U.S.
Securities and Exchange Commission
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
Commission File Number 001-41461
AINOS,
INC.
(Exact
name of registrant as specified in its charter)
(Address of principal executive offices) Zip Code
Issuer’s telephone number, including area code: (858) 869-2986
Securities
registered under Section 12(b) of the Exchange Act.
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock AIMD The Nasdaq Stock Market LLC (Nasdaq Capital Market)
Securities
registered under Section 12(g) of the Exchange Act. None
Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒
No
Indicate
by check mark whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. ☐ Yes ☒
No
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934
during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☒ Yes ☐ No
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As
of March 7, 2025, there were issued and outstanding 15,433,257 shares of the registrant’s common stock, par value $0.01, which
is the only class of common or voting stock of the registrant. As of June 30, 2024, the aggregate market value of the shares of common
stock outstanding, other than shares held by persons who may be deemed affiliates of the Registrant, computed by reference to the closing
price of $ 0.8136 for the Registrant’s common stock on June 30, 2024, as reported on Nasdaq Capital Market, was approximately $3,350,118.
Shares of common stock held by officers, directors and each shareholder owning 10% or more of the outstanding common stock have been
excluded in that such persons may be deemed to be affiliates.
TABLE
OF CONTENTS
PART I 3
ITEM 1. BUSINESS 3
ITEM 1A. RISK FACTORS 16
ITEM 1B. UNRESOLVED STAFF COMMENTS 39
ITEM 1C. CYBERSECURITY 39
ITEM 2. DESCRIPTION OF PROPERTY 39
ITEM 3. LEGAL PROCEEDINGS 39
ITEM 4. MINE SAFETY DISCLOSURES 39
ITEM 6. [RESERVED] 41
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 47
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 48
ITEM 9A. CONTROLS AND PROCEDURES 48
ITEM 9B. OTHER INFORMATION 48
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 48
PART III 49
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE 49
ITEM 11. EXECUTIVE COMPENSATION 51
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 58
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 59
PART
I
FORWARD-LOOKING
STATEMENTS
This
Annual Report on Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act) and, as such, may
involve unknown risks, uncertainties and assumptions.
Forward-looking
statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally
identify forward-looking statements as those statements containing the words “anticipate,” “believe,” “plan,”
“estimate,” “expect,” “intend,” “may,” “will,” “would,” “could,”
“should,” “might,” “potential,” “continue” or other similar expressions.
There
are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by forward-looking
statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should
not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions
and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements
included in this Annual Report on Form 10-K, particularly in the section entitled “Risk Factors” in Part I, Item 1A that
could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements
do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.
You
should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this Annual Report on Form 10-K completely
and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements
contained in this Annual Report on Form 10-K are made as of the date of this Annual Report on Form 10-K, and we do not assume any obligation
to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable
law.
As
used in this Annual Report on Form 10-K, “Ainos” “the Company,” “we,” “us,” and “our”
refer to Ainos, Inc. and our consolidated subsidiaries, except where the context otherwise requires.
ITEM
1. BUSINESS.
Overview
Ainos,
Inc. (the “Company”), incorporated in the State of Texas in 1984, is a diversified healthcare company focused on the development
of novel point-of-care testing (the “POCT”), therapeutics based on very low-dose interferon alpha (the “VELDONA”),
and synthetic RNA-driven preventative medicine. Our product pipeline includes commercial-stage VELDONA Pet supplements, clinical-stage
VELDONA human therapeutics and telehealth-friendly POCTs powered by the AI Nose technology platform. Our vision for AI Nose is to digitize
smell, extend application beyond healthcare, and ultimately become AI’s nose.
We
have historically involved in the research and development of therapeutics based on VELDONA. Building on our research and development
on VELDONA since inception, we are focused on commercializing a suite of VELDONA-based product candidates. Our priority pipeline includes
drug candidates for treating oral warts for human immunodeficiency virus (HIV) seropositive patients, Sjögren’s syndrome,
and feline chronic gingivostomatitis (FCGS), a cat oral infection.
