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Ainos, Inc. - Quarter Report: 2022 March (Form 10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended March 31, 2022

 

or

 

☐   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 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 accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ Yes  ☑ No

 

144,379,308 shares of common stock, par value $0.01 per share, outstanding as of May 16, 2022

 

 

 

AINOS, INC.

 

INDEX

 

 

 

PAGE NO.

PART I:

FINANCIAL INFORMATION

 

ITEM 1.

Financial Statements

 

 

Condensed Consolidated Balance Sheets– March 31, 2022 and December 31, 2021 (unaudited)

3

 

Condensed Consolidated Statements of Operations – Three Months Ended March 31, 2022 and 2021 (unaudited)

4

 

Condensed Consolidated Statements of Comprehensive Loss – Three Months Ended March 31, 2022 and 2021 (unaudited)

5

 

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) – Three Months Ended March 31, 2022 and 2021 (unaudited)

6

 

Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2022 and 2021 (unaudited)

7

 

Notes to Financial Statements (unaudited)

8

ITEM 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

13

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

17

ITEM 4.

Controls and Procedures

17

 

 

 

PART II:

OTHER INFORMATION

 

ITEM 1.

Legal Proceedings

18

ITEM 1A.

Risk Factors

19

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

19

ITEM 3.

Defaults Upon Senior Securities

19

ITEM 4.

Mine Safety Disclosures

19

ITEM 5.

Other Information

19

ITEM 6.

Exhibits

20

Signatures

 

22

 

 
2

Table of Contents

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

 

Ainos, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$1,871,349

 

 

$1,751,499

 

Inventory

 

 

337,805

 

 

 

-

 

Other current assets

 

 

813,905

 

 

 

466,198

 

Total current assets

 

 

3,023,059

 

 

 

2,217,697

 

Intangible assets, net

 

 

36,214,023

 

 

 

37,329,191

 

Property and equipment, net

 

 

1,419,584

 

 

 

1,187,702

 

Other assets

 

 

79,598

 

 

 

87,571

 

Total assets

 

$40,736,264

 

 

$40,822,161

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Convertible notes payable

 

$3,376,526

 

 

$3,376,526

 

Notes payable

 

 

1,013,405

 

 

 

213,405

 

Accrued expenses and others current liabilities

 

 

1,339,585

 

 

 

1,004,868

 

Payables – related party

 

 

-

 

 

 

26,000,000

 

Total current liabilities

 

 

5,729,516

 

 

 

30,594,799

 

Long term liabilities:

 

 

 

 

 

 

 

 

Convertible notes payable - noncurrent

 

 

26,900,000

 

 

 

-

 

Operating lease liabilities - noncurrent

 

 

24,152

 

 

 

30,255

 

Total long term liabilities

 

 

26,924,152

 

 

 

30,255

 

Total liabilities

 

 

32,653,668

 

 

 

30,625,054

 

 

 

 

 

 

 

 

 

 

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 March 31, 2022 and December 31,

 

 

 

 

 

 

 

 

2021; 144,379,308 shares issued and outstanding as

 

 

 

 

 

 

 

 

of March 31, 2022 and December 31, 2021

 

 

1,443,793

 

 

 

1,443,793

 

Additional paid-in capital

 

 

18,899,873

 

 

 

18,856,430

 

Accumulated deficit

 

 

(12,208,811)

 

 

(10,108,916)

Translation adjustment

 

 

(52,259)

 

 

5,800

 

Total stockholders’ equity

 

 

8,082,596

 

 

 

10,197,107

 

Total liabilities and stockholders’ equity

 

$40,736,264

 

 

$40,822,161

 

 

See accompanying notes to condensed consolidated financial statements.

