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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. 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.

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 products pipeline include commercial-stage VELDONA Pet cytoprotein supplements, clinical-stage VELDONA human therapeutics and telehealth-friendly POCTs powered by the AI Nose technology platform. Please refer to “Business” in Part I, Item 1 for description of our business.

Key Developments in 2023

The following highlights major corporate milestones in 2023 that we believe will serve as catalysts for us to develop and commercialize our product pipeline over the next several years:

In December 2023, we initiated the second phase of co-development of a VOC sensing platform, powered by AI Nose technology, in collaboration with Nisshinbo Micro Devices Inc. (“NISD”) and Taiwan Inabata Sangyo Co. (“Taiwan Inabata”). First announced in August 2023, Ainos, NISD and Taiwan Inabata plan to co-develop a VOC sensing platform, leveraging our intellectual properties surrounding AI Nose, for applications including telehealth, automotive, industrial, and environmental safety. Inabata will provide business logistics for the program and liaise between Ainos and NISD. This project underscores our commitment to digitizing smell by pioneering VOC sensing’s potential across diverse industries, thereby broadening our addressable market.

In November 2023, our contract manufacturer, Swiss Pharmaceutical Co., Ltd. ("Swiss Pharma"), has completed manufacturing of a Good Manufacturing Practice ("GMP") clinical batch of VELDONA investigational new drugs.

In November 2023, we announced that based on top-line data reported from three clinical studies for VELDONA formulation as a potential treatment for oral warts in HIV-seropositive patients, we plan to pursue a pre-IND meeting with the United States Food and Drug Administration (the "U.S. FDA") for our planned Phase III clinical studies. U.S. FDA has granted Orphan Drug Designation ("ODD") for our VELDONA formulation as a potential treatment for oral warts in HIV-seropositive patients.

In the third quarter of 2023, we commenced shipping VELDONA Pet cytoprotein supplements in Taiwan. Launched in the second quarter of 2023, our VELDONA Pet product line is formulated to address a variety of health issues in dogs and cats, including skin, gum, emotion, discomfort caused by allergies, eye, and weight-related issues.

In March 2023, we signed a distribution agreement with Topmed International Biotech Co., Ltd. ("Topmed") for distribution of VELDONA Pet cytoprotein supplements in Taiwan.

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Factors Affecting Our Business

We are pivoting away from sale of COVID-19 antigen rapid test kits, which were the main source of our revenues in 2023. Going forward, our near-term priorities include sales and marketing of VELDONA Pet, advancing our lead VOC POCT candidate, Ainos Flora, co-developing VOC sensing platform with our Japan partners, as well as advancing clinical studies and pursuing out-licensing of VELDONA human drug candidates.

We are currently marketing VELDONA Pet in Taiwan and intend to explore overseas commercial opportunities. We have offered VELDONA Pet on certain Taiwanese e-commerce platforms. Offline, we are exploring opportunities in channels such as pet supply stores, chain drugstores and convenience stores. Pet food and supplement industry is highly competitive. Our ability to effectively compete may affect our business, at least in the near-term.

We believe that post COVID-19, consumers have become increasingly familiar with at-home tests. Moving forward, people may seek additional at-home tests to manage other infections as quickly as possible. Home self-testing have become increasingly available for other infections such as vaginal infections or sexually transmitted infections (STIs). We believe this new user behavior, supported by a variety of telehealth platforms, will facilitate consumer adoption of our other POCT product candidates. Our lead candidate Ainos Flora is under clinical studies and we plan to explore strategic relationships to commercialize the product. The result of clinical studies and our success in exploring strategic relationships, and the likelihood of regulatory approvals, may affect our business, at least in the near-term.

We are co-developing a VOC sensing platform, powered by AI Nose technology, with our Japanese partners. This project underscores our commitment to digitizing smell by pioneering VOC sensing’s potential across diverse industries, thereby broadening our addressable market. The progress of this co-development may affect our business, at least in the near-term.

As of December 31, 2023, we had available cash and cash equivalents of $1,885,628. We anticipate business revenues and further potential financial support from external sources to fund our operations over the next twelve months. We have based this estimate on assumptions that may prove to be incorrect, and we could exhaust our available capital resources sooner than we expect. See “Liquidity and Capital Resources” for additional information. To finance our continuing operations, we will need to raise additional capital, which cannot be assured.

Recent Financing

On September 25, 2023, we entered into a securities purchase agreement with Lind Global Fund II LP (“Lind) to issue and sell the initial $3 million tranche of a total anticipated $10 million private placement with $2 million funded at closing and $1 million at conditions specified in the agreement. The investment is in the form of a senior secured convertible promissory note, convertible into shares of the Company’s common stock at the lower of $7.50 per share reverse-stock-split adjusted, or 90.0% of the average of the three lowest daily volume weighted average price (“VWAP") of the common stock during the 20 trading days prior to conversion, subject to certain adjustments. We also issued Lind warrants to purchase 691,244 shares of common stock giving effect to the 1-for-5 reverse stock split on December 14, 2023, at an initial exercise price of $4.50 per share reverse-stock-split adjusted, subject to certain adjustments. On January 24, 2024, we announced an additional financing with Lind. The funding amount is up to $1.75 million, with $875,000 funded at closing and $875,000 to be funded subject to effective registration statement and conditions specified in the agreement. In connection with additional funding, we issued Lind a warrant to purchase 1,021,400 shares at an exercise price of $2.16 per share.

