Ainos, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited results; comparisons are to the corresponding 2022 periods.
Business context
Ainos develops point-of-care tests (including VOC tests using its AI Nose platform), VELDONA therapeutics, and VELDONA Pet supplements. Reported revenue in both periods came solely from COVID-19 antigen test kits sold in Taiwan. The company says it is shifting focus toward VELDONA Pet sales, the Ainos Flora clinical program, and development or out-licensing of human therapeutics. It began shipping VELDONA Pet products during Q3 2023.
Financial results and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $24,489 | $1,757,774 | $102,208 | $2,481,602 |
| Gross profit (loss) | ($63,384) | $581,742 | ($142,330) | $945,528 |
| Operating expenses | $2,612,282 | $8,404,013 | $7,362,966 | $12,795,156 |
| Operating loss | ($2,675,666) | ($7,822,271) | ($7,505,296) | ($11,849,628) |
| Net loss | ($2,975,846) | ($7,821,756) | ($7,846,048) | ($11,875,682) |
| Net loss per share, basic and diluted | ($0.15) | ($0.51) | ($0.39) | ($1.03) |
- Revenue fell 99% in Q3 and 96% for the first nine months, which management attributed to lower COVID-19 infection levels in Taiwan, reducing sales volume and selling prices. Gross margin turned negative, reflecting weaker sales and inventory losses.
- Operating expenses declined, chiefly because 2022 included substantial share-based compensation for officer RSUs. Net loss narrowed 62% in Q3 and 34% year to date; this improvement does not indicate a return to profitability.
- Cash and cash equivalents were $2.37 million at September 30, versus $1.85 million at December 31, 2022. Current assets were $3.04 million and current liabilities $0.82 million. Stockholders’ equity was $27.68 million.
- Operating cash use was $3.32 million for the first nine months, versus $2.42 million in 2022; investing cash use was $0.12 million. Financing provided $4.02 million, including $3 million from March 2025 convertible notes and $2 million cash proceeds from the Lind financing, partly offset by repayments and financing costs.
- Notes payable totaled $5.31 million at September 30, including $2 million of Lind senior secured convertible notes at reported fair value. The Lind note is secured by substantially all company assets, subject to exceptions. The filing also describes potential additional financing under the Lind agreement, subject to conditions.
Outlook, risks and notable items
- Management expects higher clinical-trial spending as it advances Ainos Flora and VELDONA candidates, and plans continued sales and marketing investment for VELDONA Pet. No quantified revenue or earnings guidance is provided.
- The company expects to fund operations through existing cash, business revenue, and potential financing, but says funding availability is uncertain. It expects further losses and negative operating cash flows for at least the next 12 months; the filing states that substantial doubt exists about its ability to continue as a going concern for at least one year from issuance of the financial statements.
- The Lind note carries no stated interest, matures March 28, 2025, and may become convertible at the lower of $1.50 per share or 90% of a stock-price measure defined in the agreement, subject to terms and adjustments. Default or change-of-control provisions may require repayment at premiums. The filing reports $2 million of Lind debt at fair value and a $260,967 issuance cost expensed in Q3.
- Inventory write-downs were $120,931 for the first nine months; $255,000 of inventory was reclassified as R&D material. No impairment of definite-lived intangible or long-lived assets was recorded.
- After quarter-end, shareholders approved proposals including a 3 million-share special stock bonus, an increase in authorized preferred shares, a reverse stock split of up to 5-for-1, and a private placement of convertible securities to Lind. Some charter changes require filing an amendment to become effective.
- Management concluded disclosure controls were effective at September 30, 2023. The company reported no material legal proceedings as of the report date and no material changes to previously disclosed risk factors other than the new risk concerning collateral pledged to Lind.
Important facts for investors to verify
- Whether VELDONA Pet sales grow beyond the initial launch and produce meaningful revenue, given that reported period revenue remained tied to COVID-19 kits.
- Cash runway, operating burn, and the timing and availability of additional funding; reconcile financing commitments with amounts actually received and conditions for future Lind tranches.
- The conversion, repayment, default, collateral, and dilution terms of the Lind and March 2025 notes, including the effect of the warrants and other potentially dilutive securities.
- Progress, trial enrollment, regulatory milestones, and funding needs for Ainos Flora and VELDONA programs; the filing provides no quantified commercialization timeline.
- Implementation and dilution impact of the shareholder-approved stock bonus, preferred-share authorization increase, and proposed reverse split.