| Fresh Start Accounting [Text Block] | 5. Fresh Start Accounting. Upon the Company’s emergence from Chapter 11 bankruptcy, the Company applied the provisions of fresh start accounting to its financial statements as (i) the holders of existing voting shares of the Predecessor Company received less than 50% of the voting shares of the emerging entity and (ii) the reorganization value of the Company’s assets immediately prior to confirmation was less than the post-petition liabilities and allowed claims. The Company applied fresh start accounting as of November 20, 2014, with results of operations and cash flows in the period ending November 20, 2014 attributed to the Predecessor Company. Upon the application of fresh start accounting, the Company allocated the reorganization value to its individual assets based on their estimated fair values. Reorganization value represents the fair value of the Successor Company’s assets before considering liabilities, and the excess of reorganization value over the fair value of identified tangible and intangible assets is reported separately on the balance sheet. In accordance with fresh-start reporting requirements, management of ABI has reviewed its assets (excluding cash and prepaid expenses) and evaluated the estimated fair value of those assets, which includes its equipment and its patents. For equipment (which includes furniture & fixtures, computer equipment and software) management evaluated and determined that its estimated fair value immediately preceding ABI’s confirmation date was $0. Management reviewed the various types of equipment with an original book cost of approximately $46,000 and with dates acquired ranging from years between 1992 through 2008. Based on the condition and age of the equipment, management determined that any proceeds that could be received from a local auction-type sale would be minimal; therefore, management determined that $0 (which amount also represents current book carrying value) was a reasonable estimate of ABI’s equipment fair value. For patents, management evaluated and determined that its estimated fair value immediately preceding ABI confirmation date was approximately $86,000. Management reviewed the various patents with dates acquired ranging from years between 1999 and 2010. Based on the consideration of minimal revenues and cash flows from these patents over the past years since their inception dates, management concluded that the discounted cash flow approach was not relevant. However management did consider what it believes ABI could potentially sell such patents for to a knowledgeable third-party firm in the bio-tech industry and in an arm’s length transaction, which management determined that $86,000 (which amount also represents current book carrying value) was a reasonable estimate of ABI patents fair value. The four-column condensed balance sheet provided below applies the effects of the Plan of Reorganization and fresh start accounting to the carrying values and classifications of assets or liabilities as of November 20, 2014. Upon adoption of fresh start accounting, the recorded amounts of assets and liabilities were adjusted to reflect their estimated fair values. Accordingly, the reported historical financial statements of the Predecessor Company prior to the adoption of fresh start accounting for periods ended on or prior to November 20, 2014 are not comparable to those of the Successor Company. In applying fresh start accounting, the Company followed these principles:
● The reorganization value, which represents the enterprise value and non-interest bearing liabilities, was allocated to the Successor Company's assets based on their estimated fair values. The reorganization value exceeded the sum of the fair value assigned to assets. This excess reorganization value was recorded as part of the Successor Company assets at November 20, 2014.
● Each liability existing as of the fresh start accounting date, other than deferred taxes, has been stated at the fair value, and determined at appropriate risk adjusted interest rates.
● Deferred taxes were reported in conformity with applicable income tax accounting standards. Deferred tax assets and liabilities have been recognized for differences between the assigned values and the tax basis of the recognized assets and liabilities. The adjustments set forth in the following condensed balance sheet at November 20, 2014 reflect the effect of the consummation of the transactions contemplated by the Plan of Reorganization (reflected in the column "Reorganization Adjustments") as well as fair value adjustments as a result of the adoption of fresh start accounting (reflected in the column "Fresh Start Adjustments").