On March 13, 2023, we issued and sold two convertible promissory notes in a principal amount of $3 million to certain investors. The note will mature in two years following the issuance, bearing interest at the rate of 6% per annum, convertible to Company’s common stock at $7.50 per share reverses-stock-split adjusted.

Reverse Stock Split

On December 12, 2023, the Company announced that, as previously authorized by its shareholders, it is implementing a consolidation (reverse stock split) of its outstanding shares of common stock on the basis of one (1) new share of common stock for every five (5) currently outstanding shares. The Reverse Stock Split was effectuated on December 14, 2023 and all the shares and per share dollar information within this Annual Report on Form 10-K has been reflected the Reverse Stock Split.

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Results of Operations

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022:

Years ended December 31, Change

Operating expenses:

Non-operating (expenses) income

Fair value change for senior secured convertible note 94,207 - 94,207 -

Provision for income taxes 800 - 800 -

Revenues, Cost and Gross Profit (Loss)

The Company reported $122,112 of revenues for the year ended December 31, 2023, as compared to $3,519,627 for the year ended December 31, 2022 from the sales of Ainos COVID-19 Antigen Rapid Test Kits in Taiwan. The decrease of revenue in 2023 was primarily caused by the decline of both per unit selling price and sales volume of Ainos COVID-19 Antigen Rapid Test Kits in 2023 due to substantial slowdown of COVID-19 infection in Taiwan.

The cost of revenues relating to product sales for the year ended December 31, 2023 was $375,845 compared to $2,114,284 for the year ended December 31, 2022. The decrease of cost of revenues was due to the decrease in sales volume of Ainos COVID-19 Antigen Rapid Test Kits but offset by an increase of $235,047 in loss of excess and obsolete inventory in 2023.

Gross (loss) profit from product sales for the year ended December 31, 2023 was $(253,733) as compared to $1,405,343 for the year ended December 31, 2022. The gross loss was due to a decrease in sales volume and selling price as well as recognition of inventory loss in 2023.

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Research and Development (R&D) Expenses

R&D expenses for the years ended December 31, 2023 and 2022 were $7,317,388 and $6,845,964, respectively. The slight increase $471,424 (7%) was due to $286,777 of impairment loss recognized for equipment related to COVID-19 POCT and increased staffing expenditures (including share-based compensation), but offset by a decrease in clinical trial fees. We expect that our R&D expenses related to clinical trials will continue to grow as we further develop VOC POCT and VELDONA drug candidates and increase the pace of clinical trials previously delayed during the COVID-19 pandemic.

The share-based compensation expense and the depreciation and amortization expense in 2023 and 2022 were $5,252,730 and $4,711,028, respectively. When excluding these non-cash expenses, R&D expenses slightly decreased to $2,064,658 in 2023 from that of $2,134,936 in 2022 due to limitations on recruiting patients for clinical trials for VOC POCT and human related VELDONA drug candidates in 2023.

Selling, General and Administrative (SG&A) Expenses

SG&A expenses were $5,635,275 and $8,535,591 for the years ended December 31, 2023 and 2022, respectively. The $2,900,316 (34%) decrease was largely due to decreased expenses associated with share-based compensation as the Company granted RSUs that were immediately vested to officers in 2022 and fully recorded the total compensation expense in the same period; however, the decrease was partially offset by the special stock bonus issued in 2023 with expense was fully recorded.

The share-based compensation expense and the depreciation and amortization expense in 2023 and 2022 were $2,886,216 and $6,473,546, respectively. When excluding these non-cash expenses, SG&A expenses increased to $2,749,059 in 2023 compared to $2,062,045 in 2022 mainly due to increased professional expenses and expenditures to maintain the listing requirement as a public company after uplisting in August 2022.

Operating Loss

The Company’s operating loss was $13,206,396 and $13,976,212 during the years ended December 31, 2023 and 2022, respectively, reflecting a $769,816 (6%) decrease in operating losses between the years. We incurred a gross loss in product sales but reduced the share-based compensation expense in 2023. We continued to invest resources to execute our growth strategy and product roadmap to improve our profitability.

Non-operating expenses

The interest expense was $144,193 and $53,528 during the years ended December 31, 2023 and 2022, respectively. The increase in interest expense was due to accrued interest for convertible notes issued in March 2023 bearing a higher interest rate as compared with those interest bearing debts in 2022.

On September 28, 2023, and December 21, 2023, the Company closed a private placement by issuing senior secured convertible notes in the aggregate principal amount of $3,000,000, which was measured at fair value initially and subsequently. Due to the fair value accounting election, the Company expensed off $525,643 of the issuance cost and recorded a gain $94,207 of fair value change in the senior secured convertible notes in 2023.

Net Loss

Net loss was $13,770,549 in 2023 compared to $14,006,690 in 2022, resulting in a $236,141 (2%) decrease in net loss attributable to common stockholders due to the decrease in share-based compensation expense despite of a gross loss in product sales. The gross loss in product sales post COVID-19 pandemic was decreased; however, our new product launch for VELDONA Pet supplements has not generated material revenue by the end of 2023.

