UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~_______________________________~~

FORM 10-Q

~~_______________________________~~(Mark One)

~~(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, 2022~~March 31, 2023

☐	☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period 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~~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~~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

~~20,011,602~~20,040,934 shares of common stock, par value $0.01 per share, outstanding as of ~~November 11, 2022~~May 12, 2023

AINOS, INC.

INDEX

			PAGE ~~NO.~~NO.
PART I:	FINANCIAL INFORMATION
ITEM 1.	Financial Statements ~~(Unaudited)~~		3
	Condensed Consolidated Balance ~~Sheets as of September 30, 2022~~Sheets– March 31, 2023 and December 31, ~~2021~~2022 (unaudited)		3
	Condensed Consolidated Statements of Operations ~~for the three~~– Three Months Ended March 31, 2023 and ~~nine months ended September 30,~~ 2022 ~~and 2021~~(unaudited)		4
	Condensed Consolidated Statements of Comprehensive Loss ~~for the three~~– Three Months Ended March 31, 2023 and ~~nine months ended September 30,~~ 2022 ~~and 2021~~(unaudited)		5
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) ~~for the three~~– Three Months Ended March 31, 2023 and ~~nine months ended September 30,~~ 2022 ~~and 2021~~(unaudited)		6

	Condensed Consolidated ~~Condensed~~ Statements of Cash Flows ~~for the nine months ended September 30,~~– Three Months Ended March 31, 2023 and 2022 ~~and 2021~~(unaudited)		87
	Notes to ~~Condensed Consolidated~~ Financial Statements (unaudited)		98
ITEM 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations		1817
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		2421
ITEM 4.	Controls and Procedures		2421

PART II:	OTHER INFORMATION
ITEM 1.	Legal Proceedings	22
ITEM 1A.	26Risk Factors	22
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		2622
ITEM 3.	Defaults Upon Senior Securities		2723
ITEM 4.	Mine Safety Disclosures		2723
ITEM 5.	Other Information		2723
ITEM 6.	Exhibits		2824
Signatures			2925

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

Ainos, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

	September 30			December 31			March 31,			December 31,
	2022			2021			2023			2022
Assets
Current assets:
Cash and cash equivalents		2,417,147			1,751,499		$	1,146,132		$	1,853,362
Accounts receivable		400,198			-
Inventory		698,295			-
Accounts receivable, including related parties								111,283			201,546
Inventory, net								572,390			595,222
Other receivables - related parties								1,500,000			-
Other current assets		152,406			466,198			303,318			195,787
Total current assets		3,668,046			2,217,697			3,633,123			2,845,917
Intangible assets, net		33,946,391			37,329,191			31,691,698			32,806,738
Property and equipment, net		1,350,960			1,187,702			1,314,605			1,375,676
Other Assets		116,425			87,571
Other assets								68,817			80,683
Total assets		39,081,822			40,822,161		$	36,708,243		$	37,109,014

Liabilities and Stockholders’ Equity
Current liabilities:
Convertible notes payable		376,526			3,376,526
Notes payable		884,000			213,405
Accrued expenses and other current liabilities		1,382,721			1,004,868
Payables -related party		-			26,000,000
Convertible notes payable – related party							$	376,526		$	376,526
Notes payable, including related parties								684,000			884,000
Accrued expenses and others current liabilities								806,017			1,212,386
Total current liabilities		2,643,247			30,594,799			1,866,543			2,472,912
Long term liability:
Operating lease liabilities-non-current		12,505			30,255
Long term liabilities:
Convertible notes payable – noncurrent								2,500,000			-
Operating lease liabilities - noncurrent								3,276			8,096
Total liabilities		2,655,752			30,625,054			4,369,819			2,481,008

Stockholders’ equity
Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued		-			-
Common stock, $0.01 par value; 300,000,000 shares authorized as of September 30, 2022 and December 31,2021; 19,478,270 shares and 9,625,133 shares issued and outstanding as of September 30, 2022 and December 31, 2021		194,783			96,251
Common stock, $0.01 par value; 300,000,000 shares authorized as of March 31, 2023, and December 31, 2022; 20,011,602 shares issued and outstanding as of March 31, 2023, and December 31, 2022								200,116			200,116
Additional paid-in capital		58,491,505			20,203,972			58,965,981			58,745,149
Accumulated deficit		(21,984,598	)		(10,108,916	)		(26,636,081	)		(24,115,606	)
Translation adjustment		(275,620	)		5,800			(191,592	)		(201,653	)
Total stockholders’ equity		36,426,070			10,197,107			32,338,424			34,628,006
Total liabilities and stockholders’ equity		39,081,822			40,822,161		$	36,708,243		$	37,109,014

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Ainos, Inc.

Condensed ConsolidatedStatements of Operations

(Unaudited)

	Three months ended September 30						Nine months ended September 30						Three Months Ended March 31,
	2022			2021			2022			2021			2023			2022
Revenues	$	1,757,774		$	363,052		$	2,481,602		$	568,164		$	49,164		$	87,200
Cost of revenues		(1,176,032	)		(103,638	)		(1,536,074	)		(174,395	)		(100,848	)		(41,078	)
Gross profit		581,742			259,414			945,528			393,769

Gross (loss) profits														(51,684	)		46,122
Operating expenses:
Research and development expenses		1,834,786			646,798			5,047,096			646,798			1,698,883			1,577,454
Selling, general and administrative expenses		6,569,227			795,958			7,748,060			2,178,969			762,465			551,730
Total operating expenses		8,404,013			1,442,756			12,795,156			2,825,767			2,461,348			2,129,184
Operating loss		(7,822,271	)		(1,183,342	)		(11,849,628	)		(2,431,998	)		(2,513,032	)		(2,083,062	)

Non-operating income and expenses
Interest income and expenses, net		(9,821	)		23,517			(45,304	)		(9,361	)
Other income and expenses, net		10,336			(285	)		19,250			(2,532	)
Total non-operating income and expenses, net		515			23,232			(26,054	)		(11,893	)
Non-operating income (expenses), net
Interest expenses, net														(9,273	)		(16,687	)
Other income (expenses), net														1,830			(146	)
Total non-operating expenses, net														(7,443	)		(16,833	)
Net loss		(7,821,756	)		(1,160,110	)		(11,875,682	)		(2,443,891	)	$	(2,520,475	)	$	(2,099,895	)

Net loss per common shares-basic and diluted		(0.51	)		(0.12	)		(1.03	)		(0.48	)	$	(0.13	)	$	(0.22	)

Weighted average common shares outstanding– basic and diluted		15,301,396			9,494,468			11,538,013			5,061,160			20,011,602			9,625,133

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Ainos, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

	Three months ended September 30						Nine months ended September 30						Three Months Ended March 31,
	2022			2021			2022			2021			2023			2022
Net loss	$	(7,821,756	)	$	(1,160,110	)	$	(11,875,682	)	$	(2,443,891	)	$	(2,520,475	)	$	(2,099,895	)
Other comprehensive loss:
Other comprehensive income (loss):
Translation adjustment		(57,674	)		6,838			(281,420	)		6,838			10,061			(58,059	)
Comprehensive loss		(7,879,430	)		(1,153,272	)		(12,157,102	)		(2,437,053	)	$	(2,510,414	)	$	(2,157,954	)

See accompanying notes to condensed consolidated financial ~~statements~~statements.

Table of Contents

Ainos, Inc.

Condensed Consolidated Statements of Stockholders’ Equity ~~(Deficit)~~

For the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~

(Unaudited)

Preferred Stock

Common Stock

Additional Paid in

Accumulated

Translation

Total Stockholders’ Equity

Shares

Par Value

Shares

Par Value

Capital
Deficit
Adjustment
(Deficit)

Balance at June 30, 2022

-

$ -

9,625,133

$ 96,251

$ 20,290,857

$ (14,162,842 )

$ (217,946 )

$ 6,006,320

Issuance of stock upon offering, net of issuance cost

-

-

780,000

7,800

1,772,404

-

-

1,780,204

Conversion of convertible notes into common stock

-

-

9,073,137

90,732

30,352,227

-

-

30,442,959

Share-based compensation

-

-

-

-

6,076,017

-

-

6,076,017

Net loss

-

-

-

-

-

(7,821,756 )

-

(7,821,756 )
Translation adjustment

-

-

-

-

-

-

(57,674 )

(57,674 )
Balance at September 30, 2022

-

$ -

19,478,270

$ 194,783

$ 58,491,505

$ (21,984,598 )

$ (275,620 )

$ 36,426,070

Balance at June 30, 2021

-

$ -

9,484,634

$ 94,847

$ 25,614,745

$ (7,504,035 )

-

18,205,557

Issuance of stock for option

-

-

11,360

113

64,639

-

-

64,752

Share-based compensation

-

-

-

-

19,322

-

-

19,322

Net loss

-

-

-

-

-

(1,160,110 )

-

(1,160,110 )
Translation adjustment

-

-

-

-

-

-

6,838

6,838

Balance at September 30, 2021

-

$ -

9,495,994

$ 94,960

$ 25,698,707

$ (8,664,145 )

$ 6,838

$ 17,136,360

	Preferred Stock				Common Stock				Additional Paid in		Accumulated			Translation			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		Capital		Deficit			Adjustment			(Deficit)
Balance at December 31, 2022		-	$	-		20,011,602	$	200,116	$	58,745,149	$	(24,115,606	)	$	(201,653	)	$	34,628,006
Share-based compensation		-		-		-		-		220,832		-			-			220,832
Net loss		-		-		-		-		-		(2,520,475	)		-			(2,520,475	)
Translation Adjustment		-		-		-		-		-		-			10,061			10,061
Balance at March 31, 2023		-	$	-		20,011,602	$	200,116	$	58,965,981	$	(26,636,081	)	$	(191,592	)	$	32,338,424

Balance at December 31, 2021		-	$	-		9,625,133	$	96,251	$	20,203,972	$	(10,108,916	)	$	5,800		$	10,197,107
Share-based compensation		-		-		-		-		43,443		-			-			43,443
Net loss		-		-		-		-		-		(2,099,895	)		-			(2,099,895	)
Translation Adjustment		-		-		-		-		-		-			(58,059	)		(58,059	)
Balance at March 31, 2022		-	$	-		9,625,133	$	96,251	$	20,247,415	$	(12,208,811	)	$	(52,259	)	$	8,082,596

See accompanying notes to condensed consolidated financial ~~statements.~~statements.

~~Table of Contents~~

~~Ainos, Inc.~~

~~Statements of Stockholders’ Equity (Deficit)~~

~~For the nine months ended September 30, 2022 and 2021~~

~~(Unaudited)~~

Preferred Stock

Common Stock

Additional Paid in

Accumulated

Translation

Total Stockholders’ Equity

Shares

Par Value

Shares

Par Value

Capital
Deficit
Adjustment
(Deficit)

Balance at December 31, 2021

-

$ -

9,625,133

$ 96,251

$ 20,203,972

$ (10,108,916 )

$ 5,800

$ 10,197,107

Issuance of stock upon offering, net of issuance cost

-

-

780,000

7,800

1,772,404

-

-

1,780,204

Conversion of convertible notes into common stock

-

-

9,073,137

90,732

30,352,227

-

-

30,442,959

Share-based compensation

-

-

-

-

6,162,902

-

-

6,162,902

Net loss

-

-

-

-

-

(11,875,682 )

-

(11,875,682 )
Translation adjustment

-

-

-

-

-

-

(281,420 )

(281,420 )
Balance at September 30, 2022

-

$ -

19,478,270

$ 194,783

$ 58,491,505

$ (21,984,598 )

$ (275,620 )

$ 36,426,070

Balance at December 31, 2020

-

$ -

2,804,259

$ 28,043

$ 5,353,933

$ (6,220,254 )

-

$ (838,278 )
Issuance of stock for compensation

-

-

13,709

137

139,268

-

-

139,405

Issuance of stock for acquisition of patents

-

-

6,666,666

$ 66,667

19,933,333

-

-

20,000,000

Issuance of stock for option

-

-

11,360

113

64,639

-

-

64,752

Share-based compensation

-

-

-

-

207,533

-

-

207,533

Net loss

-

-

-

-

-

(2,443,891 )

-

(2,443,891 )
Translation adjustment

-

-

-

-

-

-

6,838

6,838

Balance at September 30, 2021

-

$ -

9,495,994

$ 94,960

$ 25,698,707

$ (8,664,145 )

$ 6,838

$ 17,136,360

~~See accompanying notes to~~ ~~condensed consolidated~~ ~~financial statements.~~

Table of Contents

Ainos, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine months ended September 30,

    2022

    2021

Cash flows from operating activities:

Net loss

$ (11,875,682 )

$ (2,443,891 )
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

3,608,080

1,178,693

Share-based compensation expense

6,162,902

207,533

Stock issued for compensation

-

139,405

Loss on disposal of fixed property and equipment

-

2,227

Changes in operating assets and liabilities:

Accounts receivable

(400,198 )

(44,643 )
Inventory

(698,295 )

2,849

Other current assets

313,792

(81,921 )
Accrued expenses and other current liabilities

483,660

470,598

Net cash used in operating activities

(2,405,741 )

(569,150 )
Cash flows from investing activities:

Payments to acquire properties and equipment

(669,792 )

(41,581 )
Proceeds from disposal of properties and equipment

-

36

Increase in refundable deposits and others

4,713

(1,795 )
Net cash used in investing activities

(665,079 )

(43,340 )
Cash flows from financing activities:

Payments of lease liabilities

(14,896 )

(6,815 )
Proceeds from convertible notes payable-non-current

1,400,000

-

    Proceeds from convertible notes payable

-

1,232,192

Proceeds from notes payable

800,000

-

Principal payments on notes payable

(129,405 )

-

Net proceeds from Uplisting in Nasdaq

1,780,204

-

Proceeds from exercise of share options

-

64,752

Net cash provided by financing activities

3,835,903

1,290,129

Effect from foreign currency exchange

(99,435 )

7,047

Net increase in cash and cash equivalents

665,648

684,686

Cash and cash equivalents at beginning of period

1,751,499

22,245

Cash and cash equivalents at end of period

2,417,147

706,931

Supplemental Cash Flow Information:

Cash paid for interest

1,872

9,363

Supplemental disclosures of noncash financing and investing activities:

Stock issued for compensation, warrant and option expense

-

346,938

Stock issued for acquisition of patents

-

20,000,000

Issuance of convertible notes for payables-related party

26,000,000

-

Conversion of convertible notes and accrued interest into common stock

30,442,959

-

ROU leased assets and obligation

-

62,723

Payment to acquire properties and equipment:

Acquisition of property and equipment

575,567

-

Increase in prepaid for equipment

33,776

-

Decrease in payables for equipment

60,449

-

Total payments

669,792

-

	Three months ended March 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(2,520,475	)	$	(2,099,895	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,204,609			1,168,773
Loss on inventory write - downs		42,826			-
Share-based compensation expense		220,832			43,443
Changes in operating assets and liabilities:
Accounts receivable		90,263			-
Inventory		(19,948	)		(337,805	)
Other current assets		(107,531	)		(297,707	)
Accrued expenses and others current liabilities		(338,003	)		133,302
Net cash used in operating activities		(1,427,427	)		(1,389,889	)
Cash flows from investing activities:
Payment to acquisition of property and equipment		(72,184	)		(135,899	)
Increase in refundable deposits and others		(299	)		-
Net cash used in investing activities		(72,483	)		(135,899	)
Cash flows from financing activities:
Payments of lease liabilities		(4,802	)		(5,116	)
Proceeds from convertible notes payable -non-current		1,000,000			850,000
Proceeds from notes payable		-			800,000
Repayments of notes payable		(200,000	)		-
Net cash provided by financing activities		795,198			1,644,884
Effect from foreign currency exchange		(2,518	)		754
Net (decrease) increase in cash and cash equivalents		(707,230	)		119,850
Cash and cash equivalents at beginning of period		1,853,362			1,751,499
Cash and cash equivalents at end of period	$	1,146,132		$	1,871,349

Supplemental disclosures of noncash financing and investing activities:
Issuance of convertible notes for payables - related party	$	-		$	26,000,000
Receivable of convertible notes issued	$	1,500,000		$	50,000
Net change in equipment payable	$	-		$	202,002

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Ainos, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and ~~Business~~Summary of Significant Accounting Policies

Organization and Business

Ainos ~~Inc., a Texas corporation formerly known as Amarillo Biosciences,~~ Inc. (the “Company”, “we” or “us”), is engaged in developing medical technologies for point-of-care (“POCT”) testing and safe and novel medical treatment for a broad range of disease indications. Since our inception in 1984, we have concentrated our resources on business planning, raising capital, research and clinical development activities for our programs, securing related intellectual property and commercialization of proprietary therapeutics using low-dose non-injectable interferon (“IFN”). In addition to our core IFN technology, we are committed to developing a diversified healthcare business portfolio to include medical devices and consumer healthcare products. ~~Although we~~

We have historically been involved in extensive ~~pharmaceutical~~ research and development of low-dose oral interferon as a ~~therapeutic,~~therapeutic. We continue to develop our VELDONA platform and other pharmaceutical platforms and recently have acquired intellectual properties to expand our POCT business. In 2021 and 2022, we ~~are prioritizing the commercialization of medical devices as part of our diversification strategy. Since April 15, 2021, we have~~ acquired significant intellectual property from our majority shareholder, Ainos ~~Inc., a Cayman Islands corporation (“Ainos KY”),~~KY, to expand our potential product portfolio into Volatile Organic Compounds (“VOC”) ~~POCTs~~ and COVID-19 POCTs. ~~We expect our underlying intellectual property to enable us to expedite the commercialization of our medical device pipeline, beginning with the Ainos-branded COVID-19 POCT product candidates.~~

2. Underwritten Public Offering

The Company’s registration statement related to its underwritten public offering (“Offering”) was declared effective on August 8, 2022, and the Company’s common stock and warrants began trading on the Nasdaq Capital Market (“Nasdaq”) on August 9, 2022 under the trading symbols “AIMD” and “AIMDW”, respectively. The Company completed its underwritten public offering of an aggregated 780,000 units at a public offering price of $4.25 per unit. Each unit issued in the offering consisted of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $4.25.

In connection with the Offering, the Company’s board of directors on April 29, 2022 and our shareholders on May 16, 2022 approved a 1-for-15 reverse stock split (the “Reverse Stock Split”) of the Company’s common stock and each series of its redeemable convertible notes to be consummated prior to the effectiveness of the ~~Offering~~Offering. The par value and authorized shares of the Company’s common stock were not adjusted as a result of the Reverse Stock Split. All issued and outstanding common stock, RSUs, warrants and options to purchase common stock and per share amounts contained in the financial statements have been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented.

The Company filed an amended Restated Certificate of Formation with the Secretary of State of Texas on August 8, 2022 that effectuated the Reverse Stock Split.

~~Additional information regarding the Offering and Reverse Stock Split can be found below in Note 5 of the Notes to Financial Statements.~~

3. Basis of ~~presentation~~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/A~~10-K for the year ended December 31, ~~2021,~~2022, as filed with the Securities and Exchange Commission ~~(the “SEC”)~~ on April ~~15, 2022 and the un-audited financial statements and footnotes included in the Company’s Form 10-Q for the quarter ending June 30, 2022 as filed with the SEC on August 15, 2022,~~3, 2023, have been prepared in accordance with the Generally Accepted Accounting Principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by for audited financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ~~and nine months~~ ended ~~September 30, 2022,~~March 31, 2023, are not necessarily indicative of the results that may be expected for the full year ending December 31, ~~2022.~~2023.

Table of Contents

4. Financial Condition

These accompanying unaudited financial statements have been prepared in accordance with GAAP, on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. At March 31, 2023 and December 31, 2022, we had available cash and cash equivalents of $1,146,132 and $1,853,362, respectively. We anticipate business revenues and potential financial support from outside sources to fund our operations over the next twelve months. The Company has generated revenues from sales of COVID-19 antigen test kits since the second quarter of 2021. However, ~~losses are anticipated in~~due to uncertainties surrounding the ~~ongoing development~~progression of ~~its business and~~COVID-19 infection, there can be no assurance that we can continue grow the COVID-19 test business. Our ability to generate product revenue sufficient to achieve profitability will depend on further successful development and commercialization of one or more of our current or future product candidates and programs. We anticipate our POCT and VELDONA candidates to potentially generate organic cash flows to support our business operation. If we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution, and legal and regulatory compliance. We may also incur additional expenses associated with increased headcount and product development. Furthermore, we expect to incur more general and administrative expenses associated with operating as a public company, including significant legal, accounting, investor relations and other expenses.

Until we can generate significant revenue from product sales, the Company intends to seek additional funding through equity offerings or borrowing arrangements or licensing agreements or strategic alliances to implement its business plan. Please refer to the Subsequent Events section. The issuances of additional equity securities by the Company may result in dilution in the equity interests of its current stockholders. Obtaining commercial loans may increase the Company’s liabilities and future cash commitments.

We are unable to predict the timing or amount of unexpected expenses or when or if we will be able to achieve or maintain profitability. The Company’s operations have been funded primarily from related-party convertible debt and equity financings. In addition, the Company received additional funding through the Offering concurrent with an uplistingincrease significant revenue due to the ~~Nasdaq Capital Markets, as described in Note 5.~~

~~The continuing operations~~numerous risks and uncertainties associated with product development and related legal regulatory requirements, and when we are eventually able to generate additional product sales or licensing income, those revenue may not be sufficient to become profitable. Furthermore, fundraising of emerging company is extremely challenging due to the high uncertainty of the Company and the recoverability of the carrying value of assets is dependent upon the ability of the Company to obtain necessary financing to fund its working capital requirements, and upon future profitable operations. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

overall economic environment at present. There can be no assurance that the revenue will be generated in time or capital will be available as necessary to meet the Company’s working capital requirements or, if the capital is available, that it will be on terms acceptable to the Company. The issuances of additional equity securities by the Company may result in dilution in the equity interests of its current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase the Company’s liabilities and future cash commitments.

If the ~~Company~~company is unable to ~~obtain financing~~generate cash inflow from operating activities in the ~~amounts~~near future, and oncannot complete fundraising with sufficient amount and acceptable terms, ~~deemed acceptable, the business and future success~~we may be ~~adversely affected~~unable to continue our operations at planned levels and ~~the Company may cease~~be forced to reduce or terminate our operations. These factors ~~may~~ raise ~~uncertainty regarding our~~substantial doubt about the Company’s ability to continue as a going ~~concern.~~concern, but the accompanying unaudited financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities.

5.2. Inventory

Inventories as of March 31, 2023 and December 31, 2022 consisted of the following:

	March 31,		December 31,
	2023		2022
Raw materials	$	403,358	$	393,253
Work in process		84,060		111,119
Finished goods		84,972		90,850
Total	$	572,390	$	595,222

Inventory write-downs to estimated net realizable values were $42,780 and $ 0 for the three months ended March 31, 2023 and 2022, respectively.

3. Stockholders’ Equity

Reverse Stock Split

On April 29, 2022, the Company’s board of directors and on May 16, 2022 our shareholders ~~approved a reverse stock split proposal and on August 8, 2022 the Board~~ approved a 1-for-15 reverse stock split (the “Reverse Stock Split”) of the Company’s common stock and each series of its redeemable convertible notes to be consummated prior to the effectiveness of the Company’s underwritten public offering (“Offering”) on August 9, 2022. The par value and authorized shares of the Company’s common stock were not adjusted as a result of the Reverse Stock Split. All issued and outstanding common stock, RSUs, warrants and options to purchase common stock and per share amounts contained in the financial statements have been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented.

Table of Contents

The Company filed an amended Restated Certificate of Formation with the Secretary of State of Texas on August 8, 2022, that effectuated the Reverse Stock Split.

Preferred Stock

We have 10,000,000 shares of preferred stock authorized for issuance. No shares of preferred stock were outstanding as of ~~September 30, 2022.~~March 31, 2023 and none are outstanding as of the date of the Balance Sheet in this report.

Common Stock

~~As of September 30, 2022, we have 300,000,000 shares of voting common shares~~The Company has reserved authorized ~~for issuance. As of September 30, 2022, a total of 21,959,509~~ shares of common stock ~~were either issued (19,478,270), or reserved~~ for ~~Company equity incentive plans (1,369,999), conversion~~future issuance as of ~~convertible debt to stock (145,066),~~March 31, 2023, and ~~shares reserved for warrant conversion (966,174).~~December 31, 2022 as follows:

March 31,
2023

December 31,
2022

Conversion of convertible notes

814,337

145,355

Unvested RSUs

732,668

800,000

Vested RSU

29,332

-

Stock options

36,666

36,666

Warrants

966,174

966,174

2,579,177

1,948,195

Warrants

~~Underwritten Public Offering~~A summary of the status of the Company’s warrants for the three months ended March 31, 2023 and 2022 are presented in the following table:

The Company’s registration statement related to its underwritten public offering (“Offering”) was declared effective on August 8, 2022, and the Company’s common stock and warrants began trading on the Nasdaq Capital Market (“Nasdaq”) on August 9,2022 under the trading symbols “AIMD” and “AIMDW”, respectively. The Company completed its underwritten public offering of an aggregated 780,000 units at a public offering price of $4.25 per unit. Each unit issued in the offering consisted of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $4.25. The foregoing described warrants may be exercised from February 5, 2023 (181 days from the effective date of our S-1 Registration Statement made effective August 8, 2022, thereafter “Registration Date”) to August 8, 2027 (5 years from the Registration Date).
10
~~Table of Contents~~
~~The Company received aggregate net proceeds of approximately $1.8 million after deducting underwriting commissions and legal, accounting, and consulting fees related to the Offering.~~
The Company granted its underwriters a 45-day option to purchase up to an additional 117,000 shares of common stock and/or up to an additional 117,000 warrants at the public offering price to cover over-allotments. The underwriters partially exercised its option to purchase an additional 117,000 warrants at $0.01 per unit for a total of $1,170. In addition, pursuant to an underwriting Agreement, the Company agreed to issue to the Representative of the underwriters, as a portion of the underwriting compensation payable to the Representative, warrants to purchase up to a total of 39,000 shares of Common Stock (the “Representative’s Warrants”). The Representative’s Warrants are exercisable at $4.68 per share, are initially exercisable 180 days after the effective date of the Offering and have a term of five years from their initial exercise date. Pursuant to the customary FINRA rules, the Representative’s Warrants are subject to a lock-up agreement pursuant to which the Representative will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will it engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the effective date of the registration statement referenced below.
Upon completion of the Offering, convertible notes outstanding in the principal amount of $30.4 million and accrued interest of $42,959 were automatically converted into 9,073,137 shares of common stock. Additional information regarding the conversion can be found below in Note 7 and Note 8 of the Notes to Financial Statements.
~~We have not paid any dividends to our common stock shareholders to date and have no plans to do so in the immediate future.~~

March 31,

2023

2022

Shares

Weighted
Average
Exercise
Price

Shares

Weighted
Average
Exercise
Price

Warrants outstanding at beginning of year

966,174

$ 4.26

30,174

$ 3.98

Issued

-

-

-

-

Warrants outstanding at the end of quarter

966,174

4.26

30,174

$ 3.98

Exercisable at the end of quarter

966,174

4.26

30,174

$ 3.98

6.4. ~~Equity Incentive Plans~~Share-Based Compensation

2018 Employee Stock Option Plan (the “2018-ESOP”).

On September 26, 2018, the Board adopted the Company 2018 Employee Stock Option Plan (the “2018-ESOP”), formerly referred to as the “Amarillo Biosciences, Inc., 2018 Employee Stock Option Plan” in prior filings. The 2018-ESOP provides for the grant of Qualified Incentive Stock Options to the Company’s employees. Qualified options automatically became non-qualified options effective September 26, 2019 and was governed under the 2018-NQSOP described below because the plan was not ratified by our shareholders. The maximum number of shares of common stock authorized under the plan was 66,666 shares. The option price per share of common stock deliverable upon the exercise of an incentive stock option was 100% of the fair market value of a share on the date of grant. The option price is ~~$5.7~~$5.70 per share and the options are exercisable during a period of ten years from the date of grant, where the options vest 20% annually over five years, commencing one year from date of grant.

Effective as of October 6, 2021, with the adoption by the Board of the 2021 SIP, no further awards may be granted under the 2018-ESOP.
10
Table of Contents

2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan (the “2018-NQSOP”)

On September 26, 2018, the Board adopted the Company 2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan (the “2018-NQSOP”), formerly referred to as the “Amarillo Biosciences, Inc., 2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan” in prior filings. The 2018-NQSOP provides for the grant of nonqualified incentive stock options to employees. The 2018-NQSOP is administered by the Board or by the Compensation Committee as constituted from time to time. The maximum number of shares of common stock which may be issued under the 2018-NQSOP is 266,666 which will be reserved for issuance upon exercise of options. The option price for the nonqualified options is $5.73 exercisable for a period of ten years, with a vesting period of five years at 20% per year commencing one year from date of grant.

