Ainos, Inc 10-Q for FY2021 Q2
Ainos, Inc. (AIMD)
About this 10-Q
Ainos, Inc filed this 10-Q on August 20, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).
Headline figures
Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $202.99K
- up 41840.5% from $484 a year earlier
- Net loss
- $749.77K
- compared with a net loss of $301.97K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM
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(Mark One)
For the quarterly period ended
or
For the transition period from ____ to ____
Commission File No.
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(Exact name of registrant as specified in its charter) |
___________________
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(State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification No.) |
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(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. ☒
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). ☒
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 | ☐ |
☒ | Smaller reporting company | ||
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| 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)
AINOS, INC.
INDEX
| 2 |
| Table of Contents |
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Ainos, Inc.
Balance Sheets
(Unaudited)
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| June 30, 2021 |
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| December 31, 2020 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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Accounts receivable |
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Inventory |
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Prepaid expense and other current assets |
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Total current assets |
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Patents, net |
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Property and equipment, net |
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Right of Use Asset |
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Total assets |
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Liabilities and Stockholders’ Equity (Deficit) |
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Current liabilities: |
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Accounts payable and accrued expenses |
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Contract liability |
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Convertible and other notes payable – related parties |
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Convertible and other notes payable |
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Lease obligation – current |
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Total current liabilities |
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Lease obligation – non-current |
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Total liabilities |
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Stockholders’ Equity (deficit) |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ equity (deficit) |
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Total liabilities and stockholders’ equity (deficit) |
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See accompanying notes to financial statements.
| 3 |
| Table of Contents |
Ainos, Inc.
Statements of Operations
(Unaudited)
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| Three months ended June 30 |
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| Six months ended June 30 |
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Revenues |
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Cost of revenues |
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Gross margin |
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Operating expenses: |
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Research and development expenses |
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Selling, general and administrative expenses |
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Total operating expenses |
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Operating loss |
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Loss on sale of fixed assets |
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Interest expense, net |
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Profit before income tax |
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Less: Income tax |
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Net loss |
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Basic and diluted net loss per average share available to common shareholders |
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Weighted average common shares outstanding – basic and diluted |
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See accompanying notes to financial statements.
| 4 |
| Table of Contents |
Ainos, Inc.
Statements of Stockholders’ Equity (Deficit)
For the three months ended June, 2021 and 2020
(Unaudited)
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| Preferred Stock |
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| Common Stock |
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| Additional Paid in |
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| Accumulated |
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| Par Value |
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| Capital |
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Balance at March 31, 2021 |
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Issuance of stock for compensation |
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Issuance of stock for acquisition of patents |
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Warrant expense |
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Option expense |
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Net loss for the 2nd-quarter |
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Balance at June 30, 2021 |
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Balance at March 31, 2020 |
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Issuance of stock for cash |
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Warrant expense |
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Option expense |
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Net loss for the 2nd-quarter |
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Balance at June 30, 2020 |
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| $ |
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| $ |
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See accompanying notes to financial statements.
| 5 |
| Table of Contents |
Ainos, Inc.
Statements of Stockholders’ Equity (Deficit)
For the six months ended June, 2021 and 2020
(Unaudited)
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| Preferred Stock |
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| Common Stock |
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| Additional Paid in |
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| Accumulated |
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| Total Stockholders’ Equity |
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| Shares |
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| Par Value |
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| Shares |
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| Par Value |
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| Capital | Deficit | (Deficit) |
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Balance at December 31, 2020 |
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Issuance of stock for compensation |
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Issuance of stock for acquisition of patents |
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Warrant expense |
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Option expense |
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Net loss for the 1st half year |
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Balance at June 30, 2021 |
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Balance at December 31, 2019 |
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Issuance of stock for cash |
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Warrant expense |
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Option expense |
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Net loss for the 1st half year |
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Balance at June 30, 2020 |
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See accompanying notes to financial statements.
| 6 |
| Table of Contents |
Ainos, Inc.
Condensed Statements of Cash Flows
(Unaudited)
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| Six months ended June 30, |
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Net cash used in operating activities |
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Cash flows from investing activities |
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Investment in patents |
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Purchase of fixed assets |
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Net cash used in investing activities |
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Cash flows from financing activities |
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Advances from shareholder |
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Proceeds from private placement offering, net |
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Proceeds from convertible note payable-related party |
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Net cash used in financing activities |
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Net change in cash |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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Supplemental Cash Flow Information |
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Cash paid for interest |
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Cash paid for income taxes |
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Non-Cash Transactions |
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Stock issued for acquisition of patents |
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Stock issued for compensation, warrant and option expense |
| $ |
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Stock issued for advances from investors |
| $ |
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ROU Leased assets |
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Lease Obligation |
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See accompanying notes to financial statements.
| 7 |
| Table of Contents |
Ainos, Inc.
Notes to Financial Statements
(Unaudited)
1. | Organization and Business. Ainos, Inc., formerly known as Amarillo Biosciences, Inc. (the "Company") is a diversified healthcare company engaged in the research and development and sales and marketing of pharmaceutical and biotech products. The Company is a Texas corporation incorporated in 1984. |
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2. | The Company primarily operates through three divisions: Pharmaceutical, Medical and Consumer. The Pharmaceutical division leverages an extensive library of proprietary clinical research by applying the Company's experience in the use of low-dose non-injectable interferon (IFN) for the treatment of neoplastic, viral, and fibrotic diseases. The Company seeks to engage in patent licensing and commercialization opportunities with global partners. The Medical division is focused on developing technology to treat metabolism related diseases such as type-1 and type-2 diabetes in Asia and point-of-care testing (“POCT”) rapid test kit products that include diagnostics for COVID-19 (SARS CoV2 Antigen Rapid Test), pneumonia, vaginal infection and helicobacter pylori (H. pylori) bacterial infection. The Consumer division is responsible for the sale and marketing of a range of nutraceutical and food supplement products and in deploying technology solutions that can be integrated with consumer electronic devices such as Smartphones. The Company currently has offices in the United States and Taiwan. The Company operates in Taiwan under the name AMARILLO BIOSCIENCES, INC. TAIWAN BRANCH and has updated its registration application to rename its branch office as AINOS, INC. TAIWAN BRANCH. |
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3. | Basis of presentation. The accompanying consolidated financial statements, which should be read in conjunction with the audited financial statements and footnotes included in the Company's Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on March 30, 2021 attached hereto as Exhibit 13 and which is incorporated by this reference, have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete 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 six months ended June 30, 2021, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2021. |
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4. | Financial Condition. These financial statements have been prepared in accordance with United States generally accepted accounting principles, assuming that the Company will continue as a going concern. The accompanying financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. |
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| While the Company has recurring losses and generated negative cash flows from operations, the Company has taken initiatives to improve its business operations. Such initiatives include the procurement of innovative diagnostic technologies and securing a strategic investor, as a result of the closing of a securities purchase agreement with Ainos, Inc. a Cayman Island corporation (“Ainos KY”), on April 15, 2021. Details of the securities purchase agreement transaction are noted in Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
| 8 |
| Table of Contents |
| Pursuant with the securities purchase agreement, the Company has introduced new management team members and board directors. On June 14, 2021, the Company became the master sales and marketing agent for the Ainos SARS-CoV-2 Antigen Rapid Test Kit (“Covid-19 Test Kit”). Since June, sales of the Covid-19 Test Kit in Taiwan have begun generating revenues. The Company’s revenues for the first six months of 2021 increased to $
As of June 30, 2021, the Company’s financial improvement includes the following:
1. An increase of cash and cash equivalents to $
2. An increase of account receivables to $
3. An increase of current liability to $
4. Total stockholders’ equity of $
The Company anticipates business revenues and potential financial support to fund the Company’s operations over the next twelve months. Pursuant to the Share Purchase Agreement, Ainos KY may use commercially reasonable efforts to enter into an additional agreement whereby Ainos KY may provide up to $3 million for working capital purposes in the form of a loan or additional shares in the Company.