Liquidity and Capital Resources

As of December 31, 2023 and 2022, the Company had available cash and cash equivalents of $1,885,628 and $1,853,362, respectively.

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The following table summarizes our cash flow during the years ended December 31, 2023 and 2022:

Years ended December 31, Change

Operating activities

Net cash used in operating activities increased by $1,653,931 during the year of 2023 compared to the year of 2022. The increase in cash used in operations primarily resulted from our net loss for the year of 2023 due to the slow down of the sales of COVID-19 antigen test kits but partially offset by cash inflow contributed by the operating assets and liabilities.

Investing activities

Net cash used in investing activities during the year of 2023 was $101,525 compared to $630,178 during the year of 2022 due to lower levels of R&D equipment and office facility acquisition as major investments had been made in 2022.

Financing activities

Cash received from financing activities were $4,923,673 and $3,850,799 during the years of 2023 and 2022, respectively. The $1,072,874 increase was primarily reflected by the following:

· Proceeds from public offering in 2022 decreased by $1,780,000; and

Sources of Liquidity

Since our uplisting and public offering in August 2022, our operations have been financed primarily by proceeds from private placements of convertible notes issued to third party or related party. As disclosed in Note 6 Debts to our accompanying financial statements, we received $3,000,000 in proceeds from the March 2025 convertible note financing and $3,000,000 in proceeds from the Lind Note financing in September and December of 2023 out of total of $10 million financing agreement. As of the date of this report, we further drew down an additional $875,000 of funding from Lind Note. We anticipate that cash reserves, business revenues, and potential debt financing through convertible and non-convertible notes will fund our operations over the next twelve months. 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 may raise additional capital through the issuance of equity securities, debt financings or other sources to further implement its business plan. However, if such financing is not available when needed and at adequate levels, we will need to reevaluate our operating plan.

Uses of Liquidity

In the near-term, we expect an increase in the pace of clinical trial spending to advance our VOC POCT and VELDONA drug candidates and expect to invest more in R&D activities. We also plan to allocate sales and marketing efforts for VELDONA Pet.

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For future liquidity consideration, we expect primary uses of cash are to fund our operations as we continue to grow our business. We may require a significant amount of cash to fund working capital and capital expenditures as we grow our commercial infrastructure. We may continue to incur operating losses in the near term as our operating expenses will be increased to support the growth of our business. We expect that our selling, general and administrative expenses, and research and development expenses will continue to increase our internal sales force to move forward our product development and commercialization roadmaps. We may also have cash requirements related to capital expenditures to support the planned growth of our business, including investments in corporate facilities and equipment.

Going Concern

As of December 31, 2023, we had cash and cash equivalents of $1,885,628. We plan to finance our operations and development needs with our existing cash and cash equivalents, additional equity and/or debt financing arrangements, and expected revenue primarily from the sale of VELDONA Pet cytoprotein supplements to support our clinical trial activities, largely in connection with Ainos Flora and human related VELDONA therapeutics. There can be no assurance that we will be able to obtain additional financing on terms acceptable to us, on a timely basis, or at all. If we are not able to obtain sufficient funds on acceptable terms when needed, our business, results of operations, and financial condition could be materially adversely impacted.

For the year ended December 31, 2023, we generated a net loss of $13,770,549. We expect to continue incurring development expenses for the next twelve months as we advance Ainos Flora and VELDONA therapeutics for humans through clinical development until regulatory approval is received and the sales and marketing of the products is authorized.

The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have incurred net operating losses and have an accumulated deficit as of December 31, 2023 of $37,886,155 and expect to incur additional losses and negative operating cash flows for at least the next twelve months. Our ability to meet obligations is dependent upon our ability to generate sufficient cash flows from operations and future financing transactions. Although we expect we will continue as a going concern, there is no assurance that our plans will be successful since the availability and amount of such funding is not certain. Accordingly, substantial doubt exists about our ability to continue as a going concern for at least one year from the issuance of these financial statements. Our financial statements do not include any adjustments to reflect the possible future effects on the recoverability of assets or the amounts and classifications of liabilities that may result from our possible inability to continue as a going concern.

Contractual Obligations and Commitments

For a discussion of our contractual obligations and commitments, refer to Part II, Item 8, Note 13, “Commitments and Contingencies” to the financial statements in this Annual Report on Form 10-K.

Critical Accounting Policies and Estimate

Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

While our significant accounting policies are more fully described in Note 2 to our financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to our financial condition and results of operations and require our most difficult, subjective and complex judgments.

Impairment Testing of Intangible Assets

Our intangible assets mainly consist of acquired patents which are initially recorded at fair value and stated net of accumulated amortization and, if applicable, impairments. We amortize our intangible assets that have finite lives using the straight-line method. Amortization is recorded over the estimated useful lives ranging from 5 to 19 years. We evaluate the recoverability of the definite lived intangible assets whenever events or changes in circumstances or business conditions indicate that the carrying value of these assets may not be recoverable based on expectations of future undiscounted cash flows for each asset group in accordance with ASC 360-10, Property, Plant and Equipment—Impairment or Disposal of Long-Lived Assets (ASC 360-10). If the carrying value of an asset or asset group exceeds its undiscounted cash flows, we estimate the fair value of the assets using market participant assumptions pursuant to ASC 820, Fair Value Measurements.

