Selling, General and Administrative Expenses. Total
operating expenses for 2020 were $1,445,721 as compared to 2019
expenses of $1,583,372, a decrease of $137,651 or 8.69%. Net
operating loss for 2020, $1,440,435, decreased 8.52% or $134,692
from the 2019 net operating loss of $1,580,413.
Salary/Wages. Salary and wage expenses for 2020 ($345,936)
decreased as compared to 2019 ($405,695) or $59,759 (14.73%). In
2020, the Company changed the Office Manager's status to part-time
from full-time and reduced the hours worked from 80 hours to 40
hours per pay period. Related to employee compensation expenses is
Compensation Restricted Stock Grant which characterizes employee
compensation paid in the Company Common Stock. There was a minimal
decrease in this expense for 2020 as compared to 2019, $109,750
versus $115,750 for a reduction of $6,000, or 5.18%.
Travel & Entertainment. Travel and entertainment
expenses were significantly lower in 2020 in both amount and
percentage. For Meals & Entertainment, expenditures in 2020
were $14,809 compared to $24,465 in 2019, a decrease of $9,656
(39.47%). Travel expense showed a greater reduction in expenditures
for 2020, $9,331 compared to $38,881 spent in 2019, a decline of
$29,550 or 76%. The need for business travel including
transportation and lodging costs was reduced due to the pandemic
and travel restrictions. Since there was less travel, there were
less expenditures for meals, lodging, and meeting
costs.
Insurance. Directors & Officers Liability Insurance
expense, increased in 2020 by $9,040 (15.39%), when comparing
$67,768 in 2020 to $58,728 in 2019. The increase was more a result
of a general tightening in the overall D&O liability insurance
market as opposed to an increase in the risk profile of the
Company. Property insurance showed a minimal increase in cost, $66
or 5.23%; Group (Health) Insurance showed a minimal decrease of
1.86% ($408); and a negligible increase in other insurance
expenditures.
Rent & Lease. Rent and lease expenses have increased in
2020 ($54,833) over 2019 ($51,349) by a minimal amount, $3,484 or
6.78%. The source of the increase was the execution of a short-term
lease for the corporate office in Amarillo, Texas.
Professional Fees – Accounting. Accounting fees were
significantly less in 2020, $96,136 as compared to expenses in
2019, $133,457. Expenses for 2020 decreased by $37,321 or 27.96%.
Accounting fees consists of costs of the SEC auditors to review,
audit, and support filing of SEC reports such as 10K, 10Q, and
other reports. Additionally the Company employs tax accountants and
accounting consultants. The decrease in accounting professional
fees was due mainly to discontinuing accounting consultants,
improved preparation for material sent to the SEC auditors, better
coordination with the SEC accounting firm, and working within
budget constraints set up with the SEC Accounting firm.
Miscellaneous Professional fees increased significantly in 2020,
$227,903 over 2019, $134,305, which was an increase of $93,598
(69.69%). This expense consists of consulting costs, contracted
administrative services, and commercial services for preparation of
SEC filings. The increase was mainly caused by a retroactive
increase in some contracted services. Professional Fees - Stock
Grants reflects expenses paid by stock for service agreements.
These are non-cash requiring expenses. There was no significant
difference between 2020 and 2019. The minimal difference was a
timing issue for a stock distribution and not additional expense.
Professional Fees - Services & Labor reflect expenses for
services purchased which in this case represent computer system
monitoring and maintenance. The minimal increase in 2020 over 2019,
$245, was minor unscheduled parts replacement in some
workstations.
18
Office Expenses. Office Supplies expense was down by 35.33%
($1,785) in 2020, $3,268 as compared to $5,053 in 2019. Repair and
maintenance was significantly down in 2020, $2,224 although such
expenditures in most years are generally modest. Telephone and
internet services were reduced by $239 (3.96%) by reviewing and
modifying the services purchased. Expenses for this service in 2020
were $5,803 as compared to $6,042 for 2019.
Legal Expenses. General legal expenses were $6,362 in 2020
as compared to $32,680 for 2019. This is an 80.53% decrease for
2020. Total legal expenditures for patents in 2020 were $46,909. A
significant amount of patent legal expenditures was related to new
patent prosecution, maintenance fees for existing patents, and
trade mark expenditures. The patent legal expenditures totaling
$46,563 were capitalized leaving $346 expensed for the
period.
Interest Expense. Expenses related to interest were up
significantly in 2020, $10,702 as compared to 2019, $4,094, an
increase of $6,579 or 161.41%. The main cause of the increase was
increasing balances owed for convertible notes payables. Interest
income was down significantly for 2020, $517 as compared to $3,209
for 2019, a decrease of $2,692, 83.89%. A lower cash balance in
2020 was the primary cause for the reduction in interest
income.
Other Expenses. Other expenses consist of amortization of
the capitalization and periodic expensing of costs associated with
intellectual property. There was a minimal increase in amortization
expense for 2020, $12,878, over 2019, $11,662, for an increase of
$1,216 (10.43%). This increase was due to the patent and trademark
costs disbursed in 2020. There was a decrease in depreciation
expense of $8,759 (82.80%) in 2020, $1,820 compared to 2019, of
$10,579 due to minimal investment in fixed assets. There was
minimal gain on foreign exchange in 2020, $86 as compared to $1,670
in 2019.
Research and Development Expenses. Direct R&D expenses
were minimal in 2020, $40,389, versus $52,510 in 2019, a decrease
of 23.08% ($12,121).
Operating Loss. Net operating loss for 2020, $1,440,435,
decreased 8.86% or $139,978 from the 2019 net operating loss of
$1,580,413.
Other Income. Other income for 2020 totalled $517, decreased
from $3,209 in 2019, which was a decrease of $2,692, or
83.89%.
Net Loss. The net loss for fiscal year 2020 was $1,450,623
which was a $130,675 decrease from the net loss of $1,581,298 for
2019. Net loss decreased 8.26% in 2020 as compared to
2019.
ITEM
7A.
QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not
applicable to a “smaller reporting company” as defined
in Item 10(f)(1) of SEC Regulation.
ITEM
8.
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
The
financial statements of the Company are set forth beginning on page
F-1 immediately following the signature page of this
report.
ITEM
9.
CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
19
ITEM
9A.
CONTROLS AND
PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our
management, with the participation of our Chief Executive Officer
and Chief Financial Officer, evaluated the effectiveness of our
disclosure controls and procedures as of December 31, 2020. The
term "disclosure controls and procedures," as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act, means controls and
other procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods
specified in the SEC's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the company's management,
including its principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required
disclosure. Management recognizes that any controls and procedures,
no matter how well designed and operated, can provide only
reasonable assurance of achieving their objectives and management
necessarily applies its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Based on the
evaluation of our disclosure controls and procedures as of December
31, 2020, our Chief Executive Officer and Chief Financial Officer
concluded that, as of such date, our disclosure controls and
procedures were effective at the reasonable assurance
level.
Management's Report on Internal Control Over Financial
Reporting
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined
in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the
supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we
conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in
Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on our evaluation
under the framework in Internal
Control - Integrated Framework (2013), our management
concluded that our internal control over financial reporting was
effective at the reasonable assurance level as of December 31,
2020.
Changes in Internal Control Over Financial Reporting
We have
not experienced any material impact to our internal controls over
financial reporting even though our workforce continues to
primarily work-from-home due to COVID-19. We are continually
monitoring and assessing the COVID-19 situation and its impact on
our internal controls.
ITEM
9B.
OTHER
INFORMATON
None.
20
PART
III
ITEM
10.
DIRECTORS,
EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
As of
December 31, 2020, the directors and executive officers of the
Company were as follows:
|
Name
|
|
Age
|
|
Position
|
|
Stephen
T. Chen, Ph.D.
|
|
71
|
|
Chairman
of the Board, Chief Executive Officer President, Chief Financial
Officer, Chief Operating Officer and Director
|
|
Bernard
Cohen
|
|
67
|
|
Vice
President - Administration
|
|
Yasushi
Chikagami
|
|
81
|
|
Director
|
|
Daniel
Fisher .
|
|
76
|
|
Director
|
|
Nicholas
Moren .
|
|
74
|
|
Director
|
|
Beatrice
Liu, Ph.D., CPA
|
|
56
|
|
Director
|
Stephen T. Chen was named Chairman of the Board in February
2012 and has been a director of the Company since February 1996.
Effective January 28, 2019, Dr. Chen assumed the duties,
responsibilities, and title of Chief Financial Officer (CFO) of the
Company in addition to his existing duties and titles of Chairman
of the Board, CEO, and President. He has been President and Chief
Executive Officer of STC International, Inc., a health care
investment firm, since May 1992. Dr. Chen has over thirty years of
international business experience, including an extensive
background in pharmaceutical product acquisition and licensing,
development of joint venture agreements, execution of business
strategy, and leadership of start-up companies in the
pharmaceutical, biotechnology and nutraceutical industries. Dr.
Chen has held executive positions in R&D and business
development at several major pharmaceutical companies, including
Burroughs Wellcome (presently GlaxoSmithKline), Miles
Pharmaceuticals (presently Bayer), ICI America (presently
AstraZeneca), and Ciba-Geigy (presently Novartis). He received a Ph.D. in Industrial & Physical
Pharmacy from Purdue University in 1977.
Bernard Cohen was hired to be a Vice-President and Chief
Financial Officer of the Company on October 1, 2009. On January 28,
2019, Bernard Cohen, relinquished the duties and title of Chief
Financial Officer (CFO) and assumed the duties and title of Vice
President – Administration. Mr. Cohen has been Director of
Finance and Data Base Manager at the Harrington Regional Medical
Center, Inc. (HRMCI), which was the management and development
entity for the Harrington Regional Medical Center in Amarillo,
Texas. Previously, he held various executive positions
at Colbert’s of Amarillo, a department store. His
positions included: Chief Executive Officer, Vice
President, Chief Financial Officer, and Controller. He
has previously been a member of the Texas Tech University Health
Sciences Center at Amarillo (TTUHSC) Institutional Review Board
(IRB) where he participated in the review of clinical trial
protocols to monitor the safety and protection of human research
and testing subjects. Neither HRMCI nor TTUHSC has any
connection whatsoever with the Company.
Yasushi Chikagami was added to the board of directors in
June 2012. Mr. Chikagami holds a B.S. Degree in Agricultural
Engineering from National Taiwan University, and an M.S. Degree in
Engineering from the University of Tokyo. Mr. Chikagami has
principally been engaged in the technology industry during his
business career, continues to serve on several boards, and is
currently serving as Chairman for Arise Corporation (Taiwan), Good
TV Broadcasting Corporation (Taiwan), and ZMOS Technology, Inc.
(US), and is a director of Anxon International, Inc.
(US).
21
Daniel Fisher was added to the board of directors in July
2015. Mr. Fisher is the co-founder, and President of Nano BioMed,
Locust Valley, New York. The base technologies are licensed from
The Albert Einstein College of Medicine. The licensed technologies
are a drug delivery system for the delivery of nitric oxide. In
addition, the company has licensed a magnetic nano drug targeting
technology. Mr. Fisher negotiated the license from the Einstein
College, closed the company’s first sublicenses, arranged for
investment financing, and developed the business plan. Mr. Fisher,
co-founder of BioZone Laboratories, Inc., served as its President
for 22 years. Based near San Francisco, California, BioZone
specializes in research, development and manufacturing of products
utilizing its drug delivery technologies. He was awarded three
patents for his work with liposomal drug delivery technology. In
addition, Mr. Fisher was president of Equalan Pharma LLC, which
marketed GlyDerm professional skincare products to dermatologists
and direct marketing companies. Prior to forming BioZone in 1989,
Mr. Fisher's experience base included more than twenty years in
sales and marketing management positions for consumer and technical
product companies, including Dun & Bradstreet, General Foods
Corporation and Control Data Corporation. His memberships include
being the founding secretary of the Foundation for Global Skin
Health Strategies. He holds a B.S. in Marketing from San Francisco
State University.
Nicholas Moren was added to the board of directors in July
2015. Mr. Moren is currently retired. Prior to that he was a senior
financial executive with several major public companies, including
Loral Space & Communications, Inc., Transworld Corporation and
Trans World Airlines, Inc. He brings with him extensive
understanding and knowledge of a wide range of businesses, and
substantial financial expertise and insightful perspectives
relating to economic, financial and business conditions acquired
during more than 20 years of serving as a senior executive. He
received a B.A. in Engineering from Brown University and a M.B.A.
from Wharton Graduate Division, University of
Pennsylvania.
Beatrice Liu was appointed to the Amarillo Biosciences,
Inc., Board of Directors in July 2019. Ms. Liu is the senior
partner of BDO Taiwan and has over twenty years of experience in
accounting, auditing, and corporate governance. Ms. Liu has an
impressive academic history earning a B.S. – Taxation degree
from National Cheng-Chi University, ROC; an M.A. – Accounting
from University of Illinois at Urbana-Champaign, USA; and a Ph.D.
– Accounting from XIAMEN University, PRC. Ms. Liu has worked
extensively in such areas as assurance service, internal audit
outsourcing, mergers and acquisitions, IPO services, corporate
restructuring, Sarbanes-Oxley Section 404 attestation services, and
many other areas. Her certifications and memberships include:
CPA-ROC; CPA-USA; Member of Audit Standards Committee of the
Auditing Research and Development Foundation, Chairman, and
Auditing and Accounting Committee of the National Federation of
Certified Accountant Associations, ROC. Ms. Liu’s knowledge
and depth of experience enable her to be a valuable asset to
Amarillo Biosciences, Inc.
The
Company’s directors are elected at the annual meeting of
shareholders to hold office until the annual meeting of
shareholders for the ensuing year or until their successors have
been duly elected and qualified. Directors receive compensation of
$1,000 per day for attendance at meetings, $250 per day for
regularly scheduled teleconference meetings, and are reimbursed for
any out-of-pocket expenses in connection with their attendance at
meetings.
Officers
are elected annually by the Board of Directors and serve at the
discretion of the Board.
If and
when the transactions contemplated under the Ainos Agreement are
completed, the five directors on the current Board will resign and
seven Purchaser-designated directors will commence service. For
information regarding the post-Closing directors, please refer to
the Company’s definitive information statement filed with the
SEC on March 19, 2021.
Audit Committee
Company
bylaws provide for the appointment of members to the Audit
Committee when and as necessary. As the Company progresses and
achieves operational goals as well as the addition of revenue
producing businesses, it is anticipated that the Audit Committee
will be appointed. While there have been no changes in internal
controls, the Company continually reviews all existing internal
controls. From time to time, the Company may engage an independent
internal control auditor who consults with the Company on its
existing internal controls and possible changes or augmentations to
those controls.
22
Code of Ethics
The
Company’s Code of Ethics may be found on the Company’s
website, www.amarbio.com,
which is incorporated herein by this reference.
Compliance with Section 16(a) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) requires directors and officers of the
Company and persons who own more than 10 percent of the
Company’s common stock to file with the Securities and
Exchange Commission (the “Commission”) initial reports
of ownership and reports of changes in ownership of the common
stock. Directors, officers and more than 10% shareholders are
required by the Exchange Act to furnish the Company with copies of
all Section 16(a) forms they file.
To the
Company’s knowledge based solely on a review of the copies of
such reports furnished to the Company, the following persons have
failed to file, on a timely basis, the identified reports required
by the Exchange Act during the most recent fiscal
year:
|
Name and
Principal Position
|
Number of Late
Reports
|
Known Failures
to File a Required Form
|
|
Dr. Stephen T.