The Company intends to explore capital raise activities to further bolster its financial condition and fund future businesses.
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 will increase the Company’s liabilities and future cash commitments to the extent such loans would be available. While management believes in its strategic plans, management cannot be certain that such events can be achieved. |
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5. | Common Stock. The shareholders have authorized 300,000,000 shares of voting common shares for issuance. On June 30, 2021, a total of |
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| We have not paid any dividends to our common stock shareholders to date, and have no plans to do so in the immediate future. |
| 9 |
| Table of Contents |
6. | Convertible Notes Payable and Other Related Party Notes Payable. As of December 31, 2020, the amount of convertible and non-convertible debt principal, on the Company’s balance sheet was $ |
Note #. |
| Conversion Rate |
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| Interest Rate |
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| June 30, 2021 |
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| December 31, 2020 |
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Note 1 - Chen |
| $ |
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Note 2 - Chen |
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Note 3.19 - Chen |
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Note 4.19 - Chen |
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Note 5.19 – i2China |
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Note 6.20 - Chen |
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Note 7.20 - Chen |
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Note 8.20a – i2China |
| $ |
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| $ |
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Note 8.20b – i2China |
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| N/A |
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| % |
| $ |
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Note 9.21 - Chen |
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| N/A |
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| % |
| $ |
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Total Notes Payable Principal– Related Party and Others |
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| Dr. Stephen T. Chen and i2China Management Group, LLC elected to defer cash compensation during a period of development and fundraising. The parties received both convertible and non-convertible promissory notes in consideration of the deferrals. Ainos KY provided working capital to the Company and received convertible promissory notes in consideration of the working capital loans.
On January 1, 2021, the Company issued Note #10.21 for deferred compensation to Dr. Stephen T. Chen in the amount of $ |
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| On January 1, 2021, the Company issued Note #11 for deferred compensation to i2China Management Group, LLC in the amount of $
On April 1, 2021, the Company issued Note #11.21 for deferred compensation to Dr. Stephen T. Chen in the amount of $
On April 27, 2021, the Company issued Note #12.21 for a short-term loan for working capital purposes from Ainos KY in the amount of $
On May 5, 2021, the Company issued Note #13.21 for a short-term loan for working capital purposes from Ainos KY in the amount of $
On May 25, 2021, the Company issued Note #14.21 for a short-term loan for working capital purposes from Ainos KY in the amount of $
On May 28, 2021, the Company issued Note #15.21 for a short-term loan for working capital purposes from Ainos KY in the amount of $
On June 9, 2021, the Company issued Note #16.21 for a short-term loan for working capital purposes from Ainos KY in the amount of $ |
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| On June 21, 2021, the Company issued Note #17.21 for a short-term loan for working capital purposes from Ainos KY in the amount of $
All of the aforementioned convertible and non-convertible promissory notes are un-secured and are due on demand. All shares issued on conversion are to be restricted subject to Rule 144 promulgated under the U.S. Securities Act of 1933. The Company may prepay the notes in whole or in part at any time without penalty. The promissory notes due to Dr. Stephen T. Chen and Ainos KY are related party notes. |
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7. | Other Related Party Transactions. |
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| On April 7, 2021, the Company issued
On April 7, 2021, the Company issued
On April 7, 2021, the Company issued
On April 7, 2021, the Company issued
On April 15, 2021, the Company consummated its Securities Purchase Agreement dated December 24, 2020 (“Ainos Agreement”) with a strategic investor, Ainos KY. Pursuant to the Ainos Agreement, the Company issued |
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| On May 28, 2021, the Company Taiwan branch office entered into an office lease contract with Ting-Chuan Lee, a Company board director. The lease term is from
On June 30, 2021, the Company issued
On June 30, 2021, the Company issued
On June 30, 2021, the Company issued
On June 30, 2021, the Company issued |
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8. | Subsequent Events. |
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| On July 2, 2021, the Company issued Note #18.21 for a short-term loan for working capital purposes from Ainos KY in the amount of $
On July 30, 2021, the Company issued
On July 30, 2021, the Company issued
On August 11, 2021, the Company Board of Directors approved the resignation of Mr. Chun-Hsien Tsai as Chief Financial Officer (CFO) and the vacancy was filled by his successor, Ms. Hui-Lan (Celia) Wu, who was elected to serve as the CFO of the Company.
Note #18.21 is un-secured and due on demand. All shares issued on conversion are to be restricted subject to Rule 144 promulgated under the U.S. Securities Act of 1933. The Company may prepay the notes in whole or in part at any time without penalty. The convertible promissory note due to Ainos KY is a related party note. |
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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.
OVERVIEW
The Company
Ainos, Inc. (the “Company”) is a Texas corporation incorporated in 1984 engaged in the discovery and development of pharmaceutical and biotech products.
The Company currently has offices in the United States and Taiwan. The Company operates in Taiwan under the name AMARILLO BIOSCIENCES, INC. TAIWAN BRANCH and has updated its registration application to rename its branch office as AINOS, INC. TAIWAN BRANCH.
Our Divisions
| A. | Our Pharmaceutical Division is dedicated to the research and development of drug therapeutics that support the human immune system and address persistent diseases. |
VELDONA (Very Low-Dose Oral Interferon Alpha)
We seek to leverage our extensive library of clinical research by applying the Company’s research in the use of low-dose non-injectable interferon (IFN) for the treatment of neoplastic, viral, and fibrotic diseases. The company’s core pharmaceutical drug development program, VELDONA (Very Low-Dose Oral Interferon Alpha), boasts the most comprehensive library of scientific clinical data for low-dose non-injectable interferon, having completed more than 100 pre-clinical animal and human studies over several decades that support its safety and efficacy.
VELDONA is a late stage drug development program based on over 30 years of clinical trial research on low-dose non-injectable interferon alpha that has shown to be exceptionally effective against numerous human disease indications such as influenza, Sjögren’s syndrome, hepatitis C, thrombocytopenia, HIV, SARS and other conditions ranging from genital warts to canker sores. The drug’s unique mechanism of action has a multitude of treatment applications, in that it is not just directed against a single disease or viral infection, but rather it activates the body’s immune system to achieve the effect of fighting against numerous viruses.
Interferons are a family of natural occurring proteins that can be used to treat many diseases that involve the immune system. Interferon-alpha (IFN-α) is a key modulator in our innate immune response to viral infection. Almost every cell in the body can produce interferon when under attack, but interferon seems to be especially important in the cells that form the frontline defense with the outside world, such as the oral and nasal mucosa. Its anti-viral effects include inhibition of viral replication, destruction of virus-infected cells, and activation of other, important immune cells. IFN-α also has anti-proliferative effects which can be targeted at rapidly spreading viruses or rapidly dividing cancer cells.