 

 
3

Table of Contents

 

Ainos, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Revenues

 

$87,200

 

 

$2,121

 

Cost of revenues

 

 

(41,078)

 

 

(1,249)

Gross margin

 

 

46,122

 

 

 

872

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development expenses

 

 

1,577,454

 

 

 

-

 

Selling, general and administrative expenses

 

 

551,730

 

 

 

522,981

 

Total operating expenses

 

 

2,129,184

 

 

 

522,981

 

Operating loss

 

 

(2,083,062)

 

 

(522,109)

Non-operating income and expenses, net

 

 

 

 

 

 

 

 

Interest expenses, net

 

 

(16,687)

 

 

(11,897)

Other losses

 

 

(146)

 

 

-

 

Total non-operating income and expenses, net

 

 

(16,833)

 

 

(11,897)

Net loss

 

$(2,099,895)

 

$(534,006)

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per average share available to common shareholders

 

$(0.01)

 

$(0.01)

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding– basic and diluted

 

 

144,379,308

 

 

 

42,066,172

 

 

See accompanying notes to condensed consolidated financial statements.

 

 
4

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Ainos, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Net loss

 

$(2,099,895)

 

$(534,006)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Translation adjustment

 

 

(58,059)

 

 

-

 

Comprehensive loss

 

$(2,157,954)

 

$(534,006)

 

See accompanying notes to condensed consolidated financial statements.

 

 
5

Table of Contents

 

Ainos, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

For the three months ended March 31, 2022 and 2021

(Unaudited)

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

Paid in

 

 

Accumulated

 

 

Other comprehensive

 

 

Total Stockholders’ Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 Capital

 

 

Deficit

 

 

loss

 

 

(Deficit)

 

Balance at December 31, 2021

 

 

-

 

 

$-

 

 

 

144,379,308

 

 

$1,443,793

 

 

$18,856,430

 

 

$(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

 

 

-

 

 

$-

 

 

 

144,379,308

 

 

$1,443,793

 

 

$18,899,873

 

 

$(12,208,811)

 

$(52,259)

 

$8,082,596

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

-

 

 

$-

 

 

 

42,066,172

 

 

 

420,662

 

 

 

4,961,315

 

 

 

(6,220,255)

 

 

 

 

 

 

(838,278)

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

94,105

 

 

 

 

 

 

 

 

 

 

 

94,105

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(534,006)

 

 

 

 

 

 

(534,006)

Balance at March 31, 2021

 

 

-

 

 

$-

 

 

 

42,066,172

 

 

$420,662

 

 

$5,055,420

 

 

$(6,754,261)

 

$-

 

 

$(1,278,179)

 

See accompanying notes to condensed consolidated financial statements.

 

 
6

Table of Contents

 

Ainos, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three months ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$(2,099,895)

 

$(534,006)

Adjustments to reconcile net loss to net cash used in operating. activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,168,773

 

 

 

3,905

 

Share-based compensation expense

 

 

43,443

 

 

 

94,105

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Inventory

 

 

(337,805)

 

 

3,024

 

Other current assets

 

 

(297,707)

 

 

18,254

 

Accrued expenses and others current liabilities

 

 

133,302

 

 

 

202,981

 

Net cash used in operating activities

 

 

(1,389,889)

 

 

(211,737)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of property and equipment

 

 

(135,899)

 

 

-

 

Net cash used in investing activities

 

 

(135,899)

 

 

-

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from convertible notes payable

 

 

850,000

 

 

 

236,854

 

Proceeds from notes payable

 

 

800,000

 

 

 

-

 

Payments of other notes payable

 

 

-

 

 

 

(37,985)

Payments of lease liabilities

 

 

(5,116)

 

 

-

 

Net cash provided by financing activities

 

 

1,644,884

 

 

 

198,869

 

Net change in cash

 

 

119,096

 

 

 

(12,868)

Effect from foreign currency exchange

 

 

754

 

 

 

-

 

Cash and cash equivalents at beginning of period

 

 

1,751,499

 

 

 

22,245

 

Cash and cash equivalents at end of period

 

 

1,871,349

 

 

 

9,377

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of noncash financing and investing activities

 

 

 

 

 

 

 

 

Issuance of convertible notes for payables - related party

 

 

26,000,000

 

 

 

-

 

Receivable of convertible notes issued

 

 

50,000

 

 

 

-

 

Net change in equipment payable

 

 

202,002

 

 

 

-

 

 

See accompanying notes to condensed consolidated financial statements.

 

 
7

Table of Contents

 

 Ainos, Inc.

Notes to Financial Statements

(Unaudited)

 

1. 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 have historically been involved in extensive pharmaceutical research and development of low-dose oral interferon as a therapeutic, 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”), 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. Basis of presentation. The accompanying consolidated financial statements, which should be read in conjunction with the audited financial statements and footnotes included in the Company's Form 10-K/A for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on April 15, 2022  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 ended March 31, 2022, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2022.

