UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from____to____ from ____ to____
Commission File No. 0-20791
AINOS, INC. | ||
(Exact name of registrant as specified in its charter) |
Texas | 75-1974352 | |||
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |||
8880 Rio San Diego Drive, Ste. 800, San Diego, CA 92108 (858) 869-2986 | ||||
(Address and telephone number, including area code, of registrant's principal executive offices) | ||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [√]☒ Yes [ ]No
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“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company,"” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☐ |
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. D
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) [ ]☐ Yes [√]☒ No
142,442,215 shares of common stock, par value $0.01 per share, outstanding as of November 13, 2020
AINOS, INC.
INDEX
PAGE NO. | ||||
3 | ||||
Balance Sheets– September 30, | 3 | |||
4 | ||||
5 | ||||
6 | ||||
7 | ||||
8 | ||||
14 | ||||
32 | ||||
32 | ||||
33 | ||||
36 | ||||
36 | ||||
36 | ||||
36 | ||||
38 | ||||
39 | ||||
| 2 |
| Table of Contents |
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Ainos, Inc.
Balance Sheets
(Unaudited)
September 30, 2020 | December 31, 2019 | |||||||
| Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 83,767 | $ | 409,039 | ||||
Accounts receivable | 751 | - | ||||||
Inventory | 3,452 | 4,131 | ||||||
Prepaid expense and other current assets | 69,960 | 32,125 | ||||||
Total current assets | 157,930 | 445,295 | ||||||
Patents, net | 139,774 | 146,263 | ||||||
Property and equipment, net | 3,576 | 5,068 | ||||||
Total assets | $ | 301,280 | $ | 596,626 | ||||
| Liabilities and Stockholders' Equity (Deficit) | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 359,996 | $ | 208,727 | ||||
Advances from investors | 85,000 | 100,000 | ||||||
Convertible notes payable – related party | 632,814 | 444,581 | ||||||
Total current liabilities | 1,077,810 | 753,308 | ||||||
Total liabilities | 1,077,810 | 753,308 | ||||||
| Stockholders' equity (deficit) | ||||||||
Preferred stock, $0.01 par value: | ||||||||
Authorized shares - 10,000,000, | ||||||||
| Issued and outstanding shares – 0 at September 30, 2020 and December 31, 2019 | - | - | ||||||
Common stock, $0.01 par value: | ||||||||
Authorized shares - 100,000,000, | ||||||||
| Issued and outstanding shares –40,916,351 and 40,516,351 at September 30, 2020 and December 31, 2019, respectively | 409,164 | 405,164 | ||||||
Additional paid-in capital | 4,586,068 | 4,207,786 | ||||||
Accumulated deficit | (5,771,762 | ) | (4,769,632 | ) | ||||
Total stockholders’ equity (deficit) | (776,530 | ) | (156,682 | ) | ||||
Total liabilities and stockholders’ equity (deficit) | $ | 301,280 | $ | 596,626 | ||||
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 706,931 |
|
| $ | 22,245 |
|
Accounts receivable |
|
| 44,643 |
|
|
| 0 |
|
Inventory |
|
| 175 |
|
|
| 3,024 |
|
Prepaid expense and other current assets |
|
| 133,065 |
|
|
| 51,144 |
|
Total current assets |
|
| 884,814 |
|
|
| 76,413 |
|
Patents, net |
|
| 19,011,337 |
|
|
| 180,628 |
|
Property and equipment, net |
|
| 39,956 |
|
|
| 3,249 |
|
Right of Use Asset |
|
| 55,724 |
|
|
| 0 |
|
Other Assets |
|
| 1,795 |
|
|
| 0 |
|
Total assets |
| $ | 19,993,626 |
|
| $ | 260,290 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity (Deficit) |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ | 578,549 |
|
| $ | 145,567 |
|
Contract liabilities |
|
| 37,616 |
|
|
| 0 |
|
Convertible notes payable – related party |
|
| 2,000,193 |
|
|
| 805,001 |
|
Convertible notes payable |
|
| 185,000 |
|
|
| 148,000 |
|
Lease Obligation-Current |
|
| 20,619 |
|
|
| 0 |
|
Total current liabilities |
|
| 2,821,977 |
|
|
| 1,098,568 |
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
Lease Obligation-Non current |
|
| 35,289 |
|
|
| 0 |
|
Total liabilities |
|
| 2,857,266 |
|
|
| 1,098,568 |
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit) |
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, 10 million shares authorized, 0 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively |
|
| 0 |
|
|
| 0 |
|
Common Stock, $0.01 par value, 300 million shares authorized, 142,442,215 and42,066,172 shares outstanding at September 30, 2021 and December 31, 2020, respectively |
|
| 1,424,422 |
|
|
| 420,662 |
|
Additional paid-in capital |
|
| 24,369,245 |
|
|
| 4,961,315 |
|
Accumulated deficit |
|
| (8,664,145 | ) |
|
| (6,220,255 | ) |
Translation adjustment |
|
| 6,838 |
|
|
| 0 |
|
Total stockholders’ equity (deficit) |
|
| 17,136,360 |
|
|
| (838,278 | ) |
Total liabilities and stockholders’ equity (deficit) |
| $ | 19,993,626 |
|
| $ | 260,290 |
|
See accompanying notes to financial statements.
Statements of Operations
(Unaudited)
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Revenues | $ | 192 | $ | 4,786 | $ | 15,876 | $ | 9,468 | ||||||||
| Cost of revenues | (123 | ) | (3,368 | ) | (11,221 | ) | (6,649 | ) | ||||||||
| Gross margin | 69 | 1,418 | 4,655 | 2,819 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development expenses | - | - | 389 | 52,510 | ||||||||||||
| Selling, general and administrative expenses | 321,153 | 366,824 | 1,001,893 | 1,161,317 | ||||||||||||
| Total operating expenses | (321,153 | ) | (366,824 | ) | (1,002,282 | ) | (1,213,827 | ) | ||||||||
| Operating income (loss) | (321,084 | ) | (365,406 | ) | (997,627 | ) | (1,211,008 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest income (expense), net | (2,201 | ) | (809 | ) | (4,503 | ) | (172 | ) | ||||||||
| Net income (loss) | (323,285 | ) | (366,215 | ) | (1,002,130 | ) | (1,211,180 | ) | ||||||||
| Basic and diluted net loss per average share available to common shareholders | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.03 | ) | ||||
| Weighted average common shares outstanding – basic and diluted | 40,516,351 | 40,156,334 | 40,620,055 | 39,684,743 | ||||||||||||
|
| Three months ended September 30 |
|
| Nine months ended September 30 |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Revenues |
| $ | 363,052 |
|
| $ | 192 |
|
| $ | 568,164 |
|
| $ | 15,876 |
|
Cost of revenues |
|
| 103,638 |
|
|
| 123 |
|
|
| 174,395 |
|
|
| 11,221 |
|
Gross margin |
|
| 259,414 |
|
|
| 69 |
|
|
| 393,769 |
|
|
| 4,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses |
|
| 646,798 |
|
|
| 0 |
|
|
| 646,798 |
|
|
| 389 |
|
Selling, general and administrative expenses |
|
| 795,958 |
|
|
| 321,153 |
|
|
| 2,178,969 |
|
|
| 1,001,893 |
|
Total operating expense |
|
| 1,442,756 |
|
|
| 321,153 |
|
|
| 2,825,767 |
|
|
| 1,002,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (1,183,342 | ) |
|
| (321,084 | ) |
|
| (2,431,998 | ) |
|
| (997,627 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income, net |
|
| 23,517 |
|
|
| (2,201 | ) |
|
| (9,361 | ) |
|
| (4,503 | ) |
Other Losses |
|
| (285 | ) |
|
| 0 |
|
|
| (2,532 | ) |
|
| 0 |
|
Total Non-operating income and expenses |
|
| 23,232 |
|
|
| (2,201 | ) |
|
| (11,893 | ) |
|
| (4,503 | ) |
Profit before income tax |
|
| (1,160,110 | ) |
|
| (323,285 | ) |
|
| (2,443,891 | ) |
|
| (1,002,130 | ) |
Less: Income tax |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Net loss |
|
| (1,160,110 | ) |
|
| (323,285 | ) |
|
| (2,443,891 | ) |
|
| (1,002,130 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per average share available to common shareholders |
|
| (0.10 | ) |
|
| (0.01 | ) |
|
| (0.03 | ) |
|
| (0.02 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding – basic and diluted |
|
| 142,419,337 |
|
|
| 40,516,351 |
|
|
| 75,919,713 |
|
|
| 40,620,055 |
|
See accompanying notes to financial statements.
| Amarillo Biosciences, Inc. | ||||||||||||||||||||||||||||
| Statements of Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||
For the nine months ended September 30, 2020 and 2019 (Unaudited) | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid in Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | |||||||||||||||||||||||||
| Balance December 31, 2019 | - | $ | - | 40,516, 351 | $ | 405,164 | $ | 4,207,786 | $ | (4,769,632 | ) | $ | (156,682 | ) | ||||||||||||||
| Issuance of stock for compensation | - | - | - | - | ||||||||||||||||||||||||
| Issuance of stock for cash | 400,000 | 4,000 | 96,000 | 100,000 | ||||||||||||||||||||||||
| Issuance of stock for debt | - | - | - | - | - | |||||||||||||||||||||||
| Warrant expense | 10,218 | 10,218 | ||||||||||||||||||||||||||
| Option expense | 272,064 | 272,064 | ||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | (1,002,130 | ) | (1,002,130 | ) | |||||||||||||||||||
| Balance September 30, 2020 | - | $ | - | 40,916,351 | $ | 409,164 | $ | 4,586,068 | $ | (5,771,762 | ) | $ | (776,530 | ) | ||||||||||||||
| Balance December 31, 2018 | - | $ | - | 39,117,524 | $ | 391,175 | $ | 3,527,238 | $ | (3,188,334 | ) | $ | 730,079 | |||||||||||||||
| Compensation – i2China (Q4 2018 accrual) | - | - | 40,170 | 401.70 | 11,598 | - | 12,000 | |||||||||||||||||||||
| Compensation – Cohen and Chen (Q4 2018 accrual) | - | - | 191,505 | 1,915.05 | 55,585 | - | 57,500 | |||||||||||||||||||||
| Subscription Issuance – Hen Vai Wu | - | - | 200,000 | 2,000 | 48,000 | - | 50,000 | |||||||||||||||||||||
| Finder’s fee issuance – Hen Vai Wu | 115,000 | 1,150 | 22,600 | 23,750 | ||||||||||||||||||||||||
| Warrant expense | - | - | - | - | 28,488 | - | 28,488 | |||||||||||||||||||||
| Option expense | - | - | - | - | 288,447 | - | 288,447 | |||||||||||||||||||||
| Conversion | - | - | 552,152 | 5,522 | 94,478 | - | 100,000 | |||||||||||||||||||||
| Subscription issuance – Assyrea Ltd. | - | - | ||||||||||||||||||||||||||
| Net loss for the period ended September 30, 2019 | - | - | - | - | - | (1,211,180 | ) | (1,211,180 | ) | |||||||||||||||||||
| Balance September 30, 2019 | - | $ | - | 40,216,351 | $ | 402,164 | $ | 4,076,434 | $ | (4,399,514 | ) | $ | 79,084 | |||||||||||||||
| 4 |
| Table of Contents |
Ainos, Inc.
