Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Summary of Significant Accounting Policies
Organization and Business
Ainos Inc. (the “Company”, “we” or “us”), is engaged in developing medical technologies for point-of-care (“POCT”) testing and safe and novel medical treatment for a broad range of disease indications. Since our inception in 1984, we have concentrated our resources on business planning, raising capital, research and clinical development activities for our programs, securing related intellectual property and commercialization of proprietary therapeutics using low-dose non-injectable interferon (“IFN”). In addition to our core IFN technology, we are committed to developing a diversified healthcare business portfolio to include medical devices and consumer healthcare products.
We have historically been involved in extensive research and development of low-dose oral interferon as a therapeutic. We continue to develop our VELDONA platform and other pharmaceutical platforms and recently have acquired intellectual properties to expand our POCT business. In 2021 and 2022, we acquired significant intellectual property from our majority shareholder, Ainos KY, to expand our potential product portfolio into Volatile Organic Compounds (“VOC”) and COVID-19 POCTs.
Underwritten Public Offering
The Company’s registration statement related to its underwritten public offering (“Offering”) was declared effective on August 8, 2022, and the Company’s common stock and warrants began trading on the Nasdaq Capital Market (“Nasdaq”) on August 9, 2022 under the trading symbols “AIMD” and “AIMDW”, respectively. The Company completed its underwritten public offering of an aggregated 780,000 units at a public offering price of $4.25 per unit. Each unit issued in the offering consisted of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $4.25.
In connection with the Offering, the Company’s board of directors on April 29, 2022 and our shareholders on May 16, 2022 approved a 1-for-15 reverse stock split (the “Reverse Stock Split”) of the Company’s common stock and each series of its redeemable convertible notes to be consummated prior to the effectiveness of the Offering. The par value and authorized shares of the Company’s common stock were not adjusted as a result of the Reverse Stock Split. All issued and outstanding common stock, RSUs, warrants and options to purchase common stock and per share amounts contained in the financial statements have been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented.
The Company filed an amended Restated Certificate of Formation with the Secretary of State of Texas on August 8, 2022 that effectuated the Reverse Stock Split.
Basis of Presentation
The accompanying consolidated financial statements, which should be read in conjunction with the audited financial statements and footnotes included in the Company’s Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on April 3, 2023, have been prepared in accordance with the Generally Accepted Accounting Principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by for audited financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2023, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023.
Financial Condition
These accompanying unaudited financial statements have been prepared in accordance with GAAP, on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. At March 31, 2023 and December 31, 2022, we had available cash and cash equivalents of $1,146,132 and $1,853,362, respectively. We anticipate business revenues and potential financial support from outside sources to fund our operations over the next twelve months. The Company has generated revenues from sales of COVID-19 antigen test kits since the second quarter of 2021. However, due to uncertainties surrounding the progression of COVID-19 infection, there can be no assurance that we can continue grow the COVID-19 test business. Our ability to generate product revenue sufficient to achieve profitability will depend on further successful development and commercialization of one or more of our current or future product candidates and programs. We anticipate our POCT and VELDONA candidates to potentially generate organic cash flows to support our business operation. If we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution, and legal and regulatory compliance. We may also incur additional expenses associated with increased headcount and product development. Furthermore, we expect to incur more general and administrative expenses associated with operating as a public company, including significant legal, accounting, investor relations and other expenses.
Until we can generate significant revenue from product sales, the Company intends to seek additional funding through equity offerings or borrowing arrangements or licensing agreements or strategic alliances to implement its business plan. Please refer to the Subsequent Events section. The issuances of additional equity securities by the Company may result in dilution in the equity interests of its current stockholders. Obtaining commercial loans may increase the Company’s liabilities and future cash commitments.