During the fourth quarter of 2023, we reassessed our short-term and long-term commercial plans for the VOC POCT related products which is identified as an asset group being assigned the major intangible assets and identified that an impairment testing is warranted for the intangible assets. As a result, we performed an undiscounted cash flow analysis pursuant to ASC 360-10 to determine if the cash flows expected to be generated by the VOC POCT products over the estimated remaining useful life of its primary assets were sufficient to recover the carrying value of the asset group. Based on this analysis, the undiscounted cash flows were sufficient to recover the carrying value of the intangible assets. Thus, no impairment loss was recorded.

To estimate the undiscounted cash flow of the asset group, we used assumptions require significant judgment, including judgment about when the in-development product can be commercialized, estimated selling price and sales volume of the in-development product and the amount and timing of other cash outflows required to complete the development, commercialization and sales of the product. The forecasted cash flows were based on the Company's most recent strategic plan and for periods beyond the strategic plan, our estimates were based on assumed growth rates expected as of the measurement date. We believe our assumptions were consistent with the strategic plans and business goals.

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Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of December 31, 2023.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation S-K.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements and notes of the Company are set forth beginning on page F-1 immediately following the signature page of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that material information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2023, our disclosure controls and procedures were effective.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the framework in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “2013 COSO Framework”). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2023.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control Over Financial Reporting

We started to sell VELDONA Pet cytoprotein supplements through distributors and e-commence platform during the fourth quarter of 2023. The agreements with the distributors have material right of return which impacts the timing of revenue recognition. We built up procedures and internal control to monitor the return in order to determine the timing and amount of revenue recognition of the Pet supplements.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.

As of March 7, 2024, the directors and executive officers of the Company were as follows:

Name Age Position

Chun-Hsien Tsai 54 Chairman, President & Chief Executive Officer

Wen-Han Chang 61 Director

Yao-Chung Chiang 72 Director

Pao-Sheng Wei 66 Director

Ting-Chuan Lee 41 Director

Chun-Jung Tsai 52 Director

Chung-Yi Tsai 48 Director

Meng-Lin Sung 51 Chief Financial Officer

Lawrence K. Lin 55 Executive Vice President of Operations

Chun-Hsien Tsai. Mr. Tsai has served as our Chairman, President, and Chief Executive Officer since April 2021. From April 2021 to August 2021, he also served as Chief Financial Officer. He has served as the chairman and CEO of Taiwan Carbon Nano Technology Corporation (TCNT) since July 2018, as a director of Ainos Inc. (Cayman Islands) since October 2017, as director and CEO of AI Nose Corporation since 2016, and as a director of TCNT since 2012. Mr. Tsai holds an EMBA degree from National Yang Ming Chiao Tung University.

Wen-Han Chang. Mr. Chang has served as a Director of the Company since April 2021 and has served as the Chairperson of our Compensation Committee and a member of our Audit Committee since August 2021. He is the superintendent at Mackay Memorial Hospital since May 2023, and was deputy superintendent between August 2015 and May 2019. He has devoted his expertise at the department of emergency medicine for approximately 30 years. Mr. Chang advocates better public health and AI’s development in the healthcare sector through his leadership roles in industry groups in Taiwan. Mr. Chang is the current chairman of Health Intelligent Medical Development Society. From 2019 to 2021, he was the president of the Childhood Burn Foundation of R.O.C. Mr. Chang holds a Ph.D in public health from Saint Louis University.

Yao-Chung Chiang. Mr. Chiang has served as a Director of the Company since April 2021 and has served as a member of our Audit Committee since August 2021. Mr. Chiang has served as the chairman of Taiwan High Speed Rail Corporation since October 2016 and as an independent director for Radiant Opto-Electronics Corporation since June 2012. From June 2015 to July 2021, Mr. Chang was an independent director for Tyntek Corp. Mr. Chiang served as the chairman for other Taiwan-incorporated companies including China Steel Chemical Corporation, Kaohsiung Rapid Transit Corporation, China Steel Corporation and China Airlines. Mr. Chiang holds a Ph.D. in Mechanical Engineering from University of Wisconsin-Madison.

Pao-Sheng Wei. Mr. Wei has served as a Director of the Company, Chairperson of the Audit Committee and as a member of the Compensation Committee since June 2022. He has served as the chairman of Shin Kong Life Insurance Co., Ltd since June 2023 and as an independent director of Nuvoton Technology Corporation since June 2022. From September 2014 to June 2022, Mr. Wei served as the chairman of KGI Bank Co., Ltd. Mr. Wei held leadership roles in the banking, securities and insurance sectors in Taiwan. He was a securities regulator as the Division Director of Corporate Finance of the Securities and Futures Bureau of the Financial Supervisory Commission, R.O.C. (Taiwan). Mr. Wei holds an MBA degree from George Washington University.

Ting-Chuan Lee. Ms. Lee has served as a Director of the Company since April 2021. She is also a manager at the CEO office. She has served as the chairperson of AI Nose Corporation since March 2016, and as a member of the board of director of Taiwan Carbon Nano Technology Corporation (TCNT) since July 2012. Ms. Lee holds a master’s degree of science from National Taiwan University.