Statements of Stockholders’ Equity (Deficit)
For the three months ended September 30, 2021 and 2020
(Unaudited)
|
| Preferred Stock |
|
| Common Stock |
|
| Additional Paid in |
|
| Accumulated |
|
| Translation |
|
| Total Stockholders’ Equity |
| ||||||||||||||
|
| Shares |
|
| Par Value |
|
| Shares |
|
| Par Value |
|
| Capital |
|
| Deficit |
|
| Adjustment |
|
| (Deficit) |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance June 30, 2021 |
|
| - |
|
| $ | 0 |
|
|
| 142,271,815 |
|
| $ | 1,422,718 |
|
| $ | 24,286,875 |
|
| $ | (7,504,035 | ) |
|
| 0 |
|
| $ | 18,205,557 |
|
Issuance of stock for compensation |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Issuance of stock for Patent assets |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Issuance of stock for Option |
|
| - |
|
|
| 0 |
|
|
| 170,400 |
|
|
| 1,704 |
|
|
| 63,048 |
|
|
| 0 |
|
|
| 0 |
|
|
| 64,752 |
|
Warrant expense |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 3,417 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,417 |
|
Option expense |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 15,905 |
|
|
| 0 |
|
|
| 0 |
|
|
| 15,905 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (1,160,110 | ) |
|
| 0 |
|
|
| (1,160,109 | ) |
Translation adjustment |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 6,838 |
|
|
| 6,838 |
|
Balance September 30, 2021 |
|
| - |
|
| $ | 0 |
|
|
| 142,442,215 |
|
| $ | 1,424,422 |
|
| $ | 24,369,245 |
|
| $ | (8,664,145 | ) |
|
| 6,838 |
|
| $ | 17,136,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2020 |
|
| - |
|
| $ | 0 |
|
|
| 40,516,351 |
|
| $ | 405,164 |
|
| $ | 4,299,196 |
|
| $ | (5,448,477 | ) |
|
| 0 |
|
|
| (744,117 | ) |
Issuance of stock for compensation |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Issuance of stock for cash |
|
| - |
|
|
| 0 |
|
|
| 400,000 |
|
|
| 4,000 |
|
|
| 96,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 100,000 |
|
Warrant expense |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 9,496 |
|
|
| 0 |
|
|
| 0 |
|
|
| 9,496 |
|
Option expense |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 181,376 |
|
|
| 0 |
|
|
| 0 |
|
|
| 181,376 |
|
Net loss for the period ended June 30, 2020 |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (323,285 | ) |
|
| 0 |
|
|
| (323,285 | ) |
Translation adjustment |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Balance September 30, 2020 |
|
| - |
|
| $ | 0 |
|
|
| 40,916,351 |
|
| $ | 409,164 |
|
| $ | 4,586,068 |
|
| $ | (5,771,762 | ) |
|
| 0 |
|
| $ | (776,530 | ) |
See accompanying notes to financial statements.
Statements of Cash Flows
For the nine months ended September 30, 2021 and 2020
(Unaudited)
| Nine months ended September 30, | ||||||||
| 2020 | 2019 | |||||||
| Net cash used in operating activities | $ | (244,967 | ) | $ | (539,076 | ) | ||
| Cash flows from investing activities | ||||||||
| Investment in equipment | - | (1,638 | ) | |||||
| Investment in patents | (1,891 | ) | (405 | ) | ||||
| Net cash used in investing activities | (1,891 | ) | (2,043 | ) | ||||
| Cash flows from financing activities | ||||||||
| Payments on convertible notes | - | (37,500 | ) | |||||
| Advances from shareholder | 35,000 | - | ||||||
| Proceeds from private placement offering | 50,000 | 25,000 | ||||||
| Net cash used in financing activities | 85,000 | (12,500 | ) | |||||
| Net change in cash | (325,272 | ) | (793,882 | ) | ||||
| Cash and cash equivalents at beginning of period | 409,039 | 1,276,654 | ||||||
| Cash and cash equivalents at end of period | $ | 83,767 | $ | 482,772 | ||||
| Supplemental Cash Flow Information | ||||||||
| Cash paid for interest | $ | 4,895 | $ | 727 | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Non-Cash Transactions | ||||||||
| Stock issued for accrued liabilities | $ | - | $ | 93,250 | ||||
| Stock issued for advances from investors | $ | 100,000 | $ | 25,000 | ||||
| Stock issued for advances from investors | $ | - | $ | 100,000 | ||||
|
| Preferred Stock |
|
| Common Stock |
|
| Additional Paid in |
|
| Accumulated |
|
| Translation |
|
| Total Stockholders’ Equity |
| ||||||||||||||
|
| Shares |
|
| Par Value |
|
| Shares |
|
| Par Value |
|
| Capital |
|
| Deficit |
|
| Adjustment |
|
| (Deficit) |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance December 31, 2020 |
|
| - |
|
| $ | 0 |
|
|
| 42,066,172 |
|
| $ | 420,661 |
|
| $ | 4,961,315 |
|
| $ | (6,220,254 | ) |
|
| 0 |
|
| $ | (838,278 | ) |
Issuance of stock for compensation |
|
| - |
|
|
| 0 |
|
|
| 205,643 |
|
|
| 2,056 |
|
|
| 137,349 |
|
|
| 0 |
|
|
| 0 |
|
|
| 139,405 |
|
Issuance of stock for Patent assets |
|
| - |
|
|
| 0 |
|
|
| 100,000,000 |
|
|
| 1,000,000 |
|
|
| 19,000,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 20,000,000 |
|
Issuance of stock for Option |
|
| - |
|
|
| 0 |
|
|
| 170,400 |
|
|
| 1,704 |
|
|
| 63,048 |
|
|
| 0 |
|
|
| 0 |
|
|
| 64,752 |
|
Warrant expense |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 10,252 |
|
|
| 0 |
|
|
| 0 |
|
|
| 10,252 |
|
Option expense |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 197,281 |
|
|
| 0 |
|
|
| 0 |
|
|
| 197,281 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (2,443,891 | ) |
|
| 0 |
|
|
| (2,443,891 | ) |
Translation adjustment |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 6,838 |
|
|
| 6,838 |
|
Balance September 30, 2021 |
|
| - |
|
| $ | 0 |
|
|
| 142,442,215 |
|
| $ | 1,424,422 |
|
| $ | 24,369,245 |
|
| $ | (8,664,145 | ) |
|
| 6,838 |
|
| $ | 17,136,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2019 |
|
| - |
|
| $ | 0 |
|
|
| 40,516,351 |
|
| $ | 405,164 |
|
| $ | 4,207,786 |
|
| $ | (4,769,632 | ) |
|
| 0 |
|
| $ | (156,682 | ) |
Issuance of stock for compensation |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Issuance of stock for cash |
|
| - |
|
|
| - |
|
|
| 400,000 |
|
| $ | 4,000 |
|
|
| 96,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 100,000 |
|
Issuance of stock for debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant expense |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 10,218 |
|
|
| 0 |
|
|
| 0 |
|
|
| 10,218 |
|
Option expense |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 272,064 |
|
|
| 0 |
|
|
| 0 |
|
|
| 272,064 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (1,002,130 | ) |
|
| 0 |
|
|
| (1,002,130 | ) |
Translation adjustment |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Balance September 30, 2020 |
|
| - |
|
| $ | - |
|
|
| 40,916,351 |
|
| $ | 409,164 |
|
| $ | 4,586,068 |
|
| $ | (5,771,762 | ) |
|
| - |
|
| $ | (776,530 | ) |
See accompanying notes to financial statements.
|
| Nine months ended September 30, 2021 |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Net cash used in operating activities |
| $ | (569,150 | ) |
| $ | (244,967 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Investment in patents |
|
| 0 |
|
|
| (1,891 | ) |
Purchase of fixed assets |
|
| (41,581 | ) |
|
| 0 |
|
Proceeds from disposal of property, plant and equipment |
|
| 36 |
|
|
| 0 |
|
Increase in refundable deposits |
|
| (1,795 | ) |
|
| 0 |
|
Net cash flows used in investing activities |
|
| (43,340 | ) |
|
| (1,891 | ) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Advances from shareholder |
|
| 0 |
|
|
| 35,000 |
|
Proceeds from private placement offering, net |
|
| 0 |
|
|
| 50,000 |
|
Proceeds from exercise of share options |
|
| 64,752 |
|
|
| 0 |
|
Payments of lease liabilities |
|
| (6,815 | ) |
|
| 0 |
|
Proceeds from convertible note payable –related party |
|
| 1,232,192 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
| 1,290,129 |
|
|
| 85,000 |
|
|
|
|
|
|
|
|
|
|
Effect of changes in exchange rates |
|
| 7,046 |
|
|
| 0 |
|
Net change in cash and cash equivalents |
|
| 677,639 |
|
|
| (325,272 | ) |
Cash and cash equivalents at beginning of period |
|
| 22,245 |
|
|
| 409,039 |
|
Cash and cash equivalents at end of period |
|
| 706,931 |
|
|
| 83,767 |
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
Interest paid |
| $ | 9,363 |
|
| $ | 4,895 |
|
Non-Cash Transactions |
|
|
|
|
|
|
|
|
Stock issued for acquisition of patents |
| $ | 20,000,000 |
|
| $ | 0 |
|
Stock issued for compensation, warrant and option expense |
| $ | 346,938 |
|
| $ | 0 |
|
Stock issued for advances from investors |
| $ | 0 |
|
| $ | 100,000 |
|
ROU Leased assets |
| $ | 62,723 |
|
| $ | 0 |
|
Lease obligation |
| $ | 62,723 |
|
| $ | 0 |
|
See accompanying notes to financial statements.
| 7 |
| Table of Contents |
Ainos, Inc.
Notes to Financial Statements
(Unaudited)
1. | Organization and Business. Ainos, Inc., formerly known as Amarillo Biosciences, Inc. (the |
2. | The Company is 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, including Sjögren’s syndrome, thrombocytopenia, and other indications using interferon (IFN) alpha that is administered in a proprietary low-dose non-injectable form. In addition to our core technology, we are working to expand our current focus into a diversified healthcare business portfolio in order to generate new revenue streams. We own 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 twelve issued patents, four patents are related to the low-dose oral delivery of interferon, three patents are associated with treatment of metabolic disorders, and five patents related to the 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. |
We primarily operate three business units: the Pharmaceutical, Medical Devices and Preventive Medicine Divisions. Our Pharmaceutical Division is focused on low-dose, orally administered lozenges containing the natural immune system activator interferon-alpha as a treatment for a variety of disease indications. We own a proprietary library of over thirty years of scientific and clinical data on the human and animal applications of low-dose oral interferon. Our Medical Device Division is dedicated to developing a novel insulin pump and further development of point-of-care rapid test kits for the detection and diagnosis of human infections. Our Preventative Medicine Division, which has been restructured from our former Consumer Product Division, is focused on SRNA-based therapeutics. |
3. | Basis of presentation. The accompanying consolidated financial statements, which should be read in conjunction with the audited financial statements and footnotes included in the Company's Form 10-K for the year ended December 31, |
4. | Financial Condition. These financial statements have been prepared in accordance with United States generally accepted accounting principles, |
| 8 |
| Table of Contents |
While the Company has recurring losses and generated negative cash flows from operations, the Company has taken initiatives to improve its management capacity and business operations. Such initiatives include the procurement of innovative diagnostic technologies and securing a strategic investor, as a result of the Company and the recoverabilityclosing of a securities purchase agreement with Ainos, Inc. a Cayman Island corporation (“Ainos KY”) on April 15, 2021 (the “Ainos KY Transaction”). Details of the carrying valueAinos Transaction were disclosed in the Company’s Form 10-Q filing for the second quarter of assets is dependent upon2021.
After closing the ability ofAinos KY Transaction, the Company engaged additional management resources including Mr. Chun-Hsien Tsai as Chairman and CEO, Ms. Hui-Lan (Celia) Wu as CFO and Mr. Chih-Heng (Jack Lu) as Head of Corporate Development, retained key management and legal staff, and implemented new business initiatives. On June 14, 2021, the Company became the master sales and marketing agent for the Ainos SARS-Cov-2 Antigen Rapid Test Kit (“Ainos Covid-19 Test Kit”) which has generated $568,164 in sales thus far in 2021.
As of September 30, 2021, the Company’s financial improvement includes the following:
Total stockholder’s equity increased to obtain necessary financing$17,136,360 as of September 30, 2021 compared to a negative total shareholder’s equity of $838,278 as of December 2021.
Cash and cash equivalents increased to $706,931 as of September 30, 2021 compared to $22,245 at December 31, 2020. This is attributable to increased revenues from sales of our Ainos Covid-19 Test Kit in Taiwan and operational loans made to the Company by Ainos KY. The Company’s revenues increased to $568,164 during this reporting period compared to $15,876 as of third quarter of 2020.