Effective as of October 6, 2021, with the adoption by the Board of the 2021 SIP, no further awards may be granted under the 2018-NQSOP. As of ~~September 30, 2022,~~March 31, 2023, options to acquire 36,666 shares of common stock remained outstanding.
11
~~Table of Contents~~

2021 Employee Stock Purchase Plan

On September 28, 2021, the Board and on May 16, 2022 our shareholders, respectively, approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP” or “Plan”). The purpose of the 2021 ESPP is to provide an opportunity for eligible employees of the company and its designated companies (as defined in the Plan) to purchase common stock at a discount through voluntary contributions, thereby attracting, retaining and rewarding such persons and strengthening the mutuality of interest between such persons and the Company’s stockholders. The Company intends for offerings under the Plan to qualify as an “employee stock purchase plan” under Section 423 of the Code; provided, that the Plan administrator may also authorize the grant of rights under offerings that are not intended to comply with the requirements of Section 423, pursuant to any rules, procedures, agreements, appendices, or sub-plans adopted by the administrator. Subject to adjustments as provided in the Plan, the maximum number of shares of common stock that may be issued under the Plan may not exceed 50,000 shares. Such shares may be authorized but unissued shares, treasury shares or shares purchased in the open market. The Plan is subject to approval by the Company’s stockholders within twelve months after the date of Board approval. The Plan will become effective on the date that stockholder approval is obtained, and will continue in effect until it expires on the tenth anniversary of the effective date of the Plan, unless terminated earlier.

2021 Stock Incentive Plan

On September 28, 2021, the Board and on May 16, 2022 our shareholders, respectively, approved the 2021 Stock Incentive Plan (the “2021 SIP” or “Plan”). The purpose of the 2021 SIP is to provide a means through which the Company, and the other members of the Company Group, defined by Section 2(n) of the Plan as the Company and its subsidiaries, and any other affiliate of the Company designated as a member of the Company Group by the Committee, may attract and retain key personnel, and to provide a means whereby directors, officers, employees, consultants and advisors of the Company and the other members of the Company Group can acquire and maintain an equity interest in the Company, or be paid incentive compensation measured by reference to the value of common stock, thereby strengthening their commitment to the interests of the Company Group and aligning their interests with those of the Company’s stockholders. The types of awards that may be granted from the Plan include individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Dividend Equivalent Rights and Other Equity-Based Award granted under the Plan. The Plan ~~will be~~became effective ~~upon shareholder approval.~~on June 21, 2022. The expiration date of the Plan, on and after which date no awards may be granted, ~~will be the~~is October 6, 2031 (the tenth anniversary of the date of Board approval of the ~~Plan,~~Plan), provided, however, that such expiration will not affect awards then outstanding, and the terms and conditions of the Plan will continue to apply to such Awards. The aggregate number of shares which may be issued pursuant to awards under the Plan is 1,333,333 shares of Common Stock (the “Plan Share Reserve”), subject to adjustments as provided in the Plan. The number of shares underlying any award granted under 2018 ESOP or 2018 NQSOP (the “Prior Plans”) that expires, terminates or is canceled or forfeited for any reason whatsoever under the terms of the Prior Plans, will increase the Plan Share Reserve. Each Award granted under the Plan will reduce the Plan Share Reserve by the number of shares underlying the award. No more than 666,666 shares may be issued in the aggregate pursuant to the exercise of incentive stock options granted under the Plan. The maximum number of shares subject to awards granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such director during the fiscal year, will not exceed $600,000 in total value (calculating the value of any such awards based on their grant date fair value for financial reporting purposes).

~~On July 28, 2022,~~During the first quarter of 2023, the Company ~~granted 533,332 and 88,000 Restricted Stock Units (the “RSUs”), after giving effect to the Reverse Stock Split,~~did not issue any award under the 2021 SIP to employees and non-employee directors, respectively. The RSUs shall vest in accordance to the respective employment agreements entered into by each of the employees and the 2021 Non-employee Director Compensation Policy relative to the non-employee directors.SIP.

11
Table of Contents
Restricted Stock Units

RSUs entitle the recipient to be paid out an equal number of common stock shares upon vesting. The fair value of RSUs is based on market price of the underlying stock on the date of grant. A summary of the Company’s RSU activity and related information for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023, is as follows:

Number of RSUs

Weighted-
Average Grant
Date Fair Value
Per RSU

Number of
RSUs

Weighted-
Average
Grant
Date Fair
Value
Per RSU

Balance as of December 31,2021

-

$ N/A

Unvested balance at December 31, 2022

800,000

$ 2.42

RSUs granted

621,332

$ 11.10

-

$ N/A

RSUs vested

(533,332 )

$ 11.10

(29,332 )

$ 11.1

RSUs canceled

-

$ N/A

(38,000 )

$ 1.43

Balance as of September 30, 2022

88,000

$ 11.10

Unvested balance at March 31, 2023

732,668

$ 2.12

The aggregate fair value of RSU awards that vested in the three- and nine-month periods ended September 30, 2022 was $1 million. The grant date fair value of awards that vested in the three- and nine-month periods ended September 30, 2022 was $5.9 million.Stock Options

~~Warrants~~A summary of option activity for the three months ended March 31, 2023 is presented below:
Date
Number of
Options
¹Qualified
Number of
Options
²Nonqualified
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Balance at December 31, 2021
3,333
33,333
$5.70
9.54 yrs
-
Granted
-
-
-
-
-
Exercised
-
-
-
-
-
Expired or Forfeited
-
-
-
-
-
Balance at December 31, 2022
3,333
33,333
$5.70
8.55 yrs
-
Granted
-
-
-
-
-
Exercised
-
-
-
-
-
Expired or Forfeited
-
-
-
-
-
Balance at March 31, 2023
3,333
33,333
$5.70
8.32 yrs
-
Exercisable at March 31, 2023
2,666
11,111
$5.70
8.32 yrs
-
¹Because the 2018 Employee Stock Option Plan was not ratified by the Company’s shareholders, the qualified options became non-qualified on September 26, 2019. These totals remain separated since the two different plans are still in existence. The Company used the Black-Scholes option pricing model to value the option awards with the following assumptions applied: (1) Volatility – 276%; (2) Term – 5 years was chosen although the full option term is 10 years to be more commensurate with the 5-year vesting portion of the plan; (3) Discount – 2.96%.

As² The Company used the Black-Scholes option pricing model to value the option awards with the following assumptions applied: (1) Volatility – 238%; (2) Term – 3 years was chosen although the full option term is 5 years to be more commensurate with the 3-year vesting portion of ~~September 30, 2022, following warrants are outstanding:~~the plan; (3) Discount – 0.81%.

Pursuant to the Offering on August 9, 2022, the Company issued 780,000 units at a public offering price of $4.25 per unit. Each unit issued in the offering consisted of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $4.25.
12
~~Table of Contents~~Warrants
Pursuant to an underwriting agreement, dated August 8, 2022, by and between the Company and Maxim Group LLC (“Maxim”), as representative of the underwriters, Maxim partially exercised the option to purchase 117,000 additional warrants at a price per warrant of $0.01.
Pursuant to the underwriting agreement the Company issued representative warrants to the Maxim, as representative of the underwriters, to purchase 39,000 shares of common stock at an exercise price of $4.675, effective from February 5, 2023 until August 8, 2027.

On November 25, 2020, the Company issued a warrant to i2China Management Group, LLC, a related party of the Company since August 1, 2021. The warrant entitles the holder to purchase 30,174 shares at $3.98 and expires on November 24, 2025.

Share-Based Compensation

~~The share-based~~Shared-based compensation for the three months ended ~~September 30,~~March 31, 2023 and 2022 were $220,832 and ~~2021 were $6,076,017 and $19,322, respectively; and compensation for the nine months ended September 30, 2022 and 2021 were $6,162,902 and $ 207,533,~~$43,443, respectively.

As of ~~September 30, 2022,~~March 31, 2023, the total unrecognized compensation cost related to outstanding RSUs, stock options and warrant was ~~$1,197,230,~~$1,672,370, which the Company expects to recognize over a weighted-average period of ~~1.61~~1.69 years.

1312
Table of Contents

7. 5. Current Convertible Notes Payable and Other Notes Payable

As of ~~September 30,~~March 31, 2023, and December 31, 2022, the amount of Current convertible and other notes payable totaled $1,060,526 and $1,260,526, respectively. The details of the convertible notes payable and other notes payable are shown in the table below:

Payee
No.
Effective Date
Due Date
From Effective
Following Maturity
Conversion Rate
Issuing Purpose
As of 12/31/2021
Addition
Converted/
Payment
As of 9/30/2022
Accrued Interest
Convertible Notes Payable:
Stephen Chen
#1.16
1/30/2016
Payable on demand
0.75%
N/A
$ 2.52
working capital
114,026
-
-
114,026
6,479
Stephen Chen
#2.16
3/18/2016
Payable on demand
0.65%
N/A
$ 2.81
working capital
262,500
-
-
262,500
11,009
376,526
-
-
376,526
17,488
Ainos KY
#12.21
4/27/2021
2/28/2023 (1)
1.85%
N/A
$ 3.00
working capital
15,000
-
(15,000)
-
-
Ainos KY
#13.21
5/5/2021
2/28/2023 (1)
1.85%
N/A
$ 3.00
working capital
20,000
-
(20,000)
-
-
Ainos KY
#14.21
5/25/2021
2/28/2023 (1)
1.85%
N/A
$ 3.00
working capital
30,000
-
(30,000)
-
-
Ainos KY
#15.21
5/28/2021
2/28/2023 (1)
1.85%
N/A
$ 3.00
working capital
35,000
-
(35,000)
-
-
Ainos KY
#16.21
6/9/2021
2/28/2023 (1)
1.85%
N/A
$ 3.00
working capital
300,000
-
(300,000)
-
-
Ainos KY
#17.21
6/21/2021
2/28/2023 (1)
1.85%
N/A
$ 3.00
working capital
107,000
-
(107,000)
-
-
Ainos KY
#18.21
7/2/2021
2/28/2023 (1)
1.85%
N/A
$ 3.00
working capital
54,000
-
(54,000)
-
-
Ainos KY
#19.21
9/1/2021
2/28/2023 (1)
1.85%
N/A
$ 3.00
working capital
120,000
-
(120,000)
-
-
Ainos KY
#20.21
9/28/2021
2/28/2023 (1)
1.85%
N/A
$ 3.00
working capital
300,000
-
(300,000)
-
-
Ainos KY
#21.21
11/10/2021
2/28/2023 (1)
1.85%
N/A
$ 3.00
working capital
50,000
-
(50,000)
-
-
Ainos KY
#22.21
11/25/2021
2/28/2023 (1)
1.85%
N/A
$ 3.00
working capital
450,000
-
(450,000)
-
-
Ainos KY
#23.21
11/29/2021
2/28/2023 (1)
1.85%
N/A
$ 3.00
working capital
300,000
-
(300,000)
-
-
Ainos KY
#24.21
12/29/2021
2/28/2023 (1)
1.85%
N/A
$ 3.00
working capital
1,219,000
-
(1,219,000)
-
-

3,000,000
-
(3,000,000)
-
-
Total convertible notes payable- related parties
3,376,526
-
(3,000,000)
376,526
17,488
Non-Convertible Notes Payable:
Stephen Chen
#9.21
1/1/2021
4/14/2021
0.13%
N/A
N/A
working capital
129,405
-
(129,405)
-
--
Ainos KY
#26.22 (2)
3/4/2022
2/28/2023
1.85%
N/A
N/A
working capital
-
800,000
-
800,000
8,556
Non-convertible notes payable-related party
129,405
800,000
(129,405)
800,000
8,556
i2 China
#8b.20
1/1/2020
1/1/2021
1.85%
N/A
N/A
consulting fee
84,000
-
-
84,000
2,473

Non-Convertible Notes payable- non-related party
84,000
-
-
84,000
2,473

Total non-convertible notes payable
213,405
800,000
(129,405)
884,000
11,029
Total convertible and non-convertible
3,589,931
800,000
(129,405)
1,260,526
28,517
14
~~Table of Contents~~
~~Notes:~~
~~(1)~~
On March 17, 2022, we executed a Promissory Note Extension Agreement with Ainos KY in which the due dates for certain convertible notes enumerated as #12.21 to #24.21 issued by the Company to Ainos KY were extended to February 28, 2023. The total unpaid principal for these extended period convertible notes amounted to $3,000,000 in the aggregate. Upon closing of the Offering, the principal and accrued interest were automatically converted into common stock of the Company.
~~(2)~~
On March 11, 2022, the Board approved a Non-Convertible Note dated March 4, 2022 in favor of Ainos KY with a principal amount of $800,000, interest of 1.85% per annum on unpaid principal and accrued interest, and a maturity date of February 28, 2023. The Note includes standard provisions for notice, default, and remedies for default.
Payee
No.
Effective
Date
Due
Date
From
Effective
Following Maturity
Conversion
Rate
Issuing
Purpose
As of
12/31/2022
Addition
Payment
As of
3/31/2023
Accrued
Interest
Current Convertible Notes Payable:
Stephen Chen
#1.16
1/30/2016
Payable on demand
0.75%
N/A
$ 2.52
working capital
114,026
-
-
114,026
6,905
Stephen Chen
#2.16
3/18/2016
Payable on demand
0.65%
N/A
$ 2.81
working capital
262,500
-
-
262,500
12,004
Total convertible notes payable- related parties
376,526
-
-
376,526
18,909
Non-Convertible Notes Payable:
Ainos KY
#26.22 (2)
3/4/2022
3/31/2023
1.85%
N/A
N/A
working capital
800,000
-
(200,000)
600,000
11,952
Non-convertible notes payable-related party
800,000
-
(200,000)
600,000
11,952
i2 China
#8b.20
1/1/2020
1/1/2021
1.85%
N/A
N/A
consulting fee
84,000
-
-
84,000
5,109

Non-Convertible Notes payable- non-related party
84,000
-
-
84,000
5,109

Total non-convertible notes payable
884,000
-
(200,000)
684,000
17,061
Total convertible and non-convertible
1,260,526
-
(200,000)
1,060,526
35,970

All of the aforementioned convertible promissory notes and other notes payable are unsecured and due on demand upon maturity. The Company may prepay the notes in whole or in part at any time. The holder of convertible notes has the option to convert some or all of the unpaid principal and accrued interest to our common voting stock.