We are unable to predict the timing or amount of unexpected expenses or when or if we will be able to increase significant revenue due to the numerous risks and uncertainties associated with product development and related legal regulatory requirements, and when we are eventually able to generate additional product sales or licensing income, those revenue may not be sufficient to become profitable. Furthermore, fundraising of emerging company is extremely challenging due to the high uncertainty of the overall economic environment at present. There can be no assurance that the revenue will be generated in time or capital will be available as necessary to meet the Company’s working capital requirements or, if the capital is available, that it will be on terms acceptable to the Company.
If the company is unable to generate cash inflow from operating activities in the near future, and cannot complete fundraising with sufficient amount and acceptable terms, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern, but the accompanying unaudited financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities.
2. Inventory
Inventories as of March 31, 2023 and December 31, 2022 consisted of the following:
| | March 31, | | | December 31, | |
| | 2023 | | | 2022 | |
Raw materials | | $ | 403,358 | | | $ | 393,253 | |
Work in process | | | 84,060 | | | | 111,119 | |
Finished goods | | | 84,972 | | | | 90,850 | |
Total | | $ | 572,390 | | | $ | 595,222 | |
Inventory write-downs to estimated net realizable values were $42,780 and $ 0 for the three months ended March 31, 2023 and 2022, respectively.
3. Stockholders’ Equity
Reverse Stock Split
On April 29, 2022, the Company’s board of directors and on May 16, 2022 our shareholders approved a 1-for-15 reverse stock split (the “Reverse Stock Split”) of the Company’s common stock and each series of its redeemable convertible notes to be consummated prior to the effectiveness of the Company’s underwritten public offering (“Offering”) on August 9, 2022. The par value and authorized shares of the Company’s common stock were not adjusted as a result of the Reverse Stock Split. All issued and outstanding common stock, RSUs, warrants and options to purchase common stock and per share amounts contained in the financial statements have been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented.
The Company filed an amended Restated Certificate of Formation with the Secretary of State of Texas on August 8, 2022, that effectuated the Reverse Stock Split.
Preferred Stock
We have 10,000,000 shares of preferred stock authorized for issuance. No shares of preferred stock were outstanding as of March 31, 2023 and none are outstanding as of the date of the Balance Sheet in this report.
Common Stock
The Company has reserved authorized shares of common stock for future issuance as of March 31, 2023, and December 31, 2022 as follows:
| | March 31, 2023 | | | December 31, 2022 | |
Conversion of convertible notes | | | 814,337 | | | | 145,355 | |
Unvested RSUs | | | 732,668 | | | | 800,000 | |
Vested RSU | | | 29,332 | | | | - | |
Stock options | | | 36,666 | | | | 36,666 | |
Warrants | | | 966,174 | | | | 966,174 | |
| | | 2,579,177 | | | | 1,948,195 | |
Warrants
A summary of the status of the Company’s warrants for the three months ended March 31, 2023 and 2022 are presented in the following table:
| | March 31, | |
| | 2023 | | | 2022 | |
| | Shares | | | Weighted Average Exercise Price | | | Shares | | | Weighted Average Exercise Price | |
Warrants outstanding at beginning of year | | | 966,174 | | | $ | 4.26 | | | | 30,174 | | | $ | 3.98 | |
Issued | | | - | | | | - | | | | - | | | | - | |
Warrants outstanding at the end of quarter | | | 966,174 | | | | 4.26 | | | | 30,174 | | | $ | 3.98 | |
Exercisable at the end of quarter | | | 966,174 | | | | 4.26 | | | | 30,174 | | | $ | 3.98 | |
4. Share-Based Compensation
2018 Employee Stock Option Plan (the “2018-ESOP”).
On September 26, 2018, the Board adopted the Company 2018 Employee Stock Option Plan (the “2018-ESOP”), formerly referred to as the “Amarillo Biosciences, Inc., 2018 Employee Stock Option Plan” in prior filings. The 2018-ESOP provides for the grant of Qualified Incentive Stock Options to the Company’s employees. Qualified options automatically became non-qualified options effective September 26, 2019 and was governed under the 2018-NQSOP described below because the plan was not ratified by our shareholders. The maximum number of shares of common stock authorized under the plan was 66,666 shares. The option price per share of common stock deliverable upon the exercise of an incentive stock option was 100% of the fair market value of a share on the date of grant. The option price is $5.70 per share and the options are exercisable during a period of ten years from the date of grant, where the options vest 20% annually over five years, commencing one year from date of grant.