The Company anticipates business revenues and potential additional financial support from Ainos KY and other entities to fund the Company’s operations over the next twelve months. The Company may raise additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its working capital requirements,business plan. However, if such financing is not available when needed and upon future profitable operations. The accompanying financial statements do not include any adjustments relativeat adequate levels, the Company will need 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. TheAny issuances of additional equity securities by the Company may result
5. | Common Stock. |
6. | Convertible Notes Payable |
| 9 |
| Table of Contents |
| Note #. | Conversion Rate | Interest Rate | September 30, 2020 | December 31, 2019 | ||||||||||||
| 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 | % | $ | 12,436 | $ | 12,453 | ||||||||
| Note 5.19 – i2China | $ | 0.2500 | 1.85 | % | $ | 16,000 | $ | 16,000 | ||||||||
| Note 6.20 - Chen | $ | 0.2500 | 1.85 | % | $ | 162,450 | $ | - | ||||||||
| Note 7.20 - Chen | $ | 0.2500 | 1.60 | % | $ | 1,782 | $ | - | ||||||||
| Note 8.20 – i2China | $ | 0.2500 | 1.85 | % | $ | 24,000 | $ | - | ||||||||
| Total Convertible Notes – Related Party | $ | 632,814 | $ | 444,581 | ||||||||||||
|
|
|
|
|
| Annual Interest Rate |
|
|
|
|
| Unpaid Principal Balance | |||||||||||
No# |
| Effective Date |
| Due Date |
| From Effective |
| Following Maturity |
|
Payee |
| Issuing Purpose |
| Sep 30, 2021 |
| Dec 31, 2020 | |||||||
Payee: Dr. Stephen T. Chen, resigned as Chairman of the Board, President, and Board director April 15, 2021 | |||||||||||||||||||||||
#1.16 | 2016/01/30 | Payable on demand | 0.75% | NA | Stephen Chen | working capital | 114,026 | 114,026 | |||||||||||||||
#2.16 | 2016/03/18 | Payable on demand | 0.65% | NA | Stephen Chen | working capital | 262,500 | 262,500 | |||||||||||||||
#3.19 | 2019/09/01 | 2020/09/01 | 1.85% | 10% | Stephen Chen | salary | 39,392 | 39,620 | |||||||||||||||
#4.19 | 2019/12/01 | 2020/12/31 | 1.61% | 10% | Stephen Chen | working capital | 14,879 | 14,879 | |||||||||||||||
#6.20 | 2020/01/01 | 2021/01/01 | 1.85% | 10% | Stephen Chen | salary | 216,600 | 216,600 | |||||||||||||||
#7.20 | 2020/01/01 | 2021/01/02 | 1.60% | 10% | Stephen Chen | working capital | 23,366 | 23,366 | |||||||||||||||
#9.20 | 2020/01/01 | 2021/04/14 | 0.13% | 10% | Stephen Chen | working capital | 279,405 | 134,010 | |||||||||||||||
#10.21 | 2021/01/01 | 2021/04/01 | 1.85% | 10% | Stephen Chen | salary | 59,025 | ||||||||||||||||
#11.21 | 2021/04/01 | 2021/05/01 | 1.85% | 10% | Stephen Chen | salary | 10,000 | ||||||||||||||||
1,019,193 | 805,001 | ||||||||||||||||||||||
Payee: Ainos KY, an affiliated company | |||||||||||||||||||||||
#12.21 | 2021/04/27 | 2021/10/27 | 1.85% | NA | Ainos KY | working capital | 15,000 | ||||||||||||||||
#13.21 | 2021/05/05 | 2021/11/05 | 1.85% | NA | Ainos KY | working capital | 20,000 | ||||||||||||||||
#14.21 | 2021/05/25 | 2021/11/25 | 1.85% | NA | Ainos KY | working capital | 30,000 | ||||||||||||||||
#15.21 | 2021/05/28 | 2021/11/28 | 1.85% | NA | Ainos KY | working capital | 35,000 | ||||||||||||||||
#16.21 | 2021/06/09 | 2021/12/09 | 1.85% | NA | Ainos KY | working capital | 300,000 | ||||||||||||||||
#17.21 | 2021/06/21 | 2021/12/21 | 1.85% | NA | Ainos KY | working capital | 107,000 | ||||||||||||||||
#18.21 | 2021/07/02 | 2022/01/02 | 1.85% | NA | Ainos KY | working capital | 54,000 | ||||||||||||||||
#19.21 | 2021/09/01 | 2021/03/01 | 1.85% | NA | Ainos KY | working capital | 120,000 | ||||||||||||||||
#20.21 | 2021/09/28 | 2021/03/28 | 1.85% | NA | Ainos KY | working capital | 300,000 | ||||||||||||||||
981,000 | 0 | ||||||||||||||||||||||
Convertible and other notes payable- related parties | 2,000,193 | 805,001 | |||||||||||||||||||||
Payee: i2China Management Group LLC, a management consultant | |||||||||||||||||||||||
#5.19 | 2019/09/01 | 2020/09/01 | 1.85% | 10% | i2China | consulting fee | 16,000 | 16,000 | |||||||||||||||
#8a.20 | 2020/01/01 | 2021/01/01 | 1.85% | 10% | i2China | consulting fee | 48,000 | 48,000 | |||||||||||||||
#8b.20 | Retroactive from 2020/01/01 | 2021/01/01 | 1.85% | 10% | i2China | consulting fee | 84,000 | 84,000 | |||||||||||||||
#11.21 | 2021/01/01 | 2021/04/01 | 1.85% | 10% | i2China | consulting fee | 37,000 | ||||||||||||||||
Convertible and other notes payable | 185,000 | 148,000 | |||||||||||||||||||||
Total Convertible and other notes payable | 2,185,193 | 953,001 | |||||||||||||||||||||
| 10 |
| Table of Contents |
All of the aforementioned convertible 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 convertiblenon-convertible promissory notes in consideration of the deferrals.
The convertiblepromissory notes due to Dr. Stephen T. Chen and Ainos KY are related party notes.
i2China Management Group, LLC (“i2China”) and Dr. Stephen T. Chen (together the “Payees”), have both agreed to waive any and all rights pertaining to the conditional term “Annual Interest Rate on Matured, Unpaid Amounts: 10% per annum, compounded annually of Convertible Notes” in regards to interest charged on any unpaid amounts following maturity for all of their respective notes. The Company and the Payees agree that the originally agreed annual interest rate will continue to be valid for any unpaid amounts after maturity. The amended terms of the above convertible notes were made during 2021 Q3 on September 1, 2021. The waived interest amount was $45,875.
|
|
|
|
|
|
|
| Unpaid |
| Interest Rate |
| Interest amount |
| Interest |
|
| ||||||
No# |
|
Date |
|
Payee |
|
Description |
| Principal Amount |
|
Original |
| after Maturity |
| Original rate |
|
10% |
| Total |
| after Maturity |
| Interest Waived |
#1.16 |
| 1/30/2016 |
| Stephen |
| working capital |
| 114,026 |
| 0.75% |
| NA |
| 5,624 |
| 0 |
| 5,624 |
| 5,624 |
| 0 |
#2.16 |
| 3/18/2016 |
| Stephen |
| working capital |
| 262,500 |
| 0.65% |
| NA |
| 9,447 |
| 0 |
| 9,447 |
| 9,447 |
| 0 |
#3.19 |
| 9/1/2019(DS) |
| Stephen |
| salary |
| 39,392 |
| 1.85% |
| 10% |
| 714 |
| 4,340 |
| 5,054 |
| 1,518 |
| 3,536 |
#4.19 |
| 12/1/2019(DE) |
| Stephen |
| working capital |
| 14,879 |
| 1.61% |
| 10% |
| 257 |
| 1,132 |
| 1,389 |
| 439 |
| 950 |
#6.20 |
| 1/1/2020(DS) |
| Stephen |
| salary |
| 216,600 |
| 1.85% |
| 10% |
| 2,179 |
| 16,363 |
| 18,543 |
| 5,206 |
| 13,336 |
#7.20 |
| 1/1/2020(DE) |
| Stephen |
| working capital |
| 23,366 |
| 1.60% |
| 10% |
| 72 |
| 1,753 |
| 1,825 |
| 352 |
| 1,473 |
#9.20 |
| 11/2020 (Open) |
| Stephen |
| working capital |
| 279,405 |
| 0.13% |
| 10% |
| 81 |
| 12,864 |
| 12,945 |
| 248 |
| 12,697 |
#10.21 |
| 1/1/2021(DS) |
| Stephen |
| salary |
| 59,025 |
| 1.85% |
| 10% |
| 178 |
| 2,968 |
| 3,146 |
| 725 |
| 2,421 |
#11.21 |
| 4/1/2021(DS) |
| Stephen |
| salary |
| 10,000 |
| 1.85% |
| 10% |
| 15 |
| 420 |
| 435 |
| 93 |
| 342 |
|
|
|
| 1,019,193 |
| 1.85% |
| 10% |
| 18,566 |
| 39,841 |
| 58,407 |
| 23,653 |
| 34,754 | ||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
#5.19 |
| 9/1/2019 |
| i2China |
| consulting fee |
| 16,000 |
| 1.85% |
| 10% |
| 253 |
| 1,759 |
| 2,012 |
| 579 |
| 1,433 |
#8a.20 |
| 1/1/2020 |
| i2China |
| consulting fee |
| 48,000 |
| 1.85% |
| 10% |
| 483 |
| 3,626 |
| 4,109 |
| 1,154 |
| 2,955 |
#8b.20 |
| 1/1/2020 |
| i2China |
| retroactive increase |
| 84,000 |
| 1.85% |
| 10% |
| 1,554 |
| 6,399 |
| 7,953 |
| 2,738 |
| 5,215 |
#11.21 |
| 1/1/2021(DS) |
| i2China |
| consulting fee |
| 37,000 |
| 1.85% |
| 10% |
| 107 |
| 1,860 |
| 1,967 |
| 450 |
| 1,517 |
|
|
|
| 185,000 |
|
|
| 2,397 |
| 13,645 |
| 16,041 |
| 4,920 |
| 11,121 | ||||||
TOTAL ACCRUED |
| 1,204,193 |
|
|
| 20,963 | 53,485 | 74,448 | 28,573 | 45,875 | ||||||||||||
The accrued interest amount was $31,983 and $18,691 as of September 30, 2021 and December 31, 2020, respectively.
| 11 |
| Table of Contents |
7. | Related Party |
The following is a list of related parties who have undertaken transactions with the Company during this reporting period:
Name of the related party | Relationship | Description | ||
Taiwan Carbon Nano Technology Corporation (TCNT) | Affiliated company | |||
Ainos, Inc. (Cayman Island) ( Ainos KY) | Affiliated company | |||
ASE Technology Holding | Affiliated company | Parent company of ASE Test Inc. which is Ainos KY's board member and with more than 10% of the | ||
i2 China Management Group LLC (i2 China) | Affiliated company | Sole member owner is Lawrence Lin, EVP Operations effective August 1, 2021 | ||
Dr. Stephen T. Chen | Principal owner | Shareholder with more than 5% of Company voting rights, Ainos' former Chairman, President, CEO and CFO | ||
Chun-Hsien Tsai | Board of Director, Executive Officer and Immediate Family | Chairman of BOD, President, CEO and spouse of Ting-Chuan Lee | ||
Ting-Chuan Lee | Board of Director and Immediate Family | Spouse of Chun Hsien Tsai | ||
Hui-Lan Wu | Executive Officer | CFO | ||
Lawrence Lin | Key management | EVP Operations effective August 1, 2021 | ||
Chih-Heng Lu | Key management | Director of Corporate Development and Corporate Secretary | ||
John Junyong Lee | Key management | Chief Legal Counsel and Corporate Secretary rewarded by fixed monthly fee and performance bonus effective September 1,2021 Chief Legal Counsel and Corporate Secretary | ||
Chien-Hsuan Huang | Immediate Family of Director | Spouse of Wen-Han Chang | ||
Bernard Cohen | Former CFO | Resigned on April 5, 2021 |
Below is a summary of the significant related party transactions entered into by the Company over the first nine months of 2021:
Financial support
|
| Convertible Note |
|
| Related Interest Expense |
| ||||||||||
|
| Nine months ended September 30, 2021 |
|
| As of September 30, 2021 |
|
| Nine months ended September 30, 2021 |
|
| As of September 30, 2021 |
| ||||
Ainos KY |
|
| 981,000 |
|
|
| 981,000 |
|
|
| 3,410 |
|
|
| 3,410 |
|
i2China |
|
| 37,000 |
|
|
| 185,000 |
|
|
| 2,087 |
|
|
| 4,920 |
|
Dr. Stephen T. Chen |
|
| 15,272 |
|
|
| 1,019,193 |
|
|
| 5,936 |
|
|
| 23,653 |
|
|
|
| 1,033,272 |
|
|
| 2,185,193 |
|
|
| 11,433 |
|
|
| 31,983 |
|
i2China became an affiliate of the Company as of August 1, 2021. From August 1, 2021 to September 30, 2021, interest payable to i2China amounted to $496.