Chen, Chairman of the Board, Chief Executive Officer, President,
and Chief Financial Officer
|
0
|
0
|
|
Bernard Cohen, Vice
President – Administration
|
0
|
0
|
|
Yasushi Chikagami,
Director
|
0
|
0
|
|
Daniel Fisher,
Director
|
0
|
0
|
|
Nicholas Moren,
Director
|
0
|
0
|
|
Edward L. Morris,
Director
|
0
|
0
|
|
Dr. Beatrice Liu,
Director
|
0
|
0
|
ITEM
11.
EXECUTIVE
COMPENSATION.
The
following table sets forth for the three years ended December 31,
2020, compensation paid by the Company to its Chairman of the
Board, President, Chief Executive Officer, and Chief Financial
Officer; and to its Vice President - Administration.
|
Summary
Compensation Table
|
||||||
|
|
|
|
Annual
Compensation
|
Long Term
Compensation
|
||
|
Name and
Principal Position
|
|
Year
|
Salary
|
Bonus
|
Other
Compensation
|
Securities
Underlying Options
|
|
Dr. Stephen T.
Chen,
Chairman
of the Board,
President,
Chief
Executive
Officer, and Chief Financial Officer
|
|
2020
|
$240,975
|
$-
|
$100,000
|
-
|
|
|
2019
|
$249,633
|
$-
|
$100,000
|
-
|
|
|
|
2018
|
$240,000
|
$-
|
$100,000
|
-
|
|
|
Mr. Bernard
Cohen,
Vice
President – Administration.
|
|
2020
|
$71,085
|
$-
|
$12,000
|
-
|
|
|
2019
|
$71,398
|
$-
|
$12,000
|
-
|
|
|
|
2018
|
$70,000
|
$12,500
|
$12,000
|
-
|
|
23
Option Grants in 2020
On
September 26, 2018, the Company’s Board of Directors adopted
the Amarillo Biosciences, Inc., 2018 Employee Stock Option Plan
(the “2018-ESOP”). The 2018-ESOP provides for the grant
of Qualified Incentive Stock Options to the Company’s
employees.
On
September 26, 2018, the Company’s Board of Directors adopted
the Amarillo Biosciences, Inc., 2018 Officers, Directors,
Employees, and Consultants Nonqualified Stock Option Plan (the
“2018-NQSOP”). The 2018-NQSOP provides for the grant of
Nonqualified Incentive Stock Options to the Company’s
employees.
Both of
these stock option plans are explained in detail in the
“Stock Options and Warrants” section and in the Financial
Statements footnotes section in note #9 “Stock Option and
Stock Plans.”
Director Compensation for Last Fiscal Year
Directors
receive $1,000 compensation for attendance at directors’
meetings and $250 for regularly scheduled teleconference meetings.
There were no regularly scheduled meetings during
2020.
ITEM
12.
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
As of
December 31, 2020, there were 42,066,172 shares of the
Company’s common stock issued and outstanding. The following
table sets forth as of December 31, 2020, the beneficial ownership
of each person who owned more than 5% of such outstanding common
stock:
|
Name and
Address
|
Amount and
Nature of Beneficial Ownership
|
Percent of Class
Owned9
|
|
Stephen T. Chen,
Ph.D.
4134 Business Park
Drive
Amarillo, Texas
79110
|
12,505,477
|
24.62%
|
|
Hung Lan Lee4134
Business Park Drive
Amarillo, Texas
79110
|
4,000,000
|
7.88%
|
|
ANXON International
Inc.4134 Business Park Drive
Amarillo, Texas
79110
|
2,459,153
|
4.84%
|
24
The
following table sets forth the beneficial ownership of the
Company’s stock as of December 31, 2020 by each executive
officer and director and by all executive officers and directors as
a group:
|
Name and Address
of Owner
|
Amount and
Nature of Beneficial Ownership
|
Percent of Class
Owned10
|
|
Stephen T. Chen,
Ph.D.4134 Business Park Drive
Amarillo, Texas
79110
|
12,505,47711
|
24.62%
|
|
Bernard
Cohen
4134 Business Park
Drive
Amarillo, Texas
79110
|
236,362
|
0.47%
|
|
Yasushi
Chikagami
4134 Business Park
Drive
Amarillo, Texas
79110
|
2,647,153
|
5.21%
|
|
Daniel
Fisher
4134 Business Park
Drive
Amarillo, Texas
79110
|
150,400
|
0.30%
|
|
Nicholas
Moren
4134 Business Park
Drive
Amarillo, Texas
79110
|
150,400
|
0.30%
|
|
Beatrice Liu,
Ph.D., CPA (ROC & U.S.)
4134 Business Park
Drive
Amarillo, Texas
79110. 104
|
-
|
-
|
|
Total Group (all
directors and executive officers – 5 persons)
|
15,689,792
|
30.90
|
_______________
25
ITEM
13.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.
Historically,
the Company has relied upon certain relationships which gave rise
to related transactions. These relationships have helped the
Company with financing, ingredients to potential products,
research, and technology. All future transactions and loans between
the Company and its officers, directors and 5% shareholders will be
on terms no less favorable to the Company than could be obtained
from independent third parties. There can be no assurance, however,
that future transactions or arrangements between the Company and
its affiliates will be advantageous, that conflicts of interest
will not arise with respect thereto or that if conflicts do arise,
that they will be resolved in favor of the Company.
Currently
there are no such arrangements that have not already been disclosed
in this document.
ITEM
14.
PRINCIPAL
ACCOUNTING FEES AND SERVICES.
Audit Fees
The
aggregate fees billed by our independent auditors, PWR CPA, LLP
(“PWR”) (who was appointed as our independent auditors
on March 19, 2020) and LBB & Associates Ltd., LLP
(“LBB”) (who were terminated as our independent
auditors on March 3, 2020), for professional services rendered for
the audit of our annual financial statements, and for the review of
quarterly financial statements for the fiscal years ended December
31, 2020 and 2019, were:
|
|
2020
|
2019
|
|
PWR
CPA
|
$35,000
|
$18,500
|
|
LBB &
Associates Ltd., LLP
|
$-
|
$20,750
|
Audit
fees incurred by the Company were pre-approved by the Board of
Directors.
Audit Related Fees: None.
Tax Fees: None.
All Other Fees: None.
We do
not use the auditors for financial information system design and
implementation. Such services, which include designing or
implementing a system that aggregates source data underlying the
financial statements or that generates information that is
significant to our financial statements, are provided internally or
by other service providers. We do not engage the auditors to
provide compliance outsourcing services.
The
Board of Directors has considered the nature and amount of fees
billed by PWR and LBB and believes that the provision of services
for activities unrelated to the audit is compatible with
maintaining PWR’s and LBB’s independence.
Accountant Approval Policy
Before
an accountant is engaged by the Company to perform audit or
non-audit services, the accountant must be approved by the
Company’s Audit Committee or the Executive Committee in the
absence of an Audit Committee.
26
PART IV
ITEM
15.
EXHIBITS, FINANCIAL
STATEMENT SCHEDULES.
|
Report of Independent Registered Public Accounting
Firm
|
F-1
|
|
Consolidated Balance Sheets as of December 31, 2020 and
2019
|
F-2
|
|
Consolidated Statements of Operations for the years ended December
31, 2020 and 2019
|
F-3
|
|
Statements of Stockholders’ Equity (Deficit) for the years
ended December 31, 2020 and 2019
|
F-4
|
|
Statements of Cash Flows for the years ended December 31, 2020 and
2019
|
F-5
|
|
Notes to Financial Statements for the years ended December 31, 2020
and 2019
|
F-6
|
EXHIBIT INDEX
|
|
INCORPORATED BY REFERENCE
|
||||
|
EXHIBIT NUMBER
|
DESCRIPTION
|
FILED WITH THIS FORM 10-K
|
FILING DATE WITH SEC
|
FORM
|
EXH #
|
|
|
|
|
|
|
|
|
Restated
Certificate of Formation of the Company, dated and filed July 27,
2015
|
|
3/30/2016
|
10-K
|
3.i.
|
|
|
Bylaws
of the Company, as amended July 10, 2015
|
|
3/30/2016
|
10-K
|
3.ii.
|
|
|
4.1(a)
|
Specimen
Common Stock Certificate
|
|
8/8/1996
|
SB-2
|
4.1
|
|
4.1(b)
|
Form of
Underwriter's Warrant
|
|
8/8/1996
|
SB-2
|
4.2
|
|
2008
Stock Incentive Plan dated May 20, 2008
|
|
5/22/2008
|
S-8
|
10.1(11)
|
|
|
2018
Employee Stock Option Plan
|
|
4/16/2019
|
10-K
|
10.72
|
|
|
2018
Officer, Directors, Employees and Consultants Nonqualified Stock
Option Plan
|
|
4/16/2019
|
10-K
|
10.73
|
|
|
2018
Stock Option Agreement – Nonqualified Stock
Option
|
|
4/16/2019
|
10-K
|
10.74
|
|
|
2018
Stock Option Agreement – Employee Plan
|
|
4/16/2019
|
10-K
|
10.75
|
|
|
Employment
Agreement between Company and Stephen T. Chen, Ph.D. dated 12/31/20
and effective 01/01/21
|
X
|
3/30/2021
|
10-K
|
10.1(f)
|
|
|
Amendment
No. 1 to Employment Agreement between Company and Stephen T. Chen,
Ph.D. effective 01/01/21
|
X
|
3/30/2021
|
10-K
|
10.1(g)
|
|
|
Employment
Agreement between Company and Bernard Cohen dated 12/31/20 and
effective 01/01/21
|
X
|
3/30/2021
|
10-K
|
10.1(h)
|
|
|
Settlement
Agreement and Mutual General Release, effective
12/24/20
|
X
|
3/30/2021
|
10-K
|
10.1(i)
|
|
|
Extension
of the consulting agreement and pre-existing warrant certificate
between the Company and i2China Management Group, LLC (originally
dated April 15, 2018), dated November 30, 2020
|
X
|
3/30/2021
|
10-K
|
10.1(j)
|
|
|
Securities
Purchase Agreement between Company and Ainos, Inc., dated December
24, 2020
|
|
12/30/2020
|
8-K
|
2.1
|
|
|
14.1
|
Code of
Ethics
|
|
|
|
|
|
Certification
of Chief Executive Officer (Principal Executive Officer) required
by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act
of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
X
|
3/30/2021
|
10-K
|
31.1
|
|
|
906
Certification
|
X
|
|
|
|
|
|
101.INS
|
XBRL
Instance Document – the instance document does not appear in
the Interactive Data File because XBRL tags are embedded within the
XBRL document.
|
X
|
|
|
|
|
101.SCH
|
XBRL
Taxonomy Extension Schema Document
|
X
|
|
|
|
|
101.CAL
|
XBRL
Taxonomy Extension Calculation Linkbase
|
X
|
|
|
|
|
101.DEF
|
XBRL
Taxonomy Extension Definition Linkbase
|
X
|
|
|
|
|
101.LAB
|
XBRL
Taxonomy Extension Label Linkbase
|
X
|
|
|
|
|
101.PRE
|
XBRL
Taxonomy Extension Presentation Linkbase
|
X
|
|
|
|
|
104.1
|
Cover Page Interactive Data File
|
X
|
|
|
|
The
exhibits listed in the Exhibit Index are filed or incorporated by
reference as part of this filing.
+
Schedules (as similar attachments) have been omitted from this
filing pursuant to Item 601(a)(5) of Regulation S-K.
*
Indicates a management contract or compensatory plan or
arrangement.
ITEM
16.
FORM 10-K
SUMMARY.
None.
27
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
AMARILLO
BIOSCIENCES, INC.
|
|
|
|
|
|
|
|
|
Date: March 30,
2021
|
By:
|
/s/ Stephen Chen
|
|
|
|
|
Stephen Chen,
Chairman of the Board,
|
|
|
|
|
Chief Executive
Officer and Chief Financial Officer
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates
indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Stephen Chen
|
|
Chairman of the
Board,
|
|
March
30, 2021
|
|
Stephen
Chen
|
|
Director
Chief
Executive Officer
and
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
/s/ Yasushi Chikagami
|
|
Director
|
|
March
30, 2021
|
|
Yasushi
Chikagami
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Daniel Fisher
|
|
Director
|
|
March
30, 2021
|
|
Daniel
Fisher
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Nicholas Moren
|
|
Director
|
|
March
30, 2021
|
|
Nicholas
Moren
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Beatrice Liu
|
|
Director
|
|
March
30, 2021
|
|
Beatrice
Liu
|
|
|
|
|
28
Amarillo
Biosciences, Inc.
Financial
Statements
Years
ended December 31, 2020 and 2019
|
Contents
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
|
|
|
Balance
Sheets
|
F-2
|
|
|
|
|
Statements
of Operations
|
F-3
|
|
|
|
|
Statements
of Stockholders’ Equity (Deficit)
|
F-4
|
|
|
|
|
Statements
of Cash Flows
|
F-5
|
|
|
|
|
Notes
to Financial Statements
|
F-6
|
|
|
|
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the
Board of Directors and
Stockholders
of Amarillo Biosciences, Inc.
Opinion on the Financial Statements
We have
audited the accompanying balance sheets of Amarillo Biosciences,
Inc. (the Company) as of December 31, 2020 and 2019, and the
related statements of operations, stockholders’ equity
(deficit), and cash flows for each of the years in the two-year
period ended December 31, 2020, and the related notes (collectively
referred to as the financial statements). In our opinion, the
financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2020 and 2019,
and the results of its operations and its cash flows for each of
the years in the two-year period ended December 31, 2020, in
conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
As
discussed in Note 1 to the financial statements, the
Company’s absence of significant revenues, recurring losses
from operations, and its need for additional financing in order to
fund its projected loss in 2021 raise substantial doubt about its
ability to continue as a going concern. These 2020 financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
Critical
Audit Matters
Critical
audit matters arising from the current period audit of the
financial statements that were communicated or required to be
communicated to the audit committee and that (1) relate to accounts
or disclosures that are material to the financial statements and
(2) involved our especially challenging, subjective, or complex
judgments. We determined that there are no critical audit
matters.
|
/s/PWR
CPA, LLP
|
|
|
|
|
|
We
have served as the Company’s auditor since 2020.
|
|
|
|
|
|
Houston,
Texas
|
|
|
|
|
|
March
30, 2021
|
|
F-1
Amarillo
Biosciences, Inc.
Balance
Sheets
|
|
December
31,
2020
|
December
31,
2019
|
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
and cash equivalents
|
$22,245
|
$409,039
|
|
Inventory
|
3,024
|
4,131
|
|
Prepaid
expense and other current assets
|
51,144
|
32,124
|
|
Total current
assets
|
76,413
|
445,294
|
|
Patents,
net
|
180,628
|
146,263
|
|
Property and
equipment, net
|
3,249
|
5,069
|
|
Total
assets
|
$260,290
|
$596,626
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity (Deficit)
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable and accrued expenses
|
$145,567
|
$208,727
|
|
Advances
from investors
|
-
|
100,000
|
|
Convertible
notes payable
|
953,001
|
444,581
|
|
Total current
liabilities
|
1,098,568
|
753,308
|
|
Total
liabilities
|
1,098,568
|
753,308
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Stockholders’
equity (deficit)
|
|
|
|
Preferred
stock, $0.01 par value:
|
|
|
|
Authorized
shares – 10,000,000,
|
|
|
|
Issued and
outstanding shares – 0 at December 31, 2020 and December 31,
2019, respectively
|
-
|
-
|
|
Common
stock, $0.01 par value:
|
|
|
|
Authorized
shares – 100,000,000,
|
|
|
|
Issued and
outstanding shares –42,066,172 and 40,516,351 at December 31,
2020 and 2019, respectively
|
420,662
|
405,164
|
|
Additional
paid-in capital
|
4,961,315
|
4,207,786
|
|
Accumulated
deficit
|
(6,220,255)
|
(4,769,632)
|
|
Total
stockholders’ equity (deficit)
|
( 838,278)
|
(156,682)
|
|
Total liabilities
and stockholders’ equity (deficit)
|
$260,290
|
$596,626
|
The accompanying notes are an integral part of these financial
statements.
