Ainos, Inc. — FY 2022 Form 10-K
Reporting period: Year ended December 31, 2022; comparisons are with FY 2021. This is an annual report, not a standalone Q4 report. Ainos develops point-of-care tests and medical treatments, including COVID-19 antigen tests, VOC testing devices and low-dose oral interferon candidates.
Financial performance and position
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Revenue | $3.52 million | $0.59 million |
| Gross profit / margin | $1.41 million / 40% | $0.41 million / 69% |
| Operating expenses | $15.38 million | $4.28 million |
| Operating loss | $(13.98) million | $(3.87) million |
| Net loss | $(14.01) million | $(3.89) million |
| Operating cash used | $(3.02) million | $(1.25) million |
| Cash and cash equivalents at year-end | $1.85 million | $1.75 million |
| Total liabilities at year-end | $2.48 million | $30.63 million |
| Total assets at year-end | $37.11 million | $40.82 million |
Revenue was primarily from COVID-19 antigen test-kit sales in Taiwan. Gross margin declined as the product mix shifted toward self-test kits. R&D expense increased 256% to $6.85 million, and selling, general and administrative expense increased 262% to $8.54 million; the latter included approximately $6.39 million of share-based compensation. The company reported $32.81 million of net intangible assets, principally patents and technology.
Financing activities provided $3.83 million, including approximately $1.78 million of net proceeds from the Nasdaq offering. Operating and investing activities used $3.02 million and $0.63 million, respectively. Liabilities fell substantially after convertible notes were converted into common stock in connection with the offering. At year-end, notes payable totaled $1.26 million; total liabilities also included accrued obligations and lease liabilities. The filing reports no off-balance-sheet arrangements.
Material changes and developments
- Revenue grew 492%, but operating loss widened by $10.11 million as operating expenses rose substantially.
- On August 9, 2022, the company’s common stock and warrants began trading on Nasdaq. The offering issued 780,000 units at $4.25 per unit, each consisting of one share and one warrant; a 1-for-15 reverse split preceded the offering.
- Approximately $30.44 million of convertible notes and accrued interest converted into shares at the offering. Year-end shares outstanding were 20,011,602.
- The company acquired additional intellectual property and equipment from majority shareholder Ainos KY for $26 million, funded with a non-interest-bearing convertible note that later converted to equity.
Outlook, risks and unusual items
- Management planned to prioritize commercialization of Ainos Flora, which was in clinical study in Taiwan, and pursue out-licensing of VELDONA candidates. The company also reported submitting an IND to the FDA for a planned Phase 2 VELDONA study for mild COVID-19 symptoms. These are development plans, not evidence of regulatory approval.
- The company discontinued investment in commercialization of its COVID-19 nucleic acid test program and said it would evaluate the technology for other indications. COVID-19 antigen tests were marketed in Taiwan under emergency use authorizations issued to the manufacturer, TCNT.
- The independent auditor and the company disclosed substantial doubt about Ainos’s ability to continue as a going concern, citing recurring losses, operating cash outflows and dependence on additional financing. Management said available cash, revenue and external funding were expected to support operations over the next 12 months, but warned that financing might not be available on acceptable terms.
- Revenue concentration is material: management said near-term revenue would depend largely on COVID-19 test sales, which are exposed to changing infection levels and a small customer base. The filing states that sales to affiliate ASE Technology Holding were $2.86 million in 2022.
- Ainos relies substantially on affiliated TCNT for product co-development and manufacturing. Regulatory approvals, clinical outcomes, commercialization, funding needs and protection of intellectual property remain significant uncertainties.
- Nasdaq notified the company on January 5, 2023 that its share price had been below the $1.00 minimum bid requirement for 30 consecutive business days. It had until July 5, 2023 to regain compliance, with a possible additional compliance period subject to conditions.
- After year-end, Ainos issued $3 million of unsecured convertible notes in March 2023, bearing 6% annual interest and convertible at $1.50 per share, subject to adjustment.
- Management assessed internal control over financial reporting as effective at December 31, 2022, stating that remediation addressed deficiencies identified in 2021. The auditor did not audit or express an opinion on those controls.
Key facts investors should verify
- Cash runway, operating cash burn and the amount and terms of any further financing; assess the going-concern disclosure alongside the March 2023 note issuance.
- How much revenue depends on COVID-19 antigen tests and affiliated customers, and whether customer concentration or demand has changed since year-end.
- Current status of Ainos Flora clinical work, VELDONA development and regulatory submissions, and any out-licensing agreements.
- Current Nasdaq listing compliance and any potential dilution from convertible notes, warrants, RSUs or future equity financing.
- Terms, valuation and governance of related-party transactions, including the $26 million asset purchase from Ainos KY and reliance on TCNT.