Other transactions
- | Inventory purchases from TCNT totaling $173,657. |
- | Product co-development agreement with TCNT resulting in $117,386 in costs and $122,680 in accounts payable. |
- | Sale of products to ASE Technology Holding totaling $185,376. |
- | Three-year office space was leased from a related party |
- | Product development consulting fee of $7,215 payable to Huang Chien-Hsuan, of which $6,671 remains outstanding and payable. |
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| Table of Contents |
- | Product development consulting fee of $7,215 payable to Huang Chien-Hsuan, of which $6,671 remains outstanding and payable. |
- | On August 1, 2021, the Company entered into a five-year product development agreement with TCNT. Pursuant to the agreement both parties will endeavor to develop pharmaceutical, medical and preventive medicine related products. Under the agreement the Company is designated as the exclusive sales agent of the resulting products. The agreement also provides for the Company to bear the expenses of product development and for TCNT to contribute personnel and facilities. Both parties shall each jointly own an equal proportion of the intellectual property rights arising from the product co-development cooperation. As a result, the Company incurred $117,386 in product co-development expenses and $122,680 in accounts payable during the |
- | The Company issued |
|
|
| Shares |
|
| Par Value |
|
| Paid in Excess of Par |
|
| Total amount |
|
| Price per share |
| |||||
06/30/2021 | Bernard Cohen |
|
| 5,876 |
|
|
| 58.76 |
|
|
| 3,107.89 |
|
|
| 3,166.65 |
|
|
| 0.5389 |
|
06/30/2021 | Dr. Stephen T. Chen |
|
| 53,419 |
|
|
| 534.19 |
|
|
| 32,799.14 |
|
|
| 33,333.33 |
|
|
| 0.6240 |
|
|
|
|
| 59,295 |
|
|
| 593 |
|
|
| 35,907 |
|
|
| 36,500 |
|
|
|
|
|
8. | Subsequent Events. |
The Company engaged PricewaterhouseCoopers, Taiwan (“PWC”) as independent accountants of Ainos Inc. Taiwan Branch under an engagement agreement dated October 4, 2021 (“Audit Engagement”). The Audit Engagement covers audit services for the years ending December 31, 2021 and 2022 and PWC will issue interfirm audit reports for group reporting purposes to the Company’s group audit firm, PWR CPA, LLP. Additionally, the Company engaged PWC under separate agreements dated October 4, 2021 for PWC to render advisory services in connection to the Company’s internal controls over financial reporting as required under section 404 of the Sarbanes-Oxley Act (“SOX Engagement”) and in respect to compliance with Taiwan corporate income tax requirements for the tax years ending December 31, 2021 and 2022 (“Taiwan Tax Engagement”).
On October 6, 2021, the Company board of directors approved and adopted the following resolutions:
· | Effective August 30, 2021, the Board appointed Hsiu-Chen Chiu and Wen-Han Chang to serve on the Compensation Committee; | |
· | Effective August 30, 2021, the Board appointed Yao-Chung Chiang, Wen-Han Chang and Hsiu-Chen Chiu to serve on the Audit Committee; | |
· | Board approval of | |
· | Board approval of | |
· | Board approval of the Company’s engagement agreements dated October 4, 2021 with PricewaterhouseCoopers, Taiwan (“PWC”) |
On November 1, Applicable Federal Rate -
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ITEM 2. Management's Discussion and Analysis of October 1, 2020.
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.
OVERVIEW
The Company is also dependent upon a broad range of general economic and financial risks, such as possible increases in the costs of employing and/or retaining qualified personnel and consultants and possible inflation which might affect the Company's ability to remain within its budget forecasts. The principal uncertainties to which the Company is presently subject are its inability to ensure that the results of trials performed by the Company will be sufficiently favorable to ensure eventual regulatory approval for commercial sales, its inability to accurately budget at this time the possible costs associated with hiring and retaining of additional personnel, uncertainties regarding the terms and timing of one or more commercial partner agreements and its ability to continue as a going concern.
Ainos, Inc. (the "Company” or “ABI”“Company”) is a Texas corporation formedincorporated in 1984 engaged in developing biologics for the treatmentdiscovery and development of humanpharmaceuticals, medical devices and animal diseases. preventative medicine. The Company currently has offices in the United States and Taiwan. The Company operates a branch office in Taiwan registered as AINOS, INC. TAIWAN BRANCH.
Our current focus is research aimed atBusiness Divisions
We operate through three business divisions: Pharmaceutical, Medical Devices and Preventive Medicine. Our Preventive Medicine Division was formerly the treatment of human disease indications, particularly influenza, hepatitis C, thrombocytopenia, and other indications usingConsumer Product Division.
Pharmaceutical: Low-dose lozenge interferon alpha that(IFN-α) Research. Our core pharmaceutical drug development platform, VELDONA (Very Low-Dose Oral Interferon Alpha), is administered in a proprietary low dose oral form. In addition to its core technology ABI is working to expand the Company’s current focus into a diversified healthcare business portfolio in order to generate new revenue streams.
Medical Devices: Our previous focus on insulin they require insulin for the rest of their lives. And even more unfortunate is that even with fairly well-controlled blood glucose levels, diabetics will face one or more undesirable complications with poor outcomes from cardiovascular, eye, nerve, or kidney disease secondary to their diabetes. This unsuccessful model of diabetes care is not satisfactory.
Preventive Medicine: We have restructured our former Consumer Product Division into a Preventive Medicine Division to expand our focus on treatments to prevent disease. Our previous efforts in the sale and marketing of liposomal nutraceutical and food supplements lacked synergies with our focus on specific disease indications and pharmaceutical treatment potentials. While we continue to believe in the efficacy of nutrition as a primary contributor to human health, we restructured this division in the third quarter of 2021 in order to incorporate a broader perspective centered on preventative interventions and to pivot towards more cutting-edge, revolutionary technologies. Going forward we are seeking new efforts on SRNA-based therapeutics development, to truly effect medical approaches that prevent the advancement of diseases. Our focus will be on fundamental research and development of vaccines with the intent to seek out-licensing opportunities and strategic partnerships when appropriate.
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Our Medtech Transformation
The COVID-19 pandemic has fundamentally changed the healthcare and medical industries. Digital transformation of healthcare is underway to provide access to quality healthcare with reduced physical contact. As a result, telehealth adoption has substantially accelerated. We believe that better telehealth service requires enhanced telehealth-enabled diagnostics, and therefore we anticipate the need for rapid, convenient, low-cost, cloud-connected digital diagnostics. In addition, the recent commercialization of mRNA COVID-19 vaccines suggests SRNA's has established SRNA’s promising potential in expediting pharmaceutical innovation. In order to meet these structural changes, we are transforming to a diversified medtech company.
We envision playing a major role in the digital healthcare revolution through an evolution in artificial intelligence, enabled by our AI Nose platform. We believe our AI Nose technology platform can potentially enable the eventual utilization of smell digitization for a plethora of applications, beginning with healthcare volatile organic compound (VOC) diagnostics. In our view, VOCs within the human body can be digitally profiled to facilitate personalized medicine. We refer to the digital identification of VOCs as “Smell ID.” As we train our AI algorithm with more Smell ID data, we believe we can provide more value-added service to our customers.
Our Strategic Partner
Ainos, Inc., a Cayman Islands incorporated company (“Ainos KY”), acquired majority ownership and management of the Company earlier this year. Under a Securities Purchase Agreement that closed on April 15, 2021 (the “Ainos KY Transaction”), we acquired intellectual properties valued at approximately $20 million that included VOC AI algorithms, digital nose technology, and a pipeline of innovative point-of-care testing (POCT) diagnostic technologies for a myriad of diseases including COVID-19, vaginitis and certain sexual transmitted diseases (STD), pneumonia and helicobacter pylori (h. pylori).
We expect that our newly-acquired in vitro POCTs can generate organic cash flows to support our business while we invest in our Pharmaceutical and Preventive Medicine Divisions. We have successfully commercialized our Ainos Covid-19 Test Kit this year in Taiwan and plan to commercialize other new in-vitro POCT diagnostics over the next several years if our products receive regulatory approval.
Ainos KY has also provided financial and management resources to supplement our business management capacity and operations. The current Board of Directors represents a broad spectrum of scientific, management, legal, and financial expertise that will be necessary to implement our business plans. After closing the Ainos KY Transaction, the Company engaged additional management resources including Mr. Chun-Hsien Tsai as Chairman and CEO, Ms. Hui-Lan (Celia) Wu as CFO and Mr. Chih-Heng (Jack) Lu as Head of Corporate Development, retained key management and legal staff.
Ainos Transformational Technologies
The intellectual property and other assets acquired from Ainos KY address key gaps in our former business model and provide a foundation for a more holistic drug and medical device development program.
First, by infusing the Company with VOC + AI algorithms and digital nose technology, we are now positioned to transition from our treatment-driven model for medical interventions to a more proactive diagnostic-driven pharmaceutical, medical device, and preventative medicine business plan. Ainos’ VOC AI assets are central to our telehealth friendly, point-of-care diagnostic-driven approaches throughout our Company’s product development program.
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VOC Diagnostics. Volatile organic compounds (VOCs) profiles measured in exhaled breath as well as from headspaces of feces or urine samples are a source of information with respect to disease detection. Emerging advances in analytical technologies in the detection and measurement of VOCs in clinical matrices have generated increasing interest for their use in evaluating the diagnostic potential of VOCs for different diseases. VOCs represent a wide range of stable chemicals, are volatile at ambient temperature (may emit odors), and are detectable in exhaled breath, urine, feces, and sweat. Testing clinical samples for VOCs offers an option for developing rapid and potentially inexpensive disease screening tools. Most of the studies on volatile biomarkers have been carried out on exhaled-breath samples, although other clinical matrices, such as urine and feces, have also been investigated. Analysis of breath samples for testing of volatiles can be performed frequently in follow-up studies and may reflect disease progression and be helpful in monitoring therapeutic intervention. Moreover, breath tests are noninvasive and thus suitable for critically ill patients in intensive care units and small children.
AI Nose Technology Platform. Our AI Nose technology platform comprises the key building block of our VOC-based approaches. AI Nose’s main technology pillars include the digital nose sensor array, our proprietary VOC AI analytics, Smell ID, and our Company’s extensive knowhow of VOC-based medical device engineering. Our technology digitally profiles each VOC as a Smell ID and as more Smell IDs are collected for individuals, we may be able to build personalized medical treatment based on this data.
Our early efforts to develop a diabetes-focused insulin pump have significantly expanded into a more comprehensive development of a wide range of innovative point-of-care testing (POCT) diagnostic technologies, starting with our recent launch of the Ainos COVID-19 Antigen Test Kit in discreet pulses, it appearsTaiwan.
COVID-19 Antigen Test Kit. On June 14, 2021 we entered into an exclusive agreement to serve as the master sales and marketing agent for the Ainos SARS-CoV-2 Antigen Rapid Test Kit (“Ainos Covid-19 Test Kit”) for Taiwan Carbon Nano Corporation (“TCNT”), the majority shareholder of Ainos KY. The Ainos COVID-19 Test Kit has been granted the CE mark, enabling us to market the product in Europe. On June 7, 2021, the Taiwan Food and Drug Administration (“TFDA”) granted emergency use authorization for the Ainos COVID-19 Test Kit for use by healthcare professionals in Taiwan.
The Ainos Covid-19 Test Kit uses an antigen rapid test technology jointly developed by Taiwan’s National Health Research Institutes (“NHRI”), National Defense Medical Center (“NDMC”), and TCNT. Our test kit features a smartphone-based test management function, which can be accessed through a data matrix code. The data matrix code stores each test kit’s unique ID. Each user will be able to store the results directly to the individual’s mobile phone.
Continuous personalized testing and community-wide tracing capabilities are fully integrated in our rapid test kit designs by leveraging smart phone applications and cloud-based technologies.
We developed a comprehensive, end-to-end, cloud-based COVID-19 management platform that allows individuals and organizations to manage tests and trace infection effectively. Our platform is comprised of our test kits, a consumer app and an enterprise app.