In
2021 and 2022, we acquired certain types of intellectual property from a controlling shareholder, Ainos Inc., a Cayman Island corporation
(“Ainos KY”), to expand product portfolio into POCTs aimed to provide connected, rapid, and convenient testing for a broad
range of health conditions. Pivoting from the sales of COVID-19 POCT, we aim to commercialize POCTs that detect volatile organic compounds
(the “VOC”) emitted by the body, powered by our AI Nose technology platform. In 2024, we licensed certain patents and patent
applications from Taiwan Carbon Nano Technology Corporation (“TCNT”), a controlling shareholder, to further expand our intellectual
properties on our VOC and POCT technologies.
We
believe the following attributes differentiate us from other diversified life science companies:
- intuitive, telehealth-friendly point-of-care testing
- AI-powered VOC testing platform
- decades of proprietary low-dose oral interferon clinical research
- capital-efficient business model
- outsourced manufacturing
- global distribution relationships
Our
Technologies
VELDONA
Interferons
are proteins made by host cells in response to the presence of pathogens. Interferons allow for communication between cells to trigger
the protective defenses of the immune system. VELDONA formulation, delivered into the oral cavity as a lozenge in low doses, is designed
to enhance autoimmunity to resist virus damages, potentially reducing side effects and risks caused by high-dose interferon and other
small molecule drugs.
We
believe VELDONA has shown to be safe and effective in the clinical studies for treatment of intended human and animal diseases. Since
our inception to date, 68 human clinical trials have been conducted with low-dose oral IFNα. 63 studies were Phase 2 trials, and
3 Phase 1 and 2 Phase 3 studies have also been conducted.
In
28 studies performed by Ainos, VELDONA was found to exhibit systemic effects in mice, cats, dogs, ferrets, chickens, rats, guinea pigs,
horses, calves/cows, and particularly pigs. VELDONA aided in boosting feed conversion efficiency and fighting deadly viral infections
in these species, including canine parvovirus, equine herpesvirus, feline coronavirus, and others. We believe the studies demonstrate
VELDONA’s therapeutic or preventive effect via the oral mucosa and shows VELDONA modulates systemic and mucosal immunity without
serious side effects.
We
are developing VELDONA for a broad range of human and animal health conditions. Our planned drug pipeline includes: oral warts for HIV-seropositive
patients, Sjogren’s Syndrome, mid COVID-19 syndromes, common cold, influenza, aphthous stomatitis, chemotherapy-induced stomatitis
and FCGS. Our priorities are HIV-seropositive patients, Sjogren’s Syndrome and FCGS. The United States Food and Drug Administration
(the “U.S. FDA”) have granted Orphan Drug Designation (“ODD”) for our VELDONA formulation as a potential treatment
for oral warts in HIV-seropositive patients. We marketed a series of health supplements for dogs and cats under the brand name “VELDONA
Pet” in Taiwan in 2024.
Point-of-Care
Tests (POCTs)
Our
POCT technologies aim to provide a simple, effective and telehealth-friendly tests that can deliver results within minutes. Our POCT
detection technologies consists of VOC sensing, lateral flow immunochromatographic assay and nucleic acid. Currently we prioritize developing
products based on VOC sensing. We intend to evaluate our lateral flow and nucleic acid test technologies for potential applications for
other disease indication.
VOC
Sensing Powered by AI Nose
We
believe the analysis of VOC is a powerful, non-invasive option for disease detection and health monitoring. Our VOC sensing technology
aims to detect the target VOCs within few minutes. AI Nose, the key enabler of our VOC sensing, consists of three key technologies: 1)
a “digital nose” detects the target VOCs; 2) a trained artificial intelligence (“AI”) algorithm analyzes the
target VOCs; 3) a “Smell ID” stores the VOC’s digital profile in the cloud.
We
believe VOC sensing powered by AI Nose is scalable into a broad range of industries for two reasons. First, digital nose sensors can
be made small and at low cost through semiconductor manufacturing technology. Second, as we train our AI with more Smell IDs, our VOC
sensing can continue to improve. While health testing is our near-term focus, we believe we can broaden VOC sensing powered by AI Nose
to other applications including telehealth, automotive, industrial, and environmental safety. To address these additional opportunities,
we are codeveloping a VOC POCT solution for the elderly care market. We are also codeveloping a VOC sensing solution to address the industrial
market, as our first move to expand the application of AI Nose beyond healthcare. Our vision is to leverage digital nose sensors and
our proprietary VOC sensing AI algorithm, to digitize smell and ultimately become AI’s nose.