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Since interferons enhance the immune system in many ways, they are used for many diseases that involve the immune system. For example:
| · | Interferon alfa-2a (Roferon-A) is approved by the U.S. FDA to treat hairy cell leukemia, AIDS-related Kaposi’s sarcoma, and chronic myelogenous leukemia; |
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| · | Interferon alfa-2b is approved by the U.S. FDA for the treatment of hairy cell leukemia, malignant melanoma, condylomata acuminata, AIDS-related Kaposi’s sarcoma, chronic hepatitis C, and chronic hepatitis B; |
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| · | Ribavirin is also combined with interferon alfa-2b, interferon alfacon-1 (Infergen), pegylated interferon alfa-2b, or pegylated interferon alpha-2a, all are approved by the U.S. FDA for the treatment of chronic hepatitis C.: and |
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| · | Interferon beta-1a, currently in use to treat multiple sclerosis, and interferon alfa-2b are both under investigation as potential treatments for people with COVID-19 coronavirus disease, the deadly respiratory pandemic caused by the SARS-nCoV-2 virus. |
In respect to its VELDONA program, the Company owns three (3) patents issued in the U.S. and one (1) issued in Taiwan as follows:
| · | “Treatment of Thrombocytopenia Using Orally Administered Interferon” as described and claimed in U.S. Patent No. 9,526,694 B2 issued December 27, 2016, Owned. Expiration: April 2033. |
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| · | “Treatment of Thrombocytopenia Using Orally Administered Interferon” as described and claimed in U.S. Patent No. 9,750,786 B2 issued September 5, 2017, Owned. Expiration: April 2033. |
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| · | “Treatment of Thrombocytopenia Using Orally Administered Interferon” as described and claimed in U.S. Patent No. 9,839,672 B2 issued December 12, 2017, Owned. Expiration: April 2033. |
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| · | “Treatment of Thrombocytopenia Using Orally Administered Interferon” as described and claimed in TAIWAN Patent No. I592165 issued July 21, 2017, Owned. Expiration: May 2033. |
The Company continues to seek to expand its patent licensing and commercialization opportunities for VELDONA with global partners. The Company’s licensing, development and commercialization of its VELDONA patents and research library are subject to approval by the FDA and other regulatory agencies in the U.S., and other regulatory agencies for use and marketing in other countries.
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| B. | Our Medical Division focuses on research and development of novel therapy protocols and medical devices. |
SMART (Simultaneous Metabolic Activation & Restoration Therapy)
Current diabetes treatments aim to control blood glucose levels, but do not address the underlying metabolic features of the disease. We believe that diabetes treatment must go beyond “glucose control.” Our SMART therapy focuses on a protocol-based pulsatile insulin infusion (PII) treatment that mimics the normal pancreas’ functions in stimulating the liver and essentially all cells in the body to process carbohydrates normally
In May 2016, the Company established a diabetes research center in Taiwan to test and accumulate valuable clinical and patient data results from pulsatile insulin infusion therapy (PII), a promising tool for diabetes management currently being commercially developed in the U.S. by various operators. Since then the Company made significant improvements to the original PII protocol to enhance overall efficacy and results. From 2016 to 2017, the diabetes research center conducted a pilot of its proprietary PII protocol involving 20 diabetes patients ranging from early stage to a 30-year diabetic patient with only 20% renal function. Preliminary results demonstrated clinical improvement or stabilization of the pilot patient’s diabetic symptoms.
Based on the clinical data derived from its research pilot testing, the Company developed a proprietary infusion therapy and a novel pulsatile insulin pump in Taiwan that consists of delivering insulin intravenously in pulses, as opposed to the typical subcutaneous route of administration, in order to more closely imitate how the pancreas secretes insulin in healthy non-diabetics. The Company’s treatment design consists of:
| · | SMART Initial Patient Screening for HbA1c, fasting blood glucose, pro-insulin, insulin, hsCRP, and adiponectin levels and assessment of diabetic complications- peripheral neuropathy, nephropathy, retinopathy as part of a comprehensive diagnostics, health history, genetic and physical examinations; |
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| · | SMART Pancreas Rescue Protocol involving doses of Insulin glargine Pioglitazone +/- GLP-1 agonist or SGLT-2 inhibitor if needed for weight loss; |
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| · | SMART Pulsatile Insulin Therapy consisting of applying its pulsatile pump for out-patient users along with certain IV supplement for metabolic efficiency; and |
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| · | SMART Lifestyle Coaching that encourages physical activity through training and monitoring, and involves nutritional counseling. |
In respect to its SMART Pulsatile Pump, the Company owns three (3) patents issued in Taiwan and China and two (2) of its patent applications in China and the U.S. are pending:
| · | “SMART DRUG INJECTION DEVICE” as described and claimed in TAIWAN invention patent application number 108137797, Owned, Issued: November 27, 2020, Expiration: October 18, 2039. |
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| · | “SMART DRUG INJECTION DEVICE” as described and claimed in TAIWAN design utility model patent application number 108213819, Owned, Issued: December 12, 2019, Expiration: November 11, 2038. |
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| · | “SMART DRUG INJECTION DEVICE” as described and claimed in CHINA design utility model patent application number 201921808292.6, Owned, Issued: July 28, 2020, Expiration: June 27, 2039. |
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| · | “SMART DRUG INJECTION DEVICE” as described and claimed in CHINA invention patent application number 201911024619.5, Pending. |
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| · | “SMART DRUG INJECTION DEVICE” as described and claimed in US invention patent application number 17/069,418, Pending. |
The Company expects to continue pilot testing of its Pulsatile Pump and proprietary diabetes therapies as preparation for FDA and regulatory approvals in Taiwan. Currently the SMART medical device and SMART therapies have not been approved by the Taiwan FDA and other regulatory agencies and for use and marketing in other countries.
Ainos SARS-CoV-2 Antigen Rapid Test Kit (“Covid-19 Test Kit”)
The Company entered into an exclusive agreement on June 14, 2021 to serve as the master sales and marketing agent for the Ainos SARS-CoV-2 Antigen Rapid Test Kit (“Covid-19 Test Kit”) developed by Taiwan Carbon Nano Corporation (“TCNT”).
On June 7th, the Taiwan Food and Drug Administration (“TFDA”) granted emergency use authorization to TCNT for the Ainos Covid-19 Test Kit that will be sold and marketed under the “Ainos” brand in the Republic of China (“Taiwan”). Once TCNT secures regulatory authorizations from foreign regulatory agencies, Ainos expects to partner with regional distributors to promote sales in other strategic markets. TCNT intends to submit an application for authorization or approval of the test kit product to the U.S. Food and Drug Administration in the future.
The Covid-19 Test Kit uses an antigen rapid test technology jointly developed by Taiwan’s National Health Research Institutes (“NHRI”), National Defense Medical Center (“NDMC”), and TCNT. The medical device includes a lateral flow immunoassay intended for the qualitative detection of SARS-CoV-2 directly from samples of both nasopharyngeal (“NPS”) and nasal swab (“NS”) specimens. Test results are available within 15 minutes and are reported to have high sensitivity and specificity.
