Ainos, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Financial statements are unaudited. Ainos develops point-of-care testing and other medical technologies; substantially all reported operating revenue came from COVID-19 antigen test kits sold in Taiwan.
Financial results
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $1.758 million | $363,052 | $2.482 million | $568,164 |
| Gross profit / margin | $581,742 / 33.1% | $259,414 / 71.5% | $945,528 / 38.1% | $393,769 / 69.3% |
| Operating expenses | $8.404 million | $1.443 million | $12.795 million | $2.826 million |
| Operating loss | $7.822 million | $1.183 million | $11.850 million | $2.432 million |
| Net loss | $7.822 million | $1.160 million | $11.876 million | $2.444 million |
| Basic and diluted loss per share | $0.51 | $0.12 | $1.03 | $0.48 |
- Q3 revenue rose 384% year over year; nine-month revenue rose 337%, driven by higher COVID-19 antigen self-test kit sales.
- Gross margin fell as the sales mix shifted toward self-test kits, which had lower margins than professional-use rapid tests.
- R&D expense was $1.835 million in Q3 and $5.047 million for nine months. SG&A was $6.569 million and $7.748 million, respectively. Q3 SG&A included $6.076 million of share-based compensation.
- For the first nine months, operating cash used was $2.406 million, investing cash used was $665,079, and financing cash provided was $3.836 million. Cash increased from $1.751 million at year-end 2021 to $2.417 million.
Balance sheet, financing, and material changes
- At September 30, 2022, total assets were $39.082 million, total liabilities $2.656 million, and stockholders’ equity $36.426 million. Current assets were $3.668 million and current liabilities $2.643 million.
- Current convertible notes were $376,526 and other notes payable were $884,000. The company reported total liabilities of $30.625 million at December 31, 2021; the decrease largely reflects conversion of approximately $30.4 million of convertible notes and accrued interest into common stock at the August 2022 Nasdaq listing.
- The August underwritten offering sold 780,000 units at $4.25 each and generated approximately $1.8 million in net proceeds. Each unit included one common share and one warrant. The company also completed a 1-for-15 reverse stock split before the offering.
- Common shares issued and outstanding were 19,478,270 at September 30, compared with 9,625,133 at December 31, 2021; 20,011,602 were outstanding as of November 11, 2022.
Outlook, risks, and notable matters
- Management said cash, business revenue, potential stock sales, and debt financing were expected to fund operations for the next 12 months, but stated that additional capital is needed and cannot be assured. The filing warns that unavailable or unacceptable financing could force the company to revise plans or cease operations; it also notes uncertainty about continuing as a going concern.
- The company expects continued significant development and clinical-trial spending and has no assurance it can achieve or maintain profitability. No numerical earnings or revenue guidance is provided.
- Near-term priorities include commercializing point-of-care candidates and developing VELDONA. Ainos discontinued investment in commercializing its COVID-19 nucleic acid test program, while retaining the technology for possible other indications. COVID-19 test demand, regulatory authorization, product performance, market acceptance, and access to capital are key stated risks.
- Revenue and product supply involve related parties: the company reported $1.988 million of nine-month test-kit sales to an affiliate, and purchases/manufacturing costs from its product co-developer. The $26 million intellectual-property and equipment acquisition from majority shareholder Ainos KY was financed with a convertible note that was converted into stock.
- Management concluded disclosure controls were effective at September 30, 2022. Previously identified internal-control deficiencies were under remediation. The filing reported no material legal proceedings and no material changes to previously disclosed risk factors.
Investor verification points
- Confirm the sustainability and customer concentration of COVID-19 test-kit revenue, and whether lower-margin self-test sales continue to dominate mix.
- Assess cash runway against operating cash use, planned R&D and clinical spending, and the company’s reliance on future financing.
- Review the effects of note conversions, offering warrants, equity awards, and subsequent share issuance on dilution.
- Verify regulatory and clinical progress, commercialization timing, and funding needs for Ainos Flora, VELDONA, and other pipeline programs.
- Examine related-party transactions and the status of internal-control remediation.