Our
Pipeline
An
integral part of our operating strategy is to create multiple revenue streams through sales of commercially ready products, out-licensing
or forming strategic relationships to develop and commercialize our products. As of December 31, 2024, we have commercialized the following
products:
From
time to time, we assess our development plan based on available resources and market dynamics. Our pipeline of the products, which are
under development, includes the following:
Our
Business Model
We
believe our business model is capital efficient based on the following:
Operation
in Taiwan. We have constructed our operation to be capital efficient by choosing Taiwan as our R&D and operating center.
We believe Taiwan has been a key center of the global technology supply chain and it is also home to high-caliber engineers, scientists
and healthcare professionals. We believe maintaining operations in Taiwan, at least in the near-term, allows us to access high-caliber
talent while staying cost effective, enabling us to develop high quality, affordable, consumer-friendly products.
Outsourced
Manufacturing. We believe our outsourced manufacturing strategy potentially saves us the time and resources required to establish
our own infrastructure. We outsource manufacturing of our POCT product candidates to TCNT. We outsource manufacturing of VELDONA drugs
for human-use to Swiss Pharmaceutical Co., Ltd., a Taiwan-based company. We outsource manufacturing of VELDONA Pet supplements to a Taiwan-based
third party and to TCNT.
Distribution
Relationships. We work with distributors to sell products. We appointed Inabata & Co. Ltd. (“Inabata”), a Japanese
corporation, as our non-exclusive worldwide distributor and preferred distributor for customers based in Japan. Inabata’s Taiwan
subsidiary (Taiwan Inabata Sangyo Co.) coordinates business logistics and working capital for our designated programs. Topmed International
Biotech Co., Ltd. (“Topmed”), a Taiwanese biotech company, is a distributor of our VELDDONA Pet supplements in Taiwan.
Intellectual
Property
We
own a portfolio of patents covering various aspects of our core technologies. As of December 31, 2024, we had sixty-five (65) issued
patents and nineteen (19) pending patent applications. Fifty-seven (57) of the issued patents relate to acquired VOC and POCT technologies,
five (5) relate to interferon technologies and three (3) relate to our smart drug injection technology. Fifty-six (56) of the issued
patents are foreign patents and nine (9) are U.S. patents. Eleven (11) issued patents are licensed patents. Of the issued patents, forty-three
(43) are invention patents, fourteen (14) are utility model patents and eight (8) are design patents. Of our issued patents, five (5)
shall expire between 2026 and 2029; twenty-two (22) between 2030 and 2034, thirty-eight (38) between 2035 and 2046.
We
also have exclusive use of twenty three (23) patents and patent applications related to VOC, POCT and nitrogen-oxygen separation technologies
for twelve months from October 16, 2024, pursuant to Product Development Agreement, effective August 1, 2021, as amended on January 9,
2024, July 8, 2024, and October 16, 2024, with TCNT. Please refer to “Part III, Item 13”.
We
own a registered trademark for VELDONA in Taiwan, Europe, Japan and China, as well as certain trademarks for our VELDONA Pet supplement
in Taiwan. We have trademark applications for certain countries outside of Taiwan.
Employees
As
of December 31, 2024, we had 44 full-time employees, of which 23 are in research and development. Majority of our employees are in Taiwan.
None of our employees are represented by a labor union or are a party to a collective bargaining agreement. We plan to continue expand
our manpower in research development, sales and marketing, and general operations to support our business programs. Please refer to Part
3 Item 10 and 11 for executive profile and compensation.
Additional
Information
Under
our former name, Amarillo Biosciences, Inc., we completed an initial public offering on the Nasdaq SmallCap Market in August 1996 and
have traded on the U.S. over-the-counter market since October 1999. On October 31, 2013, we filed a voluntary petition for reorganization
under Chapter 11 of the United States bankruptcy code. We emerged from bankruptcy on January 23, 2015. We established a Taiwan branch
office in 2017. We renamed as Ainos, Inc in April 2021.
On
August 9, 2022, our common stock and warrants began trading on the Nasdaq Capital Market under the trading symbols “AIMD”
and “AIMDW,” respectively. We effectuated a 1-for-15 reverse stock split of our common stock on August 8, 2022, and a 1-for-5
reverse stock split on December 14, 2023.
Our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available
free of charge on the Company’s website at www.ainos.com as soon as reasonably practicable after such material is electronically
filed with, or furnished to, the Securities and Exchange Commission.