Other Point-of-care Testing (“POCT”) Rapid Test Kit Products
In addition to the Ainos COVID-19 (SARS CoV2 Antigen Rapid Test), the Company plans to jointly develop, sell, and/or market other rapid test kit products with a focus on diagnostic medical devices to detect pneumonia, vaginal infection and helicobacter pylori (H. pylori) bacterial infection.
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We expect that the following five (5) Patent Assets assigned to the Company by Ainos KY at the consummation of the Ainos transaction will form the basis for the next generation of the Company’s rapid test kit products:
| · | A GAS SENSOR AND MANUFACTURE METHOD THEREOF as described and claimed in TAIWAN invention patent number I565944. |
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| · | MEDICAL VENTILATOR CAPABLE OF ANALYZING INFECTION AND BACTERIA OF PNEUMONIA VIA GAS IDENTIFICATION as described and claimed in TAIWAN invention patent number I565945. |
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| · | GAS DETECTOR as described and claimed in TAIWAN invention patent number D183554. |
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| · | MEDICAL VENTILATOR CAPABLE OF ANALYZING INFECTION AND BACTERIA OF PNEUMONIA VIA GAS IDENTIFICATION as described and claimed in Japan Patent No.: JP 6392811 B2. The Company is granted exclusive license rights in Japan from January 1, 2021 to December 31, 2028. |
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| · | GAS DETECTOR as described and claimed in CHINA invention patent number CN 304042244 S. The Company is granted exclusive license rights in China from January 1, 2021 to December 31, 2028. |
The Company’s development and commercialization of its rapid test kit products are subject to approval by the FDA and other regulatory agencies in the U.S., and other regulatory agencies for use and marketing in other countries.
| C. | Our Consumer Division is dedicated to sales and marketing of consumer health products and internet-based and smart phone-based health monitoring applications |
Liposomal Nutraceuticals
We continue our sales activities of liposomal nutraceuticals and food supplements that include Vitamin C, Glutathione, CoQ10, Curcumin/Resveratrol, DHA, and a Multi-Vitamin.
The Company has elected to discontinue its prior efforts in developing oral health supplements in order to allocate resources to more commercially profitable consumer health products and has not extended the following patent: “COMPOSITION AND METHOD FOR PROMOTING ORAL HEALTH” as described and claimed in U.S. Patent No. 6,656,920 B2 issued December 2003, Owned. Expiration: April 2021.
Ainos Smartphone Monitoring App
The Company has developed a consumer-friendly, smartphone-based tracking function that can be used in conjunction with the Ainos SARS-CoV-2 Antigen Rapid Test Kit. Our application enables test results from our rapid test kits to be accessible through a QR code. The QR Code scans the test kit and stores each test kit’s unique ID. We expect this easy to use feature will assist consumers with monitoring, tracking, and validation of their health status, while assisting government public health authorities with data collection and surveillance of outbreaks.
Ainos, Inc. Securities Purchase Agreement
On December 24, 2020, the Company entered into a Securities Purchase Agreement (“Ainos Agreement”) with Ainos, Inc., a Cayman Islands corporation (“Ainos KY”) and certain principal shareholders of the Company including (i) Stephen T. Chen, individually and as Trustee of the Stephen T. Chen and Virginia M. Chen Living Trust, dated April 12, 2018, (ii) Virginia M. Chen, individually and as Trustee of the Stephen T. Chen and Virginia M. Chen Living Trust, dated April 12, 2018, and (iii) Hung Lan Lee (collectively, “Principal Shareholders”).
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Pursuant to the Ainos Agreement, the Company acquired certain patent assets (the “Patent Assets”) by issuing 100,000,000 shares of common stock (the “Shares”) valued at $0.20 to Ainos KY. The Patent Assets encompass technologies relating to development and manufacturing of point-of-care testing rapid test kit products that include diagnostics for COVID-19 (SARS CoV2 Antigen Rapid Test), pneumonia, vaginal infection and helicobacter pylori (H. pylori) bacterial infection. As of the April 15, 2021 closing of the Ainos Agreement, Ainos KY owns approximately 70.30% of the issued and outstanding shares of common stock of the Company and its designated officer and directors manage the Company. The Ainos Agreement provides for certain registration rights to Ainos KY regarding the Shares.
The foregoing description of the Ainos Agreement is not complete and is qualified in its entirety by the text of the agreement, which is included as Exhibit 2.1 to the Form 8-K filed by the Company with the SEC on December 30, 2020, which is incorporated herein by reference.
On December 18, 2020, the Company Board, and on January 25, 2021, the holders owning a majority of the shares of common stock of the Company as of the record date of January 22, 2021 approved certain Company actions required under the Ainos Agreement. The Company filed a Form 14-C definitive information statement regarding the majority stockholder approval of the Company actions required for closing the Ainos transaction on March 19, 2021, which is incorporated herein by reference, and completed mailing of the information statements to its shareholders on March 26, 2021. The Ainos transaction closed on April 15, 2021.
Patents and Proprietary Rights
Since inception, the Company has worked to build an extensive patent portfolio for the medical diagnosis and treatment of persistent diseases. This portfolio consists of patents with claims that encompass method of use or treatment, and/or composition of matter and manufacturing. As listed in this Overview section, the Company presently owns eleven (11) issued patents with two patents pending and license rights in Japan and China for two (2) patents under patent licensing agreements. There are no current patent litigation proceedings involving the Company.
Cost of Compliance with Environmental Regulations
The Company incurred no costs to comply with environment regulations during the timeframe of this report.
United States Regulation
Before products with health claims can be marketed in the United States, they must receive approval from the U.S. Food and Drug Administration (“FDA”). To receive this approval, any drug must undergo rigorous preclinical testing and clinical trials that demonstrate the product candidate’s safety and effectiveness for each indicated use. This extensive regulatory process controls, among other things, the development, testing, manufacture, safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, sale, and distribution of pharmaceutical products.
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In general, before any ethical pharmaceutical product can be marketed in the United States, the FDA will require the following process:
• | Preclinical laboratory and animal tests; |
• | Submission of an investigational new drug application, or IND, which must become effective before human clinical trials may begin; |
• | Adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use; |
• | Pre-approval inspection of manufacturing facilities and selected clinical investigators; |
• | Submission of a New Drug Application (NDA) to the FDA; and |
• | FDA approval of an NDA, or of an NDA supplement (for subsequent indications or other modifications, including a change in location of the manufacturing facility). |
Substantial financial resources are necessary to fund the research, clinical trials, and related activities necessary to satisfy FDA requirements or similar requirements of state, local, and foreign regulatory agencies. At such time as the Company undertakes to commercialize any of its products, all necessary preclinical testing, clinical trials, data review, and approval steps will be judiciously executed to insure that the product satisfies all regulatory requirements at all levels.
505(b)(2)
The Company has historically followed and will continue to follow the traditional approval process for New Drugs as set out in Section 505(b)(1) of the Federal Food, Drug, and Cosmetic Act. If an alternative path to FDA approval for new or improved formulations of previously approved products is scientifically and economically feasible and beneficial to the Company and the public, the Company may choose to follow this alternative path as established by section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act. This section of the Act permits the applicant to rely on certain preclinical or clinical studies conducted for an approved product as some of the information required for approval and for which the applicant has not obtained a right of reference. The process of approval under 505(b)(2) will be followed as judiciously as 505(b)(1) or any regulation.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States. The Company may choose to seek approval for a product satisfying the definition of an Orphan Drug if that product can be used to treat such an indication. Orphan drug designation does not convey any advantage in or shorten the duration or rigidity of the regulatory review and approval process.