 

3. Financial Condition. These 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. The Company has not yet achieved sustained operating income, and its operations are funded primarily from related-party convertible debt and equity financings. However, losses are anticipated in the ongoing development of its business and there can be no assurance that the Company will be able to achieve or maintain profitability.

 

The continuing operations of the Company and the recoverability of the carrying value of assets is dependent upon the ability of the Company to obtain necessary financing to fund its working capital requirements, and upon future profitable operations. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

 

 
8

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There can be no assurance that capital will be available as necessary to meet the Company’s working capital requirements or, if the capital is available, that it will be on terms acceptable to the Company. The issuances of additional equity securities by the Company may result in dilution in the equity interests of its current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase the Company’s liabilities and future cash commitments. If the Company is unable to obtain financing in the amounts and on terms deemed acceptable, the business and future success may be adversely affected and the Company may cease operations. These factors raise substantial doubt regarding our ability to continue as a going concern.

 

4. Common Stock. We have 300,000,000 shares of voting common shares authorized for issuance. On March 31, 2022, a total of 163,987,550 shares of common stock were either issued (144,379,308), reserved for conversion of convertible debt to stock (17,285,625), reserved for future issuance of RSUs for non-employee directors (1,320,000), held for future exercise of stock options (550,000) and shares reserved for warrant conversion (452,617). We also have $26.9 million outstanding in convertibles notes which are convertible into shares of common stock upon and at a conversion price equal to 80% of the offering price of any public offering as a result of which the Company's common stock is listed on a national exchange.

 

We have not paid any dividends to our common stock shareholders to date, and have no plans to do so in the immediate future.

 

5. Preferred Stock. We have 10,000,000 shares of preferred stock authorized for issuance. No shares of preferred stock were outstanding as of March 31, 2022.

 

6. Current Convertible Notes Payable and Other Notes Payable. As of March 31, 2022 and December 31, 2021, the amount of convertible and other notes payable totaled $4,389,931 and $3,589,931, 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

Payment

As of 3/31/2022

Accrued Interest

Current Convertible Notes Payable:

Stephen Chen

#1.16

1/30/2016

Payable on demand

0.75%

N/A

$ 0.17

working capital

114,026

-

-

114,026

6,050

Stephen Chen

#2.16

3/18/2016

Payable on demand

0.65%

N/A

$ 0.19

working capital

262,500

-

-

262,500

10,298

376,526

-

-

376,526

16,348

Ainos KY

#12.21

4/27/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

15,000

-

-

15,000

257

Ainos KY

#13.21

5/5/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

20,000

-

-

20,000

335

Ainos KY

#14.21

5/25/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

30,000

-

-

30,000

471

Ainos KY

#15.21

5/28/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

35,000

-

-

35,000

545

Ainos KY

#16.21

6/9/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

300,000

-

-

300,000

4,486

Ainos KY

#17.21

6/21/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

107,000

-

-

107,000

1,535

Ainos KY

#18.21

7/2/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

54,000

-

-

54,000

744

Ainos KY

#19.21

9/1/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

120,000

-

-

120,000

1,289

Ainos KY

#20.21

9/28/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

300,000

-

-

300,000

2,798

Ainos KY

#21.21

11/10/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

50,000

-

-

50,000

357

Ainos KY

#22.21

11/25/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

450,000

-

-

450,000

2,851

Ainos KY

#23.21

11/29/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

300,000

-

-

300,000

1,840

Ainos KY

#24.21

12/29/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

1,219,000

-

-

1,219,000

5,684

 

 

 

 

 

 

 

 

3,000,000

-

-

3,000,000

23,192

 Total convertible notes payable- related parties

3,376,526

-

-

3,376,526

39,540

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

354

Ainos KY

#26.22 (2)

3/4/2022

3/31/2023

1.85%

N/A

N/A

working capital

-

800,000

-

800,000

1,135

Non-convertible notes payable-related party

129,405

800,000

-

929,405

1,489

i2 China

#8b.20

1/1/2020

1/1/2021

1.85%

N/A

N/A

consulting fee

84,000

-

-

84,000

3,527

 

 

 

Non-Convertible Notes payable- non-related party

84,000

 

 

84,000

3,527

 

 

 

Total non-convertible notes payable

213,405

800,000

-

1,013,405

5,016

Total convertible and non-convertible

3,589,931

800,000

-

4,389,931

44,556

 

 
9

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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 amount to $3,000,000 in the aggregate.