Government
Regulation
Regulation
of Medical Devices in Taiwan
Our
product candidates and operations are subject to the Taiwan Medical Devices Act and its implementation regulations (collectively the
“Taiwan MDA”), which govern the development, design, pre-clinical and clinical research, manufacturing, safety, efficacy,
labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, import, export, adverse event
reporting, advertising, promotion, marketing and distribution of medical devices. Under the Taiwan MDA, medical devices, depending on
the degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to provide reasonable
assurance of its safety and effectiveness, will be subject to differentiated level of review and examination of TFDA before marketing
the device. Unless an exemption applies, each medical device requires either (a) an approval granted by TFDA or (b) a registration with
TFDA before launching distribution or marketing in Taiwan. The latter is a simplified premarket review process applicable to some medical
devices classified as “lower risk level” items listed in the TFDA announcement. Our product candidates are not on the list
of “lower risk level” and the approval of TFDA will be required for us to launch distribution or marketing of such products
in Taiwan.
Additionally,
the TFDA may grant emergency use authorizations (“EUA”) to allow commercial distribution of medical devices intended to address
the public health emergency during public emergencies. The TFDA needs to assess the potential effectiveness of such medical device on
a case-by-case basis using a risk-benefit analysis and will require the submission of pre-clinical studies and clinical trials. The TFDA
also may revise or revoke an issued EUA if the circumstances justifying such granting no longer exist, the criteria for its granting
of EUA are no longer met, or other circumstances make a revision or revocation appropriate to protect the public health or safety. The
EUA granted by TFDA to TCNT for COVID-19 antigen test kits ended in March 2023.
Concerning
the post-marketing regulatory requirements, a company engaging in medical devices business will be required to follow stringent design,
testing, control, documentation, and other quality assurance procedures during all aspects of the design and manufacturing process and
report to TFDA when the device it markets has or may have caused or contributed to a death or serious injury. The TFDA also has broad
discretion to take compliance and enforcement actions, such as requiring a safety surveillance report to be submitted regularly for review,
ordering corrections, and conducting on-site inspection if it has any regulatory concerns. Failure to comply with applicable requirements
under the Taiwan MDA may subject a device and/or manufacturers to a variety of administrative sanctions, such as the TFDA’s refusal
to approve pending premarket applications, mandatory product recalls, import detentions, business suspension or license/listing cancellation,
administrative fines, product seizures and destruction, civil monetary penalties and/or criminal prosecution and criminal penalties.
Any company engaging in medical devices business may be additionally subject to ten times the criminal fines for each violation made
by its authorized representative and/or employees.
As
of December 31, 2024, Ainos Fora, our lead POCT candidate, has not been approved to sell by the TFDA.
Personal
Data Protection Laws in Taiwan
Under
the Taiwan Personal Data Protection Act (“PDPA”), each individual or governmental or non-governmental agencies, including
our affiliate in Taiwan, should be subject to certain requirements and restrictions for collecting, processing or using personal data.
The definition of “personal data” is extended to cover a broad scope, including name, birthday, ID, special features, fingerprints,
marriage status, family, education, occupation, medical records, medical history, genetic information, sex life, health examination report,
criminal records, contact information, financial status, social activities, and any other data which is sufficient to directly or indirectly
identify a specific person. Due to the nature of the use of medical devices, our operation and the operation of our partners might collect,
process, or use the data pertaining to a person’s medical records and healthcare, genetics (collectively, sensitive data), which
is subject to stricter scrutiny. Generally, we can only obtain such sensitive data when the person consents in writing or electronically.
Furthermore, in January 2022, the TFDA published the Regulations for the Security and the Maintenance of Personal Information Files in
Wholesaling and Retailing Medical Devices authorized under the PDPA, which requires the medical devices wholesalers and retailers to
adopt necessary data security/protection measures, and establish prevention and reporting mechanisms in relation to any data breach.
The bill also empowers the TFDA to conduct regular inspections and audits. If we fail to comply with the PDPA, we may be subject to punishment
for civil claims, criminal offenses and administrative liabilities; the defendant may be subject to an imprisonment; and the penalty
for administrative liabilities, and may be imposed consecutively if such violation continues.