Similarly, substantial financial resources are necessary to fund the research, design, testing, fabrication and related activities necessary to satisfy FDA requirements or similar requirements of state, local, and foreign regulatory agencies for medical devices. The Company may seek to obtain FDA clearance for the sales, marketing, and use of its novel pulsatile insulin pump for the U.S. market after obtaining FDA approvals under one of the following regulatory approvals:
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Premarket Notification 510(k)
Each person who intends to market in the U.S., a Class I, II, and III device intended for human use, for which a Premarket Approval application (“PMA”) is not required, must submit a 510(k) to FDA unless the device is exempt from 510(k) requirements of the Federal Food, Drug, and Cosmetic Act (the “FD&C Act”) and does not exceed the limitations of exemptions in .9 of the device classification regulation chapters (e.g., 21 CFR 862.9, 21 CFR 864.9).
If the Company’s novel pulsatile insulin pump is determined to be similar to one already cleared for the U.S. market, the Company will seek FDA clearance under 510(k) at least 90 days before the device is marketed. A 510(k) application requires demonstration of substantial equivalence to another legally U.S. marketed device. Substantial equivalence means that the new device is as safe and effective as the predicate. Documented laboratory testing among other submissions will be required and if the Company’s device features significant alterations from predecessor devices the Company may be required to present results from clinical trials.
Premarket Approval (PMA)
Alternatively, if the Company’s device is deemed to be completely new to the U.S. market or classified as a Class III device, the Company will be required to apply for PMA approval. The Medical Device Amendments of 1976 to the FD&C Act established three regulatory classes for medical devices. The three classes are based on the degree of control necessary to assure that the various types of devices are safe and effective. The most regulated devices are in Class III. The amendments define a Class III device as one that supports or sustains human life or is of substantial importance in preventing impairment of human health or presents a potential, unreasonable risk of illness or injury.
Under Section 515 of the FD&C Act, all devices placed into Class III are subject to premarket approval requirements. Premarket approval by FDA is the required process of scientific review to ensure the safety and effectiveness of Class III devices.
Foreign Regulation
In addition to regulations in the United States, a variety of foreign regulations govern clinical trials and commercial sales and distribution of products in foreign countries. Whether or not the Company obtains FDA approval for a product, the Company must obtain approval of a product by the comparable regulatory authorities of foreign countries before the Company can commence clinical trials or market the product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
The policies of the FDA and foreign regulatory authorities may change and additional government regulations may be enacted which could prevent or delay regulatory approval of investigational drugs or approval of new diseases for existing products and could also increase the cost of regulatory compliance. It is not possible to predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the United States or abroad.
Research and Development
During the quarter ended June 30, 2021 and the first quarter of 2021, the Company did not incur research and development expenses.
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Employees and Consultants
Following the consummation of the Ainos transaction, the Company retained key personnel in its U.S. office to ensure continuity in its operations and as a foundation for future growth:
| · | Lawrence Lin through his firm, i2China Management Group, LLC, continues to serve as Executive Advisor to the Company. |
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| · | John Junyong Lee, Esq. continues to serve as Chief Legal Counsel and Corporate Secretary. |
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| · | Chrystal Shelton continues to serves as Administration Manager. |
The Company is actively interviewing executives to assist it achieve profitability through an expansion of its product and service lines and market reach. To facilitate this expansion the Company elected to not renew certain employment relationships to enable it to make strategic hiring decisions as follows:
| · | Stephen T. Chen’s employment with the Company as Chief Executive Officer (CEO), President and Chief Operating Officer (COO), and Chief Financial Officer (CFO) expired on April 15, 2021, and was not renewed. Dr. Chen resigned as Chairman of the Board, and Board director on April 15, 2021. |
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| · | Bernard Cohen’s employment with the Company as Vice President - Administration (VP-Admin) expired on April 5, 2021, and was not renewed. |
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| · | Maggie Wang’s employment with the Company as Director of Business Development and manager of the Company’s Taiwan Branch expired on April 30, 2021, and was not renewed. |
Results of Operations for Quarter Ended June 30, 2021 and 2020:
Revenues. The Company reported revenue for the quarter ended June 30, 2021, of $202,992 from sales of Ainos SARS-CoV-2 Antigen Rapid Test Kits in Taiwan that began during the month of June. Revenue for the same period in 2020 was $484 from sales of nutraceuticals. The cost of sales for the second quarter of 2021 was $69,508 as compared to $292 for cost of sales in the same period in 2020. Gross profit for the second quarter in 2021 was $133,484 as compared to $192 in that of 2020, an increase of $133,292.
Research and Development Expenses. There was no R&D activity in the second quarter of 2021 compared to $389 during the same period in 2020.
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $860,030 (186%) higher in 2021 than 2020 largely due to increased expenses associated with the Securities Purchase Agreement transaction and newly-initiated operational activities, including the sale of the new Ainos SARS-CoV-2 Antigen Rapid Test Kit in Taiwan.
Operating Loss. The Company’s operating loss was $726,546 which was $425,877 (142%) higher for 2021 than 2020 mostly due to the expense of the Securities Purchase Agreement transaction and newly-initiated operational activities as a result of the transaction.
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Interest Expense. During the three months ended June 30, 2021, interest expense, net was $20,981, compared to $1,297 for the three months ended June 30, 2020. The interest expense recognized in the three months ended June 30, 2021 is mostly due to accrued interest for convertible debt notes.
Net Loss. Net loss attributable to common shareholders was $749,774 which was $447,808 (148%) higher during 2021 than 2020. This increase was mainly due to expenses related to the Securities Purchase Agreement transaction and newly-initiated operational activities as a result of the transaction.
Results of Operations for the Six Months Ended June 30, 2021 and 2020:
Revenues. The total revenue recognized from the sale of nutraceuticals and Covid-19 Test Kits in Taiwan was $205,113 through June 30, 2021, as compared to $15,684 for the first six months of 2020, an increase of $189,429 or 1,208%.
Cost of Revenues. Cost of sales for the six months ended June 30, 2021 was $70,757 compared to $11,098 for the six months ended June 30, 2020. The increase in cost of sales for 2021 as compared to 2020 for the six month period was $59,659, or 538%. Gross profit for six months ended June 30, 2021 was $134,356 compared to $4,586 for the six months ended June 30, 2020, an increase of $129,770 or 2,830%.
Research and Development Expenses. There was no R&D activity for the six months ended June 30, 2021 compared to $389 during the same period in 2020.
Selling, General and Administrative Expenses. Selling, general and administrative expenses of $1,383,011 were incurred for the first six months of 2021, compared to $680,740 for the first six months of 2020, an increase of $702,271 (103%). The increase in 2021 was primarily due to increased expenses associated with the Securities Purchase Agreement transaction and newly-initiated operational activities, including the sale of the new Ainos SARS-CoV-2 Antigen Rapid Test Kit in Taiwan.
Operating Loss. In the six month period ended June 30, 2021, the Company’s operating loss was $1,248,655 compared to an operating loss for the six month period ended June 30, 2020 of $676,543, a $572,112 (85%) increase. The increased selling, general, and administrative expenses in 2021 was a major factor attributable to higher operating loss.