(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.

 

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 total interest expense of convertible notes payable and other notes payable for the three months ended March 31, 2022 and as of December 31 2021 was $15,883 and $11,897 respectively; the cumulative related accrued interest as of March 31, 2022 and December 31, 2021 were $44,556 and $28,673, respectively.

 

7. Non-Current Convertible Notes Payable. As of March 31, 2022 and December 31, 2021, the amount of non-current convertible notes payable was $26,900,000 and $0, respectively.

 

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 Item 8 in these Notes to Financial Statements. The principal sum of the APA Convertible Note is payable in cash on January 30, 2027, although we may prepay the APA Convertible Note in whole or in part without penalty. The APA Convertible Note is noninterest bearing. If not earlier repaid, the APA Convertible Note will be converted into shares of our common stock or such other securities or property for which the APA Convertible Note may become convertible, immediately prior to the closing of any public offering of our common stock as a result of which our common stock will be listed on a U.S. stock exchange. The conversion price, subject to certain adjustments, will be 80% of the initial public offering price of the offering.

 

 
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Convertible Note Offering Pursuant to Regulation S

 

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 (the “Liao Convertible Note”).

 

 

 

 

·

$850,000 aggregate Convertible Notes issues on March 28, 2022 to Chih-Cheng Tsai, Ming-Hsien Lee, Yu-Yuan Hsu, and Top Calibre Corporation, a British Virgin Islands company (collectively the “Regulation S Notes”).

 

 

 

 

·

The Liao Convertible Note and the Regulation S Notes are collectively referred to as the “Convertible Notes”.

 

The Principal Amount of the Convertible Notes are payable in cash on March 30, 2027, although the Company may prepay the Convertible Notes in whole or in part without penalty. The Convertible Notes are non-interest bearing. If not earlier repaid, the Convertible Notes will be converted into shares of common stock, $0.01 par value per share of the Company, or such other securities or property for which the Convertible Notes may become convertible, immediately prior to the closing of any public offering of the Company’s common stock as result of which the Company’s common stock will be listed on a U.S. stock exchange. The conversion price, subject to certain adjustments, will be eighty percent (80%) of the initial public offering price of the offering.

 

8. Related Party Transactions. The following is a summary of related party transactions that met our disclosure threshold for the three months ended March 31, 2022 and 2021:

 

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, the Company acquired certain intellectual property assets and certain manufacturing, testing, and office equipment for a total purchase price of $26,000,000. Pursuant to the Asset Purchase Agreement, the Company agreed to hire certain employees of Ainos KY who are responsible for research 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. As payment of the purchase price, 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”). Refer to Note 7 of the Notes to Financial Statements for more information.

 

 
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Related Party Working Capital

 

All convertible and other notes payable were issued either as a result of financing or deferred compensation provided by related parties. As of March 31, 2022 and December 31, 2021, the convertible and non-convertible notes payable for related parties totaled $4,355,931 and $3,505,931, respectively. Refer to Note 6 and 7 of the Notes to Financial Statements for more information.

 

Purchase related to COVID-19 Antigen Rapid Test Kits

 

We incurred costs associated with finished goods, raw materials and manufacturing fees for Covid-19 antigen rapid test kits from TCNT pursuant to a Sales and Marketing Agreement, totaling $386,412 for the three months ended March 31, 2022. There were no purchases from TCNT during the same period last year.

 

Product Co-development Agreement

 

Pursuant to the five-year product co-development agreement effective on August 1, 2021 with TCNT (the “Product Co-Development Agreement”) we incurred development expenses totaling $167,422 for the three months ended March 31, 2022 of which $109,131 is in accrued payable as of March 31, 2022.

 

Promissory Note Extension Agreement

 

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 “Promissory Note Extension Agreement”). The total unpaid principal for these extended period convertible notes amount to $3,000,000 in the aggregate. Refer to Footnote 1 of Note 6 of the Notes to Financial Statements for more information.