The current convertible notes payable and accrued interest of Ainos KY as of August 8, 2022 in the aggregate total amount of $3,042,959 were converted to 1,014,319 shares of common stock on August 9, 2022. Information regarding the conversion can be found in Note 5 of the Notes to Financial Statements.
~~As of September 30, 2022 and December 31, 2021, the amount of current convertible and other notes payable totaled $1,260,526 and $3,589,931, respectively.~~
~~The~~ total interest expense of convertible notes payable and other notes payable for the ~~nine~~three months ended ~~September 30,~~March 31, 2023, and 2022 were $3,810 and ~~2021 were $44,674 and $32,775 respectively. The~~$15,883, respectively; the cumulative related accrued interest as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were ~~$28,517~~$35,970 and ~~$28,673,~~$35,282, respectively.

8.6. Non-Current Convertible Notes Payable.

As of March 31, 2023 and December 31, 2022, the amounts of non-current convertible notes payable were $2,500,000 and $0, respectively.
APA Convertible Note

On January 30, 2022, we issued to Ainos KY a Convertible Promissory Note in the principal amount of $26,000,000 (the “APA Convertible Note”) for the Asset Purchase Transaction as more particularly described below in Note 8.7. The principal sum of the APA Convertible Note is payable in cash on January 30, 2027, although prepayment was permitted in whole or in part without penalty. The APA Convertible Note was noninterest bearing.

March 2027 Convertible Notes

The Company issued Convertible Notes pursuant to certain Convertible Note Purchase Agreements under Regulation S. The transactions are more particularly described below:

·
$50,000 Convertible Note issued on March 31, 2022, to Yun-Han Liao. The purchaser is the daughter of Wu Hui-Lan, the Company’s Chief Financial Officer.

·
$850,000 aggregate Convertible Notes issued on March 28, 2022, to Chih-Cheng Tsai, Ming-Hsien Lee, Yu-Yuan Hsu, and Top Calibre Corporation, a British Virgin Islands company.

·
$500,000 Convertible Note issued on April 11, 2022, to ASE Test Inc., a minority owner of Ainos KY.

·
The above Convertible Notes totaling $1,400,000 are collectively referred to as the “March 2027 Convertible Notes”.
13
Table of Contents

The Principal Amounts of the March 2027 Convertible Notes were payable in cash on March 30, 2027, although the Company was permitted to prepay the Convertible Notes in whole or in part without penalty. The March 2027 Convertible Notes were non-interest bearing.

The non-current convertible notes payable as of August 9, 2022, in the aggregate total amount of $27,400,000 were all converted to 8,058,818 shares of common stock on that day.

15
March 2025 Convertible Notes
On March 13, 2023, we entered into two convertible note purchase agreements made pursuant to Regulation S of the Securities Act of 1933 relating to the sale of convertible notes, under which the Company issued and sold two convertible promissory notes (the “March 2025 Convertible Notes” or “Notes”) in the total principal amount of US$3 million to the following investors:
Convertible Note Sale to ASE Test, Inc.
Pursuant to a Convertible Note Purchase Agreement dated as of March 13, 2023, ASE Test, Inc. (a shareholder of the Company’s controlling shareholder, Ainos, Inc., a Cayman Islands corporation) committed to pay a total aggregate amount of $2,000,000 U.S.D. (the “Principal Amount”) to the Company in exchange for one or more Convertible Promissory Note(s) issued by the Company in the total aggregate Principal Amount (the “ASE Note”). The Purchaser’s obligation to pay the total aggregate Principal Amount in three (3) tranches in the amounts of One Million Dollars (USD $1,000,000) (the “First Tranche”), Five Hundred Thousand Dollars (USD $500,000) (the “Second Tranche”), and Five Hundred Thousand Dollars (USD $500,000) (the “Third Tranche”) is conditioned, among other things, on the Company achieving certain business benchmarks. ASE Test, Inc. purchased Notes for an aggregated principal amount of $1.5 million in the first quarter of 2023 disclosed in other receivable and its obligation to pay $500,000 remains outstanding and contingent on the Company achieving certain business benchmarks.
Convertible Note Sale to Li-Kuo Lee
Pursuant to the Convertible Note Purchase Agreement dated as of March 13, 2023, Li-Kuo Lee committed to pay $1,000,000 U.S.D. (the “Principal Amount”) to the Company in exchange for a Convertible Promissory Note issued by the Company (the “Lee Note”).  Li-Kuo Lee. purchased Notes for an aggregated principal amount of $1 million in the first quarter of 2023. The total interest expense for the three months ended March 31, 2023 was $3,123; the related accrued interest as of March 31, 2023 was $3,123.
The above-referenced Notes will mature in two years from the issuance dates, bearing interest at the rate of 6% compounded interest per annum. At any time after the issuance and before the maturity date, the Notes are convertible into the common shares of the Company. The conversion price is US$1.50 per common share, subject to adjustment as set forth in the Notes. Unless previously converted, the Company shall repay the outstanding principal amount plus all accrued and unpaid interest on the maturity date. The Note shall be an unsecured general obligation of the Company.
~~Table of Contents~~

9.7. Related Party Transactions.
The following is a summary of related party transactions that met our disclosure ~~threshold for the nine months ended September 30, 2022 and 2021:~~threshold:

~~Purchase of intangible assets and equipment~~
~~Securities Purchase Agreement~~
On April 15, 2021, we consummated a Securities Purchase Agreement with Ainos KY. Pursuant to the Securities Purchase Agreement, we issued 6,666,666 shares of common stock at $3 per share to Ainos KY in exchange for certain patent assignments relating to advanced testing devices and artificial intelligence consumer health care solutions, increased our authorized common stock to 300,000,000 shares and changed our name from “Amarillo Biosciences, Inc.” to “Ainos, Inc.” Immediately after consummating the transaction and issuance of the shares, Ainos KY’s ownership in the Company totaled approximately 70.30% of the issued and outstanding shares of common stock.
Asset Purchase Agreement

Ainos KY and the Company entered into an Asset Purchase Agreement dated as of November 18, 2021 (the “Asset Purchase Agreement”), as modified by an Amended and Restated Asset Purchase Agreement dated as of January 29, 2022 (the “Amended Asset Purchase Agreement”).

Pursuant to the Asset Purchase Agreement, we acquired certain intellectual property assets and certain manufacturing, testing, and office equipment for a total purchase price of $26,000,000 that included $24,886,023 for intangible intellectual property assets and $1,113,977 for equipment. As consideration we issued to Ainos KY a Convertible Promissory Note in the principal amount of $26,000,000 upon closing on January 30, 2022 (the “APA Convertible Note”). Ainos KY converted all of APA Convertible Note on or about August 8, 2022 upon the Company up-listing to the Nasdaq Capital Markets.
14
Table of Contents
Working Capital Advances

~~As part~~Except for the payment of purchasing the ~~Asset Purchase Agreement, we agreed to hire certain employees of Ainos KY who are responsible for research~~intangible assets and development of the IP Assets and/or Equipment on terms at least equal to the compensation arrangements undertaken by Ainos KY. From and after the closing, we will have no responsibility, duty or liability with respect to any employee benefit plans of Ainos KY.
~~Working Capital Advances~~
~~All~~equipment, all convertible and other notes payable were issued either as a result of financing or deferred compensation provided by shareholders.

In the first ~~three quarters~~quarter of ~~2022~~2023 and ~~2021,~~2022, Ainos KY provided working capital advances in the form of ~~convertible note and~~ non-convertible note financing in the aggregate amount of ~~$800,000~~$0 and ~~$981,000,~~$800,000, respectively. As of ~~September 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, the ~~convertible and~~ non-convertible notes payable to Ainos KY totaled $600,000 and $800,000, ~~and $3,000,000,~~ respectively. ~~Refer to Note 7 for more information.~~

On March 13, 2023, ASE Test, Inc. (the “ASE”), an affiliate of the Company, provided ~~a working capital advance~~the Company financing in the form of a convertible ~~note financing~~notes in the principal amount of $1,500,000. Pursuant to that certain Convertible Note Purchase Agreement dated as of March 13, 2023, ASE’s obligation to pay (and the Company’s obligation to issue a convertible note) additional $500,000 inremains outstanding and contingent on the 2^nd ~~quarter of 2022.~~Company achieving certain business benchmarks.

The convertible notes and related accrued interest of Ainos KY and ASE as of August 8, 2022 in the aggregate total amount of $29,542,959 were converted to common stock upon the uplisting to Nasdaq. Refer to Notes 5 for more information.
In the first three quarters of 2021, Dr. Stephen T. Chen provided working capital advances in the form of convertible note and non-convertible note financing in the aggregate amount of $69,025 and $145,395, respectively. The non-convertible note $129,405 was redeemed for cash in the 3rd quarter of 2022. As of ~~September 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, the convertible ~~and non-convertible~~ notes payable to Dr. Stephen T. Chen were ~~$376,526 and $505,931, respectively.~~both $376,526.

16
The above-referenced convertible and other notes payable are particularly described in Notes 5 and 6 to the unaudited condensed consolidated financial statements.
~~Table of Contents~~

Purchase and Sales

Ainos COVID-19 Test Kits Sales and Marketing Agreement with Ainos KY

On June 14, 2021, we entered into an exclusive agreement to serve as the master sales and marketing agent for the Ainos COVID-19 Antigen Rapid Test Kit and COVID-19 Nucleic Acid Test Kit with Ainos KY (the “Sales and Marketing Agreement”) which was developed by Taiwan Carbon Nano Technology Corporation (the “TCNT”), an affiliate of the Company. On June 7, 2021, the Taiwan Food and Drug Administration (the “TFDA”) approved emergency use authorization to TCNT for the Ainos COVID-19 Antigen Rapid Test Kit that will be sold and marketed under the “Ainos” brand in Taiwan. On June 21, 2022, we began marketing the Ainos SARS-CoV-2 Antigen Rapid Self-Test (“COVID-19 Antigen Self-Test Kit”) under a separate EUA issued by the TFDA to TCNT on June 13, 2022. As TCNT secures regulatory authorizations from foreign regulatory agencies, the Company expects to partner with regional distributors to promote sales in other strategic markets.

We incurred costs associated with finished goods, raw materials and manufacturing fees for Covid-19 antigen rapid test kits from TCNT pursuant to the Sales and Marketing Agreement, totaling ~~$1,603,169~~$46,762 and ~~$173,657~~$386,412 for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the accounts payable to TCNT were ~~$24,242~~$31,930 and ~~$0,~~$24,365, respectively.

COVID-19 Antigen Rapid Test Kits Sales

We sold Covid-19 antigen rapid test kits to ASE Technology Holding and Silicon Precision Industries Co., Ltd., an affiliate of the Company, totaling ~~$1,988,150~~$0 and ~~$185,376~~$81,100 for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. As of ~~September 30, 2022~~March 31,2023, and December 31, ~~2021,~~2022, the accounts receivable to ~~ASE Technology Holding~~aforementioned related parties were ~~$335,799~~$103,448 and ~~$0,~~$177,795, respectively.

Product Co-development Agreement

Pursuant to the five-year product co-development agreement effective on August 1, 2021 (the “Product Co-Development Agreement”) with TCNT, ~~effective on August 1, 2021~~an affiliate of the Company, we incurred development expenses totaling ~~$490,082~~$77,463 and ~~$117,386~~$167,422 for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the accrued payables were ~~$21,594~~$27,186 and ~~$65,156,~~$70,113, respectively.

~~10.~~8. ~~Subsequent Events.~~Commitments and Contingencies

~~In accordance with the respective employment agreements entered into by each~~On March 13, 2023, ASE Test, Inc. (the “ASE”), an affiliate of the ~~employees,~~Company, provided the Company ~~issued 533,332 common stock shares upon settlement~~financing in the form of a convertible notes in the principal amount of $1,500,000. Pursuant to that certain Convertible Note Purchase Agreement dated as of March 13, 2023, ASE’s obligation to pay (and the Company’s obligation to issue a convertible note) and ~~conversion of vested Restricted Stock Units (the “RSUs”) issued under our 2021 Stock Incentive Plan~~additional $500,000 remains outstanding and contingent on ~~October 26, 2022.~~the Company achieving certain business benchmarks.

1715
Table of Contents
9. Subsequent Events.
On March 13, 2023, ASE Test, Inc. (the “ASE”), an affiliate of the Company, provided the Company financing in the form of a convertible notes in the principal amount of $1,500,000. Pursuant to that certain Convertible Note Purchase Agreement dated as of March 13, 2023, ASE’s obligation to pay (and the Company’s obligation to issue a convertible note) additional $500,000 remains outstanding and contingent on the Company achieving certain business benchmarks.
On April 4, 2023, the Company filed a Schedule 14-C Definitive Information to effectuate an amendment to its 2021 Stock Incentive Plan, now restated as the Company 2023 Stock Incentive Plan (the “2023 SIP” or “Plan”) which includes, among other things, a change in the number of reserved shares under the Plan. Under the 2023 SIP, subject to a change in capital structure or a change in control, the aggregate number of shares which may be issued or transferred pursuant to awards under the Incentive Plan will be equal to up to twenty percent (20%) of shares of outstanding common stock of the Company existing as of December 31^st of the previous calendar year (the “Plan Share Reserve”). The effective date of the 2023 SIP is May 1, 2023.
On April 10, 2023, the Company issued a total of 29,332 shares of common stock to four (4) non-employee directors (each receiving 7,333 shares) pursuant to each of their Global Non-Employee Director Restricted Stock Unit Agreement dated July 28, 2022 and the Company’s 2021 Stock Incentive Plan.
16
Table of Contents