F-2
Amarillo
Biosciences, Inc.
Statements
of Operations
|
|
Years
ended
December
31,
|
|
|
|
2020
|
2019
|
|
Revenues
|
$16,563
|
$11,731
|
|
Cost of
revenues
|
(11,277)
|
(8,772)
|
|
Gross
margin
|
5,286
|
2,959
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
Research
and development expenses
|
389
|
52,510
|
|
Selling,
general and administrative expenses
|
1,445,332
|
1,530,862
|
|
Total
operating expenses
|
1,445,721
|
1,583,372
|
|
|
|
|
|
Operating
loss
|
(1,440,435)
|
(1,580,413)
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
Interest
expense, net
|
(10,188)
|
(885)
|
|
Net
loss
|
$(1,450,623)
|
$(1,581,298)
|
|
|
|
|
|
Basic and diluted
net loss per average share available to common
shareholders
|
$(.04)
|
$(0.04)
|
|
|
|
|
|
Weighted average
common shares outstanding – basic and diluted
|
40,730,934
|
39,896,388
|
The accompanying notes are an integral part of these financial
statements.
F-3
Amarillo
Biosciences, Inc.
Statements of
Stockholders’ Equity (Deficit)
Years
Ended December 31, 2020 and 2019
|
|
Preferred
Stock
|
Common
Stock
|
Additional Paid
in
|
Accumulated
|
Total
Stockholders'
|
||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
|
Balance at December 31,
2018
|
-
|
$-
|
39,117,524
|
$391,175
|
3,527,238
|
(3,188,334)
|
730,079
|
|
Issuance of stock for
compensation
|
-
|
-
|
231,675
|
2,317
|
67,183
|
-
|
69,500
|
|
Issuance of common stock for
cash
|
-
|
-
|
615,000
|
6,150
|
123,850
|
-
|
130,000
|
|
Issuance of stock for
debt
|
-
|
-
|
552.152
|
5,522
|
94,478
|
-
|
100,000
|
|
Warrant expense
|
-
|
-
|
-
|
-
|
37,984
|
-
|
37,984
|
|
Option expense
|
-
|
-
|
-
|
-
|
357,053
|
-
|
357,053
|
|
Net Loss
|
-
|
-
|
-
|
-
|
-
|
(1,581,298)
|
(1,581,298)
|
|
Balance at December 31,
2019
|
-
|
$-
|
40,516,351
|
$405,164
|
4,207,786
|
(4,769,632)
|
(156,682)
|
|
Issuance of stock for
compensation
|
-
|
-
|
1,149,821
|
11,498
|
283,192
|
-
|
294,690
|
|
Issuance of stock for
subscriptions
|
-
|
-
|
400,000
|
4,000
|
96,000
|
-
|
100,000
|
|
Warrant expense
|
-
|
-
|
-
|
-
|
11,585
|
-
|
11,585
|
|
Option expense
|
-
|
-
|
-
|
-
|
362,752
|
-
|
362,752
|
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
(1,450,623)
|
(1,450,623)
|
|
Balance at December 31,
2020
|
-
|
$-
|
42,066,172
|
$420,662
|
4,961,315
|
(6,220,255)
|
(838,278)
|
The accompanying notes are an integral part of these financial
statements.
F-4
Amarillo
Biosciences, Inc.
Statements
of Cash Flows
|
|
Year
Ended
December
31,
2020
|
Year
Ended
December
31,
2019
|
|
Cash flows from
Operating Activities
|
|
|
|
Net
loss
|
$(1,450,623)
|
$(1,581,298)
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation
and amortization
|
14,698
|
22,241
|
|
Stock
issued for compensation
|
150,440
|
|
|
Warrant
expense
|
11,585
|
37,984
|
|
Option
expense
|
362,752
|
357,053
|
|
Changes in
operating assets and liabilities:
|
|
|
|
Inventory
|
1,107
|
(4,131)
|
|
Prepaid expense and
other current assets
|
(19,020)
|
(5,544)
|
|
Accounts
payable and accrued expenses
|
419,618
|
261,674
|
|
Accrued
interest – related party
|
9,892
|
2,545
|
|
Net cash used in
operating activities
|
(499,551)
|
(909,476)
|
|
Cash flows from
Investing Activities
|
|
|
|
Investment in
patents
|
(7,243)
|
(11,469)
|
|
Capital
expenditures
|
-
|
(1,638)
|
|
Net cash used in
investing activities
|
(7,243)
|
(13,107)
|
|
Cash flows from
Financing Activities
|
|
|
|
Proceeds
from private placement offering, net
|
-
|
125,048
|
|
Proceeds from
convertible note payable – related party
|
120,000
|
-
|
|
Repayment on
convertible note payable – related party
|
-
|
(70,080)
|
|
Net cash provided
by financing activities
|
120,000
|
54,968
|
|
Net change in
cash
|
(386,794)
|
(867,615)
|
|
Cash and cash
equivalents at beginning of period
|
409,039
|
1,276,654
|
|
Cash and cash
equivalents at end of period
|
$22,245
|
$409,039
|
|
Supplemental Cash
Flow Information
|
|
|
|
Cash
paid for interest
|
$855
|
$903
|
|
Non-Cash
Transactions
|
|
|
|
Stock issued for
accrued liabilities
|
104,250
|
$69,500
|
|
Stock issued for
subscription
|
$100,000
|
$-
|
|
Conversion of debt
to common stock
|
$-
|
$100,000
|
|
Stock issued for
patent costs
|
$40,000
|
$
|
|
Stock issued for
advances from investors
|
$-
|
$100,635
|
The accompanying notes are an integral part of these financial
statements.
F-5
Amarillo Biosciences, Inc.
Notes to Financial Statements
December 31, 2020 and 2019
1.
Organization
and Summary of Significant Accounting Policies
Organization
and Business
Amarillo
Biosciences, Inc. (the "Company" or "the Company"), is a
diversified healthcare company engaged in the discovery and
development of pharmaceutical and biotech products. The Company is
a Texas corporation which was formed in 1984.
The
Company primarily operates through three divisions:
Pharmaceutical, Medical and Consumer. The Pharmaceutical
division leverages our data library by applying the Company's
experience in the use of low-dose non-injectable interferon (IFN)
for the treatment of neoplastic, viral, and fibrotic diseases. The
Company seeks to engage in patent licensing and commercialization
opportunities with global partners. The Medical division is focused
on medical devices and developing technology to treat metabolism
related diseases such as Type 1 and Type 2 diabetes in Asia.
The Consumer division includes a range of nutraceutical and food
supplement products that utilize a liposomal delivery system.
The Company currently has offices in the United States and
Taiwan. The Company operates in Taiwan under the name
AMARILLO BIOSCIENCES, INC. TAIWAN BRANCH.
Going Concern
These
financial statements have been prepared in accordance with United
States generally accepted accounting principles (U.S. GAAP), on a
going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities and commitments in the normal
course of business. The Company has not yet achieved operating
income, and its operations are funded primarily from debt and
equity financings. However, losses are anticipated in the ongoing
development of its business and there can be no assurance that the
Company will be able to achieve or maintain
profitability.
The
continuing operations of the Company and the recoverability of the
carrying value of assets is dependent upon the ability of the
Company to obtain necessary financing to fund its working capital
requirements, and upon future profitable operations. The
accompanying financial statements do not include any adjustments
relative to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might
result from the outcome of this uncertainty.
There
can be no assurance that capital will be available as necessary to
meet the Company’s working capital requirements or, if the
capital is available, that it will be on terms acceptable to the
Company. The issuances of additional equity securities by the
Company may result in dilution in the equity interests of its
current stockholders. Obtaining commercial loans, assuming those
loans would be available, will increase the Company’s
liabilities and future cash commitments. If the Company is unable
to obtain financing in the amounts and on terms deemed acceptable,
the business and future success may be adversely affected and the
Company may cease operations. These factors raise substantial doubt
regarding our ability to continue as a going concern.
F-6
Fair
Value of Financial Instruments
Under
the Financial Account Standards Board Accounting Standards
Codification (“FASB ASC”), we are permitted to elect to
measure financial instruments and certain other items at fair
value, with the change in fair value recorded in earnings. We
elected not to measure any eligible items using the fair value
option. Consistent with Fair Value Measurement Topic of the FASB
ASC, we implemented guidelines relating to the disclosure of our
methodology for periodic measurement of our assets and liabilities
recorded at fair market value.
Fair
value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. A
three-tier fair value hierarchy prioritizes the inputs used in
measuring fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets
or liabilities (level 1 measurements) and the lowest priority to
unobservable inputs (level 3 measurements). These tiers
include:
●
Level 1, defined as
observable inputs such as quoted prices for identical instruments
in active markets;
●
Level 2, defined as
inputs other than quoted prices in active markets that are either
directly or indirectly observable such as quoted prices for similar
instruments in active markets or quoted prices for identical or
similar instruments in markets that are not active;
and
●
Level 3, defined as unobservable inputs in which
little or no market data exists, therefore requiring an entity to
develop its own assumptions, such as valuations derived from
valuation techniques in which one more significant inputs or
significant value drivers are unobservable.
Our
Level 1 assets and liabilities primarily include our cash and cash
equivalents. Valuations are obtained from readily available pricing
sources for market transactions involving identical assets or
liabilities. The carrying amounts of accounts receivable,
prepaid expense, accounts payable, accrued liabilities, advances
from investors, and notes payable approximate fair value due to the
immediate or short-term maturities of these financial
instruments.
Stock-Based
Compensation
Stock-based
compensation expense is recorded in accordance with FASB ASC Topic
718, Compensation – Stock
Compensation, for stock and stock options awarded in return
for services rendered. The expense is measured at the grant-date
fair value of the award and recognized as compensation expense on a
straight-line basis over the service period, which is the vesting
period. The Company estimates forfeitures that it expects will
occur and records expense based upon the number of awards expected
to vest.
Cash and Cash Equivalents
The
Company classifies investments as cash equivalents if the original
maturity of an investment is three months or less.
Revenue Recognition
The Company's
primary source of revenue is the sale of products within three
business units: the Medical, Pharmaceutical, and Consumer Product
Divisions.
F-7
The
Medical division periodically provides medical equipment to
metabolism treatment centers in Taiwan and Hong Kong. The
Consumer Product division provides nutraceuticals and food
supplements in Asian markets. Revenues are recognized for both
these revenue streams when an agreement is in place, the price is
fixed, title for product passes to the customer or services have
been provided and collectability is reasonably assured, which is
generally upon delivery to the customer. Revenues are recorded net
of sales taxes.
The
Pharmaceutical Division is currently seeking to leverage the
Company's intellectual property and core technology, low-dose
non-injectable interferon, to expand treatment of the
aforementioned neoplastic, viral, and fibrotic diseases as well as
other potential indications.
Revenue
recognized during the year ended December 31, 2020 and 2019 was
generated by the Consumer Product division
Allowance for Doubtful Accounts
The
Company establishes an allowance for doubtful accounts to ensure
trade and notes receivable are not overstated due to
non-collectability. The Company’s allowance is based on a
variety of factors, including age of the receivable, significant
one-time events, historical experience, and other risk
considerations. The Company had no material accounts receivable and
no allowance at December 31, 2020 or 2019.
Inventory
Inventories
are stated at the lower of cost or market. Cost is determined on a
first-in, first-out basis. The Company continually assesses the
appropriateness of inventory valuations giving consideration to
slow-moving, non-saleable, out-of-date or close-dated
inventory.
Property and Equipment
Property
and equipment are stated on the basis of historical cost less
accumulated depreciation. Depreciation is provided using the
straight-line method over the two to seven year estimated useful
lives of the assets.
Patents and Patent Expenditures
The
Company holds patent license agreements and maintains patents that
are owned by the Company. All patent license agreements remain in
effect over the life of the underlying patents. Accordingly, the
patent license fee is being amortized over the estimated life of
the patent using the straight-line method. Patent fees and legal
fees associated with the issuance of new owned patents are
capitalized and amortized over the estimated 15 to 20 year life of
the patent. The Company continually
evaluates the amortization period and carrying basis of patents to
determine whether subsequent events and circumstances warrant a
revised estimated useful life or impairment in value. No patent
costs were written off for the years ended December 31, 2020, or
December 31, 2019.
Long-lived Assets
Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount. No impairment losses have been recorded
since inception.
F-8
Income Taxes
The
asset and liability approach is used to account for income taxes by
recognizing deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. The
Company records a valuation allowance to reduce the deferred tax
assets to the amount that is more likely than not to be
realized.
Research and Development
Research
and development costs are expensed as incurred. During the years
ended December 31, 2020, and December 31, 2019, the Company
incurred $40,389 of which $40,000 was paid in stock and $389 in
cash and $52,510, respectively, in expenses towards research
activities associated with the development of its proprietary
pulsatile infusion treatment. Other than corporate administrative
and professional accounting fees related to maintaining public
listing requirements, a significant portion, if not all, of the
Company’s Selling, General & Administrative expenss were
also allocated towards the research and development of the
Company’s proprietary pulsatile insulin
treatment.
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Basic and Diluted Net Income (Loss) Per Share
As of
December 31, 2020, potentially dilutive shares of 678,726 are not
included in the calculation of fully diluted net loss per share as
the effect with a net loss would be antidilutive.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to significant
concentration of credit risk consist principally of cash. The
Company has cash balances in a single U.S. financial institution
which, from time to time, could exceed the federally insured limit
of $250,000. The Company maintains multiple accounts in its Taiwan
Branch office which help to mitigate risk. As of December 31, 2020,
cash held in Taiwan accounts amounted to $3,671. No loss has been
incurred related to the aforementioned concentration of
cash.
Recent Accounting Pronouncements
Recent
accounting pronouncements issued by the FASB, its Emerging Issues
Task Force, the American Institute of Certified Public Accountants,
and the Securities and Exchange Commission did not or are not
believed by management to have a material impact on the
Company’s present or future financial
statements.
2. Property, Equipment and Software, net
Property, equipment
and software are stated at cost less accumulated depreciation and
consist of the following at December 31, 2020 and
2019:
F-9
|
|
2020
|
2019
|
|
Furniture and
equipment
|
$94,625
|
$94,625
|
|
Automobiles
|
4,912
|
4,912
|
|
Software
|
8,012
|
8,012
|
|
|
107,549
|
107,549
|
|
Less: accumulated
depreciation
|
(104,300)
|
(102,480)
|
|
Property, equipment
and software, net
|
$3,249
|
$5,069
|
Depreciation
expense amounted to $1,820 for the year ended December 31, 2020 and
$10,579 for the year ended December 31, 2019 and is included in
selling, general and administrative expenses.
3.
Patents, net
Patents
are stated at cost less accumulated amortization and consist of the
following at December 31, 2020 and 2019:
|
|
2020
|
2019
|
|
Patents
|
$245,898
|
$198,655
|
|
Less: accumulated
amortization
|
(65,270)
|
(52,392)
|
|
Patents,
net
|
$180,628
|
$146,263
|
Amortization
expense amounted to $12,878 for the year ended December 31, 2020
and $11,662 December 31, 2019 respectively, and is included in
selling, general and administrative expenses.