Chun-Jung Tsai. Mr. Tsai has served as a Director of the Company since April 2021. He is also a manager of the Company’s sales team. He has served as a director of Ainos Inc. (Cayman Islands) since 2019, a director of AI Nose Corporation since March 2016, and a director of Taiwan Carbon Nano Technology Corporation (TCNT) since July 2012.

Chung-Yi Tsai. Mr. Tsai has served as a member of our Board of Directors since April 2021 and as a director of TCNT since July 2012. Mr. Tsai is a seasoned executive in product and business development in the technology hardware sector. From May 2023 to present, he has served as a senior product marketing director at Alpha & Omega Semiconductor. Prior to that, he has served as a senior product marketing manager in Renesas Electronics from June 2020 to May 2023, executive business manager at Maxim Integrated from November 2019 to June 2022, and as a senior product marketing manager at Intersil Corporation from October 2013 to November 2019.

Meng-Lin Sung. Ms. Sung has served as our Chief Financial Officer since May 2023. She previously served as Vice President of Finance at Sercomm Corporation from September 2021. Prior to joining Sercomm, she held roles at PricewaterhouseCoopers Zhong Tian LLP from October 2018, conducting audits and advising public companies on U.S. GAAP/IFRS and SEC reporting and listing regulations. Ms. Sung has extensive experience guiding publicly-traded healthcare and life science companies through the initial public offering and auditing processes, having previously worked with companies based in the USA and mainland China. She received her MBA degree from National Taiwan University.

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Lawrence K. Lin. Mr. Lin has served as Executive Vice President of Operations since August 1, 2021. Prior to his appointment, Mr. Lin provided the Company with management consulting services from May 2018 until August 2021, as the sole member of i2China Management Group, LLC (“i2China”), and served as Executive Advisor to the previous CEO and Chairman of the Company. Mr. Lin brings more than 30 years of global cross-border strategic management consulting and financial investment experience at leading institutional corporates, such as Andersen Consulting, Salomon Smith Barney, and Credit Suisse First Boston. Mr. Lin has international management experience across several geographical locations, including the U.S., China and Taiwan, and advised on several private capital and structured public equity transactions for issuers in the healthcare and consumer sectors. Mr. Lin has a dual MBA in Finance & International Business from New York University- Stern School of Business.

Family relationships.

Chun-Hsien Tsai and Ms. Ting-Chuan Lee are husband and wife. Chun-Hsien Tsai , Mr. Chun-Jung Tsai, and Mr. Chung-Yi Tsai are brothers. Ting-Chuan Lee is the sister-in-law of Chun-Jung Tsai and Chung-Yi Tsai.

Term of Office

Our directors shall hold office for the term for which he is elected and until his successor shall have been elected and qualified in accordance with our bylaws. Our officers shall hold office until his successor shall have been duly elected and qualified or until his death or until he shall resign or shall have been removed by the board in accordance with our bylaws.

Diversity Matrix of Board of Directors

We believe the board is most effective when it embodies a diverse range of views, backgrounds and experience. Diversity is considered in the broadest sense, including, among other attributes, reflecting geography, age, gender, leadership, perspectives, educational background, other board experience and commitments, business and professional achievements, skills and experience in the context of the needs of the Board.

The below table provides information related to the composition of our board members and categories listed in the table has the meaning as it is used in Nasdaq Rule 5605(f).

Board Diversity Matrix (As of March 7, 2024)

Total Number of Directors 7

Female Male Non-Binary Did Not Disclose Gender

Part I: Gender Identity

Part II: Demographic Background

Audit Committee

Our Audit Committee consists of Mr. Wen-Han Chang, Mr. Yao-Chung Chiang and Mr. Pao-Sheng Wei, each of whom has been determined to be “independent” under applicable rules and regulations of the SEC and the listing standards of Nasdaq, and also meets the financial literacy requirements of the listing standards of Nasdaq. Mr. Wei currently serves as Chairperson of our Audit Committee.

Our Board has determined that the three audit committee members qualify as “audit committee financial experts” as defined in Item 407(d) of Regulation S-K by considering their formal education and experience in financial management.

The duties and responsibilities of the Audit Committee are set forth in its charter include the following:

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Compensation Committee

Our Compensation Committee currently consists of Mr. Wen-Han Chang and Mr. Pao-Sheng Wei. Mr. Chang currently serves as the Chairperson of our Compensation Committee. Our Board has determined that each member of our compensation committee meets the requirements for independence for compensation committee members under the rules and regulations of the SEC and the listing standards of Nasdaq. Each member of the compensation committee is also a non-employee director, as defined pursuance to Rule 16b-3 promulgated under the Exchange Act.

The duties and responsibilities of the Compensation Committee are set forth in its charter include the following:

Code of Business Conduct and Ethics

We adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer or persons performing similar functions. A copy of the code is posted on our corporate website at www.ainos.com and is filed hereto as Exhibit 14.1 and is incorporated herein by this reference. In addition, we intend to post on our website all disclosures that are required by law or listing standards concerning any amendments to, or waivers from, any provision of the code. The information contained in, or accessible through, our website does not constitute a part of this report. We have included our website address in this report solely as an inactive textual reference.

Insider Trading Policy

We have adopted an insider trading policy filed hereto as Exhibit 19.1 and is incorporated herein by this reference.