We aim to empower our customers and telehealth practitioners with rapid, accurate and non-invasive tools to monitor health with our Ainos Flora, Ainos Pen and CHS340 VAP rapid test devices.
Ainos Flora. We designed our iF-award winning Ainos Flora to empower patients to effortlessly, non-invasively and quickly test their vaginal health at home. Through specialized digital nose sensor arrays and A.I. algorithms, Ainos Flora is designed to detect vaginal infection and common STDs (including bacterial vaginosis, fungus infection, gonorrhea and trichomoniasis) in minutes. Ainos Flora is portable, handheld, and enables remote monitoring by designated medical professionals. Patients can store test results in a mobile app. Ainos Flora is designed to give women back control of monitoring their personal health.
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Ainos Pen. Conventional breathalyzers are typically single-purpose and primarily designed to test for alcohol and drug use. Ainos Pen is a multi-purpose, cloud-connected breathalyzer intended for routine health monitoring. By enabling self-care at home, we anticipate Ainos Pen will create new applications for the telehealth ecosystem by allowing its users to non-invasively monitor their health. Ainos Pen securely stores test data in a complimentary mobile app with the ability to upload test data to a cloud server for access by designated healthcare providers. Through telehealth and A.I. analytics, patients can provide comprehensive and long-term health data to their healthcare providers.
CHS430 VAP Rapid Test. Ventilator-associated pneumonia (VAP) is one of the most frequent ICU-acquired infections. Reported prevalence varies widely from 5% to 40%. Causes of VAP include prolonged duration of mechanical ventilation or endotracheal intubation. The estimated mortality of VAP is around 10%, with higher mortality rates in surgical ICU patients and in patients with mid-range severity scores at admission. CHS430 is a patented portable breathalyzer that connects into a respirator’s y-connector and detects VAP within 10 minutes. It is designed to screen VAP infections and the likely causation pathogen. A specialized sensor array and algorithms quickly identify infections and the most common bacterial species related to VAP. The device is easy to operate with the press of a button. The sensor array inside the device is designed to be better able to regulate blood glucose levels. Patients suffering from peripheral neuropathiesperiodically replaced.
Our Divisions and Product Lines
As part of our medtech transformation strategy, we reclassified our divisions into the Pharmaceutical Division, Medical Device Division and Preventive Medicine Division.
Our Pharmaceutical Division researches and develops drug therapeutics that support the human immune system and address persistent diseases.
VELDONA Pharmaceutical Drug Development Program
Since our inception we have reported less numbnessengaged in the research of low-dose non-injectable interferon delivered through nasal, oral mucosal, topical and pain after receiving pulsatile insulin infusion treatmentstransdermal pathways and in liquid, ointment or lozenge forms. Our core pharmaceutical drug development platform, VELDONA (Very Low-Dose Oral Interferon Alpha), is predicated on a comprehensive library of scientific clinical data for low-dose non-injectable interferon, including more than 100 clinical and pre-clinical animal and human studies conducted over several weeks or months. Pulsatile insulin treatments given once or twice a weekdecades that we believe substantiates its safety and efficacy. We have an accomplished track record of completing numerous late-stage clinical trials for a numbervariety of months show promise in lesseningdisease indications and also own several active patents associated with the incidencetreatment of thrombocytopenia, related to the prevention of viral recurrence of hepatitis C.
Ainos differentiates itself from other interferon drug developers through the distinct advantage of owning a proprietary library of over sixty late-stage clinical studies and severitytrials aggregated over decades of microvascular complicationsresearch experience. The VELDONA platform leverages our research of diabetes such as retinopathy, neuropathy,numerous disease indications where we have established safety data for the use of low-dose non-injectable interferon from over thirty years of clinical studies and nephropathy. In addition, certain endpoints such as reduction of patient medicationstrials without any adverse side effects from low-dose interferon. We believe we have a higher likelihood to potentially accelerate clinical trials without the need to substantiate safety data through preliminary trials normally required for new drug applications.
We believe that low-dose non-injectable interferon therapeutics have broad potential applications for new drugs and avoidance of worsening kidney function leading to kidney dialysisnutraceuticals that address infectious diseases, autoimmune diseases and cancer. It has anti-proliferative effects which can be achieved. ABI’s Medical Division hastargeted at rapidly spreading viruses or rapidly dividing cancer cells. We believe VELDONA is a safe, universal and multi-functional product that is a well-suited for the prevention and treatment of viral infections. We have developed a proprietary insulin infusion pump dedicatedformulation for administering its pulsatile insulin therapythe production of an IFN-α lozenge that can be administered sublingually as a small tablet in doses ten-thousand times less than FDA-approved high-dose injectable interferon therapies, which we believe may dramatically reduce side effects. The VELDONA lozenge is also stable at room temperature, which makes them easy and inexpensive to transport, store and administer.
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Interferon-alpha (IFN-α)
Ainos currently focuses primarily on therapeutic applications of interferon-alpha (IFN-α). Interferons are a family of natural occurring proteins that can be used to potentially treat many diseases that involve the immune system – for example, cancers, hepatitis, AIDS, multiple sclerosis (MS), genital and perianal warts, and granulomatous disease. IFN-α is currentlya key modulator in our innate immune response to viral infection. Almost every cell in the processbody can produce interferon when under attack, but research indicates that interferon seems especially important in the cells that form the frontline defense with the external environment, such as the oral and nasal mucosa. Its anti-viral effects include inhibition of obtaining patentsviral replication, destruction of virus-infected cells, and medical device approvals, including 510k FDA clearance.
High-dose systemically administered IFN-α has been used alone or in Greater China, then subsequently establish a licensing platform for clinics in 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.
We have aggregated many years of testing in the mouth where interferon bindsuse of low-dose oral IFN-α for applications ranging from the common cold and warts to surface (mucosal) cells incancers and HIV. The therapeutic diversity of IFN-α stems from its ability to induce the mouth and throat, resulting in activationtranscription of hundreds of genes in the peripheral blood that stimulate the immune system. HumanThese genes effect numerous parts of the innate and adaptive immune system, including antigen processing and presentation, leukocyte migration, lymphocyte activation, immune effector and modulation functions, apoptosis, hematopoiesis, enzymatic destruction of viral RNA. In the past, we typically used natural human cell interferon in clinical trials as this was the specific form manufactured by our previous investment partner, Hayashibara Co., Ltd. We are now considering a substitute form of recombinant interferon product to replace natural human cell interferon and plan on conducting pilot studies to establish efficacy prior to advancing further clinical trials for our target disease indications.
Much clinical trial research has already evidenced recombinant interferon to be effective in adjuvant cancer therapies and FDA-approved high-dose injectable recombinant interferon alfa-2b treatments have shownbeen used globally to treat a multitude of disease indications such as AIDS-related Kaposi sarcoma, lymphoma, hairy cell leukemia and melanoma. In fact, interferon alpha (IFN-α), a cytokine that is responsible for regulating and activating the immune response, was the first cancer immunotherapy approved by the FDA in 1986. This helps support a higher level of certainty that recombinant interferon should demonstrate a desired level of efficacy, especially given that low-dose IFN-α is delivered as a miniscule dose compared to high-dose injectable IFN-α treatments. We plan to conduct pilot clinical trials starting in the first half of 2022 to validate newly-sourced interferon material and pursue several disease indications including thrombocytopenia, and Sjögren’s syndrome. We intend to continue exploring the modernization of interferon technology by researching new sources and types of interferon and are looking into methods of new interferon production, preparation, and purification methods.
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Clinical Trials for Key Disease Indications
We plan to orchestrate a concerted effort with research and medical expert supporters of the VELDONA drug program to facilitate the advancement of various low-dose IFN-α formulations and delivery modalities. We own proprietary clinical data on previously studied indications that can potentially be delivered to market at minimal clinical trial cost. The Company plans to resume clinical studies for key disease indications. In the near term, we will seek to advance our drug program with a particular focus on conducting clinical trials for two disease indications – thrombocytopenia and Sjögren’s syndrome. We believe these two indications can reach late-stage trials with the highest probability of successful approval in the shortest time. At any time during the drug development stage, the Company aims to out-license the intellectual property, ultimately acquiring global approvals for various disease indications.
Thrombocytopenia
In a 2014 data study, “Efficacy of Low Dose Oral Interferon-alpha in Preventing Hepatitis C Relapse,” was published based on a phase 2 clinical trial of 169 hepatitis C patients conducted at Chang Gung Hospital in Taiwan that found VELDONA to reduce the relapse rate of hepatitis C and improve the function of platelets. In connection with this study, Ainos received four thrombocytopenia related patents. Low-dose oral IFN-α can contribute to reversing the immunosuppressive tumor microenvironment and prevent some of the dangerous side-effects of chemotherapy such as thrombocytopenia. We will leverage our previous clinical trial experience to prepare a well-designed protocol to test whether VELDONA is effective in treating thrombocytopenia and determine whether it can continue the next-stage trials.
Sjögren’s Syndrome
The Company intends to resume late-stage clinical trials in late 2022 for Sjögren’s syndrome, an immune system disorder characterized by dry eyes and dry mouth. We previously reached two phase 3 trials in 2003 but were unable to conduct the final FDA-mandated studies for drug approval due to capital constraints (“Treatment of primary Sjögren’s syndrome with low-dose human interferon is safealfa administered by the oromucosal route: combined phase III results”). Ainos will reference its previous research to design an efficient phase 3 study based on previous FDA guidance.
In respect to its VELDONA program, the Company owns three (3) patents issued in the U.S. and effective against viralone (1) issued in Taiwan as follows:
· | “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. |
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The Company continues to seek to expand its patent licensing and neoplastic diseases. Oral interferon is given in concentrations 10,000 times less than that usually given by injection.commercialization opportunities for VELDONA with global partners. The Company’s low-dose formulationlicensing, development and commercialization of its VELDONA patents and research library are subject to approval by the FDA and other regulatory agencies in the U.S., and other regulatory agencies for use and marketing in other countries.
Our Medical Device Division focuses on research and development of novel medical devices.
Innovations in point-of-care testing
We develop, market, and sell various easy-to-use, cloud-connected POCT diagnostics for infectious disease indications. Our product pipeline target indications include COVID-19, vaginitis, certain sexually transmitted diseases (STD), ventilator-associated pneumonia (VAP), and helicobacter pylori (H. pylori). We categorize our POCT portfolio into the following:
COVID-19 POCT. This category currently includes an antigen rapid test kit based on lateral flow immunoassay technology, a molecular test kit based on reverse transcription loop-mediated isothermal amplification (“RT-LAMP”) technology, and test management apps for personal and enterprise users. The COVID-19 antigen test kit includes professional-use and at-home SKUs. The professional SKU targets the professional healthcare segment, while at-home SKUs aims the at-home self-testing segment. We also offer a cloud-based test management platform with a personal app as well as an enterprise app. Our molecular tests comprised of test kit assay and a low-cost portable tester.
VOC-based POCT. This category employs digital nose sensors and AI algorithms to detect and analyze VOC biomarkers for rapid detection of infectious disease and everyday self-care. We further implement wireless and secured cloud technologies to enable seamless, easy-to-use test data transmission to the telehealth community. Our target disease indications include vaginitis, STD, VAP, and H. pylori. We anticipate that our near-term revenue stream for VOC-based POCTs will mainly come from hardware sales. Longer-term, we plan to introduce a subscription-based analytics service to our customers, and when sales of medical devices reach scale, we anticipate subscription revenue to create substantial operating cash flow.
The opportunities of digital nose innovation
The digital nose, also known as the electric nose (e-nose) or, more generally, gas sensor, is a more scalable technology to analyze VOCs in a clinical setting, in our view. Comprised of gas sensors, the digital nose electronically mimics the human nose and the advancement in semiconductor manufacturing technologies allow digital noses to be made small, and at low cost. When combined with a pattern recognition algorithm, the digital nose directly detects components of different VOCs present in a gas mixture, which eliminates the need for complex preprocessing steps. A digital nose can be customized for specific applications using an array of sensors, which can detect volatile components included in a predetermined VOC profile. With the help of algorithms and other electronic components such as microprocessors, and wireless technologies, the digital nose can convert a VOC profile into unique digital signals that can be understood by many electric devices, which may enable a digital nose to be quickly developed into many easy-to-use, affordable, portable, cloud-connected POCTs for a wide range of diseases. We believe these potential new tools could facilitate new telehealth services previously unavailable.