Estimated
future amortization expense is as follows:
|
2020
|
12,435
|
|
2021
|
11,222
|
|
2022
|
10,818
|
|
2023
|
10,818
|
|
2024
|
10,818
|
|
Thereafter
|
124,517
|
|
Total
expense
|
$180,628
|
F-10
4. Convertible Notes Payable
As of
December 31, 2020 and 2019, convertible notes payable consisted of
the following:
|
Note
#.
|
Conversion
Rate
|
Interest
Rate
|
December
31,
2020
Principal
Amount
|
December
31,
2019
Principal
Amount
|
|
Note 1 –
Chen
|
$0.1680
|
0.75%
|
$114,026
|
$114,026
|
|
Note 2 –
Chen
|
$0.1875
|
0.65%
|
$262,500
|
$262,500
|
|
Note 3.19 –
Chen
|
$0.2500
|
1.85%
|
$39,620
|
$39,620
|
|
Note 4.19 –
Chen
|
$0.2500
|
1.61%
|
$14,879
|
$12,435
|
|
Note 5.19 –
i2China
|
$0.2500
|
1.85%
|
$16,000
|
$16,000
|
|
Note 6.20 –
Chen
|
$0.2500
|
1.85%
|
$216,600
|
$-
|
|
Note 7.20 –
Chen
|
$0.2500
|
1.60%
|
$23,366
|
$-
|
|
Note 8.20a –
i2China
|
$0.2500
|
1.85%
|
$48,000
|
$-
|
|
Note 8.20b –
i2China
|
$0.2500
|
1.85%
|
$84,000
|
$-
|
|
Note 9.21 -
Chen
|
N/A
|
0.13%
|
$134,010
|
$-
|
|
Total Convertible
Notes – Related Party
|
|
|
$953,001
|
$444,581
|
The notes are unsecured and are due on demand. All shares
issued on conversion are to be restricted subject to Rule 144
promulgated under the U.S. Securities Act of 1933. The Company may
prepay the notes in whole or in part at any time without penalty.
The convertible notes due to Dr. Chen are related party notes. See
footnote 5.
5. Related Party Transactions
As
discussed in Note 4, as of December 31, 2020 and 2019, the Company
has convertible notes payable of $953,001 and $444,581,
respectively. Interest expense related to these notes for 2020 and
2019 was $9,892 and $4,094, respectively.
Dr.
Chen is an officer and Director of the Company. Furthermore, he
beneficially owns over 10% of the issued and outstanding stock. Dr.
Chen is, therefore, considered a related party. The total related
party promissory notes for 2020, were $805,001 as compared to
$428,581 in 2019.
6.
Common Stock
The
shareholders have authorized 100,000,000 shares of voting common
shares for issuance. On December 31, 2020, a total of 50,783,942
shares of common stock were either issued (42,066,172), reserved
for conversion of convertible debt to stock (3,608,153), held for
future exercise of stock options (4,657,000)12 and warrants
(452,617).
On
January 6, 2020, 400,000 shares were issued at the price of $0.25
per share for the investment of $100,000 in the
Company’s2019-2 Private Placement Stock Offering. The
investment funds were received on December 31, 2019.
On
October 1, 2020, 100,000 shares were issued to UHO Wellness
Corporation (UHO) pursuant to a stock for services agreement
executed by the Company and UHO on February 13, 2020. The shares
were issued at $0.22 per share for preparation and submission of a
Taiwan patent application for the Company’s SMART technology.
On December 1, 2020, the Company issued 100,000 shares at $0.18 per
share to UHO when the aforementioned patent was issued. Issuance of
the patent and payment of the shares signified fulfillment of the
agreement.
_______________
12 Of the total options granted (4,657,000),
1,912,800 are vested as of December 31, 2020.
F-11
On
December 30, 2020, 54,780 common shares were issued to the
Company’s legal consultant as part of the engagement contract
for services for the fiscal year 2019. The total amount of the
stock was $14,440. Also on December 30, 2021, 158,528 shares were
issued to the Company’s executive consultant for advisory
services rendered as part of the engagement contract for 2019 and
2020. The total amount of the stock was $42,000.
On
December 30, 2020, Dr. Stephen T. Chen, Ph.D., CEO, received
651,701 as compensation in the amount of $175,000 for 2019 and
2020. Also on December 30, 2020, Bernard Cohen, VP, received 78,203
shares as compensation of $21,000 for 2019 and 2020. Dr. Celee
Spidel, former Medical Liaison, received 6,304 common shares for
compensation of $2,250 for 2019
On May
11, 2020, the Company Board of Directors unanimously approved a
Consent Resolution enacting the 2020-1 Private Placement Memorandum
and Subscription of Non-Distributive Intent (PPM Offering) (2020-1
Private Placement Package). The offering was approved for the sale
of a maximum of 5,208,334 shares to raise an aggregate amount not
to exceed $1,000,000. The stated use of proceeds was for
commercialization of technologies and application of funds to
operating expenses as necessary. The offering was to be completed
not later than July 31, 2020.
On
November 30, 2020, the Company Board of Directors approved the
extension of the 2020-1 Private Placement Package until March 31,
2021. With the exception of the new closing date, all terms and
conditions of the 2021-1 Private Placement Package remain the same
as disclosed in the previous paragraph.
On
December 18, 2020, the Company Board of Directors approved an
increase in the amount of authorized shares for issuance from 100
million common shares to 300 million common shares contingent upon
transaction close of the Securities Purchase Agreement with Ainos,
Inc. Pursuant to this Agreement, the Company will acquire Patent
Assets by issuing 100,000,000 shares of common stock valued at
$0.20 to Ainos, Inc.
The
Company did not pay any dividends to its common stock shareholders
in 2020 and has no plans to do so in the immediate
future.
Amarillo
Biosciences, Inc. uses the services of American Stock Transfer and
Trust Company as the Company’s transfer agent.
7.
Preferred Stock
The
shareholders have authorized 10,000,000 shares of preferred stock
shares for issuance.
No
Preferred Equity was outstanding as of December 31, 2020 and 2019
and none is outstanding as of the date of this report.
8.
Stock Option and Stock Plans
On
September 26, 2018, the Company’s Board of Directors adopted
the Amarillo Biosciences, Inc., 2018 Employee Stock Option Plan
(the “2018-ESOP”). The 2018-ESOP provides for the grant
of Qualified Incentive Stock Options to the Company’s
employees. The Board, in its adoption of the 2018-ESOP, directed
the Officers to submit the 2018-ESOP to the shareholders for
ratification and approval at the next scheduled shareholders
meeting. Failure of the ratification and approval of the 2018-ESOP
within one year of the effective date renders the qualified options
to become nonqualified options for purposes of the U.S Internal
Revenue Code. The 2018-ESOP is administered by the Board of
Directors of the Company or by a committee of directors
appointed
F-12
by the
Board of Directors of the Company (the “Stock Option
Committee”) as constituted from time to time. The maximum
number of shares of Common Stock which may be issued under the
2018-ESOP is six million (6,000,000) common stock shares which will
be reserved for issuance subject to options.
The
option price per share of Common Stock deliverable upon the
exercise of an Incentive Stock Option is 100% of the fair market
value of a share of Common Stock on the date the Incentive Stock
Option is granted. The option price is $0.38 per share and the
options are exercisable during a period of ten (10) years from the
date of grant, where the options vest 20% annually over five (5)
years, commencing one (1) year from date of grant. If an option
grantee owns or controls over ten percent (10%) of the outstanding
stock, then pursuant to Section 424(d) of the Code, the option
price becomes 110% of fair market value, $0.418; the term of
exercise becomes five (5) years from ten (10); and the vesting
period decreases from five (5) years to four (4)
years.
Since
approval of the “2018-ESOP” on September 26, 2018
through the date this document was filed, no stockholders meeting
has been convened. As a result of the stockholders not having
ratified the “2018-ESOP”, the qualified options
automatically became non-qualified options on September 26, 2019.
All other terms and conditions of the plan remain the
same.
On
September 26, 2018, the Company’s Board of Directors adopted
the Amarillo Biosciences, Inc., 2018 Officers, Directors,
Employees, and Consultants Nonqualified Stock Option Plan (the
“2018-NQSOP”). The 2018-NQSOP provides for the grant of
Nonqualified Incentive Stock Options to the Company’s
employees. The 2018-NQSOP is administered by the Board of Directors
of the Company or by the Stock Option Committee as constituted from
time to time. The maximum number of shares of Common Stock which
may be issued under the 2018-NQSOP is twenty million (20,000,000)
common stock shares which will be reserved for issuance subject to
options. The option price for the Nonqualified Options is $0.38
exercisable for a period of ten (10) years, with a vesting period
of five (5) years at 20% per year commencing one (1) year from date
of grant. There are no changes in terms or conditions for
shareholders who own or control over ten percent (10%) of the
outstanding stock.
On
December 18, 2020, the Board of Directors approved the termination
of the 2008 Stock Incentive Plan that was previously approved by
the board on May 23, 2008 and replaced with the 2018 company stock
option plans that were adopted on September 26, 2018.
Equity
Compensation Plan Information:
|
Stock Plans
1
|
|
Issue Date
Range
|
Total Shares
Authorized
|
Shares
Issued
|
Shares
Remaining
|
|
Amarillo
Biosciences, Inc., 2018 Employee Stock Option Plan,
2
|
|
9/26/18 –
9/26/28
|
6,000,000
|
850,000
|
5,150,000
|
|
Amarillo
Biosciences, Inc., 2018 Officers, Directors, Employees, and
Consultants Nonqualified Stock Option Plan
|
|
9/26/18 –
9/26/28
|
20,000,000
|
3,807,000
|
16,193,000
|
_______________
1 The Board of Directors has approved all stock, stock
option and stock warrant issuances.
2 On September 26, 2019, all Qualified Options became
non-qualified options since the 2018-ESOP was not ratified by the
stockholders.
Whether
qualified or nonqualified, when options are exercised, the Company
Common Stock shares will be issued pursuant to Rule 144A meaning
that the shares cannot be traded or otherwise exchanged for a
minimum period of six months from issue date.
A
summary of option activity for the years ended December 31, 2019
and December 31, 2020 are presented below.
F-13
|
Date
|
Number of
Options 1Qualified*
|
Number of
Options Nonqualified
|
Weighted Average
Exercise Price
|
Weighted Average
Remaining Contractual Term
|
Aggregate
Intrinsic Value
|
|
Balance December
31, 2018
|
950,000
|
3,995,000
|
$0.38
|
9
years -
|
-
|
|
Exercised
|
-
|
-
|
-
|
-
|
-
|
|
Expired or
Forfeited
|
100,000
|
188,000
|
$0.38
|
-
|
-
|
|
Balance December
31, 2019
|
850,000
|
3,807,000
|
$0.38
|
8
years -
|
-
|
|
Granted
2020
|
-
|
-
|
-
|
-
|
|
|
Exercised
|
-
|
-
|
-
|
-
|
-
|
|
Expired or
Forfeited
|
|
|
$0.38
|
-
|
-
|
|
Balance December
31, 2020
|
850,000
|
3,807,000
|
$0.38
|
7
years -
|
|
|
Vested as of
December 31, 2020
|
390,000
|
1,522,800
|
$0.38
|
7
years -
|
|
●
There is one stock
owner over 10% currently holding 500,000 qualified options. The
exercise price for this option-holder would be $0.418 with an
exercise period of 5 years and a vesting period of 4 years at 25%
per year.
●
1 Insomuch as the plan
was not ratified by stockholders, the qualified options became
non-qualified on September 26, 2019. These totals remain separated
since the two different plans are still in existence.
The
Company used the Black-Scholes option pricing model to value the
option awards with the following assumptions applied: (1)
Volatility – 276%; (2) Term – 5 years was chosen
although the full option term is 10 years to be more commensurate
with the 5-year vesting portion of the plan; (3) Discount –
2.96%.
As of
December 31, 2020, there is $924,180 in unrecognized option expense
that will be recognized over the next 2.75 years.
Directors,
officers, employees and consultants did not exercise any options in
2019 or 2020.
9.
Warrants
On
November 30, 2020, the Company’s Board of Directors approved
an extension of the consulting agreement and pre-existing warrant
certificate between the Company and i2China Management Group, LLC,
originally dated April 15, 2018. The warrant is effective from
November 25, 2020, until November 25, 2025 at 5:00 P.M. Central
Standard Time. The warrant entitles the consultant to purchase
452,617 shares of common stock at an exercise price of $0.27 per
share. The warrant was valued at $70,608 and will be expensed over
sixty (60) months. The Company used the Black-Scholes option
pricing model to value the warrants with the following assumptions
applied: (1) Volatility – 201%; (2) Term – 5 years (3)
Discount Rate –.39%.
No
warrants were exercised in 2020 or 2019.
10.
Income Taxes
Income
tax expense (benefit) attributable to income from continuing
operations differed from the amounts computed by applying the U.S.
Federal income tax of 21% to pretax income from continuing
operations as a result of the following:
F-14
|
|
December
31,
2020
|
December
31,
2019
|
|
Provision (benefit)
at statutory rate
|
$(305,000)
|
$(332,000)
|
|
Permanent
differences
|
80,000
|
85,000
|
|
Change in valuation
allowance
|
225,000
|
247,000
|
|
|
$-
|
$-
|
The tax
effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 2020 and 2019, are presented below:
|
|
December
31,
2020
|
December
31,
2019
|
|
Deferred tax
assets:
|
|
|
|
Net
operating loss carryforward
|
$3,725,000
|
$5,239,000
|
|
Deferred
tax assets
|
3,725,000
|
5,239,000
|
|
|
|
|
|
Deferred tax
liabilities:
|
-
|
-
|
|
Net deferred tax
assets
|
3,725,000
|
5,239,000
|
|
Valuation
allowance
|
(3,725,000)
|
(5,239,000)
|
|
|
$-
|
$-
|
At
December 31, 2020, the Company has estimated net operating loss
carryforwards of approximately $24,948,000 for federal income tax
purposes expiring in 2021 through 2040. The ability of the Company
to utilize these carryforwards may be difficult and directly
dependent upon many factors outside of the Company’s control,
including, but not limited to, changes in the legal and regulatory
framework and the operational and corporate structure of the
Company and shareholders, or sales or transfers of stock by or
among shareholders. For example, if the Company has experienced a
change of control as defined in the relevant provisions of the
IRC,13 the
use of any existing tax attributes could be severely limited. The
Company does not believe the reorganization has or will impair any
tax attributes; however, obtaining value from the tax attributes is
a function of the Company’s return to profitable operations
and the timeframe of that return. While we believe it is possible,
there is no assurance that the Company will return to profitability
in the future.
As of
December 31, 2020, the Company had open tax years of 2020, 2019 and
2018 which are subject to examination by tax
authorities.
11.
Commitments and Contingencies
Lease commitment
Our
executive and administrative offices are located at 4134 Business
Park Drive, Amarillo, Texas in a 1,800 square-foot leased facility.
The lease term, which is a semi-annual renewal, begins on January 1
of the calendar year and expires on June 30 of the calendar year.
The lease automatically renews on July 1 of the calendar year if
termination notice is not given to lessor. The rent in effect on
December 31, 2020 was $1,315 per month. The renewed lease for the
period January 1, 2021, through March 31, 2021, has a rent cost of
$1,315 per month. The monthly lease for a similarly sized office in
Taiwan was $2,548 per month or $30,579 annually for a twelve-month
lease.
_______________
13 See 26 U.S.C. § 382 (known as Section 382 of
the IRC) and related regulations.