Compliance with Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires directors and officers of the Company and persons who own more than 10% of the Company’s common stock to file with the Securities and Exchange Commission (the “Commission”) initial reports of ownership and reports of changes in ownership of the common stock. Directors, officers and more than 10% shareholders are required by the Exchange Act to furnish the Company with copies of all Section 16(a) forms they file.

To the Company’s knowledge based solely on a review of the copies of such reports furnished to the Company, all reports required to be filed under Section 16(a) during were filed on a timely basis during the most recent fiscal year.

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ITEM 11. EXECUTIVE COMPENSATION.

As a “smaller reporting company” under SEC rules, our named executive officers during the fiscal year January 1, 2023 through December 31, 2023 (collectively, the “Named Executive Officers”) were as follows:

· Mr. Chun-Hsien Tsai, Chairman, President & Chief Executive Officer;

· Ms. Meng-Lin Sung, Chief Financial Officer;

· Ms. Hui-Lan Wu, Former Chief Financial Officer; and

· Mr. Lawrence K. Lin, Executive Vice President of Operations.

Summary Compensation Table

The following table provides information regarding the total compensation awarded to, earned by, and paid to our named executive officers for services rendered to us for the years set forth below. The amounts below for Stock Awards and Option Awards and reflect the grant date fair value of these awards during the years:

(4) All other compensation includes commuting expense.

Narrative Disclosure to Summary Compensation Table

Chun-Hsien Tsai

Effective April 15, 2021, our Board appointed Mr. Chun-Hsien Tsai to serve as Chief Executive Officer. Mr. Tsai receives a monthly salary of NT$250,000 (equivalent to approximately $8,000), a year-end bonus of two months’ salary, and a variable compensation based on Company profit targets decided by the Company’s Compensation Committee, and payable as 10% to 100% of total annual compensation in the form of cash, securities and/or other discretionary remuneration. Mr. Tsai was granted RSUs pursuant to 2021 Stock Incentive Plan. Other benefits, including labor insurance, health insurance and other benefits, will be based on local regulations and the Company’s policies. In 2023, Mr. Tsai was granted RSUs pursuant to 2023 Stock Incentive Plan and received a special stock award. Mr. Tsai’s employment agreement is attached hereto as Exhibit 10.22.

Meng-Lin Sung

We entered into an employment agreement with Ms. Meng-Lin Sung as Chief Financial Officer in May 2023. The agreement provides for a monthly salary of NT$230,000 (equivalent to approximately $7,300), a year-end bonus of two months’ salary and other statutory employee benefits. Ms. Sung was offered a special stock award as the sign-on bonus for her onboarding in late 2023 after shareholder approvals. Ms. Sung was granted RSUs under 2023 Stock Incentive Plan which will vest in tranches during 3-year service period. Mr. Sung’s employment agreement is attached hereto as Exhibit 10.25.

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Lawrence K. Lin

Effective August 1, 2021, we entered into an employment contract with Mr. Lawrence K. Lin in connection with his election as Executive Vice President of Operations (the “LL Agreement”). The LL Agreement is effective for three years and may be extended for an additional year on the same terms and conditions upon mutual agreement. Under the LL Agreement, Mr. Lin receives a monthly salary of $12,000, vesting stock options for 6,666 shares in the Company’s 2018 Officers, Directors, Employees and Consultants Non-Qualified Stock Option Plan, and a bonus of 2,000 shares in the Company’s common stock upon the Company’s successful listing on a Major National Exchange (as defined in the LL Agreement), and normal and customary benefits available to the Company’s employees. Mr. Lin’s employment agreement is attached hereto as Exhibit 10.20.

Outstanding Equity Awards at December 31, 2023

The table below summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2023.

Option awards Stock awards

(1) The market value is based on $2.05 of closing price as of December 31, 2023.

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Director Compensation Table

The following table provides information regarding the total compensation that was earned by or paid to each person who served as our directors, other than executive directors, during the year ended December 31, 2023. Mr. Chun-Hsien Tsai is not included in the table below as he is employed as our President, Chief Executive Officer and Chairman of our Board whose compensation information is provided in the “Summary Compensation Table” above.

Non-Employee Director Compensation Policy (the “2021 NEDCP”)

On September 28, 2021, the Company’s Board of Directors adopted the Company’s Non-Employee Director Compensation Policy (the “2021 NEDCP” or “Policy”). On appointment to the Board, and without any further action of the Board or Compensation Committee of the Board, at the close of business on the day of such appointment, each Non-Employee Director will automatically receive an award of 22,000 restricted stock units (“RSUs”), adjusted to 4,400 shares giving effect to the 1 for 5 reverse stock split on December 14, 2023, over Common Stock (the “Appointment Grant”). The Appointment Grant shall vest in three equal annual installments, with the first installment vesting on the last day of the six-month period commencing on the grant date and each subsequent installment vesting on the last day of the six-month period commencing on the next two subsequent anniversaries of the grant date, subject to the Director’s continuous service with us on each applicable vesting date. The RSUs shall be granted pursuant to the Company’s 2021 Stock Incentive Plan and shall be subject to such other provisions set forth in the agreement evidencing the award of the RSUs, in the form adopted from time to time by the Board or the Compensation Committee of the Board.

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In addition to the RSU grants, each member of the Board of who is not an employee of the Company or any of subsidiaries will receive the cash compensation set forth below for service on the Board. The annual cash compensation amounts will be payable in equal quarterly installments, in arrears following the end of each quarter in which the service occurred, pro-rated for any partial months of service. All annual cash fees are vested upon payment.