Effective as of October 6, 2021, with the adoption by the Board of the 2021 SIP, no further awards may be granted under the 2018-ESOP.
2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan (the “2018-NQSOP”)
On September 26, 2018, the Board adopted the Company 2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan (the “2018-NQSOP”), formerly referred to as the “Amarillo Biosciences, Inc., 2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan” in prior filings. The 2018-NQSOP provides for the grant of nonqualified incentive stock options to employees. The 2018-NQSOP is administered by the Board or by the Compensation Committee as constituted from time to time. The maximum number of shares of common stock which may be issued under the 2018-NQSOP is 266,666 which will be reserved for issuance upon exercise of options. The option price for the nonqualified options is $5.73 exercisable for a period of ten years, with a vesting period of five years at 20% per year commencing one year from date of grant.
Effective as of October 6, 2021, with the adoption by the Board of the 2021 SIP, no further awards may be granted under the 2018-NQSOP. As of March 31, 2023, options to acquire 36,666 shares of common stock remained outstanding.
2021 Employee Stock Purchase Plan
On September 28, 2021, the Board and on May 16, 2022 our shareholders, respectively, approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP” or “Plan”). The purpose of the 2021 ESPP is to provide an opportunity for eligible employees of the company and its designated companies (as defined in the Plan) to purchase common stock at a discount through voluntary contributions, thereby attracting, retaining and rewarding such persons and strengthening the mutuality of interest between such persons and the Company’s stockholders. The Company intends for offerings under the Plan to qualify as an “employee stock purchase plan” under Section 423 of the Code; provided, that the Plan administrator may also authorize the grant of rights under offerings that are not intended to comply with the requirements of Section 423, pursuant to any rules, procedures, agreements, appendices, or sub-plans adopted by the administrator. Subject to adjustments as provided in the Plan, the maximum number of shares of common stock that may be issued under the Plan may not exceed 50,000 shares. Such shares may be authorized but unissued shares, treasury shares or shares purchased in the open market. The Plan is subject to approval by the Company’s stockholders within twelve months after the date of Board approval. The Plan will become effective on the date that stockholder approval is obtained, and will continue in effect until it expires on the tenth anniversary of the effective date of the Plan, unless terminated earlier.
2021 Stock Incentive Plan
On September 28, 2021, the Board and on May 16, 2022 our shareholders, respectively, approved the 2021 Stock Incentive Plan (the “2021 SIP” or “Plan”). The purpose of the 2021 SIP is to provide a means through which the Company, and the other members of the Company Group, defined by Section 2(n) of the Plan as the Company and its subsidiaries, and any other affiliate of the Company designated as a member of the Company Group by the Committee, may attract and retain key personnel, and to provide a means whereby directors, officers, employees, consultants and advisors of the Company and the other members of the Company Group can acquire and maintain an equity interest in the Company, or be paid incentive compensation measured by reference to the value of common stock, thereby strengthening their commitment to the interests of the Company Group and aligning their interests with those of the Company’s stockholders. The types of awards that may be granted from the Plan include individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Dividend Equivalent Rights and Other Equity-Based Award granted under the Plan. The Plan became effective on June 21, 2022. The expiration date of the Plan, on and after which date no awards may be granted, is October 6, 2031 (the tenth anniversary of the date of Board approval of the Plan), provided, however, that such expiration will not affect awards then outstanding, and the terms and conditions of the Plan will continue to apply to such Awards. The aggregate number of shares which may be issued pursuant to awards under the Plan is 1,333,333 shares of Common Stock (the “Plan Share Reserve”), subject to adjustments as provided in the Plan. The number of shares underlying any award granted under 2018 ESOP or 2018 NQSOP (the “Prior Plans”) that expires, terminates or is canceled or forfeited for any reason whatsoever under the terms of the Prior Plans, will increase the Plan Share Reserve. Each Award granted under the Plan will reduce the Plan Share Reserve by the number of shares underlying the award. No more than 666,666 shares may be issued in the aggregate pursuant to the exercise of incentive stock options granted under the Plan. The maximum number of shares subject to awards granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such director during the fiscal year, will not exceed $600,000 in total value (calculating the value of any such awards based on their grant date fair value for financial reporting purposes).