F-15
Litigation
The
Company is not a party to any litigation and is not aware of any
pending litigation or unasserted claims or assessments as of
December 31, 2020.
Officer Compensation
On
January 1, 2021, the Company entered into new employment contracts
with Stephen T Chen, the Company’s Chairman, CEO, President,
and CFO; and with Bernard Cohen, the Company’s Vice-President
of Administration. These new contracts replace the previous
contracts which expired on December 31, 2020. The new contracts
began January 1, 2021, and extend through March 31, 2021, at which
time each contract expires. The job descriptions, duties, titles,
benefits, and compensation amounts are identical or proportionate
to the expired employment agreements. Compensation for Dr. Chen is
set at $20,000 per month (an annual rate of $240,000) in cash,
payable bi-monthly, and $8,333.33 monthly (an annual rate of
$100,000) payable in shares of the Company’s unregistered,
voting common stock. Compensation for Mr. Cohen is set at $70,000
per annum in $5,833.33 cash payable bi-monthly (based on the annual
amount of $70,000), and $1,000 payable monthly (annualized at
$12,000), payable in shares of the Company’s unregistered,
voting common stock.
The
contracts provide that the Employee shall devote his entire
productive time, ability, attention and energies to the business of
the Company. In addition, the contracts protect the property rights
of the Company, including inventions and other intellectual
property, trade secrets, and proprietary information. The contracts
also prohibit Employees from competing directly or indirectly with
the business of the Company or its controlled subsidiaries, both
during the term of the contracts, and continuing for a
period.
12. Subsequent Events
On
January 1, 2021, the Company issued Note #10.21 for deferred
compensation to Dr. Stephen T. Chen, Chairman, CEO, President, and
CFO, in the amount of $54,150, the maximum amount of cash
compensation that could be deferred for 2021. The Note is payable
on April 1, 2021, and bears interest at the AFR14 short-term rate of
1.85%. The note is an advancing note with a maximum limit of
$54,150 whereby the Company promises to repay the aggregate
Principal Amount advanced to date up to the stated maximum amount
at Maturity. The Company may request and the payee shall advance up
to $9,025 on the 15th and last day of each month until the note
matures. The Note may be convertible in whole or in part at a
conversion price of $0.25 per share into Amarillo Biosciences,
Inc., Common voting stock. All shares issued are to be restricted
subject to Rule 144 promulgated under the U.S. Securities Act of
1933. The Company may prepay the Note in whole or in part at any
time without penalty.
On
January 1, 2021, the Company issued Note #11.21 for deferred
compensation to i2China Management Group, LLC in the amount of
$33,000, the maximum amount of cash compensation that could be
deferred in 2021. The Note is payable on April 1, 2021, and bears
interest at the AFR15 short-term rate of
1.85%. The note is an advancing note with a maximum limit of
$33,000 whereby the Company promises to repay the aggregate
Principal Amount advanced to date up to the stated maximum amount
at Maturity. The Company may request and the payee shall advance up
to $11,000 on the last day of each month until the note matures.
The Note may be convertible in whole or in part at a conversion
price of $0.25 per share into Amarillo Biosciences, Inc., Common
voting stock. All shares issued are to be restricted subject to
Rule 144 promulgated under the U.S. Securities Act of 1933. The
Company may prepay the Note in whole or in part at any time without
penalty.
_______________
14 Applicable Federal Rate
15 Applicable Federal Rate
F-16
On
January 1, 2021, the Company issued Note #9.21 to Dr. Chen which
reduced to writing the various working capital advances through
December 2020, and became the ongoing record to track future
working capital advances through the Note’s maturity date of
April 14, 2021. The maximum aggregate value of Note #9.21 is
$325,000 and carries an AFR interest rate of 0.13%. The Company may
request in writing, as needed, an advance of funds, not to exceed
the specified maximum amount, and the payee shall advance the
requested amount until Maturity.
Following
is a complete list of Convertible Notes Payable issued by the
Company as of December 31, 2020, and subsequent to that Balance
Sheet Date.
|
Note
#.
|
Conversion
Rate
|
Interest
Rate16
|
December
31,
2020
Principal
Amount17
|
December
31,
2019
Principal
Amount
|
|
Note 1 –
Chen
|
$0.1680
|
0.75%
|
$114,026
|
$114,026
|
|
Note 2 –
Chen
|
$0.1875
|
0.65%
|
$262,500
|
$262,500
|
|
Note 3.19 –
Chen
|
$0.2500
|
1.85%
|
$39,620
|
$39,620
|
|
Note 4.19 –
Chen
|
$0.2500
|
1.61%
|
$14,879
|
$12,435
|
|
Note 5.19 –
i2China
|
$0.2500
|
1.85%
|
$16,000
|
$16,000
|
|
Note 6.20 –
Chen
|
$0.2500
|
1.85%
|
$216,600
|
$-
|
|
Note 7.20 –
Chen
|
$0.2500
|
1.60%
|
$23,366
|
$-
|
|
Note 8.20a –
i2China18
|
$0.2500
|
1.85%
|
$48,000
|
$-
|
|
Note 8.20b –
i2China19
|
$0.2500
|
1.85%
|
$84,000
|
$-
|
|
Note 9.21 -
Chen20
|
N/A
|
0.13%
|
$236,905
|
$-
|
|
Note 10.21 -
Chen
|
$0.2500
|
1.85%
|
$59,025
|
$-
|
|
Note 11.21 –
i2China
|
$0.2500
|
1.85%
|
$37,000
|
$-
|
|
Total
Convertible Notes – Related Party
|
$1,151,921
|
$444,581
|
||
_______________
16 Interest on all Related Party notes is assessed
using the short-term or medium-term Applicable Federal Rate (AFR).
Applicable Federal Rate is-the minimum
interest rate that the Internal Revenue Service (IRS) allows for
private loans. The IRS publishes a monthly set of
interest rates that the agency considers the minimum
market rate for loans, whereas, interest rates less than
the AFR would have tax implications.
18 On November 30, 2020, the Company’s Board
of Directors approved an extension of the consulting agreement and
pre-existing warrant certificate between the Company and i2China
Management Group, LLC, originally dated April 15, 2018.
Compensation stated in the updated agreement increased the monthly
retainer from $8,000 to $15,000 per month retroactive to January 1,
2020. The retainer increase was $7,000 per month and was
retroactively deferred and added to Convertible promissory note
#8.20. The retroactive retainer totaled $84,000 and was added to
the unpaid balance of the note, $48,000, bringing the total unpaid
balance as of December 31, 2020 to $132,000.
20 Dr. Chen loaned operating funds to the Company in
2020 on an open-ended basis. Note 9.21was issued in 2021. The note
is not convertible and interest will be accrued at the short-term
AFR rate.
F-17
Exhibit 10.1 (f)
EMPLOYMENT AGREEMENT
This
Agreement (the "Agreement") is effective as of the 1st day of
January 2021 (“Effective Date”) by and between, DR.
STEPHEN T. CHEN, Ph.D. (the "EMPLOYEE"), and AMARILLO BIOSCIENCES,
INC., a Texas Corporation ("EMPLOYER").
RECITALS
WHEREAS,
the EMPLOYER is in need of assistance in the area of a CHAIRMAN,
PRESIDENT, CEO AND CFO; and
WHEREAS,
EMPLOYEE has agreed to perform work for the EMPLOYER;
NOW,
THEREFORE, the parties hereby agree as follows:
1.
EMPLOYEE's
Services. EMPLOYEE shall
serve as a FULL-TIME, EXEMPT,
AT-WILL EMPLOYEE and will work
from the EMPLOYER’s office in Amarillo, Texas and/or at other
locations as directed by the EMPLOYER. EMPLOYEE shall be
responsible for complying and implementing the EMPLOYER’s
programs, policies, and projects as summarized in
Exhibit
“A” of this
Agreement ("Scope of Work") and as may be otherwise needed and
requested by EMPLOYER. This contract is for the personal services
of the EMPLOYEE and shall not be assigned by the EMPLOYEE to any
other person or entity.
2.
Consideration.
A. EMPLOYEE
Salary. In consideration
of the Services to be performed by EMPLOYEE under this Agreement
the EMPLOYER will pay EMPLOYEE the following:
(i)
Monthly Salary: A monthly salary payable to EMPLOYEE in the amount
of $20,000, payable bi-monthly;
(ii)
Monthly Stock Grant: $8,333.33 per month payable in shares of
ABI’s unregistered, voting common stock, such shares being
priced at the average of all trading day closing quotes on the
OTC-BB for the month preceding date of issuance and such shares to
be issued on February 1, 2021, March 1, 2021 and April 1, 2021 (or
as soon as thereafter practicable);
(iii)
EMPLOYEE benefits: Pursuant to the ABI employee benefits plan or
policy which may include hospital, surgical, medical, dental, group
life insurance or other benefits on terms at least as favorable as
those accorded to other employees of ABI, subject to insurability
and the execution of any agreement required therefor.
ABI
– DR STEPHEN T. CHEN Ph.D. Employment Agreement –
Effective January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
B. Expenses.
Each year, and from time to time, the EMPLOYER will establish a
budget for operating its programs and EMPLOYEE shall be bound by
the purposes and amounts for any such budget decision. In the event
that EMPLOYEE expends her own funds for pre-approved and
reimbursable expenses, EMPLOYEE will submit for EMPLOYER’s
review and pre-approval original receipts and a written
reimbursement request detailing reimbursable expenses. If the
EMPLOYER provides a credit or debit card any use of the same shall
be limited to the EMPLOYER’s pre-approved budget and for
EMPLOYER business only. EMPLOYEE shall submit a monthly written
expense report including original receipts.
3.
EMPLOYEE
Relationship. Nothing
contained herein or any document executed in connection herewith,
shall be construed to create a partnership or joint venture
relationship between the EMPLOYER and EMPLOYEE.
4.
Term. This Agreement shall be effective for
three (3)
months commencing
January 1,
2021 through
March 31,
2021. Either party may
terminate this Agreement upon the earlier of: (i)
ten (10)
days prior written notice for
termination without cause and for the convenience of either party,
(ii) immediately
if EMPLOYER terminates this Agreement
for cause which includes, but is not limited to, breach of any of
the agreements and covenants in this Agreement, acts of dishonesty,
malfeasance, misfeasance, negligence, or material
misrepresentation, or (iii) immediately upon written notice of the
date that EMPLOYEE retires.
5.
Competent
Work. All work will be
done in a competent fashion and all services are subject to final
approval by an authorized representative of the EMPLOYER prior to
payment. In the event that the work-product or reports of EMPLOYEE
do not meet the standards and requirements of the EMPLOYER, the
EMPLOYER may issue a “Stop Work Order” and EMPLOYEE
shall cease any and all activity specified in such notice until
such time that the Parties agree to continue or terminate
EMPLOYEE’s performance EMPLOYEE services.
6.
Representations and
Warranties. The EMPLOYEE
will make no representations, warranties, or commitments that bind
the EMPLOYER without the consent of the Board of Directors of the
EMPLOYER. Furthermore, U.S. law requires
companies to employ only individuals who may legally work in the
United States – either U.S. citizens, or foreign citizens who
have the necessary authorization. EMPLOYEE represents that her
employment with the EMPLOYER is in compliance with U.S. law.
EMPLOYEE represents that all communications during the course of
hiring, including EMPLOYEE’s resume / curriculum vitae and
references, are true and correct. Any breach of this section shall
be cause for immediate termination and cancellation of this
Agreement. The EMPLOYER is hereby authorized to verify, at any
time, any representation made by EMPLOYEE to induce the EMPLOYER to
enter into this Agreement.
7.
No Waiver. Failure to invoke any right, condition, or
covenant in this Agreement by either Party shall not be deemed to
imply or constitute a waiver of any rights, condition, or covenant
and neither Party may rely on such failure.
ABI
– DR STEPHEN T. CHEN Ph.D. Employment Agreement –
Effective January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
8.
Notices. For Notices required under this Agreement
(other than written reports and routine business communications)
shall be deemed effective when (a) personally delivered or
deposited, postage prepaid, in the first class mail of the United
States properly, (b) delivered by facsimile or electronic mail and
addressed to the appropriate party at the address set forth
below:
Notices as to EMPLOYEE:
Dr.
Stephen Chen, Chairman, President, CEO and CFO
Amarillo
Biosciences, Inc. Taiwan Branch
7F.,
No. 47, Ln. 77, Sec. 2, Zhongshan N. Rd., Zhongshan
Dist.,
Taipei
City 104, Taiwan (R.O.C.).
Email: stcacts@amarbio.com
Notices to the EMPLOYER:
Bernard
Cohen
VP
- Administration
Amarillo
Biosciences, Inc.
4134
Business Park Drive
Amarillo,
Texas 79110
Phone:
806-376-1741 Ext. 16
Fax:
806-376-9301
Email: bcohen@amarbio.com
With Copies to:
Jun
Y. Lee
468 North Camden Drive, 2nd
Floor
Beverly
Hills CA 90210
Fax:
213-607-3105
Email: junylee@gmail.com
9.
EMPLOYER Supervisor.
Supervision will be provided to the
EMPLOYEE on an as-needed basis. The EMPLOYEE’s primary
supervisor for contract compliance shall be designated by the
EMPLOYER.
10.
Enforceability. If
any provision of this Agreement is held by a court of competent
jurisdiction to be unenforceable, the reminder of the Agreement
shall remain in full force and effect and shall in no way be
impaired
11.
Entire Agreement and
Amendments. This Agreement
constitutes the entire agreement of the Parties with regard to the
subject matter hereof, and replaces and supersedes all other
agreements or understandings, whether written or oral. No amendment
or extension of this Agreement shall be binding unless in writing
and signed by both Parties. EMPLOYEE agrees to the attached
Exhibit
“A” (“Scope
of Work”), Exhibit “B”
(Standard Terms and Conditions).
EMPLOYEE shall strictly comply with any and all policies,
procedures, standards and other requirements determined by
EMPLOYER.
ABI
– DR STEPHEN T. CHEN Ph.D. Employment Agreement –
Effective January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
12.
Conditions Precedent.
Execution of all of the following
agreements are conditions precedent for the enforceability of this
Agreement, are material terms of this Agreement and are
incorporated herein by this reference: Settlement Agreement and
Mutual General Release and Intellectual Property Assignment
Agreement, in a form and content satisfactory to
EMPLOYER.
13.
Binding Effect,
Assignment. This Agreement
shall be binding upon and shall inure to the benefit of EMPLOYEE
and the EMPLOYER and to the extent applicable each Party’s
heirs, successors and assigns. Assignment of any right or
obligation under this Agreement is expressly prohibited without the
prior written consent of both Parties.
14.
Governing Law,
Severability. This
Agreement shall be governed by the laws of the State of Texas,
irrespective of its Choice of Law rules. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other
provision.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the
date written above:
|
|
Amarillo Biosciences, Inc.
|
|
|
EMPLOYEE:
|
|
|
By:
|
/s/ John Junyong Lee
|
|
By:
|
/s/
Stephen T. Chen
|
|
|
|
John Junyong
Lee
|
|
|
Dr. Stephen T. Chen, Ph.D. |
|
|
|
Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
12/31/2020
|
|
Date:
|
12/31/2020
|
|
ABI
– DR STEPHEN T. CHEN Ph.D. Employment Agreement –
Effective January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
EXHIBIT “A”
SCOPE OF WORK
1.
Executive
management of all aspects of EMPLOYER
2.
Executive
and statutory oversight of federal and state securities compliance
and reportings
3.
Coordination
with EMPLOYER employees, consultants, accountants, auditors,
attorney(ies) and vendors
4.