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The ~~following discussion~~unaudited condensed financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with ~~our~~the financial statements and ~~the~~ notes thereto for the year ended December 31, 2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which ~~appear elsewhere~~are contained in our 2022 Annual Report. In addition to historical information, this ~~report. The results shown herein are not necessarily indicative of the results to be expected in any future periods.~~
~~Some of the~~discussion and analysis contains forward-looking statements ~~in this report are “forward-looking statements”~~ within the meaning of ~~the safe harbor provisions~~Section 27A of the ~~Private~~ Securities ~~Litigation Reform~~ Act of ~~1995. Forward-looking statements include statements regarding our current beliefs, goals~~1933, as amended, and ~~expectations about matters such~~Section 21E of the Securities Exchange Act of 1934, as our expected financial position and operating results, our business strategy and our financing plans. The forward-looking statements in this report are not based on historical facts, but rather reflectamended, or the current expectations of our management concerning future results and events. The forward-looking statements generally can be identified by the use of terms such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “may,” “guidance,” “estimate,” “potential,” “outlook,” “target,” “forecast,” “likely” or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals are, or may be, forward-looking statements.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be different from any future results, performance and achievements expressed or implied by these statements. We cannot guarantee that our forward-looking statements will turn out to be correct or that our beliefs and goals will not change. Our actual results could be very different from and worse than our expectations for various reasons.Exchange Act. These forward-looking statements are ~~not guarantees of future performance and involve numerous~~subject to risks and uncertainties, including those set forth under “Part I. Item 1A. Risk Factors” in our 2022 Annual Report, “Part II. Item 1A. Risk Factors” in this Quarterly Report, and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data, or methods which may be incorrect or imprecise and we may not be able to realize them. We do not guaranteeelsewhere in this Quarterly Report, that ~~the transactions and events described will happen as described (or that they will happen at all).~~
18
~~Table of Contents~~
~~The following factors, among others,~~ could cause actual results ~~and future events~~ to differ materially from ~~those set forth~~historical results or ~~contemplated in the forward-looking statements:~~
·
~~the extent and duration of the COVID-19 pandemic and the impact of the end of the COVID-19 pandemic on our business and our expectations regarding customer and user demand for our COVID-19 test kits;~~
·
~~possible changes in capital structure, financial condition, future working capital needs and other financial items;~~
·
~~our expectations of the reliability, accuracy and performance of our products and services;~~
·
~~our ability to obtain additional funds for our operations;~~
·
~~unforeseen changes in the course of research and development activities and in clinical trials;~~
·
our ability to obtain and maintain regulatory authorizations, clearances or approvals for our tests and other product candidates, including EUAs (“Emergency Use Authorizations”) for our COVID-19 test kits or other product candidates;
·
~~our ability to successfully build out our sales and marketing infrastructure, the costs and success of our marketing efforts, and our ability to promote our brand;~~
·
~~our ability to establish demand for our products and services and expand geographically;~~
·
~~our intellectual property position and our expectations regarding our ability to obtain and maintain intellectual property protection;~~
·
~~our ability to effectively manage our expected growth, including our ability to retain and recruit personnel, and maintain our culture;~~
·
~~possible changes in cost, timing and progress of development, preclinical studies, clinical trials and regulatory submissions;~~
·
~~the rate and degree of market acceptance of any approved product candidates;~~
·
~~the impact of applicable U.S., Taiwanese and international laws and regulations; and~~
·
~~our ability to implement, maintain and improve effective internal controls and remediate material weaknesses.~~
Any forward-looking statements in this report are made only as of the date hereof and, except as may be required by law, we do not have any obligation to publicly update any forward-looking statements contained in this report to reflect subsequent events or circumstances.anticipated results.

~~For a further discussion of these~~When used in this Quarterly Report, all references to "Ainos," the "Company," "we," "our" and other factors that could impact our future results, performance or transactions, see Part I, Item 1A (Risk Factors) of our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021 filed with the SEC on April 15, 2022."us" refer Ainos, Inc.

Overview

Ainos ~~Inc., a Texas corporation formerly known as Amarillo Biosciences,~~ Inc. (the “Company”, “we” or “us”), is engaged in developing medical technologies for point-of-care (“POCT”) testing and safe and novel medical treatment for a broad range of disease indications. Since our inception in 1984, we have concentrated our resources on business planning, raising capital, research and clinical development activities for our programs, securing related intellectual property and commercialization of proprietary therapeutics using low-dose non-injectable interferon (“IFN”). In addition to our core IFN technology, we are committed to developing a diversified healthcare business portfolio to include medical devices and consumer healthcare products.

~~Although we~~We have historically been involved in extensive ~~pharmaceutical~~ research and development of low-dose oral interferon as a ~~therapeutic,~~therapeutic. We continue to develop our VELDONA platform and other pharmaceutical platforms and recently have acquired intellectual properties to expand our POCT business. In 2021 and 2022, we ~~are prioritizing the commercialization of medical devices as part of our diversification strategy. Since the beginning of 2021, we have~~ acquired significant intellectual property from our majority shareholder, Ainos ~~Inc., a Cayman Islands corporation (“Ainos KY”),~~KY, to expand our potential product portfolio into Volatile Organic Compounds (“VOC”) and COVID-19 POCTs. ~~We expect our underlying intellectual property to enable us to expedite the commercialization of our medical device pipeline, beginning with Ainos-branded COVID-19 POCT product candidates.~~

1917
Table of Contents

Our Portfolio of Products

Our portfolio of products is currently comprised of the following:

·
COVID-19 Antigen Rapid Test ~~Kit and Ainos’ Cloud-based Test Management Apps~~Kit. . Our cloud-based test management platform is comprised of an antigen rapid test kit, a personal application, or app, and an enterprise app. We anticipate our management apps will allow individuals and organizations to seamlessly manage tests, trace infections, and share results. As the first commercialized COVID-19 product we sell, we currently market ~~the Ainos~~ COVID-19 antigen rapid test ~~kit~~kits in Taiwan under emergency use authorization (“EUA”) issued by the Taiwan Federal and Drug Administration (“TFDA”). for healthcare professional use and for self-test use. We also offer companion test management apps for the tests kits for healthcare professional use. We market the ~~Ainos COVID-19 antigen rapid~~ test ~~kit~~kits under ~~our~~the Ainos brand name. The kit is manufactured by TCNT, our product co-developer.

·
VOC POCT – Ainos ~~Flora~~Flora.. Our Ainos Flora device, currently under clinical study in Taiwan, is intended to perform a non-invasive test for female vaginal health and certain common sexually transmitted diseases (“STDs”) ~~including chlamydia, gonorrhea and trichomoniasis,~~ within a few minutes. We ~~expect~~are developing a companion app that enables users to conveniently manage test results. We believe Ainos Flora ~~will provide~~provides connected, convenient, discreet, rapid testing in a point-of-care ~~setting which will allow women to self-test at home.~~setting.

·
VOC POCT – Ainos ~~Pen~~Pen. . Our Ainos Pen device is a cloud-connected, multi-purpose, portable breath analyzer that is intended to monitor health conditions ~~including oral, gastrointestinal, liver, and renal health~~ within minutes. We expect consumers to be empowered to share their ~~self-test~~test results with their physicians through in-person and telehealth medical consultations.

·
VOC POCT – ~~CHS430~~CHS430. . The CHS430 device is intended to provide non-invasive testing for ventilator-associated pneumonia within 10few minutes, as compared to current standard of care invasive culture tests that typically take more than two days to provide results. We plan to be the exclusive sales agent for CHS430, pursuant to our Product Development Agreement with our co-developer, TCNT, who will manufacture the product.

·
Very Low-Dose Oral Interferon Alpha (“VELDONA”). VELDONA is a low-dose oral interferon alpha (“IFN-α”) formulation based on our nearly four decades of research on IFN-α’s broad treatment applications. ~~We have recently completed our own animal studies for~~Our pipeline candidates include oral treatment offor COVID-19 for human, feline chronic gingivostomatitis (FCGS) and ~~potential other viral infections. Subsequently, we are now conducting studies based on the VELDONA-only program.~~canine atopic dermatitis (CAD). We also intend to explore various business opportunities, including out-licensing, to advance ~~our~~ other candidates including thrombocytopenia, Sjögren’s syndrome, aphthous stomatitis, chemotherapy-induced stomatitis, influenza, and the common cold.

·
Synthetic RNA (“SRNA”). We are developing a SRNA technology platform in ~~Taiwan. Our initial focus is to develop~~Taiwan with a ~~potential COVID-19 mRNA vaccine platform using the full-length spike or the RBD gene sequence~~long-term goal of ~~the alpha~~developing next-generating precision treatments and ~~delta variants as reference sequences.~~rapid tests.

An integral part of our operating strategy is to create multiple revenue streams through commercializing our product portfolio and leveraging our intellectual property patents, including potentially out-licensing or forming strategic relationships to develop our ~~medical devices, consumer healthcare~~POCT products and low-dose interferon therapeutics.

~~As a general strategy,~~In 2023, we ~~plan~~are prioritizing the commercialization of our lead VOC POCT candidate, Ainos Flora, pursue out-licensing of our VELDONA candidates. We are also commercializing VELDONA as supplements for pets, initially in Taiwan. We recently assigned Topmed International Biotech Co. to ~~conduct clinical trials~~exclusively market the pet supplement product in Taiwan and use the data to apply for TFDA approval and FDA clearance or comparable pathway. If our products are approved, we plan to work with third-party distributors to market our products in countries where we receive regulatory approval and to seek various business relationships with other medtech companies to market our products. At the same time, we plan to initiate clinical trials for the VELDONA and SRNA programs over the course of this year.Taiwan.
We signed a Master Service Agreement with Swiss Pharmaceutical Co., Ltd. (Taiwan) (“Swiss Pharma”). Pursuant to the agreement, Swiss Pharma will test, manufacture, and package the Company’s VELDONA “GMP Clinical Batch” and “GMP Commercial Batch” product candidates for the Company’s planned clinical trials under both Pharmaceutical Inspection Co-operation Scheme Good Manufacturing Practice (“PIC/S GMP”) and U.S. Food & Drug Administration (“U.S. FDA”) Current Good Manufacturing Practice regulations. This relationship with Swiss Pharma is intended to develop the Company’s VELDONA product candidates and enable us to effectively increase our manufacturing capabilities for VELDONA for our clinical trials, including testing, quality inspection, labeling, and packaging.
20
~~Table of Contents~~

Our ability to generate product revenue sufficient to achieve profitability will depend on further successful development and commercialization of one or more of our current or future product candidates and programs. In the near-term, we expect the COVID-19 antigen test kits to generate organic cash flows while we invest in our other pipeline projects. We expect to continue to incur significant expenses for the next few years as we advance our product candidates through preclinical development, clinical trials and regulatory approval. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution, and legal and regulatory compliance. We may also incur expenses in connection with strategic relationships for the development of additional product candidates. Furthermore, we expect to continue to incur costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses.

Until we can generate significant revenues, if ever, we expect to finance our operations with business revenues and proceeds from external sources. We may pursue additional funding that may include our entry into or expansion of borrowing arrangements; research and development incentive payments, government grants, co-financing from pharmaceutical companies and other corporate sources; and potential future collaboration agreements with pharmaceutical companies or other third parties. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization, potential in-licenses or acquisitions plans for one or more of our product candidates.

We are unable to predict the timing or amount of unexpected expenses or when or if we will be able to achieve or maintain profitability due to the numerous risks and uncertainties associated with product development and related legal regulatory requirements. When we are eventually able to generate additional product sales, those sales may not be sufficient to become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

18
Table of Contents
As of ~~September 30, 2022,~~March 31, 2023, we had available cash and cash equivalents of ~~$2,417,147.~~$1,146,132. We anticipate business revenues and further potential financial support from external sources to fund our operations over the next twelve months. We have based this estimate on assumptions that may prove to be incorrect, and we could exhaust our available capital resources sooner than we expect. See “Item 2 -– Management’s Discussion and Analysis of Financial Condition and Results of Operations -– Liquidity and Capital Resources” for additional information. To finance our continuing operations, we will need to raise additional capital, which cannot be assured.

Impact of COVID-19 on Our Business

~~The COVID-19 pandemic presented us an opportunity to grow our COVID-19 antigen test business.~~ Substantially all of our operating revenue ~~came~~comes from the sale of the Ainos COVID-19 antigen rapid test kits in ~~Taiwan.~~Taiwan under emergency use authorization. We ~~intend to broaden our market reach if TCNT, our product co-developer and manufacturing partner, successfully obtains regulatory clearance~~have marketed the COVID-19 test kit primarily in ~~the U.S. or other countries.~~Taiwan.

We believe ~~affordable, easy-to-use, rapid~~that during the COVID-19 ~~testing~~pandemic, consumers have become increasingly familiar with at-home tests. Moving forward, people may seek additional at-home tests to manage other infections as quickly as possible. Home self-testing and self-collection have been increasingly available for other infections such as vaginal or sexually transmitted infections. We believe this new user behavior, supported by a variety of telehealth platforms, will ~~continue to be in demand at least in the short-term.~~become increasingly accommodative for our other POCT products as COVID-19 becomes an endemic.

~~Due~~Moving forward, we plan to evolving market dynamics with COVID testing and the current financial environment, we decided to discontinue investment in commercializing the COVID-19 nucleic acid test program. We intend to evaluate our nucleic acid test technology for potential applications for other disease indications. At the same time, we continue to developprioritize our other long-term growth programs, including Ainos Flora and our ~~VELDONA~~VELONDA candidates. We intend to actively explore out-licensing opportunities for our VELDONA candidates to accelerate return of our investments. We also intend to commercialize VELDONA as a pet health supplement initially in Taiwan and later in other countries, if applicable.

We are continuing to monitor the potential impact of the pandemic, but we cannot be certain the future impact on our business, financial condition, results of operations and prospects. Depending on developments relating to the pandemic, including the emergence of new variants, the pandemic may affect our ability to initiate and complete research studies, delay the initiation of our future research studies, disrupt regulatory activities or have other adverse effects on our business, results of operations, financial condition and prospects.

Results of ~~Operation~~Operations for Quarter Ended ~~September 30,~~March 31, 2023 (“Q1 2023”) and March 31, 2022 (“Q3Q1 2022”) ~~and 2021 (“Q3 2021”)~~:

Revenues and Cost. The Company reported $49,164 and $87,200 in revenue in Q1 2023 and Q1 2022, respectively from product sales of Ainos COVID-19 Antigen Rapid Test Kits. The change in Q1 2023 revenues reflected a slowdown of COVID-19 infection in Taiwan.

~~Revenues increased~~The cost of sales relating to product sales in Q1 2023 was $100,848 compared to $41,078 in Q1 2022. The change was primarily attributable to the one-time inventory loss $42,826 resulting from overbuild inventory and unallocated manufacturing overhead of $22,602.
Gross (loss) profit from product sales in Q1 2023 was $(51,684) as compared to $46,122 in Q1 2022. The change in gross profit was driven by ~~384.2% to US$1,757,774~~the shift in the ~~third quarter of 2022 from US$363,052 in the same period of 2021, driven by increased sales of the~~ Company’s ~~COVID-19 Antigen Self-Test Kits in Taiwan. An increase in the number of COVID-19 cases in Taiwan~~revenue mix and increased ~~acceptance~~cost mentioned above. Gross profit excluding inventory loss and unallocated overhead was $13,744 in Q1 2023.
Research and Development Expenses. R&D expenses in Q1 2023 and Q1 2022 were $1,698,883 and $1,577,454, respectively. The $121,429 (8%) increase was largely due to increased expenses associated with depreciation expense, staffing expenditures (including share-based compensation), and professional expense. We expect that our R&D expenses will increase over time as we further product development of our ~~highly accurate self-test kit contributed~~product candidates. In addition to ~~the strong performance.~~increasing our in-house R&D staffing, we also contribute R&D funding under our co-development agreements with Taiwan Carbon Nano Technology (“TCNT”), our manufacturing collaborator and our affiliate company, for POCT products.
When excluding share-based compensation, depreciation and amortization expenses, R&D expenses increased to $503,899 in Q1 2023 from $441,241 in Q1 2022.
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $762,465 and $551,730 in Q1 2023 and Q1 2022, respectively. The $210,735 (38%) increase was largely due to increased expenses associated with share-based compensation.
When excluding share-based compensation, depreciation and amortization expenses, SG&A expenses increased to $555,995 in Q1 2023 compared to $531,505 in Q1 2022.