 

9. Subsequent Events.

 

On April 11, 2022, we issued to ASE Test Inc., a minority owner of Ainos KY, a convertible note in the principal amount of $500,000 due on March 30, 2027 (the “ASE Note”). The convertible note will automatically convert into shares of our common stock immediately prior to the closing of any public offering of our common stock as a result of which our common stock will be listed on a U.S. stock exchange. The conversion price, subject to certain adjustments, will be 80% of the initial public offering price of the offering.

  

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

 

The following discussion should be read in conjunction with our financial statements and the notes thereto which appear elsewhere in this report. The results shown herein are not necessarily indicative of the results to be expected in any future periods.

 

Some of the statements in this report are “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding our current beliefs, goals and expectations about matters such 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 reflect 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. These forward-looking statements are not guarantees of future performance and involve numerous risks and uncertainties 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 guarantee that the transactions and events described will happen as described (or that they will happen at all).

 

The following factors, among others, could cause actual results and future events to differ materially from those set forth 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;

 

·

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 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.

 

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 have historically been involved in extensive pharmaceutical research and development of low-dose oral interferon as a therapeutic, 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”), 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.

 

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. 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 in Taiwan under emergency use authorization (“EUA”) issued by the Taiwan Federal and Drug Administration (“TFDA”) in 2021. We market the Ainos COVID-19 antigen rapid test kit under our brand name. The kit is manufactured by TCNT, our product co-developer.

 

 

 

 

·

COVID-19 Nucleic Acid Test. Our solution consists of a color-changing assay that is compatible with standard Polymerase Chain Reaction (“PCR”) machines and delivers test results within 40 minutes. In addition to our assay’s compatibility with existing PCR equipment, we will also offer portable, low-cost test equipment intended to help medical professionals quickly scale testing capacity. We will market the product under the Ainos brand name, and our co-developer TCNT will manufacture the product.

 

 

 

 

·

VOC POCT Ainos Flora. Our Ainos Flora device will perform a non-invasive test for female vaginal health and certain sexually transmitted diseases (“STDs”) including vaginitis, gonorrhea and trichomoniasis, within a few minutes. We expect Ainos Flora will provide convenient, discreet, rapid testing in a point-of-care setting which will allow women to self-test at home.

 

 
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·

VOC POCT Ainos 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 results with their physicians through in-person and telehealth medical consultations.

 

 

 

 

·

VOC POCT CHS430. The CHS430 device is intended to provide non-invasive testing for ventilator-associated pneumonia within 10 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 recently initiated a strategic relationship with InnoPharmax, Inc. to jointly develop and market an orally administered cytotoxin-induced complementary combined therapy (“CICCT”) for the treatment of COVID-19 and other potential viral infections. We are conducting a parallel study for the COVID-19 treatment based on VELDONA alone.

 

 

 

 

·

Synthetic RNA (SRNA). We are developing a SRNA technology platform in Taiwan. Our initial focus is to develop a potential COVID-19 mRNA vaccine platform using the full-length spike or the RBD gene sequence of the alpha and delta variants as reference sequences.

 

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 products and low-dose interferon therapeutics.

 

In 2022, we are prioritizing the commercialization of our POCT devices, beginning with seeking EUA authorizations for the COVID-19 POCT product candidates and plans to commercialize our other POCT product candidates. As a general strategy, we plan to conduct clinical trials in Taiwan and use the data to apply for TFDA approval and FDA clearance via the 510(k) 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 CICCT and SRNA programs over the course of this year.

 

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 products candidates to potentially generate organic cash flows to support our business 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 revenue from product sales, 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.

 

 
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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.

 

As of March 31, 2022, we had available cash and cash equivalents of $1,871,349. 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 business. Substantially all of our operating revenue came from the sale of the Ainos COVID-19 antigen rapid test kits in Taiwan. We intend to broaden our market reach if TCNT, our product co-developer and manufacturing partner, successfully obtains regulatory clearance in the U.S. or other countries.