Our AI Nose technology platform
Our AI Nose technology platform comprises the key building block of our VOC-based POCT. AI Nose’s main technology pillars include the digital nose sensor array, our proprietary VOC AI analytics, Smell ID, and the Company’s extensive knowhow of VOC-based medical device engineering. Our technology digitally profiles each VOC as a Smell ID and as more Smell IDs are collected for individuals, we may be able to build personalized medical treatment based on this data. We believe Smell ID’s long-term potential goes beyond healthcare. As we populate AI with more Smell ID, we believe we may eventually enable the AI Nose to detect smell in the broader, non-healthcare settings.
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COVID-19 Antigen Test Kit
Antigen test kits have been vital in testing COVID-19 at high frequency, large scale, and at low cost. Most EUA-approved test kits claim nearly identical value propositions and these essential functions are already commoditized. In our opinion, helping communities to better store and report the test results, and assisting organizations to better trace infection are critical attributes as countries try to reopen their economies. Unfortunately, few COVID-19 antigen test kits in the market provide these services. While testing labs are required to report their findings, many at-home tests are not required to report results to the health authorities.
We have developed a comprehensive, end-to-end, cloud-based platform that allows individuals and organizations to manage tests and trace infection effectively. Our platform is comprised of our test kit, a consumer app and an enterprise app. Consumers can visually see the test result on our test kit without using the app. We launched a free, consumer-friendly app called the Ainos Antigen Rapid Test App, available on iOS and Android. The app is currently available in Taiwan and we plan to roll out to additional countries in which we receive authorization to market, if approved. The app provides a simple and comprehensive interface platform to manage test results with the following vital services:
· | Secure log-in: User logs in with email and mobile phone number, receives a PIN number to authenticate. | |
· | Double authentication: Each test kit carries a data matrix code storing a unique serial number. User takes a selfie, and then scans the data matrix code before and after testing. This establishes a double authentication protocol for a reliable at-home testing experience. | |
· | Digital test report: Our app stores and displays vital information from the user’s latest test. The report includes the result, the unique I.D. number of the test kit associated with the test result, the date of the test and the user’s picture. Another Ainos user can scan the test report’s QR code. With this function, the user can display and share results with businesses, organizations, and healthcare authorities, allowing informed and safe gathering of data as well as improved test management. | |
· | Manage test results. The app stores all past tests results performed by the test kit and uploads these results to our secure cloud server. If the test kit is purchased by an organization that uses our enterprise app, the organization can access the user’s testing history in the enterprise app to facilitate remote tracing of COVID-19. | |
· | Filter visitors at entry. The app can scan another person’s digital test report. Organizations and business owners can use this function at any point of entry, creating a safe environment for gathering. | |
· | Proximity alert. The app notifies the user if someone tested positive has been in proximity with the user. |
Our Ainos Enterprise App is a centralized, cloud-based COVID-19 test management platform designed for public and private institutions. With this app, institutions can centrally manage and trace COVID-19 testing. The key features are:
· | Manage test result centrally. The app tracks inventory and sends testing reminders, daily reports to a designated person. An app administrator can download the test results as a spreadsheet. | |
· | Trace footprint of positive cases. The app administrator can trace a positive case’s footprint over the past seven days. |
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COVID-19 Nucleic Acid Test Kit
COVID-19 testing methods generally fall into three categories: molecular tests, antigen tests and antibody tests. The molecular test features the best accuracy. Current molecular tests rely on centralized laboratory testing, and face complex sample transportation, logistics, and throughput challenges. As a result, molecular test results can take from two to 14 days, require highly trained technicians to operate complex instruments and are generally expensive. These attributes present challenges to the rollout of testing capacity at the scale needed to meet current global demand. Lastly, effectively tracking molecular test results is difficult, as reporting is often conducted manually.
Based on our proprietary reverse transcription loop-mediated isothermal amplification (RT-LAMP) technology, Ainos has developed a fast and affordable molecular test. It consists of a color-changing assay that is compatible with standard PCR machines and portable, low-cost equipment. We offer the following functionality to our customers and when combined, we believe that they enable accurate, fast, cost-effective COVID-19 management.
· | Intuitive test results. Our assay displays test results by change of color. Yellow indicates positive results while red indicates negative results, permitting the naked eye or a smartphone camera to easily interpret the test result. | |
· | Quick result: Our assay delivers test results in 30-40 minutes, faster than a traditional test that may take from one hour to a two-day cycle. | |
· | Compatible with standard PCR machines. We have designed our assay to be compatible with most standard PCR machines. As a result, healthcare stakeholders can quickly deploy our assay without investing in new equipment. | |
· | Portable, low-cost equipment. Our RT-LAMP assay tests COVID-19 at a constant temperature. This allows us to develop a portable test device. As the result, we can deliver PCR-comparable performance with portability and low-cost. In contrast, standard PCR tests operate at multiple temperature changes, which require complex and large machines. |
Ainos Flora – discreet, telehealth-enabled STD tests in your hands
Invasive sampling is essential in the diagnosis of certain sexually transmitted diseases (STDs), such as vaginitis, gonorrhea, chlamydia and trichomoniasis. Pelvic exams are conducted primarily in an outpatient setting as they require the trained operation of specialized instruments.
Conventional testing methods, including pelvic exams, have several disadvantages. First, while the pelvic test/whiff test is quick, the wait time at the outpatient clinic is often long. Second, patients commonly feel anxiety before and during the pelvic exam. Third, the pelvic test and pH test cannot by themselves provide a definitive diagnosis. Fourth, the laboratory culture test takes a few hours to a few days to complete. Fifth, the pelvic exam is vulnerable to healthcare disputes. Lastly, the overall inconvenience may discourage follow-up visits and treatments. These shortcomings have two critical implications. First, crowded hospitals and clinics and long wait times may amplify patients’ anxiety levels. This may discourage patients with STD-suspected infections from getting tested or cause delays in seeking medical help. This may increase the risk of patients with mild symptoms unknowingly contributing to the spread of STDs. Second, it implies that the STD testing market size could be larger than reported by market research data.
We have designed our iF-award winning Ainos Flora to empower patients to effortlessly, non-invasively and quickly test their vaginal health at home. Through specialized digital nose sensor arrays and A.I. pattern recognition, Ainos Flora is designed to detect vaginal infection and common STDs (including bacterial vaginosis, fungus infection, gonorrhea and trichomoniasis) in minutes. Ainos Flora is portable, handheld, and enables remote monitoring by designated medical professionals. Patients can store test results in almosta mobile app.
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Flora is designed to give women back control of monitoring their personal health with the following clinical and commercial benefits:
· | Convenience. Ainos Flora’s form factor is designed to allow easy self-testing or clinical testing. | |
· | Non-invasive and no skin contact. The digital nose sensors enable Flora to gather and analyze a pathogen’s metabolic VOC a few centimeters away from the private area, without skin contact. | |
· | Results within minutes. The complex digital nose sensor and A.I. algorithm work together to deliver test results in about one minute. In contrast, a culture test can take days. | |
· | Remote monitor. A complementary mobile app wirelessly receives test results from Ainos Flora and uploads results to our secure cloud server. A patient’s designated physicians can then download the test results and remotely prescribe treatment. The process is designed to avoid potentially long wait times and remain discreet. |
Ainos Pen – a multipurpose breathalyzer for everyday telehealth
Conventional breathalyzers are typically single-purpose and primarily designed to test for alcohol and drug use. Ainos Pen is a multi-purpose, cloud-connected breathalyzer intended for routine health monitoring. By enabling self-care at home, we anticipate Ainos Pen will create new applications for the telehealth ecosystem by allowing users to non-invasively monitor their health. Ainos Pen securely stores test data in a complimentary mobile app with the ability to upload test data to a cloud server for access by designated healthcare providers. Through telehealth and A.I. analytics, patients can provide comprehensive and long-term health information for their healthcare providers.
Ainos Pen brings easy-to-use testing in a sleek pocket-sized form factor. This portable breath analyzer identifies VOCs from human breath in minutes and our A.I. algorithms. We designed the Ainos Pen to detect total VOC, eCO2, carbon monoxide, ethanol, hydrogen sulfide, and ammonia. Inside the Ainos Pen, the digital nose sensor technology can be built to specifications for monitoring various health conditions, such as halitosis (bad breath), gastrointestinal, liver, renal health, and smoking habits. Additional functions can potentially be created as we identify more new VOC biomarkers.
CHS430: ventilator-associated pneumonia (VAP) detection within 10 minutes
Ventilator-associated pneumonia (VAP) is one of the most frequent ICU-acquired infections. Reported prevalence varies widely from 5% to 40%. Causes of VAP include prolonged duration of mechanical ventilation or endotracheal intubation. The estimated mortality of VAP is around 10%, with higher mortality rates in surgical ICU patients and in patients with mid-range severity scores at admission. VAP also imposes a significant economic burden.
In our opinion, the current diagnosis of VAP is inefficient in method and speed, which complicates treatment, prevention and affects patient outcomes. The first step of diagnosis relies on clinical evaluation (e.g. evaluation of symptoms, use of a Clinical Pulmonary Infection Score (“CPIS”) and chest x-rays) and culture analysis. However, no side effects, in contrastsingle clinical criterion is sufficient to high dose injectable interferon,provide a definitive diagnosis. The second step of diagnosis is to perform microbiological sampling for culture analysis. However, sampling techniques for VAPs can be confusing. Culture analysis is a complex and slow process that increases the risk of antibiotics overuse. Performing culture analysis requires trained clinicians while sampling is often invasive and poses a threat to intensive care unit (ICU) patients who are already physically and emotionally vulnerable. Culture test results are often delayed, and during the wait time, healthcare providers may prescribe broad-spectrum antibiotics empirically, which causes adverse effects in at leastmay lead to poor patient outcome. The prescription of broad-spectrum antibiotics prior to a diagnosis raises the risk of antibiotic resistance, as studies suggest that VAP accounts for nearly 50% of recipients.
CHS430 is a patented portable breathalyzer that connects into to the y-connector of a respirator and detects VAP within 10 minutes. It is designed to screen VAP infections and the likely causation pathogen, subject to further clinical validation. The device quickly screens a patient’s breath VOC using an AI-powered digital nose. A specialized sensor array and algorithms quickly identify infections and the most common bacterial species related to VAP. The sensor array inside the device is designed to be periodically replaced. The device also requires regular maintenance.
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CHS430 is intended for use by medical professionals, particularly in critical care centers and ICUs. We believe the device serves as a rapid screening tool and enables faster, better decision making by critical care providers.
Key benefits include:
· | Quick result. CHS430 completes self-cleaning and testing within 10 minutes, faster than a culture test. | |
· | Non-invasive testing. The device non-invasively analyzes a patient’s breath VOC, improving quality of care and avoiding the cross-contamination risk associated with invasive sampling. | |
· | Easy-to-use. Connecting CHS430 to the y-tube requires minimal training. CHS430 self-cleans and begins testing with a simple press of button. The device can monitor the patient in real-time at customizable intervals. | |
· | Better treatment options. Faster bacteria identification allows doctors to select the right treatment path earlier than culture analysis. | |
· | Improves outcome. Early identification leads to better patient outcomes. Treating VAP requires the right antibiotic for the right strain at the right time and mistakes can result in harm to patients. Early detection reduces the risk of mortality or disease metastasis. |
AI Nose – healthcare digital nose for consumer electrics
We are developing a highly integrated multi-element digital nose sensor module, called the AI Nose. AI Nose is comprised of four sensor chips and an integrated digital processing chip. The sensor chip’s structure utilizes a complex semiconductor manufacturing process called microelectromechanical systems (MEMS).
We are developing AI Nose to introduce powerful VOC detection to the healthcare market. Each module can work alone or FDA approval is required for low-dose oral interferon.in arrays. We also designed the module’s form factor to be small enough so that it can be adopted into mobile devices such as smartphones. We believe that the AI Noise offers a great companion technology for medtech innovators to launch the next generation of healthcare devices. AI Nose can detect breath VOCs or environmental VOCs at the parts-per billion (ppb) level. Because exhaled VOCs are produced at the ppb level, we believe AI Nose is an ideal solution to monitor health.