Regulation
of Veterinary Drugs in Taiwan
Our
veterinary product candidates are subject laws and regulations in Taiwan including, but not limited to, the Veterinary Drugs Control
Act, Enforcement Rules under the Veterinary Control Act, Guidelines of Good Manufacture Practice for Veterinary Drug Manufacturers, and
Taiwan Regulations for Pet Foods and Supplements. The laws and regulations govern, among other things, product design and development,
pre-clinical and clinical testing, quality testing, manufacturing, packaging, labeling, storage, record keeping and reporting, clearance
or approval, marketing, sales and distribution, promotion and advertising, import and export and post-marketing surveillance.
Under
Taiwan law, a “veterinary drug” refers to one of the following substances in the form of bulk chemical compound, formulated
preparation, or over the counter drug: Biologics specifically made for preventing and treating animal diseases based on microbiology,
immunology or molecular biology; Antibiotics specifically made for preventing and treating animal diseases; Diagnostics announced and
designated by the central competent authority for the diagnosis of animal diseases; and drugs that enhance or regulate animal physical
functions specifically for preventing and treating animal diseases.
The
competent authorities with licensing and enforcement authority under the Veterinary Drugs Control Act include the Council of Agriculture
of the central government, the municipal government of a special municipality, or a local city or county.
As
of December 31, 2024, our VELDONA FCGA candidate has not been approved to sell by TFDA.
Regulation
of Medical Devices in the United States
Our
product candidates and operations are subject to extensive and ongoing regulation by the FDA under the Federal Food, Drug, and Cosmetic
Act of 1938 and its implementing regulations, collectively referred to as the FDCA, as well as other federal and state regulatory bodies
in the United States. The laws and regulations govern, among other things, product design and development, pre-clinical and clinical
testing, manufacturing, packaging, labeling, storage, record keeping and reporting, clearance or approval, marketing, distribution, promotion,
import and export and post-marketing surveillance.
The
FDA regulates the development, design, pre-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage,
installation, servicing, recordkeeping, premarket clearance or approval, import, export, adverse event reporting, advertising, promotion,
marketing and distribution of medical devices in the United States to ensure that medical devices distributed domestically are safe and
effective for their intended uses and otherwise meet the requirements of the FDCA. Failure to comply with applicable requirements may
subject a device and/or its manufacturer to a variety of administrative sanctions, such as FDA refusal to approve pending premarket applications,
issuance of warning letters, mandatory product recalls, import detentions, civil monetary penalties, and/or judicial sanctions, such
as product seizures, injunctions, and criminal prosecution.
FDA
Premarket Clearance and Approval Requirements
Unless
an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket
notification, approval of a premarket approval, or PMA, or grant of a de novo request for classification. During public emergencies,
FDA also may grant emergency use authorizations to allow commercial distribution of devices intended to address the public health emergency.
Under the FDCA, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the
degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to provide reasonable
assurance of its safety and effectiveness.
Class
I devices include those with the lowest risk to the patient and are those for which safety and effectiveness can be reasonably assured
by adherence to the FDA’s “general controls” for medical devices. Some Class I or low risk devices also require premarket
clearance by the FDA through the 510(k) premarket notification process described below.
Class
II devices are moderate risk devices that require premarket review and clearance by the FDA through the 510(k) premarket notification
process, though certain Class II devices are exempt from this premarket review process. Unless a specific exemption applies, 510(k) premarket
notification submissions are subject to user fees. If the FDA determines that the device, or its intended use, is not substantially equivalent
to a legally marketed device, the FDA will place the device, or the particular use of the device, into Class III, and the device sponsor
must then fulfill more rigorous premarketing requirements.
Class
III devices include devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices
and devices deemed not substantially equivalent to a predicate device following a 510(k) submission. Submission and FDA approval of a
PMA application is required before marketing of a Class III device. As with 510(k) submissions, unless an exemption applies, PMA submissions
are subject to user fees.
We
intend to position Ainos Flora, our lead POCT candidate, as Class II device. As of December 31, 2024, our Ainos Flora, has not been approved
to sell by the FDA.
Emergency
Use Authorization
In
emergency situations, such as a pandemic, the FDA has the authority to allow unapproved medical products or unapproved uses of cleared
or approved medical products to be used in an emergency to diagnose, treat, or prevent serious or life-threatening diseases or conditions
caused by chemical, biological, radiological, or nuclear warfare threat agents when there are no adequate, approved, and available alternatives.