Support
to EMPLOYER Board of Directors
ABI
– DR STEPHEN T. CHEN Ph.D. Employment Agreement –
Effective January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
EXHIBIT “B”
STANDARD TERMS AND CONDITIONS
These Standard Terms and Conditions are made and incorporated by
this reference in the EMPLOYEE AGREEMENT (“Agreement”)
attached hereto.
1.0
PROTECTION OF EMPLOYER INFORMATION AND PROPERTY
1.1
Trade
Secrets. EMPLOYEE hereby agrees
and covenants not to disclose to third-parties or otherwise use to
the detriment of EMPLOYER any of the EMPLOYER’s data, forms,
processes, procedures, business plans or information, and methods
of operation whether or not marked “confidential” or
“trade secret”, and all of the foregoing is agreed to
treated as confidential and trade secrets of EMPLOYER by
EMPLOYEE.
1.2
Intellectual
Property. EMPLOYEE shall
immediately cease and desist using any of EMPLOYER’s trade
name, trade and service marks, and any other intellectual or
intangible property (whether or not registered) upon termination of
this Agreement. Any original works, as that term is defined under
the U.S. Copyright laws, that are created by EMPLOYEE in the
performance of this Agreement is agreed to be a “work made
for hire” and shall vest ownership to EMPLOYER upon creation.
Any other intellectual property created by EMPLOYEE that is not
subject to the copyright laws, are made by EMPLOYEE for the
exclusive benefit of EMPLOYER and EMPLOYEE hereby grants to the
EMPLOYER an irrevocable, exclusive, unlimited, and royalty-free
license to EMPLOYER for such works.
1.3
Use of Trade
Equipment. EMPLOYEE agrees and
covenants that its use of EMPLOYER’s trade equipment,
inclusive of EMPLOYER’s information technology, computer, and
communications systems, is for the exclusive benefit and purpose of
further EMPLOYER’s business. EMPLOYEE further agrees that any
personal use of EMPLOYER’s trade equipment is not
permitted.
2.0
EMPLOYEE’S DUTIES UPON TERMINATION.
2.1
Return of EMPLOYER
Property. Upon termination,
EMPLOYEE shall immediately return to EMPLOYER any and all data,
information, computer records and data, business records and files,
and any other document, record, trade equipment, supplies, keys,
modes of access, or any other material that was furnished by or
work products (including digital photographs, data, worksheets,
draft and final work product versions) created for the EMPLOYER
during the term of the Agreement. All of the foregoing shall at all
times by conclusively owned by the EMPLOYER and shall be returned
and submitted to the EMPLOYER at the conclusion of each task or
sub-task assigned under the Agreement. No files, documents, or
other materials will be removed from the EMPLOYER office to perform
the scope of work under this Agreement.
ABI
– DR STEPHEN T. CHEN Ph.D. Employment Agreement –
Effective January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
2.2
Termination of Right
of Access. Upon termination,
EMPLOYEE’s right of access to EMPLOYER’s information
technology, computer and communications systems, trade equipment,
business premises, records, files and any other property of
EMPLOYER shall be automatically terminated without further
notice.
2.3
Transfer of Business
Assignments. EMPLOYEE agrees
that upon termination, EMPLOYER has the unlimited right to assign
any of EMPLOYEE’s projects, assignments, or other matters (in
whole, or in part) to another person or entity as solely determined
by EMPLOYER. EMPLOYEE hereby understands and agrees that EMPLOYEE
does not have any property interest whatsoever in any of the
projects, assignment, business relationships, intangible and
tangible property, and any other matter made, created, or performed
during the term of this Agreement.
3.0
MISCELLANEOUS PROVISIONS.
3.1
Exclusive and Binding
Arbitration.
THE PARTIES AGREE
TO BINDING ARBITRATION AS THE EXCLUSIVE DISPUTE RESOLUTION FORUM TO
SETTLE AND RESOLVE ANY AND ALL DISPUTES ARISING FROM THE AGREEMENT
AND THE EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES. IT IS
FURTHER AGREED THAT TEXAS LAW SHALL GOVERN THIS AGREEMENT
(IRRESPECTIVE OF ITS CONFLICT OF LAW RULES), AND THAT THE
JURISDICTION AND VENUE FOR BINDING ARBITRATION SHALL BE THE CITY OF
DALLAS, STATE OF TEXAS. THE PARTIES AGREE TO UTILIZE JAMS MEDIATION
AND ARBITRATION SERVICES TO SETTLE ALL DISPUTES. THE PARTIES
EXPRESSLY AGREE TO WAIVE THEIR RIGHTS TO A JURY
TRIAL.
3.2
Injunctive and
Equitable Relief.
Notwithstanding Section 3.1, EMPLOYEE also agrees that any breach
by EMPLOYEE of Sections 1.0 and 2.0 of this Agreement, including
such sub-parts, would create irreparable and immediate harm to
EMPLOYER and as such EMPLOYEE consents to any injunctive or
equitable relief that may be available to
EMPLOYER.
3.3
Attorney’s Fees
and Costs. The prevailing party
under any dispute shall be entitled to its reasonable
attorney’s fees and costs, including costs of investigation
of such dispute.
3.4
Collection of
Claims. In the event that
EMPLOYEE adjudged the prevailing party in any action, EMPLOYEE
hereby agrees that her sole source to satisfy any judgment shall be
the operating checking account of the EMPLOYER. EMPLOYEE expressly
waives any rights to seek collection of any judgment against
EMPLOYER’s intellectual property rights or
interests.
ABI
– DR STEPHEN T. CHEN Ph.D. Employment Agreement –
Effective January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
3.5
Survival.
This Agreement shall survive and inure to the benefit of the
successors, assigns, heirs, and/or estates of the
parties.
3.6
Statute of
Limitations. Notwithstanding
any statutory or common-law rule to the contrary, the parties agree
that any right of action must be commenced within one (1) year of
the act, omission, event, or circumstance that gave rise to such
cause of action.
3.7
Liquidated Damages;
Settlement, Release and Discharge of EMPLOYER. The parties agree that the extent and cost for
injury, damage, or other adverse impacts to EMPLOYEE under this
Agreement is difficult to determine and speculative. In the
interest of settling any claims against EMPLOYER expeditiously, the
EMPLOYER may elect to pay EMPLOYEE liquidate damages and terminate
this Agreement. EMPLOYEE hereby agrees to this liquidated damages
clause and shall settle, release and discharge EMPLOYER from any
and all liabilities upon EMPLOYER’s payment. As such, the
parties expressly agree that the extent of EMPLOYER’s
liability to EMPLOYEE for injury, damage, or other adverse impact,
whether incurred during the course of performance of this Agreement
or arising from wrongful termination or other breach of this
Agreement by EMPLOYER shall be (2) months Salary. These provisions
and waiver shall apply to any claims, whether known by EMPLOYEE,
and do include an express waiver of any reservation of rights under
Section 1542 of the California Civil Code which reads as
follows: “A GENERAL RELEASE DOES
NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO
EXIST IN HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOW BY HIM MUCH HAVE MATERIALLY AFFECTED HER SETTLEMENT WITH THE
DEBTOR.”
3.8
Pro-rated Salary and
Medical Contribution. In the
event this Agreement is terminated prior to the expiration of the
Term, any salary, stock grants, benefits, and/or medical
contribution payments due EMPLOYEE shall be equitably adjusted and
pro-rated.
ABI
– DR STEPHEN T. CHEN Ph.D. Employment Agreement –
Effective January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
Exhibit 10.1(g)
AMENDMENT NO. 1
TO
EMPLOYMENT AGREEMENT
THIS
AMENDMENT NO. 1 is made by and between
AMARILLO BIOSCIENCES, INC., a Texas corporation, inclusive of
any Affiliates or subsidiaries (“ABI”)
and
STEPHEN T. CHEN, Ph.D. (“EMPLOYEE”) to
that certain Employment Agreement between the parties made
effective January 1, 2021 (“Agreement”).
1.
All references to
“Chairman, President, CEO, and CFO” shall be deleted
and be replaced by “Senior Scientific Advisor” for the
purposes of Employee’s employment only. For the avoidance of
doubt, the deletion of the herein references shall not constitute a
resignation or removal of any officer position that Employee may
hold now or in the future.
2.
Notwithstanding the
foregoing paragraph 1, Employee may serve in any capacity as an
officer of ABI as determined by ABI’s Board of Directors and
Article III of ABI’s Bylaws.
3.
All other terms and
conditions under the Agreement not expressly amended or modified by
this amendment shall continue in full force and
effect.
IN
WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by a duly authorized officer on the day
and year first above written.
|
|
Amarillo Biosciences, Inc.
|
|
|
EMPLOYEE:
|
|
|
By:
|
/s/ John Junyong Lee
|
|
By:
|
/s/
Stephen T. Chen
|
|
|
|
John Junyong
Lee
|
|
|
Dr. Stephen T. Chen, Ph.D. |
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Secretary
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Date:
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January 19, 2021 |
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Date:
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January 19, 2021 |
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AMENDMENT
NO. 1 TO EMPLOYMENT AGREEMENT
January
19, 2021
Page
[Insert
Page Number] of 1
Exhibit 10.1(h)
EMPLOYMENT AGREEMENT
This
Agreement (the "Agreement") is effective as of the 1st day of
January 2021 (“Effective Date”) by and between, BERNARD
COHEN (the "EMPLOYEE"), and AMARILLO BIOSCIENCES, INC., a Texas
Corporation ("EMPLOYER").
RECITALS
WHEREAS,
the EMPLOYER is in need of assistance in the area of a VICE
PRESIDENT - ADMINISTRATION; and
WHEREAS,
EMPLOYEE has agreed to perform work for the EMPLOYER;
NOW,
THEREFORE, the parties hereby agree as follows:
1.
EMPLOYEE's
Services. EMPLOYEE shall
serve as a FULL-TIME, EXEMPT,
AT-WILL EMPLOYEE and will work
from the EMPLOYER’s office in Amarillo, Texas and/or at other
locations as directed by the EMPLOYER. EMPLOYEE shall be
responsible for complying and implementing the EMPLOYER’s
programs, policies, and projects as summarized in
Exhibit
“A” of this
Agreement ("Scope of Work") and as may be otherwise needed and
requested by EMPLOYER. This contract is for the personal services
of the EMPLOYEE and shall not be assigned by the EMPLOYEE to any
other person or entity.
2.
Consideration.
A. EMPLOYEE
Salary. In consideration
of the Services to be performed by EMPLOYEE under this Agreement
the EMPLOYER will pay EMPLOYEE the following:
(i)
Monthly Salary: A monthly salary payable to EMPLOYEE in the amount
of $5,833.33, payable bi-monthly;
(ii)
Monthly Stock Grant: $1,000 per month payable in shares of
ABI’s unregistered, voting common stock, such shares being
priced at the average of all trading day closing quotes on the
OTC-BB for the month preceding date of issuance and such shares to
be issued on February 1, 2021, March 1, 2021 and April 1, 2021 (or
as soon as thereafter practicable);
(iii)
EMPLOYEE benefits: Pursuant to the ABI employee benefits plan or
policy which may include hospital, surgical, medical, dental, group
life insurance or other benefits on terms at least as favorable as
those accorded to other employees of ABI, subject to insurability
and the execution of any agreement required therefor.
B. Expenses.
Each year, and from time to time, the EMPLOYER will establish a
budget for operating its programs and EMPLOYEE shall be bound by
the purposes and amounts for any such budget decision. In the event
that EMPLOYEE expends her own funds for pre-approved and
reimbursable expenses, EMPLOYEE will submit for EMPLOYER’s
review and pre-approval original receipts and a written
reimbursement request detailing reimbursable expenses. If the
EMPLOYER provides a credit or debit card any use of the same shall
be limited to the EMPLOYER’s pre-approved budget and for
EMPLOYER business only. EMPLOYEE shall submit a monthly written
expense report including original receipts.
ABI
– BERNARD COHEN Employment Agreement – Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
3.
EMPLOYEE
Relationship. Nothing
contained herein or any document executed in connection herewith,
shall be construed to create a partnership or joint venture
relationship between the EMPLOYER and EMPLOYEE.
4.
Term. This Agreement shall be effective for
three (3)
months commencing
January 1,
2021 through
March 31,
2021. Either party may
terminate this Agreement upon the earlier of: (i)
ten (10)
days prior written notice for
termination without cause and for the convenience of either party,
(ii) immediately
if EMPLOYER terminates this Agreement
for cause which includes, but is not limited to, breach of any of
the agreements and covenants in this Agreement, acts of dishonesty,
malfeasance, misfeasance, negligence, or material
misrepresentation, or (iii) immediately
upon written notice of the date that
EMPLOYEE retires.
5.
Competent
Work. All work will be
done in a competent fashion and all services are subject to final
approval by an authorized representative of the EMPLOYER prior to
payment. In the event that the work-product or reports of EMPLOYEE
do not meet the standards and requirements of the EMPLOYER, the
EMPLOYER may issue a “Stop Work Order” and EMPLOYEE
shall cease any and all activity specified in such notice until
such time that the Parties agree to continue or terminate
EMPLOYEE’s performance EMPLOYEE services.
6.
Representations and
Warranties. The EMPLOYEE
will make no representations, warranties, or commitments that bind
the EMPLOYER without the consent of the Board of Directors of the
EMPLOYER. Furthermore, U.S. law requires
companies to employ only individuals who may legally work in the
United States – either U.S. citizens, or foreign citizens who
have the necessary authorization. EMPLOYEE represents that her
employment with the EMPLOYER is in compliance with U.S. law.
EMPLOYEE represents that all communications during the course of
hiring, including EMPLOYEE’s resume / curriculum vitae and
references, are true and correct. Any breach of this section shall
be cause for immediate termination and cancellation of this
Agreement. The EMPLOYER is hereby authorized to verify, at any
time, any representation made by EMPLOYEE to induce the EMPLOYER to
enter into this Agreement.
7.
No Waiver. Failure to invoke any right, condition, or
covenant in this Agreement by either Party shall not be deemed to
imply or constitute a waiver of any rights, condition, or covenant
and neither Party may rely on such failure.
8.
Notices. For Notices required under this Agreement
(other than written reports and routine business communications)
shall be deemed effective when (a) personally delivered or
deposited, postage prepaid, in the first class mail of the United
States properly, (b) delivered by facsimile or electronic mail and
addressed to the appropriate party at the address set forth
below:
ABI
– BERNARD COHEN Employment Agreement – Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
Notices
as to EMPLOYEE:
Bernard
Cohen
VP -
Administration
Amarillo
Biosciences, Inc.
4134
Business Park Drive
Amarillo, Texas
79110
Phone:
806-376-1741 Ext. 16
Fax:
806-376-9301
Email: bcohen@amarbio.com
Notices to the EMPLOYER:
Dr.
Stephen Chen, Chairman, President, CEO and CFO
Amarillo
Biosciences, Inc. Taiwan Branch
7F.,
No. 47, Ln. 77, Sec. 2, Zhongshan N. Rd., Zhongshan
Dist.,
Taipei
City 104, Taiwan (R.O.C.).
Email: stcacts@amarbio.com
With Copies to:
Jun Y.
Lee
468
North Camden Drive, 2nd Floor
Beverly
Hills CA 90210
Fax:
213-607-3105
Email:
junylee@gmail.com
9.
EMPLOYER Supervisor. Supervision will be
provided to the EMPLOYEE on an as-needed basis. The
EMPLOYEE’s primary supervisor for contract compliance shall
be designated by the EMPLOYER.
10.