Interest Income and Expense. Interest expense, net was $32,879 for the six months ended June 30, 2021, compared to $2,302 for the six month period ended June 30, 2020, an increase of $30,577 (1,328%). The increase in interest expense for 2021 was precipitated by the deferral of salary for Dr. Stephen T. Chen and consulting fees for i2China, both of which were included in the outstanding balances for Convertible Notes Payable and Other Related Party Notes Payable. There was an increase in outstanding principal debt for the period December 31, 2020, through June 30, 2021, in the amount of $758,420 (80%) from $953,001 to $1,711,421, primarily due to newly issued promissory notes with related parties as described in Convertible Notes Payable and Other Related Party Notes Payable.
Net Loss. The Net Loss for the first half of 2021, increased to $1,283,781 from $678,845 in 2020, an increase of $604,936 (89%) for the period. The major constituents of the increase in net loss are the increases in operating expenses in the first six months of 2021.
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Liquidity and Capital Resources
As of June 30, 2021, the Company had available cash of $606,638 whereas it had a cash position of $172,802 for the same period in 2020 and $22,245 as of December 31, 2020. The Company had a working capital deficit of $1,506,762 at the end of June 2021, and a working capital deficit of $689,094 for the same period in 2020, an increase of 119%. As of December 31, 2020, working capital was a deficit of $1,022,155. The average monthly burn rate in 2021 was approximately $100,000 partially attributed to additional one-time expenses related to the Securities Purchase Agreement transaction and the ensuing business development activity. Going forward, we expect that the burn rate will continue to rise in correlation to increased operational activity.
The Company continues to develop and establish new revenue streams to become, and maintain, the position of a profitable going concern. Our major areas of focus are (1) to continue to leverage the Company’s core technology, the development and application of low-dose non-injectable interferon, (2) to commercialize its metabolic restoration therapy for the treatment of diabetes and other metabolic diseases, and (3) as a result of the Securities Purchase Agreement transaction, leverage newly-integrated staffing and capital resources to quickly develop, license and commercialize a scheduled pipeline of medical diagnostic products, beginning with the sales of Covid-19 Test Kits in Taiwan that recently commenced.
There can be no assurance that we will be successful in our efforts to make the Company profitable. If those efforts are not successful, we will evaluate our need to obtain working capital financial assistance from Ainos KY, of up to $3 million, in the form of a loan or additional shares in the Company.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company,” we are not required to provide the information under this Item 3.
ITEM 4. Controls and Procedures
Disclosure Controls and Procedures
At the end of the period covered by this report, 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 June 30, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
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Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control - Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective at the reasonable assurance level as of June 30, 2021.
Changes in Internal Control Over Financial Reporting
We have not experienced any material impact to our internal controls over financial reporting even though our workforce continues to primarily work-from-home due to COVID-19. We are continually monitoring and assessing the COVID-19 situation and its impact on our internal controls.
This interim report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit the company to provide only management’s report in this interim report.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. As of the date of this report, we were not aware of any such legal proceedings or claims against us.
ITEM 1A. Risk Factors.
Please carefully consider the following discussion of significant factors, events, and uncertainties that make an investment in our securities risky. The events and consequences discussed in these risk factors could, in circumstances we may or may not be able to accurately predict, recognize, or control, have a material adverse effect on our business, growth, reputation, prospects, financial condition, operating results (including components of our financial results), cash flows, liquidity, and stock price. These risk factors do not identify all risks that we face; our operations could also be affected by factors, events, or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations. In addition, the global economic climate amplifies many of these risks.
We Face Intense Competition
The pharmaceutical industry is an expanding and rapidly changing industry characterized by intense competition. The Company believes that our ability to compete will be dependent in large part upon our ability to successfully operate business lines, continue recapitalization, and steadily enhance and improve our core technology products. In order to do so, we must effectively utilize and expand our research and development capabilities and, once developed, quickly convert new technology into products and processes, which can then be commercialized. Competition is based primarily on scientific and technological superiority, technical support, availability of patent protection, access to adequate capital, the ability to develop, acquire and market products and processes successfully, the ability to obtain governmental approvals and the ability to serve the particular needs of commercial customers. Corporations and institutions with greater resources therefore, have a significant competitive advantage.
Our potential competitors include entities that develop and produce therapeutic agents and/or medical devices for treatment of human and animal disease. These include numerous public and private academic and research organizations and pharmaceutical and biotechnology companies pursuing production of, among other things, biologics from cell cultures, genetically engineered drugs and natural and chemically synthesized drugs. Many of these potential competitors have substantially greater capital resources, research and development capabilities, manufacturing and marketing resources. Competitors may succeed in developing products or processes that are more effective or less costly or that gain regulatory approval prior to our products. The Company expects that the number of competitors and potential competitors will increase as more anti-viral and cytotoxic products receive commercial marketing approvals from the FDA or analogous foreign regulatory agencies. Any of these competitors may be more successful in manufacturing, marketing and distributing its products.
Our Expansion Places a Significant Strain on our Management, Operational, Financial, and Other Resources
Increasing our product and service offerings will require scaling our management, financial and research and development resources. The complexity of the current focus of our business on innovative biotechnologies and treatments, digital health, and diagnostic point-of-care testing can place significant strain on our management, personnel, operations, systems, technical performance, financial resources, and internal financial control and reporting functions, and our expansion increases these factors. Failure to manage growth effectively could damage our reputation, limit our growth, and negatively affect our operating results.
Our Expansion into New Products, Services, Technologies, and Geographic Regions Subjects Us to Additional Risks
We may have limited or no experience in our newer market segments, and our customers may not adopt our product or service offerings. These offerings, which can present new and difficult technology challenges, may subject us to claims if customers of these offerings experience service disruptions or failures or other quality issues. In addition, profitability, if any, in our newer activities may not meet our expectations, and we may not be successful enough in these newer activities to recoup our investments in them. Failure to realize the benefits of amounts we invest in new technologies, products, or services could result in the value of those investments being written down or written off.
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Our International Operations Expose Us to a Number of Risks
We have relatively little operating experience and may not benefit from any first-to-market advantages or otherwise succeed. It is costly to establish, develop, and maintain international operations, sales and marketing channels, and research and development and licensing capacity. Our international operations may not become profitable on a sustained basis.
In addition to risks described elsewhere in this section, our international sales and operations are subject to a number of risks, including:
| · | local economic and political conditions; |
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| · | government regulation (such as regulation of our product and service offerings and of competition); restrictive governmental actions (such as trade protection measures, including export duties and quotas and custom duties and tariffs); nationalization; and restrictions on foreign ownership restrictions on sales or distribution of certain products or services and uncertainty regarding liability for products, services, and content, including uncertainty as a result of less Internet-friendly legal systems, local laws, lack of legal precedent, and varying rules, regulations, and practices regarding the physical and digital distribution of media products and enforcement of intellectual property rights; |
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| · | business licensing or certification requirements, such as for imports, exports, medical devices and medical treatments; |
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| · | limitations on the repatriation and investment of funds and foreign currency exchange restrictions; |
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| · | difficulty in staffing, developing, and managing foreign operations as a result of distance, language, and cultural differences; |
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| · | compliance with the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting corrupt payments to government officials and other third parties; |
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| · | laws and policies of the U.S. and other jurisdictions affecting trade, foreign investment, loans, and taxes; and |
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| · | geopolitical events, including war and terrorism. |
Our Commercial Agreements, Strategic Alliances, and Other Business Relationships Expose Us to Risks
Our business growth depends on commercial agreements, strategic alliances, and business relationships. Under these agreements, we provide access to our research library and clinical data as part of licensing and sales and marketing agreements. These arrangements are complex and require substantial infrastructure capacity, personnel, and other resource commitments, which may limit the amount of business we can service. We may not be able to implement, maintain, and develop the components of these commercial relationships, which may include research and development, clinical trials, diagnostic software and hardware design, and engaging third parties to perform services.