Annual Board Service Retainer:

All Eligible Directors: $ 12,000

Chairperson of the Board: $ 14,000

Annual Committee Chair Service Retainer:

Chairperson of the Audit Committee: $ 7,000

Chairperson of the Compensation Committee: $ 4,500

Annual Committee Member Service Retainer:

Member of the Audit Committee: $ 4,000

Member of the Compensation Committee: $ 3,000

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth certain information, as of March 7, 2024, with respect to the holdings of (1) each person who is the beneficial owner of more than 5% of our common stock, (2) each of our directors, (3) each of our named executive officers, and (4) all of our current directors and executive officers as a group.

Beneficial ownership of the common stock is determined in accordance with the rules of the SEC and includes any shares of common stock over which a person exercises sole or shared voting or investment power, or of which a person has a right to acquire ownership at any time within 60 days of March 7, 2024. Applicable percentage ownership in the following table is based on 5,954,317 shares of common stock plus, for each individual, any securities that individual has the right to acquire within 60 days of March 7, 2024.

The information in the table below is based on information known to us or ascertained by us from public filings made by the stockholders. Except as otherwise indicated in the table below, addresses of the director, executive officers and named beneficial owners are in care of Ainos, Inc. at 8880 Rio San Diego Drive, Suite 800, San Diego, CA, 92108.

We are not aware of any arrangements, including any pledge by any person of securities of our Company or any of its parents, the operation of which may at a subsequent date result in a change in control of our Company.

Security ownership of certain beneficial owners:

Security ownership of management and directors:

All Directors and Executive Officers as a Group (9 persons) 779,085 13.08 %

*Represents beneficial ownership of less than 1%

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Equity Compensation Plan Information

The following table summarizes our equity compensation plan information as of December 31, 2023.

Equity compensation plans not approved by security holders 6,034 (5) $ 19.88 -

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Certain Relationships and Related Party Transactions

In addition to the executive officer and director compensation arrangements discussed above under Item 11 “Executive Compensation”, since January 1, 2022, the following are the only transactions or series of similar transactions to which we were or will be a party in which the amount involved exceeds $120,000 and in which any director, nominee for director, executive officer, beneficial holder of more than 5% of our common stock or any member of their immediate family or any entity affiliated with any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change of control and other arrangements, which are described under “Executive Compensation.

Purchase of intangible assets and equipment

Asset Purchase Agreement

Ainos KY and the Company entered into an Asset Purchase Agreement dated as of November 18, 2021 (the “Asset Purchase Agreement”), as modified by an Amended and Restated Asset Purchase Agreement dated as of January 29, 2022 (the “Amended Asset Purchase Agreement”).

Pursuant to the Asset Purchase Agreement, the Company acquired certain intellectual property assets and certain manufacturing, testing, and office equipment for a total purchase price of $26,000,000 that included $24,886,023 for intangible intellectual property assets and $1,113,977 for equipment. As consideration, the Company issued to Ainos KY a convertible promissory note in the principal amount of $26,000,000 upon closing on January 30, 2022 (the “APA Convertible Note”). Ainos KY converted all of the APA Convertible Note on or about August 8, 2022 upon the Company’s up-listing to the Nasdaq Capital Market.

Working Capital Advances

Ainos KY provided $800,000 in cash in exchange of a promissory note to support working capital of the Company in March 2022 (the “KY Note”). The Company paid off $530,000 of the KY Note during the year ended December 31, 2023. The KY Note bear an interest rate of 1.85% per annum. On August 17, 2023, the Company entered into extension agreements with Ainos KY to extend the maturity of the KY Note to March 31, 2025.

On March 13, 2023, the Company entered into a convertible promissory note purchase agreements pursuant to Regulation S of the Securities Act of 1933, as amended, in the total principal amount of $2,000,000 with ASE Test, Inc. (the “ASE”), a shareholder of Ainos KY (the “ASE Note”) to support working capital of the Company.

Purchase and Sales

Ainos COVID-19 Test Kits Sales and Marketing Agreement with Ainos KY

On June 14, 2021, the Company entered into an exclusive agreement with Ainos KY to serve as the master sales and marketing agent for the Ainos COVID-19 Antigen Rapid Test Kit and COVID-19 Nucleic Acid Test Kit which were developed and manufactured by Taiwan Carbon Nano Technology Corporation (the “TCNT”) (the “Sales and Marketing Agreement”). On June 7, 2021, the Taiwan Food and Drug Administration (the “TFDA”) approved emergency use authorization (the “EUA”) to TCNT for the Ainos COVID-19 Antigen Rapid Test Kit sold and marketed under the “Ainos” brand name in Taiwan. On June 21, 2022, the Company began marketing the Ainos SARS-CoV-2 Antigen Rapid Self-Test (together with Ainos COVID-19 Antigen Rapid Test Kit, the “COVID-19 Antigen Rapid Test Kits”) under a separate EUA issued by the TFDA to TCNT on June 13, 2022.

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The Company incurred costs associated with manufacturing COVID-19 Antigen Rapid Test Kits by TCNT pursuant to the Sales and Marketing Agreement, totaling $46,635 and $1,968,291 for the years ended December 31, 2023 and 2022, respectively.