Enforceability. If
any provision of this Agreement is held by a court of competent
jurisdiction to be unenforceable, the reminder of the Agreement
shall remain in full force and effect and shall in no way be
impaired
11.
Entire Agreement and
Amendments. This Agreement
constitutes the entire agreement of the Parties with regard to the
subject matter hereof, and replaces and supersedes all other
agreements or understandings, whether written or oral. No amendment
or extension of this Agreement shall be binding unless in writing
and signed by both Parties. EMPLOYEE agrees to the attached Exhibit “A” (“Scope of
Work”), Exhibit
“B” (Standard Terms and Conditions). EMPLOYEE
shall strictly comply with any and all policies, procedures,
standards and other requirements determined by
EMPLOYER.
12.
Conditions Precedent. Execution of all
of the following agreements are conditions precedent for the
enforceability of this Agreement, are material terms of this
Agreement and are incorporated herein by this reference: Settlement
Agreement and Mutual General Release and Intellectual Property
Assignment Agreement, in a form and content satisfactory to
EMPLOYER.
ABI
– BERNARD COHEN Employment Agreement – Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
13.
Binding Effect,
Assignment. This Agreement
shall be binding upon and shall inure to the benefit of EMPLOYEE
and the EMPLOYER and to the extent applicable each Party’s
heirs, successors and assigns. Assignment of any right or
obligation under this Agreement is expressly prohibited without the
prior written consent of both Parties.
14.
Governing Law,
Severability. This
Agreement shall be governed by the laws of the State of Texas,
irrespective of its Choice of Law rules. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other
provision.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the
date written above:
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Amarillo Biosciences, Inc.
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EMPLOYEE:
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By:
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/s/ John Junyong Lee
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By:
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/s/ Bernard
Cohen
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John Junyong Lee |
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Bernard Cohen |
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Secretary |
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Date:
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12/31/2020 |
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Date:
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12/31/2020 |
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ABI
– BERNARD COHEN Employment Agreement – Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
EXHIBIT “A”
SCOPE OF WORK
1.
Investor
Relations
2.
Federal and state
securities compliance and reportings
3.
Support to EMPLOYER
consultants, consultants, attorney(ies) and vendors
4.
Support to EMPLOYER
Chairman, President, CEO and CFO (and designees)
5.
Support to EMPLOYER
Board of Directors
6.
Support to EMPLOYER
Treasurer and Bookkeeper
7.
Daily
Administrative Duties
a.
Take
and transmit telephone and electronic messages
b.
Manage
mail, distributing it to the appropriate parties; forwarding
deposits to the appropriate party or making the deposit, as
instructed
c.
Keep
detailed records of activities and provide a summary each month;
prepare for the supervisor a weekly summary of activities and
anticipated activities for the next several weeks
d.
Update
shareholder and other records
e.
Update
legal, operational, financial and accounting records
f.
Manage federal,
state, and local legal, regulatory, and accounting
compliance
g.
Maintain a
professional and welcoming office
ABI
– BERNARD COHEN Employment Agreement – Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
EXHIBIT “B”
STANDARD TERMS AND CONDITIONS
These
Standard Terms and Conditions are made and incorporated by this
reference in the EMPLOYEE AGREEMENT (“Agreement”)
attached hereto.
1.0
PROTECTION
OF EMPLOYER INFORMATION AND PROPERTY
1.1
Trade Secrets. EMPLOYEE hereby
agrees and covenants not to disclose to third-parties or otherwise
use to the detriment of EMPLOYER any of the EMPLOYER’s data,
forms, processes, procedures, business plans or information, and
methods of operation whether or not marked
“confidential” or “trade secret”, and all
of the foregoing is agreed to treated as confidential and trade
secrets of EMPLOYER by EMPLOYEE.
1.2
Intellectual Property. EMPLOYEE
shall immediately cease and desist using any of EMPLOYER’s
trade name, trade and service marks, and any other intellectual or
intangible property (whether or not registered) upon termination of
this Agreement. Any original works, as that term is defined under
the U.S. Copyright laws, that are created by EMPLOYEE in the
performance of this Agreement is agreed to be a “work made
for hire” and shall vest ownership to EMPLOYER upon creation.
Any other intellectual property created by EMPLOYEE that is not
subject to the copyright laws, are made by EMPLOYEE for the
exclusive benefit of EMPLOYER and EMPLOYEE hereby grants to the
EMPLOYER an irrevocable, exclusive, unlimited, and royalty-free
license to EMPLOYER for such works.
1.3
Use of Trade Equipment.
EMPLOYEE agrees and covenants that its use of EMPLOYER’s
trade equipment, inclusive of EMPLOYER’s information
technology, computer, and communications systems, is for the
exclusive benefit and purpose of further EMPLOYER’s business.
EMPLOYEE further agrees that any personal use of EMPLOYER’s
trade equipment is not permitted.
2.0
EMPLOYEE’S
DUTIES UPON TERMINATION.
2.1
Return of EMPLOYER Property.
Upon termination, EMPLOYEE shall immediately return to EMPLOYER any
and all data, information, computer records and data, business
records and files, and any other document, record, trade equipment,
supplies, keys, modes of access, or any other material that was
furnished by or work products (including digital photographs, data,
worksheets, draft and final work product versions) created for the
EMPLOYER during the term of the Agreement. All of the foregoing
shall at all times by conclusively owned by the EMPLOYER and shall
be returned and submitted to the EMPLOYER at the conclusion of each
task or sub-task assigned under the Agreement. No files, documents,
or other materials will be removed from the EMPLOYER office to
perform the scope of work under this Agreement.
ABI
– BERNARD COHEN Employment Agreement – Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
2.2
Termination of Right of Access.
Upon termination, EMPLOYEE’s right of access to
EMPLOYER’s information technology, computer and
communications systems, trade equipment, business premises,
records, files and any other property of EMPLOYER shall be
automatically terminated without further notice.
2.3
Transfer of Business
Assignments. EMPLOYEE agrees that upon termination, EMPLOYER
has the unlimited right to assign any of EMPLOYEE’s projects,
assignments, or other matters (in whole, or in part) to another
person or entity as solely determined by EMPLOYER. EMPLOYEE hereby
understands and agrees that EMPLOYEE does not have any property
interest whatsoever in any of the projects, assignment, business
relationships, intangible and tangible property, and any other
matter made, created, or performed during the term of this
Agreement.
3.0
MISCELLANEOUS
PROVISIONS.
3.1
Exclusive and Binding
Arbitration. THE PARTIES
AGREE TO BINDING ARBITRATION AS THE EXCLUSIVE DISPUTE RESOLUTION
FORUM TO SETTLE AND RESOLVE ANY AND ALL DISPUTES ARISING FROM THE
AGREEMENT AND THE EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE
PARTIES. IT IS FURTHER AGREED THAT TEXAS LAW SHALL GOVERN THIS
AGREEMENT (IRRESPECTIVE OF ITS CONFLICT OF LAW RULES), AND THAT THE
JURISDICTION AND VENUE FOR BINDING ARBITRATION SHALL BE THE CITY OF
DALLAS, STATE OF TEXAS. THE PARTIES AGREE TO UTILIZE JAMS MEDIATION
AND ARBITRATION SERVICES TO SETTLE ALL DISPUTES. THE PARTIES
EXPRESSLY AGREE TO WAIVE THEIR RIGHTS TO A JURY
TRIAL.
3.2
Injunctive and Equitable
Relief. Notwithstanding Section 3.1, EMPLOYEE also agrees
that any breach by EMPLOYEE of Sections 1.0 and 2.0 of this
Agreement, including such sub-parts, would create irreparable and
immediate harm to EMPLOYER and as such EMPLOYEE consents to any
injunctive or equitable relief that may be available to
EMPLOYER.
3.3
Attorney’s Fees and
Costs. The prevailing party under any dispute shall be
entitled to its reasonable attorney’s fees and costs,
including costs of investigation of such dispute.
3.4
Collection of Claims. In the
event that EMPLOYEE adjudged the prevailing party in any action,
EMPLOYEE hereby agrees that her sole source to satisfy any judgment
shall be the operating checking account of the EMPLOYER. EMPLOYEE
expressly waives any rights to seek collection of any judgment
against EMPLOYER’s intellectual property rights or
interests.
ABI
– BERNARD COHEN Employment Agreement – Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
3.5
Survival. This Agreement shall
survive and inure to the benefit of the successors, assigns, heirs,
and/or estates of the parties.
3.6
Statute of Limitations.
Notwithstanding any statutory or common-law rule to the contrary,
the parties agree that any right of action must be commenced within
one (1) year of the act, omission, event, or circumstance that gave
rise to such cause of action.
3.7
Liquidated Damages; Settlement,
Release and Discharge of EMPLOYER. The parties agree that
the extent and cost for injury, damage, or other adverse impacts to
EMPLOYEE under this Agreement is difficult to determine and
speculative. In the interest of settling any claims against
EMPLOYER expeditiously, the EMPLOYER may elect to pay EMPLOYEE
liquidate damages and terminate this Agreement. EMPLOYEE hereby
agrees to this liquidated damages clause and shall settle, release
and discharge EMPLOYER from any and all liabilities upon
EMPLOYER’s payment. As such, the parties expressly agree that
the extent of EMPLOYER’s liability to EMPLOYEE for injury,
damage, or other adverse impact, whether incurred during the course
of performance of this Agreement or arising from wrongful
termination or other breach of this Agreement by EMPLOYER shall be
(2) months Salary. These provisions and waiver shall apply to any
claims, whether known by EMPLOYEE, and do include an express waiver
of any reservation of rights under Section 1542 of the California
Civil Code which reads as follows: “A GENERAL RELEASE DOES NOT EXTEND TO
CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HER
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOW BY HIM
MUCH HAVE MATERIALLY AFFECTED HER SETTLEMENT WITH THE
DEBTOR.”
3.8
Pro-rated Salary and Medical
Contribution. In the event this Agreement is terminated
prior to the expiration of the Term, any salary, stock grants,
benefits, and/or medical contribution payments due EMPLOYEE shall
be equitably adjusted and pro-rated.
ABI
– BERNARD COHEN Employment Agreement – Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
Exhibit 10.1 (i)
SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE
This
Settlement Agreement and Mutual General Release (the
“Agreement”), effective as of December 24, 2020
(“Effective Date”), is made and entered into by and
between AMARILLO BIOSCIENCES, INC. (“ABI”), on the one
hand, and BERNARD COHEN (“COHEN”), on the other hand,
each of which shall be referred to as a “Party” hereto
and collectively as the “Parties hereto” or “the
Parties to this Agreement.”
RECITALS
WHEREAS, the Parties entered into that
certain Employment Agreement dated and executed on March 28, 2018
(“Employment Agreement”);
WHEREAS, the term of the Employment
Agreement commenced on January 1, 2018 and terminates on December
31, 2020;
WHEREAS, ABI provided written notice to
COHEN on December 10, 2020 stating that the Employment Agreement
shall be terminated as of December 31, 2020 pursuant thereto
(“Termination Notice”);
WHEREAS, ABI received a notice of breach
of contract dated November 23, 2019 from COHEN’s legal
counsel, Jeremi K. Young of Young & Newsom, P.C. alleging the
following breaches of the Employment Agreement: (a) unilateral
reduction in salary from early September 2019 by 67% from a gross
monthly pay of $5,800 to $1,950 (“Salary Reduction”),
(b) violation of the Federal Fair Labor Standards Act for
classifying Cohen as exempt from overtime (“FLSA
Claim”), compensation due for accrued and unused paid time
off (“Paid Time Off Claim”), and (c) ABI’s
non-payment of Medicare supplemental insurance premiums
(“Insurance Claim”) (collectively herein referred to as
“COHEN Claims”;
ABI
– BERNARD COHEN Settlement Agreement and Mutual General
Release
Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
WHEREAS, all of the COHEN Claims have
been cured or addressed by ABI and COHEN has accepted ABI’s
actions to cure or address the COHEN Claims, and in any event, to
avoid any instance of doubt the Parties enter into this Agreement;
and
WHEREAS, excepting the matters under
Articles VII and VIII of the Employment Agreement (which is
stipulated to survive termination of the Employment Agreement) and
any fraudulent or criminal actions by either Party during the term
of the Employment Agreement, the Parties to this Agreement wish to
forever discharge all claims, demands, liabilities, and causes of
action which have or could have been asserted among them relating
to the COHEN Claims and any and all claims arising out of any
agreement, relationships, acts or occurrences between the Parties
to date.
AGREEMENT
NOW, THEREFORE, and in consideration of
the mutual terms, obligations, covenants agreements, releases and
conditions herein contained, receipt and sufficiency of which are
hereby acknowledged, the Parties to this Agreement hereby agree as
follows:
1.
Incorporation of
Recitals. The above
Recitals are hereby incorporated herein by reference.
2.
Consideration.
Contemporaneously with the execution of this Agreement the Parties
shall enter into a separate employment agreement which shall
provide for (a) an employment term commencing January 1, 2021 and
terminating on March 31, 2021, (b) a monthly salary payable to
COHEN in the amount of $5,833.33, payable bi-monthly, (c) $1,000
per month payable in shares of ABI’s unregistered, voting
common stock, such shares being priced at the average of all
trading day closing quotes on the OTC-BB for the month preceding
date of issuance and such shares to be issued on February 1, 2021,
March 1, 2021 and April 1, 2021 (or as soon as thereafter
practicable), and employee benefits pursuant to the ABI employee
benefits plan or policy which may include hospital, surgical,
medical, dental, group life insurance or other benefits on terms at
least as favorable as those accorded to other employees of ABI,
subject to insurability. In addition, pursuant to Section 7.03 of
the Employment Agreement, COHEN shall execute and deliver an
Intellectual Property Right Assignment Agreement conveying and
assigning to ABI all right, title and interest in the matters
stipulated therein.
ABI
– BERNARD COHEN Settlement Agreement and Mutual General
Release
Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
3.
Specific Releases
of COHEN Claims. COHEN hereby acknowledges and agrees that
he has received all compensation and/or wages due to him from the
ABI and that he is not entitled to any other payments or employee
benefits of any kind including, but not limited to, regular wages,
overtime wages, waiting time penalties, meal period or rest period
penalties, bonuses, commissions, vacation pay, equity, expense
reimbursements or any other compensation or benefits of any
kind.
4.
Mutual General
Releases. Except for
the promises, warranties, representations or obligations made or
expressly undertaken or reaffirmed in this Agreement, upon the
Parties to this Agreement executing this Agreement, the Parties to
this Agreement on behalf of themselves, and on behalf of their own
predecessors, successors, and assigns hereby release and discharge
the other Party hereto and that Party’s predecessors,
successors, assigns, current and former officers, directors,
agents, employees, shareholders, partners, joint venturers,
insurers, and attorneys from any and all claims, suits, demands,
obligations, liabilities, attorneys fees, costs, and causes of
action of any kind whatsoever, whether known or unknown, suspected
or unsuspected, claimed or unclaimed, asserted or unasserted or
which could have been claimed or asserted by either Party as of the
Effective Date, irrespective of the theory of recovery that could
be asserted. This release applies to all claims in contract, tort,
or otherwise, and under any statute or common law, in law or in
equity, based on any act from the beginning of time until the
Effective Date hereof. COHEN expressly acknowledges that this
release applies to, without limitation:
a.
any and all claims
relating to or arising from his employment relationship (including
but not limited to claims for wages with ABI and the termination of
that relationship;
b.
any and all claims
relating to, or arising from, his right to receive, purchase, or
actual purchase of shares of stock of the ABI, including, without
limitation, any claims for fraud, misrepresentation, breach of
fiduciary duty, breach of duty under applicable state corporate
law, and securities fraud under any state or federal
law;
ABI
– BERNARD COHEN Settlement Agreement and Mutual General
Release
Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
c.
any and all claims
for wrongful discharge of employment; termination in violation of
public policy; discrimination; breach of contract, both express and
implied; breach of a covenant of good faith and fair dealing, both
express and implied; negligent or intentional infliction of
emotional distress; negligent or intentional misrepresentation;
negligent or intentional interference with contract or prospective
economic advantage; unfair business practices; defamation; libel;
slander; negligence; personal injury; assault; battery; invasion of
privacy; false imprisonment; and conversion;
d.
any and all claims
for violation of any federal, state or municipal statute,
including, but not limited to, Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Age Discrimination
in Employment Act of 1967, the Americans with Disabilities Act of
1990, the Fair Labor Standards Act, the Employee Retirement Income
Security Act of 1974, The Worker Adjustment and Retraining
Notification Act, Older Workers Benefit Protection Act; and Texas
labor laws including, but not limited to, the Texas Payday Act,
Texas Minimum Wage Law, Texas statutes pertaining to employment
discrimination, fair employment, and workers
compensation.
e.
any and all claims
for violation of the federal, or any state, constitution;
and
f.
any and all claims
arising out of any other laws and regulations relating to
employment or employment discrimination.