 

We believe affordable, easy-to-use, rapid COVID-19 testing will continue to be in demand at least in the short-term. We anticipate our management apps, when used with the Ainos antigen rapid test kit, will allow individuals and organizations to effectively manage tests, trace infections, and share results. We also anticipate the Ainos COVID-19 nucleic acid test can help medical professionals quickly scale testing capacity if the product receives regulatory clearance.

 

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 Operations for Quarter Ended March 31, 2022 (“Q1 2022”) and March 31, 2021 (“Q1 2021”):

 

Revenues. The Company reported $87,200 in revenue in Q1 2022 from product sales of the Ainos COVID-19 Antigen Rapid Test Kits. Revenue from product sales in Q1 2021 was $2,121 generated from sales of liposomal nutraceuticals. The cost of sales relating to product sales in Q1 2022 was $41,078 compared to $1,249 in Q1 2021. Gross profit from product sales in Q1 2022 was $46,122 as compared to $872 in Q1 2021. Gross profits generated from product sales increased by $45,250 between Q1 2022 and the same quarter in the previous year. In 2021, the Company discontinued sales of liposomal nutraceuticals and instead plans to focus on sales of POCTs, including the Ainos COVID-19 Antigen Test Kit.

 

 
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Research and Development Expenses. R&D expenses in Q1 2022 were $1,577,454 mainly consisting of amortization expense of intellectual property assets, staffing and co-development research. There were no R&D expenses during the same quarter in 2021. We expect that our R&D expenses will increase over time as we further product development of our POCT and other product candidates. In addition to 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 and InnoPharmax, Inc. to jointly develop and promote an orally administered CICCT for the treatment of COVID-19 and potentially other viral infections.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $551,730 and $522,981 in Q1 2022 and Q1 2021, respectively. The $28,749 (6%) increase was largely due to increased expenses associated with staffing and consulting.

 

Operating Loss. The Company's operating loss was $2,083,062 and $522,109 in Q1 2022 and Q1 2021, respectively, reflecting a $1,560,953 (299%) increase in operating losses between the reporting periods. As stated in our discussion about R&D expenses, our operating losses are mainly attributable to additional R&D expenses in line with the Company's product development initiatives.

 

Interest Expense. In Q1 2022 interest expense was $16,687 compared to $11,897 in Q1 2021, due to accrued interest for convertible and other debt notes issued by the Company.

 

Net Loss. Net loss attributable to common stock shareholders was $2,099,895, in Q1 2022 compared to $534,006 in Q1 2021, resulting in a $1,565,889 (293%) increase in net losses attributable to our shareholder of common stock. The net losses are attributable to increased R&D expenses in line with the Company's product development plans.

 

Liquidity and Capital Resources

 

As of March 31, 2022 and December 31, 2021, the Company had available cash of $1,871,349 and $1,751,499, respectively. The following table summarizes our cash flows for the first quarter of 2022:

 

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

Net cash used in operating activities

 

 

(1,389,889)

 

 

(211,737)

Net cash used in investing activities

 

 

(135,899)

 

 

 

Net cash provided by financing activities

 

 

1,644,884

 

 

 

198,869

 

 

 
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Operating activities:

 

Cash used in operating activities increased in Q1 2022 compared to Q1 of 2021, due to higher net loss and negative working capital.  We incurred net operating outflow of $1,389,889 for Q1 2022 and $211,737 for Q1 2021. While our revenues grew in Q1 2022 due to sales of the Ainos COVID-19 test kits, our acquisition of intellectual property and equipment, increased staffing, and investment in research and developments increased our expenses and resulted in higher net losses of $2,099,895. These higher net losses were partially offset by increased amortization and depreciation for acquisition of intellectual property and equipment to $1,168,773 for Q1 2022 from $3,905 for Q1 2021. Negative working capital primarily resulted from the increase of inventories due to upcoming anticipated sales activities and the increase of other current assets primarily due to the preparation for a potential public offering for which we filed a Registration Statement on Form S-1 under the Securities Act of 1944, as amended, on April 28, 2022.

 

Investing activities:

Cash used in investing activities increased in Q1 2022 compared to cash used in Q1 2021, driven by the acquisition of R&D equipment, and building out existing facilities.

 

Financing activities:

Cash provided by financing activities increased in Q1 2022 compared to cash provided in Q1 2021, which primarily reflects higher proceeds from convertible notes payable and notes payable.  For a discussion of the notes, see “Part II, Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds.”