Under
this authority, the FDA may issue an EUA for an unapproved device if the following four statutory criteria have been met: (1) a serious
or life-threatening condition exists; (2) evidence of effectiveness of the device exists; (3) a risk-benefit analysis shows that the
benefits of the product outweigh the risks; and (4) no other alternatives exist for diagnosing, preventing, or treating the disease or
condition.
Once
issued, an EUA will remain in effect and generally terminate on the earlier of (1) the determination by the Secretary of Health and Human
Services that the public health emergency has ceased or (2) a change in the approval status of the product such that the authorized use(s)
of the product are no longer unapproved. After the EUA is no longer valid, the product is no longer considered to be legally marketed
and one of the FDA’s non-emergency premarket pathways would be necessary to resume or continue distribution of the subject product.
The
FDA also may revise or revoke an EUA if the circumstances justifying its issuance no longer exist, the criteria for its issuance are
no longer met, or other circumstances make a revision or revocation appropriate to protect the public health or safety.
510(k)
Clearance Marketing Pathway
To
obtain 510(k) clearance for a medical device, an applicant must submit to the FDA a 510(k) submission demonstrating that the proposed
device is “substantially equivalent” to a legally marketed device, known as a “predicate device.” A showing of
substantial equivalence sometimes, but not always, requires clinical data. Once the 510(k) submission is accepted for review, by regulation,
the FDA has 90 calendar days to review and issue a determination. As a practical matter, clearance may take and often takes longer. Upon
review, the FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence.
In addition, the FDA collects user fees for certain medical device submissions and annual fees and for medical device establishments.
Before
the FDA will accept a 510(k) submission for substantive review, the FDA will first assess whether the submission satisfies a minimum
threshold of acceptability. If the FDA determines that the 510(k) submission is incomplete, the FDA will issue a “Refuse to Accept”
letter which generally outlines the information the FDA believes is necessary to permit a substantive review and to reach a determination
regarding substantial equivalence. An applicant must submit the requested information within 180 days before the FDA will proceed with
additional review of the submission.
If
the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance
to commercially market the device. If the FDA determines that the device is “not substantially equivalent” to a previously
cleared device, for example, due to a finding of a lack of a predicate device, that the device has a new intended use or different technological
characteristics that raise different questions of safety or effectiveness when the device is compared to the cited predicate device,
the device is automatically designated as a Class III device. The device sponsor must then fulfill more rigorous PMA requirements, or
can request a risk-based classification determination for the device in accordance with the “de novo” process, which is a
route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device. If
the FDA determines that the information provided in a 510(k) submission is insufficient to demonstrate substantial equivalence to the
predicate device, the FDA generally identifies the specific information that needs to be provided so that the FDA may complete its evaluation
of substantial equivalence, and such information may be provided within the time allotted by the FDA or in a new 510(k) submission should
the original 510(k) submission have been withdrawn.
After
a device receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would
constitute a major change or modification in its intended use, will require a new 510(k) marketing clearance or, depending on the modification,
PMA approval. The determination as to whether or not a modification could significantly affect the device’s safety or effectiveness
is initially left to the manufacturer using available FDA guidance. Many minor modifications today are accomplished by a “letter
to file” in which the manufacturer documents the rationale for the change and why a new 510(k) submission is not required. However,
the FDA may review such letters to file to evaluate the regulatory status of the modified product at any time and may require the manufacturer
to cease marketing and recall the modified device until 510(k) marketing clearance or PMA approval is obtained. The manufacturer may
also be subject to significant regulatory fines or penalties.
Over
the last several years, the FDA has proposed reforms to its 510(k) clearance process, and such proposals could include increased requirements
for clinical data and a longer review period, or could make it more difficult for manufacturers to utilize the 510(k) clearance process
for their products.
As
of December 31, 2024, we have not made any 510(k) submission for our POCT candidates.
De
novo Classification
Medical
device types that the FDA has not previously classified as Class I, II or III are automatically classified into Class III regardless
of the level of risk they pose. To market low to moderate risk medical devices that are automatically placed into Class III due to the
absence of a predicate device, a manufacturer may request a de novo down-classification on the basis that the device presents low or
moderate risk, rather than requiring the submission and approval of a PMA application. In the event the FDA determines the data and information
submitted demonstrate that general controls or general and special controls are adequate to provide reasonable assurance of safety and
effectiveness, the FDA will grant the de novo request for classification. When the FDA grants a de novo request for classification, the
device is granted marketing authorization and further can serve as a predicate for future devices of that type, through a 510(k) premarket
notification.