Predecessor Company Reorganization Adjustments Fresh-Start Adjustments Successor Company
Assets
Current assets:
Cash and cash equivalents $ 261,147 $ 113,220 (a) $ - $ 374,367
Prepaid expense and other current assets 24,063 - - 24,063
Total current assets 285,210 113,220 - 398,430
Patents, net 86,355 - - 86,355
Total assets 371,565 113,220 - 484,785
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses 347,236 (291,009 ) (b) - 56,227
Accrued interest – related parties 1,051,093 (1,051,093 ) (c) - -
Accrued expenses – related party 78,360 (78,360 ) (d) - -
Notes payable – related parties 4,214,935 (3,830,380 ) (e) - 384,555
Total current liabilities 5,691,624 (5,250,842 ) - 440,782
Total liabilities 5,691,624 (5,250,842 ) - 440,782
Stockholders' deficit
Preferred stock (Predecessor) 33 (33 ) (f) - -
Common stock (Predecessor) 732,910 (732,910 ) (g) - -
Additional paid-in capital (Predecessor) 31,968,516 732,910 (g) (32,701,426 ) (j) -
Preferred stock (Successor) - - - -
Common stock (Successor) - 201,448 (h) - 201,448
Additional paid-in capital (Successor) - 1,739,797 (h) (1,897,242 ) (j) (157,445 )
Accumulated deficit (38,021,518 ) 3,422,850 (i) 34,598,668 (j) -
Total stockholders' deficit (5,320,059 ) 5,364,062 - 44,003
Total liabilities and stockholders’ deficit $ 371,565 $ 113,220 $ - $ 484,785 Reorganization Adjustments
(a) The cash payments recorded on the Effective Date from implementation of the Plan of Reorganization include the following:
Proceeds from Yang Group $ 322,500
Less: Payments of Class Four claims (207,110 )
Less: Payments of Class Five claims (2,170 )
Net increase in cash $ 113,220
(b) Pursuant to the Plan of Reorganization, General Unsecured Creditors were given a settlement of six percent (6%) of the amount of the allowed claim. Administrative Convenience Creditors were given the opportunity to receive the lesser of $500 or 100% of their claim and receive payment within twenty-eight (28) days after the twenty-eight day objection period expired. The Effective Date was November 20, 2014. Creditors had twenty-eight days from the Effective Date to object to the amount of their particular claim. The objection period was from November 21, 2014, through December 18, 2014. Administrative Convenience Claims were paid beginning December 19, 2014 and payments to this class were completed no later than January 16, 2015. Creditors in the following general ledger accounts received six percent (6%) payout in full and final settlement of all outstanding debts. The balance of the debts for both classes was discharged after the settlement payments were tendered.
General Ledger Account Amount Paid in Settlement Amount Discharged
Deferred Revenue $ 225 $ 1,557
Accounts Payable 8,029 161,167
Accrued Payroll – P. Mueller* - * 30,590 *
Accrued Payroll – B. Cohen 793 12,428
Notes Payable 1,111 17,266
Accrued Dividends 3,471 54,372
Total $ 13,629 $ 277,380 * There was no settlement payout for this creditor. The debt was beyond the Statute of Limitations and, therefore, not an allowed debt.
(c) Pursuant to the Plan of Reorganization, Accrued Interest for Related Parties was classified as General Unsecured Creditors. These Creditors received six percent (6%) of the allowed claim in full and final settlement of all outstanding debts. The balance of the debt was discharged after the settlement payment was tendered.
Description Amount
Tibbits payout of interest on $200,000 loan; write off of unpaid & discharged interest debt. $ 43,123
Adjustment to interest for The Yang Group. 1,933
Sub-Total 45,056
Accrued Yang interest post-bankruptcy (163 )
Accrued Yang interest post-bankruptcy (53 )
Sub-Total Yang interest (216 )
Net Sub-Total 44,840
Write off HBL accrued interest discharged. 1,006,253
Total Adjustment $ 1,051,093
(d) Write off licensing fees due Hayashibara Biochemical Laboratories, Inc. (HBL) which originated through sales of Bimron, and interferon product.
(e) The total amount of cash received by ABI from the Yang Group was $2,324,185. The amount of debt exchanged for equity with Yang was $1,939,630 leaving $384,555 of cash not converted to debt and still owed to The Yang Group. This cash was for the purpose of financing future, post-bankruptcy operations. The Notes Payable – Related Parties consisted of the following:
Creditor Amount
Tibbits $ 200,000
Martin Cummins 13,250
Allowed Unsecured Debt to Yang 1,939,630
Hayashibara Biochemical Laboratories 2,000,000
Total Discharged 4,152,880
Yang Cash for future operations (322,500 )
Total Adjustment $ 3,830,380 The amount of remaining debt to Yang, $384,555 was reclassified pursuant to the Plan of Reorganization in that ABI has a secured debt to Yang in the amount of $150,000 and an unsecured note payable to Yang for $234,555.
( f) Convert Preferred Stock at Par to Common Stock pursuant to Implementation of Plan of Reorganization – 32.62 shares of Preferred stock at $0.01 par to 3,262,000 Common shares at par $0.01.
(g) Adjust Common Stock at par value of $0.01 for 20,144,810 Common Shares following 1-for-19 reverse stock split pursuant to Plan of Reorganization.
(h) Adjust Common Stock at par of $0.01 and Additional Paid in Capital for conversion of Yang debt to (New) ABI Common Equity.
(i) Adjust Accumulated Deficit for debt forgiveness/debt discharge pursuant to the Plan of Reorganization. Fresh Start Adjustments
(j) Adjust Paid in Capital – Predecessor, Paid in Capital – Successor, and Accumulated Deficit for Fresh Start Reporting. |