ABI
– BERNARD COHEN Settlement Agreement and Mutual General
Release
Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
5.
Waiver by the
Parties to this Agreement. Except as otherwise provided under the
Agreement, each of the Parties to this Agreement elects to and
hereby does release each other from all claims, whether known or
unknown, general or specific, and each of the Parties to this
Agreement fully understands that if the facts with respect to the
Agreement are found hereafter to be other than or different from
the facts now believed by it to be true, each of the Parties
expressly accepts and assumes the risk of such possible differences
in fact and agrees that this Agreement shall be and remain
effective, notwithstanding any such differences. Each of the
Parties hereto states that this Agreement is executed voluntarily
with full knowledge of its significance and legal
effect.
6.
Older Workers
Benefits Protection Act: It is intention of the Parties that
the releases contained in this agreement apply to all claims of any
kind against ABI. In order to comply with the Older Workers
Benefits Protection Act [29 U.S.C. Section 626(f)] and effectuate
the release by COHEN of any potential claims under the federal Age
Discrimination in Employment Act, COHEN agrees as
follows:
a.
He has carefully
reviewed the foregoing Agreement, and understands the terms and
conditions it contains;
b.
He has been advised
of his right to consult any attorney to review this Agreement, and
has had the benefit of an attorney throughout the settlement
process and has had an attorney review this Agreement;
c.
He does not waive
any rights or claims that may arise after the date this Agreement
is executed;
d.
He is receiving
consideration beyond anything of value to which he is already
entitled;
e.
By entering into
this Agreement, he is giving up potential valuable legal rights,
and he intends to be bound by all the terms and conditions set
forth above;
ABI
– BERNARD COHEN Settlement Agreement and Mutual General
Release
Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
f.
He is entering into
this Agreement freely, knowingly, and voluntarily;
g.
He has been given
twenty-one (21) days to consider whether to agree to the terms and
conditions set forth in this Agreement and expressly waives this
provision if he chooses to execute it prior to the expiration of
twenty-one (21) days.
h.
For a seven (7) day
period following his execution of this Agreement, COHEN may revoke
this Agreement by delivering a written revocation to counsel for
the ABI, and this Agreement shall not become effective nor
enforceable until the revocation period has expired.
7.
Entire
Agreement. This
Agreement and any provisions reaffirmed herein constitutes the
entire agreement and understanding between the Parties to this
Agreement with respect to the subject matters herein, and
supersedes and replaces any prior agreements and understandings,
whether oral or written, between and among them with respect to
such matters. Each Party expressly represents that it has not
relied upon any representation of any other Party or its attorney,
outside of the express provisions of this Agreement, and that it
has relied solely on counsel of its choice to advise it with
respect to the terms here. The provisions of this Agreement may be
waived, altered, amended or repealed in whole or in part only upon
the written consent of all Parties to this Agreement.
8.
Governing Law;
Venue. This Agreement
shall be governed by and construed in accordance with the internal
laws of the State of Texas. Any court action arising out of or
relating to this Agreement shall be sited in a court of competent
jurisdiction in Dallas, Texas, and the Parties expressly consent to
jurisdiction in such courts.
ABI
– BERNARD COHEN Settlement Agreement and Mutual General
Release
Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
9.
No
Assignment/Authority of Signatory. The Parties to this Agreement
represent that each has not previously assigned or conveyed to any
third person (including by operation of law) any right, claim or
cause of action that is the subject of this Agreement (including
the releases contained in this Agreement), and that each has the
full and complete authority to enter into this Agreement. To the
extent that any third person’s consent is necessary for any
of the Parties hereto to enter into this Agreement and to make it
binding on all Parties hereto, the Parties to this Agreement
represent that they have acquired such third person’s consent
to the same.
10.
No Admission of
Liability. The
Parties to this Agreement agree that nothing in this Agreement is
intended or shall be construed as an admission of
liability.
11.
No Construction
against Drafter. For
purposes of any action arising out of the application,
interpretation, or alleged breach of this Agreement brought by any
Party, each Party waives any statutory or common law principle, and
any judicial interpretation of this Agreement which would create a
presumption against the other Party as a result of its having
drafted any provision of this Agreement. Counsel for the respective
Parties have reviewed and revised this Agreement, and there shall
not be applied any rule construing ambiguities against the drafting
Party.
12.
Additional
Documents. Each of
the Parties to this Agreement agrees that it will execute and
provide, at the request of any other Party, any and all such other
documents or other written instruments as may be reasonably
necessary to effectuate the purposes of this
Agreement.
13.
Descriptive
Headings. The
headings used herein are descriptive only and for the convenience
of identifying provisions, and are not determinative of the meaning
or effect of any such provisions.
ABI
– BERNARD COHEN Settlement Agreement and Mutual General
Release
Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
14.
Successors and
Assigns. All
covenants, promises, obligations, warranties, representations and
agreements herein shall bind and inure to the benefit of the
respective successors and assigns of the Parties to this
Agreement.
15.
Litigation
Expense. If any Party
brings an action against any other Party hereto by reason of the
breach of any covenant, promise, warranty, representation,
obligation or condition hereof, or otherwise arising out of or
relating to this Agreement, whether for declaratory or other
relief, the prevailing Party in such suit shall be entitled to its
costs of suit and reasonable attorneys’ fees.
16.
Signature in
Counterparts; Facsimile. This Agreement may be signed in
counterparts, and facsimile signatures shall have the same binding
effect as originals.
17.
Severability.
Should any portion of this Agreement be held to be void or
unenforceable, the remaining provisions shall remain in full force
and effect, to be read and construed as if the void and
unenforceable provisions were originally deleted.
18.
Voluntary Execution
of Agreement. This Agreement is executed voluntarily and
without any duress or undue influence on the part or behalf of the
Parties hereto, with the full intent of releasing all claims. The
Parties acknowledge that they have read this Agreement and they
have been represented in the preparation, negotiation, and
execution of this Agreement by legal counsel of their own choice or
that they have voluntarily declined to seek such
counsel.
BY
SIGNING BELOW, THE UNDERSIGNED AGREE AND ACKNOWLEDGE THEY HAVE READ
AND UNDERSTAND THE BINDING NATURE OF THIS SETTLEMENT AGREEMENT,
THAT IT REPRESENTS A FINAL AND BINDING SETTLEMENT ACCORDING TO ITS
TERMS AND THAT THEY ARE ENTERING INTO THE SETTLEMENT AGREEMENT
VOLUNTARILY.
ABI
– BERNARD COHEN Settlement Agreement and Mutual General
Release
Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
IN WITNESS WHEREOF, the undersigned Parties execute this
Agreement:
PARTIES
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By:
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/s/
Bernard Cohen
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Bernard Cohen |
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AMARILLO
BIOSCIENCES, INC.
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By:
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/s/ John Junyong Lee
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John Junyong Lee |
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Secretary |
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ABI
– BERNARD COHEN Settlement Agreement and Mutual General
Release
Effective
January 1 2021
Initials:
EMPLOYER _________; EMPLOYEE __________
Exhibit
10.1 (j)
AMENDMENT TO CONSULTING AGREEMENT
THIS
AMENDMENT (“Amendment’) is made on this 25th day of November
2020 to that certain Consulting Agreement dated May 3, 2018
(“CA”) by and between Amarillo Biosciences, Inc., a
company organized under the laws of the State of Texas and/or its
affiliates (“ABI”) and i2China Management Group, LLC, a
Delaware limited liability company (“Consultant”) as
follows.
1.
This Amendment
shall amend and replace, in its entirety, Section 1 of the CA dated
May 3, 2018 between ABI and Consultant as follows:
1. Since
May 3, 2018, Consultant has been dutifully retained by ABI without
interruption or termination of Services by mutually agreement. ABI
desires to maintain the existing engagement relationship and the
Consultant hereby accepts to continue such engagement, in
accordance with the terms and conditions set forth in this
Agreement. The Consultant shall continue to serve as an
“Executive Advisor” to ABI and report directly to ABI
Chairman & CEO, for the period commencing from April 15, 2018
(the “Effective Date”) and ending one week after ABI
serves written notice of termination on the Consultant or
Consultant serves written notice of termination on ABI (herein "the
Notice Period"). If ABI serves notice of termination of this
Agreement, in addition to the Fees chargeable for the period of
this Agreement, Consultant will be entitled to invoice ABI for an
additional sum equal to one month's Retainer fees by way of
compensation for termination of the Agreement. During the Notice
Period ABI shall have absolute discretion as to whether Consultant
will be required to continue to perform Services. ABI reserves the
right to terminate this Agreement at any time without further
payment of any compensation in the event of fundamental breach of
the Agreement by the Consultant in the provision of the Services
including but not limited to any significant illegal or criminal
actions, gross insubordination, or gross negligence.
2.
This Amendment
shall amend and replace, in its entirety, Section 3 of the CA dated
May 3, 2018 between ABI and Consultant as follows:
3. This
agreement shall be extended until May 3, 2022, unless earlier
terminated in accordance with the terms of Section 1 above.
Thereafter, this Agreement may be extended for additional terms by
the mutual consent of the parties.
3.
This Amendment
shall amend and replace, in its entirety, Section 4 of the CA dated
May 3, 2018 between ABI and Consultant as follows:
4. Retainer to
Consultant
Consultant has provided exemplary services and proven extremely
integral to ABI’s corporate operations, business development
efforts, and investment financing activities. Given the increased
level of responsibility and workload assigned to the Consultant
during the engagement, ABI agrees to pay Consultant a monthly cash
retainer of $15,000 (the “Retainer”) effective
retroactively as of January 1, 2020 for continuing the performance
of Services specified in Exhibit A upon the execution of this
Amendment. It is understood that ABI may have insufficient cash
funds to make payment of Retainer at the time of signing this
Amendment. ABI agrees that upon such time it and/or its affiliate
companies receives adequate investment financing proceeds, ABI will
immediately pay on demand any and all past due Retainer payments in
its entirety to Consultant. Note that the payable difference of
$7,000 between the retroactive cash retainer increase ($15,000)
and
original cash retainer ($8,000) shall
not be applied as a convertible promissory note; rather it shall be
designated payable as a simple cash promissory note at the minimal
interest required by law for such promissory note. Notwithstanding,
a nominal portion of the Retainer in the amount of four thousand US
dollars ($4,000) shall continue to be payable in advance by the
5th
day of each month as has been the case
since September 2019.
4.
This Amendment
shall amend and replace, in its entirety, Section 4c of the CA
dated May 3, 2018 between ABI and Consultant as
follows:
4c. Warrants
As a performance bonus and incentive to align the
Consultant’s interests for the extension of Services, ABI
agrees to extend for an additional five (5) years that certain
Warrant Certificate dated April 15, 2018 between Consultant and ABI
(“Original Warrant Certificate”) for 452,617 warrants
exercisable (partially, or in its entirety for 452,617 shares of
fully-paid Voting Common Stock of ABI) at an exercise price of
$0.265125, which had previously expired on April 14, 2020.
Consultant shall be reissued a new Warrant Certificate (“New
Warrant”) with similar terms as the Original Warrant
Certificate that will indicate a new expiration date of November
24, 2025. In the case of any partial exercise of New Warrant by
Consultant, ABI will issue and deliver to Consultant a subsequent
Warrant of like tenor for the balance of the shares of ABI Common
Stock purchasable under the same strike price and terms as the
Warrant. It is understood by the Consultant that resulting shares
of Common Stock owned may be in the form of ABI’s restricted
(as to Rule 144) stock and shall be solely responsible for any tax
payments related to the exercise of shares. Consultant hereby
agrees to timely pay all federal income tax withholdings,
self-employment tax, FITA, FUCA, and any other items payable with
respect to the compensation received by Consultant from
ABI.
5.
All other terms and
conditions under the CA not specifically amended or modified hereby
shall continue in full force and effect.
IN
WITNESS WHEREOF, Company executes this Amendment as of the date
first written above.
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AMARILLO
BIOSCIENCES, INC, a Texas Corporation
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By:
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/s/ Stephen T.
Chen
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Dr. Stephen T. Chen |
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Chairman & CEO |
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i2CHINA MANAGEMENT
GROUP, LLC (“CONSULTANT”)
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By:
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/s/ Lawrence K.
Lin
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Lawrence K. Lin |
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Manager |
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Exhibit
31.1
FORM OF CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
CERTIFICATION
I,
Stephen T. Chen, certify that:
1. I
have reviewed this annual report on Form 10-K of Amarillo
Biosciences, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement
of material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the periods
covered by this report;
3. Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4. The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f))for the registrant and
have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
(b)
Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting
principles;
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
(d) Disclosed
in this report any change in the registrant’s internal
control over financial reporting that occurred during the
registrant’s most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting;
and
5. The
registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize, and report financial
information; and
(b) Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
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Date: March 30, 2021
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/s/ Stephen T.
Chen
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Stephen T. Chen, Chairman of the Board,
Chief Executive Officer and Chief Financial Officer
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Exhibit
33.1
CERTIFICATION REPORT
Management’s Report on Internal Control Over Financial
Reporting
Management
is responsible for establishing and maintaining adequate internal
control over financial reporting of the Company. Internal control
over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally
accepted in the United States of America.
The
Company’s internal control over financial reporting includes
those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
Company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements
in accordance with accounting principles generally accepted in the
United States of America, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of
management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
Company’s assets that could have a material effect on the
financial statements.
Because
of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management
conducted an evaluation of the effectiveness of internal control
over financial reporting based on the framework in Internal
Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based
on this evaluation, management concluded that the Company’s
internal control over financial reporting was not effective as of
December 31, 2020.
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Date: March 30, 2021
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/s/ Stephen T.
Chen
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Stephen T. Chen, Chairman of the Board,
Chief Executive Officer and Chief Financial Officer
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Exhibit
99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report of Amarillo Biosciences, Inc. on
Form 10-K for the period ended December 31, 2019 as filed with the
Securities and Exchange Commission on the date hereof (the
“Report”), the undersigned, in the capacity and on the
date indicated below, hereby certifies pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of his
knowledge:
1.
The Report fully
complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
2.
The information
contained in the Report fairly presents, in all material respects,
the financial condition and results of operation of the
Company.
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Date: March 30, 2021
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/s/ Stephen T.
Chen
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Stephen T. Chen, Chairman of the Board,
Chief Executive Officer and Chief Financial Officer
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F-6