As
of December 31, 2024, we were not seeking a de novo classification for any device in development.
Clinical
Trials
Clinical
trials are typically required to support a PMA, oftentimes for a de novo request for classification, and are sometimes required to support
a 510(k) submission. All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with
the FDA’s investigational device exemption, or IDE, regulations which govern investigational device labeling, prohibit promotion
of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and
study investigators. The clinical trials must be approved by, and conducted under the oversight of, an Institutional Review Board, or
IRB, for each clinical site. If an IDE application is approved by the FDA and one or more IRBs, clinical trials may begin at a specific
number of investigational sites with a specific number of patients, as approved by the FDA.
If
the device is considered a “non-significant risk,” IDE submission to FDA is not required. Instead, only approval from the
IRB overseeing the investigation at each clinical trial site is required. After a trial begins, we, the FDA or the IRB could suspend
or terminate a clinical trial at any time for various reasons.
Post-market
Regulation
After
a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply. These include:
● Establishment registration and device listing with the FDA;
The
FDA has broad regulatory compliance and enforcement powers. If the FDA determines that we failed to comply with applicable regulatory
requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions:
● customer notifications for repair, replacement, refunds;
● recall, withdrawal, administrative detention, or seizure of our test kits;
● operating restrictions or partial suspension or total shutdown of production;
● withdrawing 510(k) clearance or PMA approvals that are already granted;
● refusal to grant export approval for our test kits; or
● criminal prosecution.
U.S.
drug and biological product development
In
the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (FDCA) and its implementing regulations and
biologics under the FDCA, the Public Health Service Act (PHSA), and their implementing regulations. Both drugs and biologics also are
subject to other federal, state and local statutes and regulations. Failure to comply with applicable U.S. requirements at any time during
the product development process, approval process or following approval may subject us to administrative or judicial sanctions. These
sanctions could include, among other actions, the FDA’s refusal to approve pending applications, license revocation, a clinical
hold, untitled or warning letters, product recalls, market withdrawals, product seizures, total or partial suspension of production or
distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and civil or criminal penalties.
Our
VELDONA product candidates for human use must be approved by the FDA through a BLA or new drug application (NDA), or supplemental BLA
or supplemental NDA, process before they may be legally marketed in the United States. As of December 31, 2024, none of our VELDONA candidates
have been approved by the FDA.
Preclinical
studies
Before
any of our development candidates may be tested in humans, the development candidate must undergo rigorous preclinical testing. Preclinical
studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential
for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal
regulations and requirements, including GLP regulations for safety/toxicology studies. An IND sponsor must submit the results of the
preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for
clinical studies, among other things, to the FDA as part of an IND. An IND is a request for authorization from the FDA to administer
an investigational product to humans and must become effective before human clinical trials may begin. Unless the FDA raises concerns,
an IND automatically becomes effective 30 days after receipt by the FDA. In such a case, the IND sponsor and the FDA must resolve any
outstanding concerns before the clinical trial can begin.
Clinical
trials
The
clinical stage of development involves the administration of the investigational medicine to healthy volunteers or patients under the
supervision of qualified investigators and in accordance with GCP requirements. Clinical trials are conducted under protocols detailing,
among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters
to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted
to the FDA as part of the IND. Furthermore, each clinical trial must be reviewed and approved by an Institutional Review Board (IRB)
for each institution at which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical
trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must
be provided to clinical trial subjects and monitors the clinical trial until completed. Further, progress reports detailing the results
of the clinical trials, among other information, must be submitted at least annually to the FDA and more frequently in other situations,
including the occurrence of serious adverse events. Information about certain clinical trials must be submitted within specific timeframes
for publication on the www.clinicaltrials.gov website.
Foreign
studies conducted under an IND must meet the same requirements that apply to studies being conducted in the United States. Data from
a foreign study not conducted under an IND may be submitted in support of a BLA if the study was conducted in accordance with GCP requirements,
and the FDA is able to validate the data.
Clinical
trials generally are conducted in three sequential phases, which may overlap:
The
FDA may also require post-approval Phase 4 non-registrational studies to explore scientific questions to further characterize safety
and efficacy during commercial use of a drug.