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Our licensing agreements may be dependent on the volume of another company’s sales. Therefore, when the other company’s offerings are not successful, the compensation we receive may be lower than expected or the agreement may be terminated. Moreover, we may not be able to enter into additional or alternative commercial relationships and strategic alliances on favorable terms. We also may be subject to claims from businesses to which we provide these services if we are unsuccessful in implementing, maintaining, or developing these services.
We Face Significant Supply Risk
We are vulnerable to significant supply risks. The Company’s long-time human interferon producer is no longer manufacturing interferon. Plans for further clinical trials and commercialization of a low-dose interferon product are dependent upon identifying a new source of interferon. The Company is actively seeking a new manufacturing partner and exploring sourcing options. Procuring a new source of interferon may require additional studies to compare results to the Company’s research and further clinical trials may have to be performed. The Company’s inability to secure interferon supplies may adversely affect our operating results.
The Company is the master sales and marketing agent for the Ainos Covid-19 Test Kit developed by Taiwan Carbon Nano Corporation (“TCNT”), a related party. The Company sources the Ainos Covid-19 Test Kit exclusively from TCNT. TCNT currently manufactures the Covid-19 Test Kit in Taiwan. Any unexpected supply disruption by TCNT may adversely affect our business results.
We plan to develop, sell, and/or market other rapid test kit products with a focus on point-of-care diagnostic medical devices. We may continue to rely on TCNT to manufacture these devices. Any unplanned supply risk at TCNT may negatively affect our future business plan.
Government Regulation Is Evolving and Unfavorable Changes Could Harm Our Business
We are subject to general business regulations and laws, as well as regulations and laws specifically governing biologics, pharmaceuticals, and medical devices and treatments. A large number of jurisdictions regulate our operations, and the extent, nature, and scope of such regulations is evolving and expanding as the scope of our businesses expand. We are regularly subject to formal and informal reviews and investigations by governments and regulatory authorities under existing laws, regulations, or interpretations or pursuing new and novel approaches to regulate our operations. Unfavorable regulations, laws, decisions, or interpretations by government or regulatory authorities applying those laws and regulations, or inquiries, investigations, or enforcement actions threatened or initiated by them, could cause us to incur substantial costs, expose us to unanticipated civil and criminal liability or penalties (including substantial monetary fines), diminish the demand for, or availability of, our products and services, increase our cost of doing business, require us to change our business practices in a manner materially adverse to our business, damage our reputation, impede our growth, or otherwise have a material effect on our operations.
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Claims, Litigation, Government Investigations, and Other Proceedings May Adversely Affect Our Business and Results of Operations
As a company focusing on diagnostics and treatments for a wide range of human health care needs, we may be subject to actual and threatened claims, litigation, reviews, investigations, and other proceedings, including proceedings by governments and regulatory authorities, involving a wide range of issues, including patent and other intellectual property matters, taxes, labor and employment, competition and antitrust, privacy and data protection, product liability, consumer protection, commercial disputes, goods and services offered by us and by third parties, and other matters. Any of these types of proceedings can have an adverse effect on us because of legal costs, disruption of our operations, diversion of management resources, negative publicity, and other factors. The outcomes of these matters are inherently unpredictable and subject to significant uncertainties.
Our results of operations may be negatively impacted by the COVID-19 outbreak
To date the outbreak has not had a material adverse impact on our operations. The future impact of the outbreak is highly uncertain and cannot be predicted, and there is no assurance that the outbreak will not have a material adverse impact on the future results of the Company.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
ITEM 3. Defaults Upon Senior Securities.
None
ITEM 4. Mine Safety Disclosures.
Not applicable
ITEM 5. Other Information.
Following the consummation of the Ainos Agreement and transaction, the following individuals were elected and/or appointed to their respective roles on the Board and to the Company:
| · | Chun-Hsien Tsai, age 52, serves as Chairman of the Board of Directors, Chief Executive Officer, Chief Financial Officer, and director of the Company. He concurrently serves as the Chairman of the Board of Directors Ainos, Inc., a Cayman Islands corporation, the Chairman of the board of directors of Taiwan Carbon Nano Technology Co., and as the Chief Executive Officer of AI Nose Corporation. Mr. Tsai has served in each of these roles since 2012. In his capacity as the Chief Executive Officer of Taiwan Carbon Nano Technology Co., Mr. Tsai oversaw the completion of the world’s first carbon nanotube reactor. Mr. Tsai also currently serves as a member of the Taiwan Energy Storage Alliance and a member of the China Alternative Energy Association. Mr. Tsai owns more than 150 patents. |
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| · | Chung-Yi Tsai, age 45, serves as a director of the Company. He has served as the Executive Business Manager in the Automotive Business Unit of Maxim Integrated since November 2019, where he manages the high voltage (off battery) power management ICs for automotive ADAs & safety, information, telematics & head unit applications. From October 2013 through November 2019, Mr. Tsai served as a Senior Product Marketing Manager in the Battery & Optical Business Unit of Intersil Corporation. In such role, Mr. Tsai managed computer core power, battery charger and USB/USB power delivery product lines focused on computing and consumer markets. |
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| · | Chun-Jung Tsai, age 50, serves as a director of the Company. He concurrently serves as the Executive Director of Ainos, Inc., a Cayman Islands corporation and as the Executive Director of Taiwan Carbon Nano Technology Co. Mr. Tsai has served in both of these roles since 2012. In his capacity as the Executive Director of Taiwan Carbon Nano Technology Co., Mr. Tsai oversaw the completion of the world’s first carbon nanotube reactor. |
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| · | Ting-Chuan Lee, age 38, serves as a director of the Company. She has served as a director on the board of directors of Taiwan Carbon Nano Technology Co. since 2012. From 2012 to 2017, Ms. Lee served as the Chairman of the board of directors of Taiwan Carbon Nano Technology Co. Ms. Lee holds a master’s degree of science from the Nation Taiwan University and a bachelor’s of science degree from the National Cheng Kung University. |
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| · | Wen-Han Chang, age 58, serves as a director of the Company. He also currently serves as the Medical Director of the Department of Emergency Medicine for Mackay Memorial Hospital in Taiwan, the President of the Taiwan Society of Health Technology and Intelligence Medicine, and the Executive Director of the Taiwan Society of Geriatric Emergency & Critical Care Medicine. In addition, Mr. Chang is an Honorary President of the Taiwan Society of Engineering Technology and Practical Medicine, a Director on the board of directors of the Taiwan Society of Emergency Medicine, a Director on the board of directors of the Taiwan Society of Emergency Management Medicine, and a Supervisor of the Emergency and Critical Care Medicine Society. From September 2015 to May 2019, Mr. Change served as a Vice President General at Mackay Memorial Hospital. |
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| · | Yao-Chung Chiang, age 68, serves as a director of the Company. He is also the current Chairman of the board of directors of the Taiwan High Speed Rail Corporation. Mr. Chiang has previously served as the Chairman of the board of directors for the China Steel Chemical Corporation, Kaohsiung Rapid Transit Corporation, China Steel Corporation and China Airlines. Mr. Chiang holds a Ph.D. in Mechanical Engineering from the University of Wisconsin-Madison and a master’s degree in Mechanical Engineering from the National Cheng Kung University. |