Our digital nose technology learns to recognize scent in much the same way human learn to smell. In the presence of a VOC, AI Nose generates a digital signal corresponding to the incoming VOC’s unique profile (“the Smell ID”). As we collect and populate our database with more Smell IDs, we can train AI Nose to be smarter and more accurate. Combined with a subscription-based service, we plan to provide analytic and monitoring services to our customers.
Our Preventive Medicine Division is dedicated to developing innovative technologies that prevent disease, disability, and death while promoting health and well-being.
sRNA research initiative
Ainos is in the process of establishing a synthetic RNA (SRNA) technology platform capable of producing messenger RNAs (mRNAs) and/or short inhibitory RNAs (siRNAs) for potential vaccine development and disease treatment. Based on this platform, our short-term goal is soundto research and develop 2nd generation COVID-19 mRNA vaccines. Our long-term goal is to develop therapeutic RNA drugs featuring the use of mRNA and siRNA as genetic modulators for effective control of aberrant immune or genetic disorders.
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We believe effective production of RNA based vaccines or therapeutics through SRNA platform represents promising potential for numerous biomedical applications and disease prevention. Although clinical implementation of SRNAs as drugs to treat human diseases is still rare, we believe this is changing as clinical application of mRNAs are proving to be successful in expressing functional protein antigens and inducing protective neutralizing antibodies against the SARS-CoV-2 virus. As RNA’s fabrication, purification, and cellular delivery technologies continue to advance, we anticipate increased interest in the use of RNA-based vaccines or therapeutics to treat various human diseases for two reasons. First, SRNAs are cost-effective and simple to manufacture. Second, SRNAs can be commercializedrapidly developed as personalized drugs for various indications. most clinical and inherited diseases.
Due to occurrencesthe continuous outbreaks and the emergent SARS-CoV-2 variants, our short-term goal focuses on developing 2nd generation SARS-CoV-2 vaccines using a synthetic mRNA-based platform. We plan to use the full-length spike gene sequence of the British alpha variant (lineage B1.1.7) and the Indian delta variant (lineage B.1.617.2) as reference sequences to generate mRNA vaccines with 6 proline mutations. We also plan to adopt sequence modifications and codon optimization of the mRNA vaccines. We will test vaccine delivery with a liposome of known formulation and evaluate the immunization through intramuscular (systemic) and nasal (mucosal) routs in mice. We anticipate the interferon supply market overresearch will generate a T helper 1 (Th1) biased immune response with potent neutralization antibody and effector CD8 T cell response. In addition, relevant recombinant spike proteins will be produced in Baculovirus expression systems. These proteins can be used as alternative immunogens, immunostimulatory adjuvants, or antigens to develop therapeutic monoclonal antibodies.
Our long-term vision is to enable treatment of inflammatory diseases and cancers. We will generate mRNAs and/or siRNAs critical for immune modulations or tumor suppression. These mRNAs may express tumor suppressors, cancer-associated antigens, or immune agonists, while siRNAs may be used to degrade disease associated genes of aberrant expression.
We plan to focus on the past several years,research and development of the technology. In addition, we have been unsuccessful at such commercializationintend to date. However,explore strategic partnership opportunities upon completion of phase 1 clinical trial(s).
Our asset-light manufacturing model
We operate an asset light business model that allows us to fully dedicate resources towards technological innovation and business development. We believe this strategy allows us to optimize capital and stay cost competitive by working with suppliers in Asia.
Taiwan Carbon Nano Technology Corporation (TCNT) is our primary manufacturing partner. On August 1, 2021, we entered into a Product Co-development Agreement with TCNT. Pursuant to the agreement, TCNT will manufacture our POCT products. TCNT operates its facilities in conformance with a variety of International Organization for Standardization (ISO) and Good Manufacturing Practice (GMP) certifications, with most of our healthcare facilities’ quality management systems meeting ISO 13485. Based on our design of the AI Nose module and our co-developed manufacturing process, TCNT subcontracts to other semiconductor manufacturers including a specialized contract manufacturer that produces our sensors and an outsourced semiconductor assembly and testing company, or “OSAT” company, that assembles our sensors into a highly miniaturized module and tests the functionality.
We expect that the following five (5) Patent Assets assigned to the Company as a result of Covid-19, Chinese government health authorities recently 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 stemAinos transaction will form the pandemic. In lightbasis for the next generation of the circumstances, ABI is uniquely positioned to potentially develop safe, low-dose interferon.
· | A GAS SENSOR AND MANUFACTURE METHOD THEREOF as described and claimed in TAIWAN invention patent number I565944. | |
· | MEDICAL VENTILATOR CAPABLE OF ANALYZING INFECTION AND BACTERIA OF PNEUMONIA VIA GAS IDENTIFICATION as described and claimed in TAIWAN invention patent number I565945. |
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· | GAS DETECTOR as described and claimed in TAIWAN invention patent number D183554. | |
· | MEDICAL VENTILATOR CAPABLE OF ANALYZING INFECTION AND BACTERIA OF PNEUMONIA VIA GAS IDENTIFICATION as described and claimed in Japan Patent No.: JP 6392811 B2. The Company is granted exclusive license rights in Japan from January 1, 2021 to December 31, 2028. | |
· | GAS DETECTOR as described and claimed in CHINA invention patent number CN 304042244 S. The Company is granted exclusive license rights in China from January 1, 2021 to December 31, 2028. |
The Company’s long-time human interferon producer is no longer manufacturing interferon. Plans for further clinical trialsdevelopment and commercialization of a low-dose
Patents and effective anti-viral medications, there is still sufficient time 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.
Since inception, the companyCompany has worked to build an extensive patent portfolio for low dose orally administered interferon.the medical diagnosis and treatment of persistent diseases. This portfolio consists of patents with claims that encompass method of use or treatment, and/or composition of matter and manufacturing. As listed below,in this Overview section, the Company presently owns eleven (11) issued patents with two patents pending and license rights in Japan and China for two (2) patents under patent licensing agreements. 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 during the timeframe of this report.
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.
In general, before any ethical pharmaceutical product can be marketed in the United States, the FDA will require the following process:
• | Preclinical laboratory and animal tests; | |
• | Submission of an investigational new drug application, or IND, which must become effective before human clinical trials may begin; | |
| • | Adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use; | |
| • | Pre-approval inspection of manufacturing facilities and selected clinical investigators; | |
• | Submission of a New Drug Application (NDA) to the FDA; and | |
• | 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). |
Substantial financial resources are necessary to fund the research, clinical trials, and related activities necessary to satisfy FDA requirements or licenses five issued patents.
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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. Patent No. 9,526,694 B2 issued December 27, 2016, Owned. Expiration: April 2033.
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).
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 describedsafe and claimedeffective 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.
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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.
Employees and Consultants
As of September 30, 2021, the Company had a total of twenty-seven employees, compared to four in the same period 2020. Research and development employees currently represent approximately 33% of our total employees. In the future, we plan to increase research and development human resources to support our various technology development efforts.
Following the consummation of the Ainos Transaction, the Company retained key personnel in its U.S. Patent No. 9,750,786 B2 issued September 5, 2017, Owned. Expiration: April 2033.
· | Lawrence Lin, who previously worked as Executive Advisor to the Company through his firm, i2China Management Group, LLC, is now an employee serving as Executive Vice-President of Operations. | |
· | John Junyong Lee, Esq. continues to serve as Chief Legal Counsel and Corporate Secretary. | |
· | Chrystal Shelton continues to serves as Administration Manager. |
The Company is actively interviewing additional research and claimed in U.S. Patent No. 9,839,672 B2 issued December 12, 2017, Owned. Expiration: April 2033.
Results of OperationsOperation for Quarter Ended September 30, 20202021 and 2019:
Revenues, Costs and Gross Margins
|
| Three months ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Revenues |
| $ | 363,052 |
|
| $ | 192 |
|
Cost of revenues |
|
| (103,638 | ) |
|
| (123 | ) |
Gross margin |
| $ | 259,414 |
|
| $ | 69 |
|
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Revenues for the quarter ended September 30, 2020, of2021 was $363,052, compared to $192 from sales of liposomal nutraceuticals. Revenue forin the same period of 2020. Cost of revenues was $103,638, compared to $123 in 2019the same period of 2020. Gross margin was $4,786 also from$259,414, compared to $69 in the same period of 2020. The Company began sales of nutraceuticals.its Ainos Covid-19 Test Kits in June this year, of which 64% were sold through distribution channels and the remaining 36% mainly sold to enterprises, schools and medical institutions.
Research and Development Expenses
|
| Three months ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Research and development expenses |
| $ | 646,798 |
|
|
| - |
|
During the quarter ended September 30, 2021, the Company’s research and development expenses increased to $646,798 primarily due to spending on testing and development of the Ainos Covid-19 Test Kit and a mold to be used for manufacturing of our AI Nose pen product.
Since August 2021, in support of our medtech transformation we have begun expanding our research and development staffing and committed additional resources into technology and product developments across our Pharmaceutical, Medical Device and Preventive Medicine divisions. As a result, we incurred increased R&D expenses that reflect increased salary for R&D personnel, amortization of acquired intellectual properties, as well as expenses for technology development and technology license fees.
For the Pharmaceutical Division, we have established a focused approach to our core pharmaceutical drug development platform, VELDONA (Very Low-Dose Oral Interferon Alpha). We plan to analyze and explore new applications for VELDONA to optimize business opportunities. To execute this new approach, we plan to conduct further clinical trials of VELDONA for thrombocytopenia and Sjögren’s syndrome, for which we are deploying key resources that include staffing, capital and securing strategic business relationships with various partners, including biotech companies and medical research centers.
For the Medical Device Division, we have implemented a product roadmap for our diagnostics business. We are focused on establishing partnerships for technology development, clinical trials and business development in order to facilitate our product launch schedule.
For the Preventive Medicine Division, we have set up a research initiative for SRNA technologies to truly effect medical approaches that prevent the advancement of diseases. Our focus is on fundamental research and development of vaccines with the intent to seek out-licensing opportunities and strategic partnerships when appropriate. We have invested in additional staffing, and initiated product development partnerships with medical centers and universities for our mRNA vaccine research initiative.
Selling, General and Administration Expenses
|
| Three months ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Selling, general and administrative expenses |
| $ | 795,958 |
|
| $ | 321,153 |
|
Our selling, general and administration expense was $795,958, compared to $321,153 in the same period of 2020. The costincrease was associated with increased marketing expenses of salesour Ainos Covid-19 Test Kit, expenses related to the Ainos KY Transaction, an increase of employee salaries and professional service fees for corporate governance and legal compliance matters.
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Operating Loss
|
| Three months ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Operating loss |
| $ | (1,183,343 | ) |
| $ | (321,084 | ) |
Our operating loss was $1,183,343 during the third quarter of 2020 was $123 as2021, compared to $3,368 for costan operating loss of sales$321,084 in 2019. Gross profit for the quarter in 2020 was $69 as compared to $1,418 in 2019, a decrease of $1,349.
Net Loss
|
| Three months ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Net loss |
| $ | (1,161,110 | ) |
| $ | (323,285 | ) |
Net loss was $321,084 which was $44,322 (12%) lower$1,161,110 for 2020 than the 2019 operating loss of $365,406 mostly due to decreases in SG&A expenses.
Results of OperationsOperation for the Nine Monthsmonths Ended September 30, 20202021 and 2019:
Revenues, Costs and Gross Margins
|
| Nine months ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Revenues |
| $ | 568,164 |
|
| $ | 15,876 |
|
Cost of revenues |
|
| (174,395 | ) |
|
| (11,221 | ) |
Gross margin |
| $ | 393,769 |
|
| $ | 4,655 |
|
Revenues for the first nine months of 2019, an increase2021 were $568,164, compared to $15,876 in the same period of $6,408 or 68%.
Research and Development Expenses
|
| Nine months ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Research and development expenses |
| $ | 646,798 |
|
| $ | 389 | |
Research and development cost for the nine months of 2021 was $646,798, compared to $389 in the same period of 2020. The increase was due to the purchase of patents under the Ainos KY Transaction and associated new product development and research expenses.
Selling, General and Administrative Expenses
|
| Nine months ended September 30 |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Selling, general and administrative expenses |
| $ | 2,178,969 |
|
| $ | 1,001,893 |
|
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Selling, general and administrative expenses were $2,178,969 for the nine months ended September 30, 2020 was $11,221. For2021, compared to $1,001,893 in the nine months ended September 30, 2019, the costsame period of sales was $6,649.2020. The increase in cost of sales for 2020 as compared to 2019was associated with increased marketing expenses for the nine month periodAinos Covid-19 Test Kit, expenses related to the Ainos KY Transaction, an increase of employee salaries, and professional service fees for corporate governance and legal compliance matters.