 

As of March 31, 2022, the principal amount of our convertible and other notes payable due within the next 12 months was $3,376,526 and $1,013,405, respectively. The holders of these notes waived their rights to the unpaid default interest under the notes in Q3 2021. See footnotes 4 and 6 of consolidated financial statements for more information related to convertible and other notes payable. In March 2022, we issued a non-convertible note in the principal amount of $800,000 due in March 2023.

 

On January 30, 2022, we issued a noninterest-bearing Convertible Promissory Note in the principal amount of $26,000,000 (the “APA Convertible Note”) in connection with the closing under the Asset Purchase Agreement. The  principal amount of the APA Convertible Note is due in January 2027. If not earlier repaid, the APA Convertible Note will be converted into shares of our common stock immediately prior to the closing of any public offering of our common stock as a result of which our common stock will be listed on a U.S. stock exchange.

 

In addition, in the first quarter of 2022, we executed $900,000 of convertible notes with terms that are substantially similar to the terms of the APA Convertible Note.

 

In 2022 we intend to focus on commercializing our POCT medical devices and developing our CICCT 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, including the Ainos COVID-19 Nucleic Acid Test, the Ainos Flora, the Ainos Pen and our CICCT program. We also intend to increase staffing for general administration, marketing and technology development purposes.

 

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 the CHS430 device, in collaboration with TCNT, and clinical trial expenses for our SRNA program.

 

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. As the number of reported COVID cases has been increasing in Taiwan, we anticipate demand for the test kits to increase, at least in the short term.  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.

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

 

As a “smaller reporting company,” we are not required to provide the information under this Item 3.

 

ITEM 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

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 March 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

 
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Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). 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 our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of 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 quarter of 2022, as part of our remediation plan and procedures, we began 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.

 

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.

 

 
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ITEM 1A. Risk Factors.

 

There are no material changes to the risk factors as previously disclosed in the company’s Form 10-K/A in response to Part I - Item 1A of our annual report filed with the SEC on April 15, 2022.

 

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

 

2021 Asset Purchase Agreement

 

On November 18, 2021, we entered into the Asset Purchase Agreement with Ainos KY, our majority shareholder. We closed the transaction on January 30, 2022. 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). As payment of the Purchase Price, at the closing on January 30, 2022, the Company issued to Ainos KY the APA Convertible Note, a convertible promissory note in the principal amount of $26,000,000.

 

The principal sum of the APA Convertible Note is payable in cash on January 30, 2027, although we may prepay the APA Convertible Note in whole or in part without penalty. The APA Convertible Note is non-interest bearing. The APA Convertible Note will be automatically converted into shares of our common stock immediately prior to the closing of this offering at a conversion price equal to 80% of the per Unit public offering price.

 

2021 – 2022 Ainos KY Working Capital Advances

 

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 $0.20 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 dates for the convertible notes issued in 2021 to Ainos KY were extended to February 28, 2023.

 

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

 

The Company issued convertible notes pursuant to Regulation S as more particularly described below:

 

 

·

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 We Hui-Lan, 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”).

 

 

 

The Principal Amount of the Convertible Notes are payable in cash on March 30, 2027, although the Company may prepay the Convertible Notes in whole or in part without penalty. The Convertible Notes are non-interest bearing. If not earlier repaid, the Convertible Notes will be converted into shares of common stock, $0.01 par value per share of the Company, or such other securities or property for which the Convertible Notes may become convertible, immediately prior to the closing of any public offering of the Company’s common stock as result of which the Company’s common stock will be listed on a U.S. stock exchange. The conversion price, subject to certain adjustments, will be eighty percent (80%) of the initial public offering price of the offering.

 

ITEM 3. Defaults Upon Senior Securities.

 

None

 

ITEM 4. Mine Safety Disclosures.

 

Not applicable

 

ITEM 5. Other Information.

 

Not applicable

 

 
19

Table of Contents

 

ITEM 6. Exhibits.

 

EXHIBIT INDEX

 

 

INCORPORATED BY REFERENCE

EXHIBIT NUMBER

DESCRIPTION

FILED WITH

THIS FORM 10-K

FILING DATE WITH SEC

FORM

EXH #

HYPERLINK TO FILINGS

 

 

 

 

 

 

 

3.1

Restated Certificate of Formation of the Company, dated and filed July 27, 2015

 

3/30/2016

10-K

3.i.