Product Development Agreement with TCNT

Pursuant to a five-year Product Development Agreement (the “Product Development Agreement”) with TCNT, effective August 1, 2021, the development expenses incurred were $368,372 and $618,522 for the years ended December 31, 2023 and 2022, respectively.

On January 9, 2024, the Company and TCNT entered into an addendum to the Product Development Agreement (the “Addendum Agreement”) in connection with the scope of co-development and certain terms. For products defined in the Addendum agreement, TCNT will provide facilities, equipment, mass production process technology, ISO9001 and ISO13485 related management, as well as mass production support. The procurement of parts and raw materials, rental fees, and utility expenses are excluded. The Company will pay a total fee of NT$5 million (USD$162,840) for five-years of development commencing from January 2024. The Company prepaid the full amount of the fee on January 10, 2024 at TCNT’s request. In addition, TCNT will provide non-exclusive use of certain patents related to VOC and POCT technologies for a monthly fee of $95,000 (plus 5% indirect tax), with negotiable payment terms for six months from January 2024 to June 2024. The subsequent use of the patents after June 2024 will be discussed at a later date. As of the date of the report, the Company has paid $285,000 (plus 5% indirect tax) of license fee to TCNT.

COVID-19 Antigen Rapid Test Kits Sales

The Company sold COVID-19 Antigen Rapid Test Kits to ASE’s affiliates, totaling $33,388 and $2,855,205 for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, the accounts receivable was nil and $177,595, respectively.

Controlling Shareholder

Taiwan Carbon Nano Technology Corporation (the “TCNT”) holds majority share of Ainos KY, which holds majority voting power of the Company as of December 31, 2023.

Director Independence

We are a “controlled company” as defined in Rule 5615(c)(1) of the Nasdaq Listing Rules because more than 50% of our voting power is held by Ainos KY through direct shareholding and voting agreement dated January 26, 2024 by and among Ainos KY, and Chun-Hsien Tsai, Ting Chuan Lee, Chun-Jung Tsai, and Chung-Yi Tsai. As a “controlled company,” we are exempt from the requirements of Rule 5605(b), (d) and (e) of the Nasdaq listing standards that would otherwise require us to have (i) a majority of independent directors on the Board, (ii) compensation and nominating committees composed solely of independent directors, (iii) the compensation of executive officers determined by a majority of the independent directors or a compensation committee composed solely of independent directors, and (iv) director nominees selected or recommended to the Board for selection, either by a majority of the independent directors, or a nominating committee composed solely of independent directors. Consequently, we are exempt from independent director requirements of Rule 5605(b), (d) and (e) of the Nasdaq Listing Rules, except for the requirements under subsection (b)(2) thereof pertaining to executive sessions of independent directors and those under subsection (c) thereof pertaining to the Audit Committee. Currently, we have an Audit Committee and Compensation Committee composed solely of independent directors.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

KCCW Accountancy Corp. (KCCW) was approved and appointed as our principal accounting firm starting Q1 of 2023. The fees billed or will be billed by KCCW is as below:

Audit Fees

The aggregate fees billed and will be billed by our principal auditor for professional services rendered for the audit of annual financial statements, and for the review of quarterly financial statements for the fiscal year ended December 31, 2023, were $135,000 and were pre-approved by the Audit Committee of the Board of Directors. In addition, the fees related to re-audit of annual financial statement for the fiscal year ended December 31, 2022 were $60,000 which were also pre-approved by the Audit Committee of the Board of Directors.

Audit Related Fees: None.

Tax Fees: None.

All Other Fees: None.

Accountant Approval Policy

Before an accountant is engaged by the Company to perform audit or non-audit services, the accountant must be approved by the Company’s Audit Committee. We filed the Charter of the Audit Committee of the Board of Directors in our Form 10-Q with the SEC on November 15, 2021 which describes the committee’s pre-approval policies and procedures, attached hereto as Exhibit 99(ii) and is incorporated by this reference.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Report of Independent Registered Public Accounting Firm (PCAOB ID:2851) F-2

Statements of Operations for the years ended December 31, 2023 and 2022 F-5

Statements of Cash Flows for the years ended December 31, 2023 and 2022 F-8

Notes to Financial Statements for the years ended December 31, 2023 and 2022 F-9

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EXHIBIT INDEX

INCORPORATED BY REFERENCE

4.7 Description of securities X

9.1 Voting Agreement dated September 2, 2022 13D/A 1 Voting Agreement

9.4 Voting Agreement dated on March 7, 2024 X Voting Agreement

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24.1 Power of Attorney X

97.1 Clawback policy X

The exhibits listed in the Exhibit Index are filed or incorporated by reference as part of this filing.

* Indicates a management contract or compensatory plan or arrangement.

ITEM 16. FORM 10-K SUMMARY.

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the 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.

Date: March 8, 2024 By: /s/ Chun-Hsien Tsai

Chun-Hsien Tsai, Chairman of the Board, President, and

Chief Executive Officer

By: /s/ Meng-Lin Sung

Meng-Lin Sung, Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

Chun-Hsien Tsai

/s/ Meng-Lin Sung Chief Financial Officer March 8, 2024

Meng-Lin Sung

/s/ Wen-Han Chang Director March 8, 2024

Wen-Han Chang