During the first quarter of 2023, the Company did not issue any award under the 2021 SIP.
Restricted Stock Units
RSUs entitle the recipient to be paid out an equal number of common stock shares upon vesting. The fair value of RSUs is based on market price of the underlying stock on the date of grant. A summary of the Company’s RSU activity and related information for the three months ended March 31, 2023, is as follows:
| | Number of RSUs | | | Weighted- Average Grant Date Fair Value Per RSU | |
Unvested balance at December 31, 2022 | | | 800,000 | | | $ | 2.42 | |
RSUs granted | | | - | | | $ | N/A | |
RSUs vested | | | (29,332 | ) | | $ | 11.1 | |
RSUs canceled | | | (38,000 | ) | | $ | 1.43 | |
Unvested balance at March 31, 2023 | | | 732,668 | | | $ | 2.12 | |
Stock Options
A summary of option activity for the three months ended March 31, 2023 is presented below:
Date | Number of Options 1Qualified | Number of Options 2 Nonqualified | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value |
Balance at December 31, 2021 | 3,333 | 33,333 | $5.70 | 9.54 yrs | - |
Granted | - | - | - | - | - |
Exercised | - | - | - | - | - |
Expired or Forfeited | - | - | - | - | - |
Balance at December 31, 2022 | 3,333 | 33,333 | $5.70 | 8.55 yrs | - |
Granted | - | - | - | - | - |
Exercised | - | - | - | - | - |
Expired or Forfeited | - | - | - | - | - |
Balance at March 31, 2023 | 3,333 | 33,333 | $5.70 | 8.32 yrs | - |
Exercisable at March 31, 2023 | 2,666 | 11,111 | $5.70 | 8.32 yrs | - |
1 Because the 2018 Employee Stock Option Plan was not ratified by the Company’s shareholders, the qualified options became non-qualified on September 26, 2019. These totals remain separated since the two different plans are still in existence. The Company used the Black-Scholes option pricing model to value the option awards with the following assumptions applied: (1) Volatility – 276%; (2) Term – 5 years was chosen although the full option term is 10 years to be more commensurate with the 5-year vesting portion of the plan; (3) Discount – 2.96%.
2 The Company used the Black-Scholes option pricing model to value the option awards with the following assumptions applied: (1) Volatility – 238%; (2) Term – 3 years was chosen although the full option term is 5 years to be more commensurate with the 3-year vesting portion of the plan; (3) Discount – 0.81%.
Warrants
On November 25, 2020, the Company issued a warrant to i2China Management Group, LLC, a related party of the Company since August 1, 2021. The warrant entitles the holder to purchase 30,174 shares at $3.98 and expires on November 24, 2025.
Share-Based Compensation
Shared-based compensation for the three months ended March 31, 2023 and 2022 were $220,832 and $43,443, respectively.
As of March 31, 2023, the total unrecognized compensation cost related to outstanding RSUs, stock options and warrant was $1,672,370, which the Company expects to recognize over a weighted-average period of 1.69 years.