Restated Certificate of Formation of the Company, dated and filed July 27, 2015.

3.2

Amended and Restated Bylaws of the Company, effective August 20, 2021

 

4/28/2022

S-1

3.2

https://www.sec.gov/Archives/edgar/data/0001014763/000165495422005505/aimd_ex32.htm

4.1

Specimen Common Stock Certificate

 

8/8/1996

SB-2

4.1

Specimen Common Stock Certificate.

10.1

Amended and Restated Asset Purchase Agreement, dated as of January 29, 2022, between Ainos, Inc. and Ainos, Inc.

 

2/3/2022

8-K

2.1

https://www.sec.gov/Archives/edgar/data/0001014763/000165495422001066/aimd_ex21.htm

10.2

Convertible Promissory Note, dated as of January 30, 2022, issued by Ainos, Inc.

 

2/3/2022

8-K

10.1

https://www.sec.gov/Archives/edgar/data/0001014763/000165495422001066/aimd_ex101.htm

10.3

Non-Convertible Note dated March 4, 2022.

 

3/17/2022

8-K

10(i)

https://www.sec.gov/Archives/edgar/data/0001014763/000165495422003341/aimd_ex10i.htm

10.4

Note Extension Agreement dated March 17, 2022

 

3/17/2022

8-K

10(ii)

https://www.sec.gov/Archives/edgar/data/0001014763/000165495422003341/aimd_ex10ii.htm

10.5*

Employment Agreement by and between Chun-Hsien Tsai and Ainos, Inc. dated March 17, 2022

 

3/17/2022

8-K

10(iii)

https://www.sec.gov/Archives/edgar/data/0001014763/000165495422003341/aimd_ex10iii.htm

10.6*

Employment Agreement by and between Hui-Lan Wu (aka Celia Wu) and Ainos, Inc. dated March 17, 2022

 

3/17/2022

8-K

10(iv)

https://www.sec.gov/Archives/edgar/data/0001014763/000165495422003341/aimd_ex10iv.htm

10.7*

Employment Agreement by and between Chih-Heng Jack Lu and Ainos, Inc. dated March 17, 2022

 

3/17/2022

8-K

10(v)

https://www.sec.gov/Archives/edgar/data/0001014763/000165495422003341/aimd_ex10v.htm

10.8

Form of Convertible Note Purchase Agreement

 

4/4/2022

8-K

2.1

https://www.sec.gov/Archives/edgar/data/0001014763/000165495422004526/aimd_ex21.htm

10.9

Form of Convertible Promissory Note

 

4/4/2022

8-K

10.1

https://www.sec.gov/Archives/edgar/data/0001014763/000165495422004526/aimd_ex101.htm

24.1

Power of Attorney by Board of Directors

X

 

 

 

 

31.1

Certification of Principal Executive Officer Pursuant to Rule 13a-  14(a) / 15d – 14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002

X

 

 

 

 

 

 

20

Table of Contents

 

31.2

Certification of Principal Financial Officer Pursuant to Rule 13a-  14(a) / 15d – 14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002

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

 

 

 

 

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

 

 

 

 

100

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

 

 

 

 

101.SCH

XBRL Taxonomy Extension Schema Document

X

 

 

 

 

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

X

 

 

 

 

101.DEF

XBRL Taxonomy Extension Definition Linkbase

X

 

 

 

 

101.LAB

XBRL Taxonomy Extension Label Linkbase

X

 

 

 

 

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

X

 

 

 

 

104.1

Cover Page Interactive Data File

X

 

 

 

 

 

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

 

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

 

* Indicates a management contract or compensatory plan or arrangement.

 

 
21

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 16, 2022

By:

 /s/ Chun-Hsien Tsai

 

 

 

Chun-Hsien Tsai, Chairman of the Board,

President, and Chief Executive Officer

 

 

 

 

 

 

 

 

 

Date: May 16, 2022

By:

/s/ Hui-Lan Wu

 

 

 

Hui-Lan Wu, Chief Financial Officer

 

 

 
22