Ainos(AIMD) - 2021 Q1 - Quarterly Report

PART I: FINANCIAL INFORMATION Financial Statements The company's Q1 2021 financials show declining revenue, a wider net loss, and a strained balance sheet Balance Sheets The balance sheet as of March 31, 2021 reflects decreased assets, increased liabilities, and a larger stockholders' deficit Balance Sheet Summary (Unaudited) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $42,267 | $76,413 | | Cash and cash equivalents | $9,377 | $22,245 | | Total Assets | $222,239 | $260,290 | | Total Current Liabilities | $1,500,418 | $1,098,568 | | Convertible notes payable – related party | $915,016 | $953,001 | | Total Liabilities | $1,500,418 | $1,098,568 | | Total stockholders' equity (deficit) | ($1,278,179) | ($838,278) | Statements of Operations Q1 2021 operations resulted in a sharp revenue decline and a significantly wider operating and net loss year-over-year Quarterly Operating Results (Unaudited) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Revenues | $2,121 | $15,200 | | Gross Margin | $872 | $4,394 | | Operating Loss | ($522,109) | ($375,874) | | Net Loss | ($534,006) | ($376,879) | | Basic and Diluted Net Loss Per Share | ($0.01) | ($0.01) | Condensed Statements of Cash Flows Q1 2021 cash flow shows continued operational cash burn, reliance on related-party financing, and a sharp drop in cash reserves Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($115,712) | ($119,482) | | Net cash provided by financing activities | $102,844 | $0 | | Net change in cash | ($12,868) | ($119,482) | | Cash and cash equivalents at end of period | $9,377 | $289,557 | Notes to Financial Statements Notes reveal substantial going concern doubt, significant related-party debt, and a post-quarter change of control - The company operates through three divisions: Pharmaceutical (low-dose interferon), Medical (diabetes technology), and Consumer (nutraceuticals)[13] - The financial statements were prepared on a going concern basis, but the company's history of losses and dependence on financing raise substantial doubt about its ability to continue operations[15][16][17] - As of March 31, 2021, the principal balance of convertible promissory notes, primarily to Chairman Dr. Stephen T. Chen and consultant i2China, was $915,016[19] - On April 15, 2021, the company completed a Securities Purchase Agreement with Ainos, Inc. (Cayman Islands), resulting in the investor gaining approximately 70.30% ownership, a change of control, and a new board and CEO[30] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses operational diversification, a change of control, poor Q1 results, and critical liquidity issues - The company's core technology is low-dose, non-injectable interferon-alpha, but it is expanding into a diversified healthcare portfolio to generate new revenue streams[36][38][39] - The company acquired patent assets for point-of-care testing by issuing 100 million shares to Ainos, Inc. (Cayman Islands), resulting in a change of control[46][48] Q1 2021 vs Q1 2020 Performance | Metric | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue | $2,121 | $15,200 | -86% | | Gross Profit | $872 | $4,394 | -80% | | Operating Loss | ($522,109) | ($375,874) | +39% | | Net Loss | ($534,006) | ($376,879) | +42% | - The company's liquidity is severely constrained, with cash of $9,377 and a working capital deficit of $1,458,151 as of March 31, 2021, and it estimates needing $3M to $6M for short-term project development[75][76] Quantitative and Qualitative Disclosures About Market Risk The company is exempt from market risk disclosures as a "smaller reporting company" - As a "smaller reporting company," Ainos, Inc. is exempt from providing quantitative and qualitative disclosures about market risk[77] Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective as of March 31, 2021 - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[78] - Based on the COSO framework (2013), management concluded that internal control over financial reporting was effective as of March 31, 2021[80] - No material impact on internal controls was reported due to the COVID-19 pandemic and work-from-home arrangements[81] PART II: OTHER INFORMATION Legal Proceedings The company reports no material legal proceedings or claims as of the report date - The company is not currently involved in any material lawsuits or legal proceedings[82] Risk Factors Key risks include intense competition, critical supply chain disruptions for interferon, and challenges of expansion - The company faces intense competition from larger, better-capitalized pharmaceutical and biotechnology companies[85][86] - A significant supply risk exists as the company's long-time human interferon producer is no longer manufacturing the product, which has placed further clinical trials and commercialization on hold[94] - Expansion into new products and geographic regions places a significant strain on management, financial, and operational resources[87] - International operations expose the company to risks such as local political conditions, government regulations, and currency exchange restrictions[90] Unregistered Sales of Equity Securities and Use of Proceeds The company has an open private placement offering and recently rescinded a chairman's subscription, converting it to a note - A 2020-1 Private Placement offering of up to 5,208,334 shares at $0.192 per share is currently open for investment[98] - A $100,000 stock subscription by the Chairman was rescinded, with the $85,000 already paid being converted into a promissory note for the company[99] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[100] Other Information The company amended and extended employment agreements for key executives on March 31, 2021 - The company extended the employment agreement for Stephen T. Chen to the closing date of the Ainos Agreement[100] - The company extended the employment agreement for Bernard Cohen to April 5, 2021[101] Exhibits This section indexes all exhibits filed with the report, including agreements, certifications, and related filings - Lists exhibits filed with the report, including amendments to employment agreements and various certifications required by the Sarbanes-Oxley Act[103][105][106]