The
FDA or the clinical trial site may suspend or terminate a clinical trial at any time on various grounds, including a finding that the
patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at
its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug or biologic
has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group
of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides
authorization for whether a clinical trial may move forward at designated check points based on access to certain data from the clinical
trial.
FDA
review process
Following
completion of the clinical trials, data are analyzed to assess whether the investigational product is safe and effective for the proposed
indicated use or uses. The results of preclinical studies and clinical trials are then submitted to the FDA as part of a BLA or NDA,
along with proposed labeling, chemistry, and manufacturing information to ensure product quality and other relevant data. A BLA is a
request for approval to market a biologic for one or more specified indications and must contain proof of the biologic’s safety,
purity, and potency. An NDA for a new drug must contain proof of the drug’s safety and efficacy. To support marketing approval,
the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to
the satisfaction of the FDA. FDA approval of a BLA or NDA must be obtained before a biologic or drug may be marketed in the United States.
Before
approving a BLA or NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine
whether the facilities comply with cGMP requirements and are adequate to assure consistent production of the product within required
specifications. The FDA also may audit data from clinical trials to ensure compliance with GCP requirements. Additionally, the FDA may
refer applications for novel products or products which present difficult questions of safety or efficacy to an advisory committee of
expert advisors for review, evaluation and a recommendation as to whether the application should be approved and under what conditions,
if any. The committee makes a recommendation to the FDA that is not binding but is generally followed.
After
the FDA evaluates a BLA or NDA, it will grant marketing approval, request additional information or issue a complete response letter
(CRL) outlining the deficiencies in the submission. The CRL may require additional testing or information, including additional preclinical
or clinical data, for the FDA to reconsider the BLA or NDA. Even if such additional information and data are submitted, the FDA may decide
that the BLA or NDA still does not meet the standards for approval. If the FDA grants approval, it issues an approval letter that authorizes
commercial marketing of the product with specific prescribing information for specific indications.
Orphan
drug designation
Under
the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic product 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, or more than 200,000 individuals
in the United States and for which there is no reasonable expectation that the cost of developing and making the product available in
the United States for this type of disease or condition will be recovered from sales of the product.
If
a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such
designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market
the same drug for the same indication for seven years from the date of such approval, except in very limited circumstances, such as if
the latter product is shown to be clinically superior to the orphan product.
Health
Insurance Portability and Accountability Act
We
may be subject to compliance with the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Healthcare
Information Technology for Economic and Clinical Health Act of 2009, or HIPAA, among other things, established federal protection for
the privacy and security of protected health information, or PHI. The HIPAA privacy regulations protect PHI by limiting its use and disclosure,
giving patients the right to access certain information about them, and limiting most disclosures of PHI to the minimum amount necessary
to accomplish an intended purpose. The HIPAA security standards require the adoption of administrative, physical, and technical safeguards
and the adoption of written security policies and procedures.
In
addition, various states, such as California and Massachusetts, have implemented similar privacy and security laws and regulations. The
interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance
issues. The compliance requirements of these laws, including additional breach reporting requirements, and the penalties for violation
vary widely, and new privacy and security laws in this area are evolving. Requirements of these laws and penalties for violations vary
widely.
Failure
to comply with HIPAA, Healthcare Information Technology for Economic and Clinical Health Act of 2009 or their implementing regulations,
and similar state laws, may result in significant penalties, including civil, criminal and administrative penalties, fines, imprisonment
and exclusion from participation in federal or state healthcare programs, and the curtailment or restructuring of our operations.
U.S.
Federal, State and Foreign Fraud and Abuse Laws
The
U.S. federal and state governments have enacted, and actively enforce, a number of laws to address fraud and abuse in federal healthcare
programs. Our business is subject to compliance with these laws.
Anti-Kickback
Statutes
The
federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully soliciting, offering, receiving or paying remuneration,
directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual, or the purchase,
order, arrangement for, or recommendation of, items or services for which payment may be made, in whole or in part, under a federal healthcare
program such as Medicare or Medicaid. Many states have adopted laws similar to the federal Anti-Kickback Statute. Some of these state
prohibitions apply to referral of recipients for healthcare products or services reimbursed by any source, not only government healthcare
programs, and may apply to payments made directly by the patient.
Government
officials have focused their enforcement efforts on the marketing of healthcare services and products, among other activities, and recently