5. Current Convertible Notes Payable and Other Notes Payable
As of March 31, 2023, and December 31, 2022, the amount of Current convertible and other notes payable totaled $1,060,526 and $1,260,526, respectively. The details of the convertible notes payable and other notes payable are shown in the table below:
Payee | No. | Effective Date | Due Date | From Effective | Following Maturity | Conversion Rate | Issuing Purpose | As of 12/31/2022 | Addition | Payment | As of 3/31/2023 | Accrued Interest |
Current Convertible Notes Payable: |
Stephen Chen | #1.16 | 1/30/2016 | Payable on demand | 0.75% | N/A | $ 2.52 | working capital | 114,026 | - | - | 114,026 | 6,905 |
Stephen Chen | #2.16 | 3/18/2016 | Payable on demand | 0.65% | N/A | $ 2.81 | working capital | 262,500 | - | - | 262,500 | 12,004 |
Total convertible notes payable- related parties | 376,526 | - | - | 376,526 | 18,909 |
Non-Convertible Notes Payable: | | | | | | | | | | |
Ainos KY | #26.22 (2) | 3/4/2022 | 3/31/2023 | 1.85% | N/A | N/A | working capital | 800,000 | - | (200,000) | 600,000 | 11,952 |
| | | Non-convertible notes payable-related party | 800,000 | - | (200,000) | 600,000 | 11,952 |
i2 China | #8b.20 | 1/1/2020 | 1/1/2021 | 1.85% | N/A | N/A | consulting fee | 84,000 | - | - | 84,000 | 5,109 |
| | | Non-Convertible Notes payable- non-related party | 84,000 | - | - | 84,000 | 5,109 |
| | | Total non-convertible notes payable | 884,000 | - | (200,000) | 684,000 | 17,061 |
| | Total convertible and non-convertible | 1,260,526 | - | (200,000) | 1,060,526 | 35,970 |
All of the aforementioned convertible promissory notes and other notes payable are unsecured and due on demand upon maturity. The Company may prepay the notes in whole or in part at any time. The holder of convertible notes has the option to convert some or all of the unpaid principal and accrued interest to our common voting stock.
The total interest expense of convertible notes payable and other notes payable for the three months ended March 31, 2023, and 2022 were $3,810 and $15,883, respectively; the cumulative related accrued interest as of March 31, 2023 and December 31, 2022 were $35,970 and $35,282, respectively.
6. Non-Current Convertible Notes Payable.
As of March 31, 2023 and December 31, 2022, the amounts of non-current convertible notes payable were $2,500,000 and $0, respectively.
APA Convertible Note
On January 30, 2022, we issued to Ainos KY a Convertible Promissory Note in the principal amount of $26,000,000 (the “APA Convertible Note”) for the Asset Purchase Transaction as more particularly described below in Note 7. The principal sum of the APA Convertible Note is payable in cash on January 30, 2027, although prepayment was permitted in whole or in part without penalty. The APA Convertible Note was noninterest bearing.
March 2027 Convertible Notes
The Company issued Convertible Notes pursuant to certain Convertible Note Purchase Agreements under Regulation S. The transactions are more particularly described below:
| · | $50,000 Convertible Note issued on March 31, 2022, to Yun-Han Liao. The purchaser is the daughter of Wu Hui-Lan, the Company’s Chief Financial Officer. |
| | |
| · | $850,000 aggregate Convertible Notes issued on March 28, 2022, to Chih-Cheng Tsai, Ming-Hsien Lee, Yu-Yuan Hsu, and Top Calibre Corporation, a British Virgin Islands company. |
| | |
| · | $500,000 Convertible Note issued on April 11, 2022, to ASE Test Inc., a minority owner of Ainos KY. |
| | |
| · | The above Convertible Notes totaling $1,400,000 are collectively referred to as the “March 2027 Convertible Notes”. |
The Principal Amounts of the March 2027 Convertible Notes were payable in cash on March 30, 2027, although the Company was permitted to prepay the Convertible Notes in whole or in part without penalty. The March 2027 Convertible Notes were non-interest bearing.
The non-current convertible notes payable as of August 9, 2022, in the aggregate total amount of $27,400,000 were all converted to 8,058,818 shares of common stock on that day.