Operating Loss
|
| Nine months ended September 30 |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Operating loss |
| $ | (2,431,998 | ) |
| $ | (997,627 | ) |
Company operating loss was $4,572, or 69%. Gross profit for nine months ended September 30, 2020, was $4,655 compared to $2,819$2,431,998 for the nine months ended September 30, 2019, an increase of $1,836 or 65%.
Net Loss
|
| Nine months ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Net loss |
| $ | (2,443,891 | ) |
| $ | (1,002,130 | ) |
Net loss was $4,895$2,443,891 for the nine months ended September 30, 2020,2021, compared to $2,920 for the nine month period ended September 30, 2019, an increase of $1,975 (68%). The increase in interest expense for 2020 was precipitated by the continued deferral of salary for Dr. Chen and consulting fees for i2China, both of which were included$1,002,130 in the outstanding balances for Convertible Notes – Related Party as explained in footnote 6 to financial statements. There was an increase in outstanding Convertible Debt- Related Party for thesame period June 30, 2020, through September 30, 2020, in the amount of $54,150 from $578,664 to $632,814. As shown in the table of footnote 6, principal for the notes increased from $444,581 on December 31, 2019 to $632,814 as of September 30, 2020, or $188,233, or 42%.
Liquidity and Capital Resources
As of September 30, 2020,2021, the Company had available cash of $83,767$706,931 whereas it had a cash position of $482,772$83,767 for the same period in 20192020 and $409,039$22,245 as of December 31, 2019.2020. The Company had a working capital deficit of $919,880$1,937,163 at the end of September 2020,30, 2021, and a working capital deficit of $65,043$919,880 for the same period in 2019,2020, an increase of 1,414%111%. As of December 31, 2019,2020, working capital was a deficit of $308,013. $1,022,155.
The average monthly burn rate in 2020, was $65,000. Going forward, we expect that the burn rate will continueCompany anticipates business revenues and potential financial support to be in that same range.
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company,” we are not required to provide the information under this Item 3.
ITEM 4. Controls and Procedures
Disclosure Controls and Procedures
At the end of the period covered by the Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and this Form 10-Q Quarterly Report for the quarter ending September 30, 2020, an evaluation was carried out under the supervision of andreport, our management, with the participation of our management, including the Chief Executive Officer (“CEO”)/and Chief Financial Officer, (“CFO”), as toevaluated the effectiveness of the design and operations of our disclosure controls and procedures (asas of September 30, 2021. The term “disclosure controls and procedures,” as defined in RuleRules 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based on that evaluation, the CEO/CFO has concluded that as of the end of the period covered by this Annual Report, our disclosureAct, means controls and other procedures were not effective in ensuring that: (i)of a company that are designed to ensure that information required to be disclosed by usa company in the reports that we fileit files or submit to the SECsubmits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in applicablethe SEC's rules and formsforms. Disclosure controls and (ii) materialprocedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in ourthe reports filedthat it files or submits under the Exchange Act is accumulated and communicated to ourthe company's management, including its principal executive and our CEO/CFO,principal financial officers, as appropriate to allow for accurate and timely decisions regarding required disclosure.
Management's Report on Internal Controls and Procedures overControl Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, to provide reasonable assurance regardingas such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the reliabilitysupervision and with the participation of our management, including our principal executive officer and principal financial reporting and the preparationofficer, we conducted an evaluation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”). Management has assessed the effectiveness of our internal control over financial reporting based on the criteria set forthframework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)Commission. Based on our evaluation under the framework inInternal Control-IntegratedControl - Integrated Framework. A material weakness, as defined by SEC rules, is a control deficiency, or combination of control deficiencies, such (2013), our management concluded that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses inour internal control over financial reporting that were identified are:
Changes in Internal Control Over Financial Reporting
We have not maintain effectiveexperienced any material impact to our internal controlcontrols over financial reporting as of September 30, 2020, basedeven 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 the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
This interimquarter report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit the company to provide only management's report in this interimquarter report.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. As of the date of this report, we were not aware of any such legal proceedings or claims against us.
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, digital health, and diagnostic point-of-care testing 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.
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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.
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 | |
· | 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 may be dependent on the volume of another 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.
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We Face Supply Risk
We are vulnerable to supply risks. The 2020-1 Private PlacementCompany’s long-time human interferon producer is no longer manufacturing interferon. Plans for further clinical trials and commercialization of a low-dose interferon product are dependent upon identifying a new source of interferon. The Company has secured a supply partner for current needs but will continue to actively seek new alternative suppliers and explore additional sourcing options. Procuring a new source of interferon may require additional studies to compare results to the Company’s research and further clinical trials may have to be performed. The Company’s inability to secure interferon supplies may adversely affect our operating results.
The Company is the master sales and marketing agent for the Ainos Covid-19 Test Kit developed by Taiwan Carbon Nano Corporation (“TCNT”), a related party. The Company sources the Ainos Covid-19 Test Kit exclusively from TCNT. TCNT currently manufactures the Covid-19 Test Kit in Taiwan. Any unexpected supply disruption by TCNT may adversely affect our business results.
We plan to develop, sell, and/or market other rapid test kit products with a focus on point-of-care diagnostic medical devices. We may continue to rely on TCNT to manufacture these devices. Any unplanned supply risk at TCNT may negatively affect our future business plan.
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 expands. 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.
Our results of operations may be negatively impacted by the COVID-19 outbreak
To date the outbreak has not had a material adverse impact on our operations. The future impact of the outbreak is highly uncertain and cannot be predicted, and there is no assurance that the outbreak will not have a material adverse impact on the future results of the Company.
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ITEM 2. Unregistered Sales of Equity Security OfferingSecurities and Use of Proceeds.
None
ITEM 3. Defaults Upon Senior Securities.
None
ITEM 4. Mine Safety Disclosures.
Not applicable
ITEM 5. Other Information.
Employment Offer Letters to CEO and CFO
On August 11, 2021, the Company and the CEO of the Company executed an Offer Letter, subject to mutual agreement of employment terms and conditions and approval of the Board, under which Mr. Tsai was unanimously authorizedoffered a monthly salary of 250,000 New Taiwan Dollars (equivalent to approximately $8,929), a year-end bonus of 2 months’ salary, and approveda variable compensation based on Company profit targets decided by Consentthe Company’s Compensation Committee, and payable as 10-30% of ABItotal annual compensation in the form of cash, securities and/or other discretionary remuneration. An initial equity grant to Mr. Tsai will be determined by the Compensation Committee at a later date. Other benefits, including labor insurance, health insurance and other benefits, will be based on local regulations and the Company’s policies.
On August 11, 2021, the Company and the CFO of the Company executed an Offer Letter, subject to mutual agreement of employment terms and approval of the Board, under which Ms. Wu was offered a monthly salary of 230,000 New Taiwan Dollars (equivalent to approximately $8,214), a year-end bonus of 2 months’ salary, and a variable compensation based on Company profit targets decided by the Company’s Compensation Committee, and payable as 10-30% of total annual compensation in the form of cash, securities and/or other discretionary remuneration. An initial equity grant to Ms. Wu will be determined by the Compensation Committee at a later date. Other benefits, including labor insurance, health insurance and other benefits, will be based on local regulations and the Company’s policies.
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As part of our Board’s commitment to corporate governance, our Company’s Board adopted the following policies governing the Board, the Company, and its Committees:
Board Policies
Rules and Procedures of Board of Directors. Directors Meetings, adopted August 20, 2021, incorporated herein by this reference, and attached hereto as Exhibit 99.1;
Corporate Governance Policies of the Board of Directors, adopted August 20, 2021, incorporated herein by this reference, and attached hereto as Exhibit 99.2;
Charter of the Audit Committee of the Board of Directors, adopted August 20, 2021, incorporated herein by this reference, and attached hereto as Exhibit 99.3;
Charter of the Compensation Committee of the Board of Directors, adopted August 20, 2021, incorporated herein by this reference, and attached hereto as Exhibit 99.4;
Insider Trading Policy of the Board of Directors, as amended and adopted August 20, 2021, incorporated herein by this reference, and attached hereto as Exhibit 99.5; and
Code of Business Conduct and Ethics, adopted August 20, 2021, as reported in our Form 8-K, incorporated herein by this reference, filed on August 26, 2021 and attached hereto as Exhibit 99.6
Amendments to Bylaws
The Board of Directors of the Company offered upapproved the following amendment to 5,208,334 sharesArticle II, Section 10 of Common voting stock at a pricethe Company’s Bylaws effective August 20, 2021, as reported in our Form 8-K, incorporated herein by this reference, filed on August 26, 2021:
“Section 10. Compensation.The Board of $0.192 per share for an aggregate amount of $1,000,000. That offering is currently open and still available for investment.
Prior to the amendment, Article II, Section 10 of the Company’s 2020-1 Private Placement Stock Offering. The total amountBylaws provided as follows:
“Section 10. Compensation. Directors as such shall not receive any stated salary for their services, but by resolution of the investment is $100,000Board a fixed sum and expense of which $85,000 has been submitted by Dr. Chen. The shares willattendance, if any, may be issued upon receiptallowed for attendance at such regular or special meetings of the balanceBoard; provided, that nothing contained herein shall be construed to preclude any director from serving the Corporation in any other capacity or receiving compensation therefor.”
Additionally, the Board of Directors of the investment funds.
ITEM 6. Exhibits.
EXHIBIT INDEX
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| INCORPORATED BY REFERENCE | ||||||||
EXHIBIT NUMBER |
| DESCRIPTION |
| FILED WITH THIS FORM 10-K |
| FILING DATE WITH SEC |
| FORM |
| EXH # |
| HYPERLINK TO FILINGS |
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| Restated Certificate of Formation of the Company, dated April 15, 2021 and filed April 21, 2021 |
|
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| 4/21/2021 |
| 8-K |
| 3. |
| Restated Certificate of Formation of the Company, dated and filed July 27, 2015. | |
|
| X |
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| ||
4.1 |
| Specimen Common Stock Certificate |
|
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| 8/8/1996 |
| SB-2 |
| 4.1 |
| Specimen Common Stock Certificate. |
|
| X |
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| ||
| Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350 |
| X |
|
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| |
| Rules and Procedures of Board of Directors Meetings, adopted August 20, 2021 |
| X |
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| |
| Corporate Governance Policies of the Board of Directors, adopted August 20, 2021 |
| X |
|
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|
|
|
| |
| Charter of the Audit Committee of the Board of Directors, adopted August 20, 2021 |
| X |
|
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| |
| Charter of the Compensation Committee of the Board of Directors, adopted August 20, 2021 |
| X |
|
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| |
| Insider Trading Policy of the Board of Directors, as amended and adopted August 20, 2021 |
| X |
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| |
99.6 |
| Code of Business Conduct and Ethics, adopted August 20, 2021 |
|
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| 8/26/21 |
| 8-K |
| 5.05 |
| https://www.sec.gov/ix?doc=/Archives/edgar/data/1014763/000165495421009457/amar_8k.htm |
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 |
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101.SCH |
| XBRL Taxonomy Extension Schema Document |
| X |
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101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase |
| X |
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101.DEF |
| XBRL Taxonomy Extension Definition Linkbase |
| X |
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101.LAB |
| XBRL Taxonomy Extension Label Linkbase |
| X |
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101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase |
| X |
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104.1 |
| Cover Page Interactive Data File |
| X |
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The exhibits listed in the Exhibit Index are filed 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
+ Schedules (as similar attachments) have been omitted from this filing pursuant to the exhibitItem 601(a)(5) of the same number to the Company's Registration Statement on Form SB-2 filed with and declared effective by the Commission (File No. 333-4413) on August 8, 1996.
* Indicates a management contract or compensatory Plan required to be filed as an Exhibit per Item 15(b) of Form 10K.
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AINOS, INC. | |||
Date: November | By: | /s/ | |
Chun-Hsien Tsai, Chairman of the Board, and | |||
Chief Executive Officer | |||
Date: November 15, 2021 | By: | /s/ Hui-Lan Wu | |
Hui-Lan Wu, Chief Financial Officer | |||
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