2119
Table of Contents

~~Costs and Gross Profit~~
Cost of revenues was US$1,176,032 in the third quarter of 2022, compared with US$103,638 in the same period of 2021. Such increase was consistent with the corresponding increase in sales volume, as the Company shipped more of its COVID-19 Antigen Self-Test Kits.
In the third quarter of 2022, gross profit was US$581,742, representing a 33.1% gross margin, compared to US$259,414, or a 71.5% gross margin a year ago. The decline in gross margin was driven by a shift in the Company’s revenue mix. To align with Taiwan’s infection control policy, we generated more revenue from the COVID-19 Antigen Self-Test Kit in the third quarter. In comparison, the majority of our revenue during the comparable period had been generated from sales of our COVID-19 Rapid Test Kit for use by healthcare professionals. The self-test kit accounted for all our business in the third quarter, compared to 7% in the previous quarter.
~~Research and Development Expenses~~
Compared to $646,798 in Q3 2021, R&D expenses in Q3 2022 were $1,834,786, mainly consisting of amortization expense of intellectual property assets, staffing, experimental materials, service fee for CRO and animal study, co-development research with labs of universities and other companies. In Q3 2022, we committed additional funding toward our VELDONA development.
~~When excluding depreciation and amortization expenses, R&D expenses increased to US$628,367 from US$401,526 over the same period.~~
~~Selling, General and Administration Expenses~~
Selling, general and administrative expenses in Q3 2022 were $6,569,227, compared to $795,958 in Q3 2021. Aside from share-based compensation expense, SG&A expense mainly consisted of staffing, legal, audit, consulting, and professional service expenses.
Our share-based compensation expenses related to the Company’s 2018-ESOP, 2018-NQSOP, employee-related Warrants, and 2021 Stock Incentive Plan was $6,076,017 and $19,322 in Q3 2022 and Q3 2021, respectively.
~~When excluding depreciation and amortization expenses and share-based compensation, SG&A expenses increased to US$489,838 from US$358,063 over the same period.~~
Operating ~~Loss~~Loss.
The Company’s operating loss was ~~$7,822,271~~$2,513,032 and ~~$1,183,342~~$2,083,062 in Q3Q1 2023 and Q1 2022, ~~and Q3 2021,~~ respectively, reflecting a ~~$6,638,929 (561%~~$429,970 (21%) increase in operating losses between the reporting ~~periods, which was driven by R&D~~periods. We incurred additional operating expenses as we continued to invest resources to execute our growth strategy and ~~share-based compensation.~~product roadmap.

~~Net Loss~~Interest Expense. In Q1 2023 interest expense was $9,273 compared to $16,687 in Q1 2022, due to accrued interest for convertible and other debt notes issued by the Company.

Net Loss. Net loss attributable to common stock shareholders was ~~$7,821,756~~$2,520,475 in ~~Q3 2022~~Q1 2023 compared to ~~$1,160,110~~$2,099,895 in ~~Q3 2021,~~Q1 2022, resulting in a ~~$6,661,646 (574%~~$420,580 (20%) increase in net ~~losses.~~losses attributable to our shareholder of common stock. The net losses are attributable to increased R&D expenses ~~and share-based compensation.~~
~~Results of Operation for the Nine months Ended September 30, 2022 and 2021~~
~~Revenues~~
Revenues increased by 337% to US$2,481,602 in the first nine months ended September 30, 2022 from US$568,164 in the same period of 2021, driven by increased sales of the Company’s COVID-19 Antigen Self-Test Kits in Taiwan. An increase in the number of COVID-19 cases in Taiwan and increased acceptance of our highly accurate self-test kit contributed to the strong performance.
22
~~Table of Contents~~
~~Costs and Gross Profit~~
Cost of revenues was US$1,536,074 in the first nine months ended September 2022, compared with US$174,395 in the same period of 2021. Such increase was consistent with the corresponding increase in sales volume, as the Company shipped more of its COVID-19 Antigen Self-Test Kits.
In the first nine months ended September 30, 2022, gross profit was US$945,528, representing a 38.1% gross margin, compared to US$393,769, or a 69.3% gross margin in the same period in 2021. The decline in gross margin was driven by a shift in the Company’s revenue mix.
~~Research and Development Expenses~~
Research and development expenses of $5,047,096 were incurred for the first nine months of 2022, compared to $646,798 for the first nine months of 2021, an increase of $4,400,298. Nevertheless, the first six months of 2021, the R&D expense is $0. The increase in 2022 was primarily due to amortization expense of intellectual property assets, staffing experimental materials, service fee for CRO and animal study, co-development research with labs of universities and other companies.
~~When excluding depreciation and amortization expenses, R&D expenses increased to US$1,548,711 from US$211,506 over the same period.~~
~~Selling, General and Administrative Expenses~~
Selling, general and administrative expenses of $7,748,060 were incurred for the first nine months of 2022, compared to $2,178,969 for the first nine months of 2021, an increase of $5,569,091 (256%). The mainly S&A expenses of the first nine months 2022 and 2021 are the same as Q3 2022 and Q3 2021, and the reasons for expenses increase are also the same. Please refer to the analysis in preceding paragraph.
~~When excluding depreciation and amortization expenses and share-based compensation, SG&A expenses increased to US$1,523,223 from US$1,089,176 over the same period.~~
~~Operating Loss~~
In the first nine months period ended September 30, 2022, the Company’s operating loss was $11,849,628 compared to an operating loss for the first nine months period ended September 30, 2021 of $2,431,998, a $9,417,630 (387%) increase. Our operating losses are mainly attributable to additional R&D expenses and share-based compensation expense, in line with the Company’s product development ~~initiatives and human resource policy.~~
~~Net Loss~~
The Net Loss for the first nine months of 2022, increased to $11,875,682 from $2,443,891 in 2021, an increase of $9,431,791 (386%) for the period. The major constituents of the increase in net loss are the increases in R&D expenses in the first nine months of 2022 and share-based compensation expense in the third quarter of 2022.plans.

Liquidity and Capital Resources

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had available cash of ~~$2,417,147~~$1,146,132 and ~~$1,751,499,~~$1,853,362, respectively.

The following table summarizes our cash flows atfor the ~~end~~first quarter of ~~September 30, 2022:~~2023:

Nine Months Ended September 30,

Three Months Ended March 31,

2022

2021

2023

2022

Net cash used in operating activities

(2,405,741 )

(569,150 )

(1,427,427 )

(1,389,889 )
Net cash used in investing activities

(665,079 )

(43,340 )

(72,483 )

(135,899 )
Net cash provided by financing activities

3,835,903

1,290,129

795,198

1,644,884

Cash Flows Used in Operating Activities:
Cash used in operating activities increased by $37,538 in Q1 2023 compared to Q1 2022. Our net loss for Q1 2023 increased by $420,580 primarily due to a change in sales of COVID-19 antigen test kits. However, net cash used in operating activities did not increase as much, mainly attributable to:

23
·
No cash out expenses including share-based compensation, depreciation and provision of inventory increased approximately by $256,000.
·
Working capital injected into account receivables, inventories and other current assets decreased by approximately $598,000.
~~Table of Contents~~
·
Working capital injected into accrued expenses and other current liabilities decreased by approximately $471,000.

~~Operating activities:~~
~~While our revenues grew~~Cash Flows Used in ~~the first nine months of 2022 due to sales of Ainos COVID-19 test kits, we increased investment in research and developments and working capital, resulting in a higher net operating outflow.~~
~~Cash expenditures for operating activities in the first nine months of 2022 and 2021 were $2,405,741 and $569,150, respectively.~~
Investing activities:

Cash used in investing activities ~~increased~~ in ~~the first nine months of 2022~~Q1 2023 was $72,483 compared to ~~cash used~~$135,899 in ~~the same period in 2021 were $665,079~~Q1 2022, respectively, due to lower levels of equipment purchases and ~~$43,340, respectively, attributed to the acquisition of R&D equipment and office facilities.~~facility building costs.

Cash Flows Used in Financing activities:

Cash ~~provided by~~received from financing activities was $795,198 and $1,644,884 in Q1 2023 and Q1 2022, respectively. The decrease of $849,686 primarily reflected the repayment of notes payable increased inby $200,000 and the ~~first nine months in 2022 compared to cash provided in the same period in 2021 were $3,835,903 and $1,290,129, respectively, which primarily reflects higher~~ proceeds from convertible notes and notes payable ~~amounted to $838,403 and net~~decreased by $650,000.
As disclose in Footnote 9 Subsequent Events, we received $1.5 million in proceeds from ~~uplisting amounted~~a convertible note issued to ~~$1,780,204.~~
~~Our total liabilities decreased significantly due to the Offering and the conversion~~ASE Test, Inc, an affiliate of the majority of outstanding convertible notes into common stock. As of September 30, 2022 and December 31, 2021, total liabilities were $2,655,752 and $30,625,054, and debt ratios were 7% and 75%, respectively.
In 2022 we intend to focus on commercializing our POCT candidates and developing our VELDONA-based COVID-19 oral treatment program. Our near-term liquidity requirements will include expenses for clinical trials, repayment of debt not converted into equity, regulatory clearances, and marketing to commercialize our POCT devices and our VELDONA-based COVID-19 oral treatment program. We also intend to increase staffing for general administration, marketing and technology development purposes.Company.

In 2023, ~~and beyond,~~ we intend to invest in research and development and clinical trial spending to advance our VELDONA development efforts for disease indications such as thrombocytopenia and Sjögren’s syndrome. We also plan on investing in clinical trials and regulatory approval for our POCT devices, in collaboration with TCNT, and clinical trial expenses for our SRNA program.
20
Table of Contents

The Company anticipates that its cash reserves, business revenues from the Ainos COVID-19 test kits, sales of its common stock, and debt financing through convertible and non-convertible notes are sufficient to fund the Company’s operations over the next twelve months. There can be no assurance that we will be successful in our efforts to make the Company profitable. If those efforts are not successful, the Company may raise additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan, including, as required, additional external financing from our majority shareholder. However, if such financing is not available when needed and at adequate levels, the Company will need to reevaluate its operating plan.

Critical Accounting Policies and Significant Management Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our unaudited condensed financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.
We evaluate our estimates and judgments, including those related to revenues, inventory valuation, accrued expenses and stock-based compensation, on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis - Critical Accounting Policies and Significant Management Estimates” of our 2022 Annual Report, except for those accounting subjects discussed in the Notes, if any, to the unaudited condensed financial statements included in this Quarterly Report on Form 10-Q.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

AsWe are a ~~“smaller~~smaller reporting company~~” we~~ as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item 3.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act ~~means~~refers to controls and ~~other~~ procedures ~~of a company~~ that are designed to ~~ensure~~provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
24
~~Table of Contents~~
~~Internal Control Over Financial Reporting~~ Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.

Our management, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). As previously disclosed in our Form 10-K/A for the year ended December 31, 2021, under the supervision and with the participation of our ~~management, including~~Chief Executive Officer and our Chief Financial Officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer ~~we conducted an evaluation~~concluded that our disclosure controls and procedures as of the ~~effectiveness~~end of the period covered by this Quarterly Report were effective at the reasonable assurance level and that the condensed financial statements in this Quarterly Report fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting as of December 31, 2021. As a result of such review as of December 31, 2021, we identified certain deficiencies in the design and implementation of our internal controls with respect to reporting and implemented a remediation plan.
~~During the first nine months of 2022, as part of our remediation plan and procedures, we have been implementing the following changes:~~
·
~~Increasing staff resources dedicated to internal controls and reporting including the hiring of a full-time accounting assistant for the CFO who is dedicated to financial reporting;~~
·
Specifically delegating roles and responsibilities for each participant in compiling and reviewing our reports including designating a single-point of contact for consolidating data inputs and delegation of key reporting elements to relevant department leads;
·
Designating an executive team to review all narrative disclosures, including potential changes thereto. The executive team is comprised of the CEO, CFO, Director of Corporate Development, Executive Vice President of Operations, and Chief Legal Counsel;
·
Establishing a final review process with our Chief Executive Officer and Chief Financial Officer prior to finalizing and filing our reports. At each stage of preparing financial reports the executive team conducts a review of draft materials and discusses the results in telephone conferences; and
·
Establishing an executive review team to approve the final EDGAR version and IXBRL data file for our reports. As described above, the executive team meets and confers to review the final financial reports that are then submitted to the Audit Committee and Board for final approval prior to filing.
During the remainder of 2022, we will continue to implement our remediation plan. In connection with such plan, we expect to further increase our internal corporate resources focused on improving the design, implementation and monitoring of our internal control systems.reporting.

2521
Table of Contents

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 material legal proceedings or claims involving the Company.

ITEM 1A. Risk Factors.
This Quarterly Report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in this Quarterly Report. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Quarterly Report.
You should carefully consider the risk factors disclosed in our Form 10-K for the period ending December 31, 2022 (the “2022 Annual Report”), together with all other information in this Quarterly Report, including our unaudited condensed financial statements and notes thereto, and in our other filings with the Securities and Exchange Commission. If any of the following risks, or other risks not presently known to us or that we currently believe to not be significant, develop into actual events, then our business, financial condition, results of operations or prospects could be materially adversely affected. If that happens, the market price of our common stock could decline, and stockholders may lose all or part of their investment.