March 2025 Convertible Notes
On March 13, 2023, we entered into two convertible note purchase agreements made pursuant to Regulation S of the Securities Act of 1933 relating to the sale of convertible notes, under which the Company issued and sold two convertible promissory notes (the “March 2025 Convertible Notes” or “Notes”) in the total principal amount of US$3 million to the following investors:
Convertible Note Sale to ASE Test, Inc.
Pursuant to a Convertible Note Purchase Agreement dated as of March 13, 2023, ASE Test, Inc. (a shareholder of the Company’s controlling shareholder, Ainos, Inc., a Cayman Islands corporation) committed to pay a total aggregate amount of $2,000,000 U.S.D. (the “Principal Amount”) to the Company in exchange for one or more Convertible Promissory Note(s) issued by the Company in the total aggregate Principal Amount (the “ASE Note”). The Purchaser’s obligation to pay the total aggregate Principal Amount in three (3) tranches in the amounts of One Million Dollars (USD $1,000,000) (the “First Tranche”), Five Hundred Thousand Dollars (USD $500,000) (the “Second Tranche”), and Five Hundred Thousand Dollars (USD $500,000) (the “Third Tranche”) is conditioned, among other things, on the Company achieving certain business benchmarks. ASE Test, Inc. purchased Notes for an aggregated principal amount of $1.5 million in the first quarter of 2023 disclosed in other receivable and its obligation to pay $500,000 remains outstanding and contingent on the Company achieving certain business benchmarks.
Convertible Note Sale to Li-Kuo Lee
Pursuant to the Convertible Note Purchase Agreement dated as of March 13, 2023, Li-Kuo Lee committed to pay $1,000,000 U.S.D. (the “Principal Amount”) to the Company in exchange for a Convertible Promissory Note issued by the Company (the “Lee Note”). Li-Kuo Lee. purchased Notes for an aggregated principal amount of $1 million in the first quarter of 2023. The total interest expense for the three months ended March 31, 2023 was $3,123; the related accrued interest as of March 31, 2023 was $3,123.
The above-referenced Notes will mature in two years from the issuance dates, bearing interest at the rate of 6% compounded interest per annum. At any time after the issuance and before the maturity date, the Notes are convertible into the common shares of the Company. The conversion price is US$1.50 per common share, subject to adjustment as set forth in the Notes. Unless previously converted, the Company shall repay the outstanding principal amount plus all accrued and unpaid interest on the maturity date. The Note shall be an unsecured general obligation of the Company.
7. Related Party Transactions.
The following is a summary of related party transactions that met our disclosure threshold:
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, we 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 we 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 APA Convertible Note on or about August 8, 2022 upon the Company up-listing to the Nasdaq Capital Markets.
Working Capital Advances
Except for the payment of purchasing the intangible assets and equipment, all convertible and other notes payable were issued either as a result of financing or deferred compensation provided by shareholders.
In the first quarter of 2023 and 2022, Ainos KY provided working capital advances in the form of non-convertible note financing in the aggregate amount of $0 and $800,000, respectively. As of March 31, 2023, and December 31, 2022, the non-convertible notes payable to Ainos KY totaled $600,000 and $800,000, respectively.
On March 13, 2023, ASE Test, Inc. (the “ASE”), an affiliate of the Company, provided the Company financing in the form of a convertible notes in the principal amount of $1,500,000. Pursuant to that certain Convertible Note Purchase Agreement dated as of March 13, 2023, ASE’s obligation to pay (and the Company’s obligation to issue a convertible note) additional $500,000 remains outstanding and contingent on the Company achieving certain business benchmarks.
As of March 31, 2023, and December 31, 2022, the convertible notes payable to Dr. Stephen T. Chen were both $376,526.
The above-referenced convertible and other notes payable are particularly described in Notes 5 and 6 to the unaudited condensed consolidated financial statements.