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| · | Hsiu-Chen Chiu, age 46, serves as a director of the Company and is currently an Attorney-at-Law at the Da Sheng International Law Firm, with certifications to practice law in both China and Taiwan, including Taiwan patent and trademark matters. Ms. Chiu received her Ph.D. from Tsinghua University in China and her LL.M. from the National Chengchi University in Taiwan. |
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| · | John Junyong Lee, Esq., age 55, serves as a non-director, Corporate Secretary of the company and is also serving as Chief Legal Counsel. Mr. Lee has diverse experience in federal compliance and corporate governance matters in addition to extensive work in investment and transactional structuring, licensing and technology transfers, joint ventures and foreign direct investments in the U.S. and internationally. Mr. Lee received his Bachelor of Arts degree in International Relations from Claremont McKenna College, Juris Doctorate degree from the Columbus School of Law, The Catholic University of America, and is licensed to practice law in the District of Columbia. |
In addition, pursuant to the closing conditions of the Ainos Agreement and transaction, the following events occurred:
| · | The Company filed a Restated Certificate of Formation with the Texas Secretary of State on April 15, 2021 that changed the name of the corporation from “Amarillo Biosciences, Inc.” to “Ainos, Inc.”, increased the authorized shares of common stock from One Hundred Million to Three Hundred Million, one-cent ($0.01) par value, changed the registered agent and registered office from Bernard Cohen to CT Corporation System, and amended the Certificate to show the names of the current Board of Directors. |
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| · | On April 30, 2021, the Company closed its office location at 4134 Business Park Dr., Amarillo, TX 79110 and subsequently established an office location at 8880 Rio San Diego Drive, Suite 800, San Diego, CA 92108. The Company main office telephone number also changed from (806) 376-1741 to (858) 869-2986. |
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| · | The Company filed a Statement and Designation by Foreign Stock Corporation with the California Secretary of State on May 12, 2021 registering the Company as “Ainos, Inc., which will do business in California as Ainos USA.” |
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| · | FINRA approved the Company’s registration of its new corporate name as “Ainos, Inc”, CUSIP Number 00902F105, and new symbol “AIMD”. These changes were announced by FINRA on May 21, 2021 and were made effective May 24, 2021. |
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ITEM 6. Exhibits.
EXHIBIT INDEX
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| INCORPORATED BY REFERENCE | ||||||||
EXHIBIT NUMBER |
| DESCRIPTION |
| FILED WITH THIS FORM 10-Q |
| FILING DATE WITH SEC |
| FORM |
| EXH # |
| HYPERLINK TO FILINGS |
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| Restated Certificate of Formation of the Company, dated April 15, 2021 and filed April 21, 2021 |
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| 4/21/2021 |
| 8-K |
| 3.1 |
| https://www.sec.gov/Archives/edgar/data/0001014763/000165495421004461/amar_ex31.htm | |
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| 3/30/2016 |
| 10-K |
| 3.ii. |
| Bylaws of the Company, as amended July 10, 2015. | ||
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| 8/8/1996 |
| SB-2 |
| 4.1 |
| Specimen Common Stock Certificate. | ||
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| 8/8/1996 |
| SB-2 |
| 4.2 |
| Form of Underwriter’s Warrant. | ||
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| 5/22/2008 |
| S-8 |
| 10.1(11) |
| 2008 Stock Incentive Plan dated May 20, 2008. | ||
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| 4/16/2019 |
| 10-K |
| 10.72 |
| 2018 Employee Stock Option Plan | ||
| 2018 Officer, Directors, Employees and Consultants Nonqualified Stock Option Plan |
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| 4/16/2019 |
| 10-K |
| 10.73 |
| 2018 Officer, Directors, Employees and Consultants Nonqualified Stock Option Plan | |
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| 4/16/2019 |
| 10-K |
| 10.74 |
| Stock Option Agreement – Nonqualified Stock Option | ||
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| 4/16/2019 |
| 10-K |
| 10.75 |
| Stock Option Agreement – Employee Plan | ||
| Securities Purchase Agreement between Company and Ainos, Inc., dated December 24, 2020 |
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| 12/30/2020 |
| 8-K |
| 2.1 |
| https://www.sec.gov/Archives/edgar/data/1014763/000165495420014016/amar_ex2-1.htm | |
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| 3/30/2021 |
| 10-K |
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| https://www.sec.gov/Archives/edgar/data/1014763/000165495421003517/amar_10k.htm | ||
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99.1 |
| 906 Certification |
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| Form 8-K reporting on the closing of the Ainos Agreement and transaction |
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| 4/21/2021 |
| 8-K |
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| https://www.sec.gov/Archives/edgar/data/1014763/000165495421004461/0001654954-21-004461-index.htm | |
| Form 8-K reporting on the resignation of the Company’s Chief Operating Officer |
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| 5/3/2021 |
| 8-K |
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| https://www.sec.gov/Archives/edgar/data/1014763/000165495421005015/0001654954-21-005015-index.htm | |
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| 8/16/2021 |
| 8-K |
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| Form 8-K reporting CFO, et al | ||
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. |
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101.SCH |
| XBRL Taxonomy Extension Schema Document |
| X |
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101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase |
| X |
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101.DEF |
| XBRL Taxonomy Extension Definition Linkbase |
| X |
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101.LAB |
| XBRL Taxonomy Extension Label Linkbase |
| X |
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101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase |
| X |
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104.1 |
| Cover Page Interactive Data File |
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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.
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AINOS, INC. |
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Date: August 20, 2021 | By: | /s/ Chun-Hsien Tsai |
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| Chun-Hsien Tsai, Chairman of the Board, and Chief Executive Officer |
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Date: August 20, 2021 | By: | /s/ Hui-Lan Wu |
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| Hui-Lan Wu, Chief Financial Officer |
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EXHIBIT 31.1
FORM OF CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
CERTIFICATION
I, Chun-Hsien Tsai and Hui-Lan Wu, certify that:
| 1. | I have reviewed this report on Form 10-Q of Ainos, Inc.; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 20, 2021 |
| /s/ Chun-Hsien Tsai |
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| Chun-Hsien Tsai, Chairman of the Board, and Chief Executive Officer |
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| Date: August 20, 2021 |
| /s/ Hui-Lan Wu |
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| Hui-Lan Wu, Chief Financial Officer |
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Ainos, Inc. on Form 10-Q for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
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| AINOS, INC. |
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| Date: August 20, 2021 | By: | /s/ Chun-Hsien Tsai |
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| Chun-Hsien Tsai, Chairman of the Board, |
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| and Chief Executive Officer |
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| Date: August 20, 2021 | By: | /s/ Hui-Lan Wu |
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| Hui-Lan Wu, Chief Financial Officer |
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