There are no material changes to the risk factors as previously disclosed in our ~~Form S-1/A (Amendment No. 3)~~2022 Annual Report, incorporated herein by this referenced, which was filed with the ~~SEC~~Securities and Exchange Commission on ~~July 27, 2022.~~April 3, 2023.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~2021 Asset Purchase Agreement~~Recent Sales of Unregistered Equity Securities

On ~~November 18, 2021,~~March 13, 2023, we entered into two convertible note purchase agreements made pursuant to Regulation S of the ~~Asset Purchase Agreement with Ainos KY, our majority shareholder. We closed the transaction on January 30, 2022. Pursuant~~Securities Act of 1933 relating to the ~~Asset Purchase Agreement, we acquired certain intellectual property assets and certain manufacturing, testing, and office equipment for a total purchase price~~sale of ~~$26,000,000. As payment of the Purchase Price, at the closing on January 30, 2022,~~convertible notes, under which the Company issued ~~to Ainos KY the APA Convertible Note, a~~and sold two convertible promissory ~~note~~notes (the “March 2025 Convertible Notes” or “Notes”) in ~~the~~a principal amount of ~~$26,000,000.~~US$3 million to certain investors. The Notes will mature in two years following the issuance, bearing interest at the rate of 6% compounded interest per annum. At any time after the issuance and before the maturity date, the Notes are convertible into the common shares of the Company. “” The conversion price is US$1.50 per Common Share, subject to adjustment as set forth in the Notes. Unless previously converted, the Company shall repay the outstanding principal amount plus all accrued and unpaid interest on the maturity date. The Note shall be an unsecured general obligation of the Company.
Issuer Purchase of Equity Securities
None.
Use of Proceeds of Registered Securities

On August 9,8, 2022, ~~the APA Convertible Note was converted into 7,647,058 shares~~we closed on our underwritten public offering of ~~our common stock (on a post-split basis)~~780,000 units at a ~~conversion price equal to $3.40, or 80% of the per unit~~ public offering price of ~~our~~$4.25 per unit (the “IPO”). Each unit issued in the offering ~~that closed~~consisted of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $4.25. The common stock and warrants were immediately separable and were issued separately. The common stock and warrants began trading on the Nasdaq Capital Market on August 9, 2022, under the symbols “AIMD” and “AIMDW,” respectively. Ainos received gross proceeds of approximately $3.3 million, before deducting underwriting discounts and commissions and other estimated offering expenses. In connection with the offering, the Company effectuated a reverse split of its issued and outstanding common stock at a ratio of 1-for-15. The reverse stock split became effective at 8 p.m., Eastern Time, on August 8, 2022.

2622
Table of Contents

~~2021 – 2022~~As part of its offering Ainos ~~KY Working Capital Advances~~granted its underwriters a 45-day option to purchase up to an additional 117,000 shares of common stock and/or up to an additional 117,000 warrants at the public offering price to cover over-allotments. The underwriters partially exercised its option to purchase an additional 117,000 warrants at $0.01/warrant.

In 2021, Ainos KY provided working capital advances in the form of convertible note financing in the aggregate amount of $3,000,000. The working capital convertible notes issued in 2021 bear interest at the AFR short-term rate of 1.85% and may be convertible in whole or in part at a conversion price of $3.00 per share, subject to adjustment. On March 17, 2022, we executed a Promissory Note Extension with Ainos KY dated March 17, 2022, pursuant to which the maturity datesMaxim Group LLC acted as sole book-running manager for the ~~convertible notes issued in 2021 to Ainos KY were extended to February 28, 2023. On August 9, 2022,~~offering. Brookline Capital Markets, a division of Arcadia Securities, LLC acted as co-manager for the ~~notes in the aggregate principal amount of $3,000,000 plus accrued interest of $42,959 were converted by Ainos KY into a total of 1,014,319 shares of our common stock.~~
In March 2022, Ainos KY provided us a working capital advance in the form of a non-convertible note financing in the principal amount of $800,000, at a 1.85% per annum interest rate, with a maturity date of February 28, 2023.
~~Convertible Note Offering Pursuant to Regulation S~~offering.

The ~~Company issued convertible notes (the “March 2027 Convertible Notes”)~~offering was conducted pursuant to ~~Regulation S as more particularly described below.~~the Company’s registration statement on Form S-1 (Registration No. 333-264527) that was previously filed with Securities and Exchange Commission (“SEC”), and declared effective on August 8, 2022.

·
Under a Convertible Note Purchase Agreement dated as of March 31, 2022 by and between the Company and Yun-Han Liao (the “Purchaser”). The Purchaser is the daughter of Hui-Lan Wu, the Company’s Chief Financial Officer. Pursuant to the Agreement the Purchaser paid a total of $50,000 to the Company in exchange for a Convertible Promissory Note issued by the Company in the principal amount of $50,000 (the “Liao Convertible Note”).
·
Under those certain Convertible Note Purchase Agreements dated as of March 28, 2022 (the “Regulation S Agreements”) by and between the Company and Chih-Cheng Tsai, Ming-Hsien Lee, Yu-Yuan Hsu, and Top Calibre Corporation, a British Virgin Islands company (collectively the “Regulation S Purchasers”). Pursuant to the Regulation S Agreements, the Purchasers paid a total of $850,000 (the “Principal Amount”) to the Company in exchange for Convertible Promissory Notes issued by the Company in the Principal Amount (together with the Liao Convertible Note, the “Convertible Notes”).
·
~~$500,000 Convertible Note issued on April 11, 2022 to ASE Test Inc., a minority owner of Ainos KY and an affiliate of the Company.~~
~~On August 9, 2022,~~There has been no material change in ~~connection~~the use of proceeds from our IPO as described in our final prospectus filed with the ~~listing of the Company’s common stock~~SEC pursuant to Rule 424(b)(4) on the Nasdaq Capital Market, the March 2027 Convertible Notes were converted into 411,760 shares of our common stock (on a post-split basis) at a conversion price equal to $3.40, or 80% of the per unit public offering price of our Offering.August 10, 2022.

ITEM 3. Defaults Upon Senior Securities.

None

ITEM 4. Mine Safety Disclosures.

Not applicable

ITEM 5. Other Information.

On September 28, 2022, the Board of Directors of the Company approved an amendment to Article V, Section 1 and 2 of the Company’s Bylaws which, as amended, require that: (a) the ownership interests in the Company, inclusive of its common stock and its preferred stock, shall be either uncertificated or certificated shares, and (b) any certificated shares that have been issued and are outstanding to date shall be deemed to be uncertificated shares only after the certificate is surrendered to the Company in accordance with the requirements of the Board, as may be adopted at its discretion. The Company’s Form 8-K filed on October 4, 2022 and its amended restated Bylaws are incorporated herein by this reference.Not applicable

2723
Table of Contents

ITEM 6. ~~Exhibits.~~Exhibits

EXHIBIT INDEX

INCORPORATED BY REFERENCE

INCORPORATED BY REFERENCE
EXHIBIT NUMBER
DESCRIPTION
FILED WITH THIS FORM 10-Q
FILING DATE WITH SEC
FORM
EXH #
HYPERLINK TO FILINGS
DESCRIPTION
FILED WITH THIS FORM 10-Q
FILING DATE WITH SEC
FORM
EXH #
HYPERLINK TO
FILINGS
3.1(a)
Restated Certificate of Formation of the Company, dated April 15, 2021
4/21/2021
8-K
3.1
Restated Certificate of Formation of the Company, dated April 15, 2021
Restated Certificate of Formation of the Company, dated April 15, 2021
4/21/2021
8-K
3.1
Restated Certificate of Formation of the Company, dated April 15, 2021
3.1(b)
Certificate of Amendment to the Restated Certificate of Formation, dated August 8, 2022
8/12/2022
8-K
3.1
Certificate of Amendment, dated August 8 2022
Certificate of Amendment to the Restated Certificate of Formation, dated August 8, 2022
8/12/2022
8-K
3.1
Certificate of Amendment, dated August 8 2022
3.2
Amended and Restated Bylaws of the Company, effective September 28, 2022
10/4/2022
8-K
3.2
Amended and Restated Bylaws, effective September 28, 2022
Amended and Restated Bylaws of the Company, effective September 28, 2022
10/4/2022
8-K
3.2
Amended and Restated Bylaws, effective September 28, 2022
4.1(a)
Form Common Stock Certificate
X
Form Common Stock Certificate
4/3/2023
10-K
4.1
Form of Common Stock Certificate
4.1(b)
Form of Warrant
8/2/2022
S-1/A
4.1
Form of Warrant
Form of Warrant
8/2/2022
S-1/A
4.1
Form of Warrant
4.1(c)
Form of Warrant Agency Agreement
8/2/2022
S-1/A
4.3
Form of Warrant Agency Agreement
Form of Warrant Agency Agreement
8/2/2022
S-1/A
4.3
Form of Warrant Agency Agreement
10
Master Service Agreement with Swiss Pharmaceutical Co., Ltd. (Taiwan)
X
23.1
Consent of PWR CPA LLP, independent registered accounting firm
X
24
Power of Attorney
X
22
Published report regarding matters submitted to vote of security holders

3/8/2023
14-C PRE

Schedule 14-C Preliminary Information Statement
24.1
Power of Attorney
x
31.1
Certification of Chief Executive Officer Pursuant to Rule 13a- 14(a) / 15d – 14(a)
X
Certification of Chief Executive Officer Pursuant to Rule 13a- 14(a) / 15d – 14(a)
x
31.2
Certification of Chief Financial Officer Pursuant to Rule 13a- 14(a) / 15d – 14(a)
X
Certification of Chief Financial Officer Pursuant to Rule 13a- 14(a) / 15d – 14(a)
x
32.1
Certification Of Principal Executive Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
X
Certification Of Principal Executive Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
x
32.2
Certification Of Principal Financial Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
X
Certification Of Principal Financial Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
x
99.1
Form 10-K/A for the year ended December 31, 2021
4/15/2022
10-K/A
Form 10-K/A, year ended December 31, 2021
Form 10-K for the year ended December 31, 2022
4/3/2023
10-K
Form 10-K, year ended December 31, 2022
100
XBRL – Related Documents
X
XBRL – Related Documents
x
101.INS
XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the XBRL document.
X
XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the XBRL document.
x
101.SCH
XBRL Taxonomy Extension Schema Document
X
XBRL Taxonomy Extension Schema Document
x
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
X
XBRL Taxonomy Extension Calculation Linkbase
x
101.DEF
XBRL Taxonomy Extension Definition Linkbase
X
XBRL Taxonomy Extension Definition Linkbase
x
101.LAB
XBRL Taxonomy Extension Label Linkbase
X
XBRL Taxonomy Extension Label Linkbase
x
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
X
XBRL Taxonomy Extension Presentation Linkbase
x
104.1
Cover Page Interactive Data File
X
Cover Page Interactive Data File
x

The exhibits listed in the Exhibit Index are filed or incorporated by reference as part of this filing.

+ Schedules (as similar attachments) have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K.

* Indicates a management contract or compensatory plan or arrangement.

2824
Table of Contents

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: May 12, 2023
By:
/s/ Chun-Hsien Tsai

~~Date: November 14, 2022~~
Chun-Hsien Tsai, Chairman of the Board, ~~AND~~

President, and Chief Executive Officer

Date: ~~November 14, 2022~~May 12, 2023
By:
/s/ Hui-Lan Wu

Hui-Lan Wu, Chief Financial Officer

2925

	Preferred Stock				Common Stock				Additional Paid in		Accumulated			Translation			Total Stockholders’ Equity
	Shares		Par Value		Shares		Par Value		Capital		Deficit			Adjustment			(Deficit)

Balance at June 30, 2022		-	$	-		9,625,133	$	96,251	$	20,290,857	$	(14,162,842	)	$	(217,946	)	$	6,006,320
Issuance of stock upon offering, net of issuance cost		-		-		780,000		7,800		1,772,404		-			-			1,780,204
Conversion of convertible notes into common stock		-		-		9,073,137		90,732		30,352,227		-			-			30,442,959
Share-based compensation		-		-		-		-		6,076,017		-			-			6,076,017
Net loss		-		-		-		-		-		(7,821,756	)		-			(7,821,756	)
Translation adjustment		-		-		-		-		-		-			(57,674	)		(57,674	)
Balance at September 30, 2022		-	$	-		19,478,270	$	194,783	$	58,491,505	$	(21,984,598	)	$	(275,620	)	$	36,426,070

Balance at June 30, 2021		-	$	-		9,484,634	$	94,847	$	25,614,745	$	(7,504,035	)		-			18,205,557
Issuance of stock for option		-		-		11,360		113		64,639		-			-			64,752
Share-based compensation		-		-		-		-		19,322		-			-			19,322
Net loss		-		-		-		-		-		(1,160,110	)		-			(1,160,110	)
Translation adjustment		-		-		-		-		-		-			6,838			6,838
Balance at September 30, 2021		-	$	-		9,495,994	$	94,960	$	25,698,707	$	(8,664,145	)	$	6,838		$	17,136,360

	Nine months ended September 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(11,875,682	)	$	(2,443,891	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,608,080			1,178,693
Share-based compensation expense		6,162,902			207,533
Stock issued for compensation		-			139,405
Loss on disposal of fixed property and equipment		-			2,227
Changes in operating assets and liabilities:
Accounts receivable		(400,198	)		(44,643	)
Inventory		(698,295	)		2,849
Other current assets		313,792			(81,921	)
Accrued expenses and other current liabilities		483,660			470,598
Net cash used in operating activities		(2,405,741	)		(569,150	)
Cash flows from investing activities:
Payments to acquire properties and equipment		(669,792	)		(41,581	)
Proceeds from disposal of properties and equipment		-			36
Increase in refundable deposits and others		4,713			(1,795	)
Net cash used in investing activities		(665,079	)		(43,340	)
Cash flows from financing activities:
Payments of lease liabilities		(14,896	)		(6,815	)
Proceeds from convertible notes payable-non-current		1,400,000			-
Proceeds from convertible notes payable		-			1,232,192
Proceeds from notes payable		800,000			-
Principal payments on notes payable		(129,405	)		-
Net proceeds from Uplisting in Nasdaq		1,780,204			-
Proceeds from exercise of share options		-			64,752
Net cash provided by financing activities		3,835,903			1,290,129
Effect from foreign currency exchange		(99,435	)		7,047
Net increase in cash and cash equivalents		665,648			684,686
Cash and cash equivalents at beginning of period		1,751,499			22,245
Cash and cash equivalents at end of period		2,417,147			706,931
Supplemental Cash Flow Information:
Cash paid for interest		1,872			9,363
Supplemental disclosures of noncash financing and investing activities:
Stock issued for compensation, warrant and option expense		-			346,938
Stock issued for acquisition of patents		-			20,000,000
Issuance of convertible notes for payables-related party		26,000,000			-
Conversion of convertible notes and accrued interest into common stock		30,442,959			-
ROU leased assets and obligation		-			62,723
Payment to acquire properties and equipment:
Acquisition of property and equipment		575,567			-
Increase in prepaid for equipment		33,776			-
Decrease in payables for equipment		60,449			-
Total payments		669,792			-