Purchase and Sales
Ainos COVID-19 Test Kits Sales and Marketing Agreement with Ainos KY
On June 14, 2021, we entered into an exclusive agreement 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 with Ainos KY (the “Sales and Marketing Agreement”) which was developed by Taiwan Carbon Nano Technology Corporation (the “TCNT”), an affiliate of the Company. On June 7, 2021, the Taiwan Food and Drug Administration (the “TFDA”) approved emergency use authorization to TCNT for the Ainos COVID-19 Antigen Rapid Test Kit that will be sold and marketed under the “Ainos” brand in Taiwan. On June 21, 2022, we began marketing the Ainos SARS-CoV-2 Antigen Rapid Self-Test (“COVID-19 Antigen Self-Test Kit”) under a separate EUA issued by the TFDA to TCNT on June 13, 2022. As TCNT secures regulatory authorizations from foreign regulatory agencies, the Company expects to partner with regional distributors to promote sales in other strategic markets.
We incurred costs associated with finished goods, raw materials and manufacturing fees for Covid-19 antigen rapid test kits from TCNT pursuant to the Sales and Marketing Agreement, totaling $46,762 and $386,412 for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 and December 31, 2022, the accounts payable to TCNT were $31,930 and $24,365, respectively.
COVID-19 Antigen Rapid Test Kits Sales
We sold Covid-19 antigen rapid test kits to ASE Technology Holding and Silicon Precision Industries Co., Ltd., an affiliate of the Company, totaling $0 and $81,100 for the three months ended March 31, 2023 and 2022, respectively. As of March 31,2023, and December 31, 2022, the accounts receivable to aforementioned related parties were $103,448 and $177,795, respectively.
Product Co-development Agreement
Pursuant to the five-year product co-development agreement effective on August 1, 2021 (the “Product Co-Development Agreement”) with TCNT, an affiliate of the Company, we incurred development expenses totaling $77,463 and $167,422 for the three months ended March 31, 2023 and 2022. As of March 31, 2023 and December 31, 2022, the accrued payables were $27,186 and $70,113, respectively.
8. Commitments and Contingencies
On March 13, 2023, ASE Test, Inc. (the “ASE”), an affiliate of the Company, provided the Company financing in the form of a convertible notes in the principal amount of $1,500,000. Pursuant to that certain Convertible Note Purchase Agreement dated as of March 13, 2023, ASE’s obligation to pay (and the Company’s obligation to issue a convertible note) and additional $500,000 remains outstanding and contingent on the Company achieving certain business benchmarks.
9. Subsequent Events.
On March 13, 2023, ASE Test, Inc. (the “ASE”), an affiliate of the Company, provided the Company financing in the form of a convertible notes in the principal amount of $1,500,000. Pursuant to that certain Convertible Note Purchase Agreement dated as of March 13, 2023, ASE’s obligation to pay (and the Company’s obligation to issue a convertible note) additional $500,000 remains outstanding and contingent on the Company achieving certain business benchmarks.
On April 4, 2023, the Company filed a Schedule 14-C Definitive Information to effectuate an amendment to its 2021 Stock Incentive Plan, now restated as the Company 2023 Stock Incentive Plan (the “2023 SIP” or “Plan”) which includes, among other things, a change in the number of reserved shares under the Plan. Under the 2023 SIP, subject to a change in capital structure or a change in control, the aggregate number of shares which may be issued or transferred pursuant to awards under the Incentive Plan will be equal to up to twenty percent (20%) of shares of outstanding common stock of the Company existing as of December 31st of the previous calendar year (the “Plan Share Reserve”). The effective date of the 2023 SIP is May 1, 2023.
On April 10, 2023, the Company issued a total of 29,332 shares of common stock to four (4) non-employee directors (each receiving 7,333 shares) pursuant to each of their Global Non-Employee Director Restricted Stock Unit Agreement dated July 28, 2022 and the Company’s 2021 Stock Incentive Plan.