	March 31, 2023		December 31, 2022
Conversion of convertible notes		814,337		145,355
Unvested RSUs		732,668		800,000
Vested RSU		29,332		-
Stock options		36,666		36,666
Warrants		966,174		966,174
		2,579,177		1,948,195

	Number of RSUs			Weighted- Average Grant Date Fair Value Per RSU		Number of RSUs			Weighted- Average Grant Date Fair Value Per RSU
Balance as of December 31,2021		-		$	N/A
Unvested balance at December 31, 2022							800,000		$	2.42
RSUs granted		621,332		$	11.10		-		$	N/A
RSUs vested		(533,332	)	$	11.10		(29,332	)	$	11.1
RSUs canceled		-		$	N/A		(38,000	)	$	1.43
Balance as of September 30, 2022		88,000		$	11.10
Unvested balance at March 31, 2023							732,668		$	2.12

Date	Number of Options ¹Qualified	Number of Options ²Nonqualified	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Balance at December 31, 2021	3,333	33,333	$5.70	9.54 yrs	-
Granted	-	-	-	-	-
Exercised	-	-	-	-	-
Expired or Forfeited	-	-	-	-	-
Balance at December 31, 2022	3,333	33,333	$5.70	8.55 yrs	-
Granted	-	-	-	-	-
Exercised	-	-	-	-	-
Expired or Forfeited	-	-	-	-	-
Balance at March 31, 2023	3,333	33,333	$5.70	8.32 yrs	-
Exercisable at March 31, 2023	2,666	11,111	$5.70	8.32 yrs	-

Payee	No.	Effective Date	Due Date	From Effective	Following Maturity	Conversion Rate	Issuing Purpose	As of 12/31/2021	Addition	Converted/ Payment	As of 9/30/2022		Accrued Interest
Convertible Notes Payable:
Stephen Chen	#1.16	1/30/2016	Payable on demand	0.75%	N/A	$ 2.52	working capital	114,026	-	-	114,026	6,479
Stephen Chen	#2.16	3/18/2016	Payable on demand	0.65%	N/A	$ 2.81	working capital	262,500	-	-	262,500	11,009
								376,526	-	-	376,526	17,488
Ainos KY	#12.21	4/27/2021	2/28/2023 (1)	1.85%	N/A	$ 3.00	working capital	15,000	-	(15,000)	-	-
Ainos KY	#13.21	5/5/2021	2/28/2023 (1)	1.85%	N/A	$ 3.00	working capital	20,000	-	(20,000)	-	-
Ainos KY	#14.21	5/25/2021	2/28/2023 (1)	1.85%	N/A	$ 3.00	working capital	30,000	-	(30,000)	-	-
Ainos KY	#15.21	5/28/2021	2/28/2023 (1)	1.85%	N/A	$ 3.00	working capital	35,000	-	(35,000)	-	-
Ainos KY	#16.21	6/9/2021	2/28/2023 (1)	1.85%	N/A	$ 3.00	working capital	300,000	-	(300,000)	-	-
Ainos KY	#17.21	6/21/2021	2/28/2023 (1)	1.85%	N/A	$ 3.00	working capital	107,000	-	(107,000)	-	-
Ainos KY	#18.21	7/2/2021	2/28/2023 (1)	1.85%	N/A	$ 3.00	working capital	54,000	-	(54,000)	-	-
Ainos KY	#19.21	9/1/2021	2/28/2023 (1)	1.85%	N/A	$ 3.00	working capital	120,000	-	(120,000)	-	-
Ainos KY	#20.21	9/28/2021	2/28/2023 (1)	1.85%	N/A	$ 3.00	working capital	300,000	-	(300,000)	-	-
Ainos KY	#21.21	11/10/2021	2/28/2023 (1)	1.85%	N/A	$ 3.00	working capital	50,000	-	(50,000)	-	-
Ainos KY	#22.21	11/25/2021	2/28/2023 (1)	1.85%	N/A	$ 3.00	working capital	450,000	-	(450,000)	-	-
Ainos KY	#23.21	11/29/2021	2/28/2023 (1)	1.85%	N/A	$ 3.00	working capital	300,000	-	(300,000)	-	-
Ainos KY	#24.21	12/29/2021	2/28/2023 (1)	1.85%	N/A	$ 3.00	working capital	1,219,000	-	(1,219,000)	-	-
								3,000,000	-	(3,000,000)	-	-
Total convertible notes payable- related parties								3,376,526	-	(3,000,000)	376,526	17,488
Non-Convertible Notes Payable:
Stephen Chen	#9.21	1/1/2021	4/14/2021	0.13%	N/A	N/A	working capital	129,405	-	(129,405)	-	--
Ainos KY	#26.22 (2)	3/4/2022	2/28/2023	1.85%	N/A	N/A	working capital	-	800,000	-	800,000	8,556
			Non-convertible notes payable-related party					129,405	800,000	(129,405)	800,000	8,556
i2 China	#8b.20	1/1/2020	1/1/2021	1.85%	N/A	N/A	consulting fee	84,000	-	-	84,000	2,473
			Non-Convertible Notes payable- non-related party					84,000	-	-	84,000	2,473
			Total non-convertible notes payable					213,405	800,000	(129,405)	884,000	11,029
		Total convertible and non-convertible						3,589,931	800,000	(129,405)	1,260,526	28,517

Payee	No.	Effective Date	Due Date	From Effective	Following Maturity	Conversion Rate	Issuing Purpose	As of 12/31/2022	Addition	Payment	As of 3/31/2023		Accrued Interest
Current Convertible Notes Payable:
Stephen Chen	#1.16	1/30/2016	Payable on demand	0.75%	N/A	$ 2.52	working capital	114,026	-	-	114,026	6,905
Stephen Chen	#2.16	3/18/2016	Payable on demand	0.65%	N/A	$ 2.81	working capital	262,500	-	-	262,500	12,004
Total convertible notes payable- related parties								376,526	-	-	376,526	18,909
Non-Convertible Notes Payable:
Ainos KY	#26.22 (2)	3/4/2022	3/31/2023	1.85%	N/A	N/A	working capital	800,000	-	(200,000)	600,000	11,952
			Non-convertible notes payable-related party					800,000	-	(200,000)	600,000	11,952
i2 China	#8b.20	1/1/2020	1/1/2021	1.85%	N/A	N/A	consulting fee	84,000	-	-	84,000	5,109
			Non-Convertible Notes payable- non-related party					84,000	-	-	84,000	5,109
			Total non-convertible notes payable					884,000	-	(200,000)	684,000	17,061
		Total convertible and non-convertible						1,260,526	-	(200,000)	1,060,526	35,970

	·	$50,000 Convertible Note issued on March 31, 2022, to Yun-Han Liao. The purchaser is the daughter of Wu Hui-Lan, the Company’s Chief Financial Officer.

	·	$850,000 aggregate Convertible Notes issued on March 28, 2022, to Chih-Cheng Tsai, Ming-Hsien Lee, Yu-Yuan Hsu, and Top Calibre Corporation, a British Virgin Islands company.

	·	$500,000 Convertible Note issued on April 11, 2022, to ASE Test Inc., a minority owner of Ainos KY.

	·	The above Convertible Notes totaling $1,400,000 are collectively referred to as the “March 2027 Convertible Notes”.

	·	~~the extent and duration of the COVID-19 pandemic and the impact of the end of the COVID-19 pandemic on our business and our expectations regarding customer and user demand for our COVID-19 test kits;~~
	·	~~possible changes in capital structure, financial condition, future working capital needs and other financial items;~~
	·	~~our expectations of the reliability, accuracy and performance of our products and services;~~
	·	~~our ability to obtain additional funds for our operations;~~
	·	~~unforeseen changes in the course of research and development activities and in clinical trials;~~
	·	our ability to obtain and maintain regulatory authorizations, clearances or approvals for our tests and other product candidates, including EUAs (“Emergency Use Authorizations”) for our COVID-19 test kits or other product candidates;
	·	~~our ability to successfully build out our sales and marketing infrastructure, the costs and success of our marketing efforts, and our ability to promote our brand;~~
	·	~~our ability to establish demand for our products and services and expand geographically;~~
	·	~~our intellectual property position and our expectations regarding our ability to obtain and maintain intellectual property protection;~~
	·	~~our ability to effectively manage our expected growth, including our ability to retain and recruit personnel, and maintain our culture;~~
	·	~~possible changes in cost, timing and progress of development, preclinical studies, clinical trials and regulatory submissions;~~
	·	~~the rate and degree of market acceptance of any approved product candidates;~~
	·	~~the impact of applicable U.S., Taiwanese and international laws and regulations; and~~
	·	~~our ability to implement, maintain and improve effective internal controls and remediate material weaknesses.~~

	·	COVID-19 Antigen Rapid Test ~~Kit and Ainos’ Cloud-based Test Management Apps~~Kit. . Our cloud-based test management platform is comprised of an antigen rapid test kit, a personal application, or app, and an enterprise app. We anticipate our management apps will allow individuals and organizations to seamlessly manage tests, trace infections, and share results. As the first commercialized COVID-19 product we sell, we currently market ~~the Ainos~~ COVID-19 antigen rapid test ~~kit~~kits in Taiwan under emergency use authorization (“EUA”) issued by the Taiwan Federal and Drug Administration (“TFDA”). for healthcare professional use and for self-test use. We also offer companion test management apps for the tests kits for healthcare professional use. We market the ~~Ainos COVID-19 antigen rapid~~ test ~~kit~~kits under ~~our~~the Ainos brand name. The kit is manufactured by TCNT, our product co-developer.

	·	VOC POCT – Ainos ~~Flora~~Flora.. Our Ainos Flora device, currently under clinical study in Taiwan, is intended to perform a non-invasive test for female vaginal health and certain common sexually transmitted diseases (“STDs”) ~~including chlamydia, gonorrhea and trichomoniasis,~~ within a few minutes. We ~~expect~~are developing a companion app that enables users to conveniently manage test results. We believe Ainos Flora ~~will provide~~provides connected, convenient, discreet, rapid testing in a point-of-care ~~setting which will allow women to self-test at home.~~setting.

	·	VOC POCT – Ainos ~~Pen~~Pen. . Our Ainos Pen device is a cloud-connected, multi-purpose, portable breath analyzer that is intended to monitor health conditions ~~including oral, gastrointestinal, liver, and renal health~~ within minutes. We expect consumers to be empowered to share their ~~self-test~~test results with their physicians through in-person and telehealth medical consultations.

	·	VOC POCT – ~~CHS430~~CHS430. . The CHS430 device is intended to provide non-invasive testing for ventilator-associated pneumonia within 10few minutes, as compared to current standard of care invasive culture tests that typically take more than two days to provide results. We plan to be the exclusive sales agent for CHS430, pursuant to our Product Development Agreement with our co-developer, TCNT, who will manufacture the product.

	·	Very Low-Dose Oral Interferon Alpha (“VELDONA”). VELDONA is a low-dose oral interferon alpha (“IFN-α”) formulation based on our nearly four decades of research on IFN-α’s broad treatment applications. ~~We have recently completed our own animal studies for~~Our pipeline candidates include oral treatment offor COVID-19 for human, feline chronic gingivostomatitis (FCGS) and ~~potential other viral infections. Subsequently, we are now conducting studies based on the VELDONA-only program.~~canine atopic dermatitis (CAD). We also intend to explore various business opportunities, including out-licensing, to advance ~~our~~ other candidates including thrombocytopenia, Sjögren’s syndrome, aphthous stomatitis, chemotherapy-induced stomatitis, influenza, and the common cold.

	·	Synthetic RNA (“SRNA”). We are developing a SRNA technology platform in ~~Taiwan. Our initial focus is to develop~~Taiwan with a ~~potential COVID-19 mRNA vaccine platform using the full-length spike or the RBD gene sequence~~long-term goal of ~~the alpha~~developing next-generating precision treatments and ~~delta variants as reference sequences.~~rapid tests.


23 ·	No cash out expenses including share-based compensation, depreciation and provision of inventory increased approximately by $256,000.
	·	Working capital injected into account receivables, inventories and other current assets decreased by approximately $598,000.
~~Table of Contents~~	·	Working capital injected into accrued expenses and other current liabilities decreased by approximately $471,000.

	·	~~Increasing staff resources dedicated to internal controls and reporting including the hiring of a full-time accounting assistant for the CFO who is dedicated to financial reporting;~~
	·	Specifically delegating roles and responsibilities for each participant in compiling and reviewing our reports including designating a single-point of contact for consolidating data inputs and delegation of key reporting elements to relevant department leads;
	·	Designating an executive team to review all narrative disclosures, including potential changes thereto. The executive team is comprised of the CEO, CFO, Director of Corporate Development, Executive Vice President of Operations, and Chief Legal Counsel;
	·	Establishing a final review process with our Chief Executive Officer and Chief Financial Officer prior to finalizing and filing our reports. At each stage of preparing financial reports the executive team conducts a review of draft materials and discusses the results in telephone conferences; and
	·	Establishing an executive review team to approve the final EDGAR version and IXBRL data file for our reports. As described above, the executive team meets and confers to review the final financial reports that are then submitted to the Audit Committee and Board for final approval prior to filing.

	·	Under a Convertible Note Purchase Agreement dated as of March 31, 2022 by and between the Company and Yun-Han Liao (the “Purchaser”). The Purchaser is the daughter of Hui-Lan Wu, the Company’s Chief Financial Officer. Pursuant to the Agreement the Purchaser paid a total of $50,000 to the Company in exchange for a Convertible Promissory Note issued by the Company in the principal amount of $50,000 (the “Liao Convertible Note”).

	·	Under those certain Convertible Note Purchase Agreements dated as of March 28, 2022 (the “Regulation S Agreements”) by and between the Company and Chih-Cheng Tsai, Ming-Hsien Lee, Yu-Yuan Hsu, and Top Calibre Corporation, a British Virgin Islands company (collectively the “Regulation S Purchasers”). Pursuant to the Regulation S Agreements, the Purchasers paid a total of $850,000 (the “Principal Amount”) to the Company in exchange for Convertible Promissory Notes issued by the Company in the Principal Amount (together with the Liao Convertible Note, the “Convertible Notes”).

	·	~~$500,000 Convertible Note issued on April 11, 2022 to ASE Test Inc., a minority owner of Ainos KY and an affiliate of the Company.~~

	AINOS, INC.
Date: May 12, 2023	By:	/s/ Chun-Hsien Tsai
~~Date: November 14, 2022~~		Chun-Hsien Tsai, Chairman of the Board, ~~AND~~
		President, and Chief Executive Officer

Date: ~~November 14, 2022~~May 12, 2023	By:	/s/ Hui-Lan Wu
		Hui-Lan Wu, Chief Financial Officer