{"url_path":"/sec/aimd/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-03-30","source_url":"https://www.sec.gov/Archives/edgar/data/1014763/0001493152-26-013579-index.html","accession_number":"0001493152-26-013579","cik":"0001014763","ticker":"AIMD","issuer_name":"Ainos, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1014763/0001493152-26-013579-index.html","primary_entity_key":"0001014763","primary_entity_name":"Ainos, Inc."},"word_count":4450,"has_tables":true,"body_markdown":"**ITEM\n7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**\n\n \n\n*The\nfollowing discussion and analysis of our financial condition and results of operations should be read together with our financial statements\nand related notes appearing elsewhere in this Annual Report on Form 10-K, as well as the Risk Factors contained in Part I, Item 1A of\nthis Annual Report on Form 10-K, and other information provided from time to time in our other filings with the SEC.*\n\n \n\n**Overview**\n\n** **\n\nAinos,\nInc. (the “Company”), incorporated in the State of Texas in 1984, is a dual-platform company advancing artificial intelligence–based\nsmelltech technologies and immune therapeutics. Our primary strategic focus is the commercialization of our proprietary scent digitization\nplatform, AI Nose, while we also continue to develop therapeutic assets based on our low-dose oral interferon program, VELDONA®.\nPlease refer to “Business” in Part I, Item 1 for description of our business.\n\n \n\n**Key\nDevelopments in 2025**\n\n \n\nThe\nfollowing highlights major corporate developments in 2025 that management believes advanced the commercialization and scaling of our\nplatform technologies:\n\n \n\n**Advancement\nof AI Nose toward early commercialization.**\n\n** **\n\nDuring\n2025, we accelerated the transition of the AI Nose platform from development-stage validation to early-stage commercialization, with\na focus on industrial and infrastructure-oriented applications. We expanded our industrial ecosystem through additional system integrators,\ndistribution channels, and early customers, enabling pilot and initial commercial deployments across semiconductor manufacturing, robotics,\nand smart manufacturing environments.\n\n \n\nIn\nsemiconductor manufacturing environments, we secured an initial commercial order totaling approximately $2.1 million over three years\nfrom a leading semiconductor packaging and testing customer, supporting deployment of 1,400 AI Nose system. We also entered into a commercial\narrangement with a semiconductor engineering and systems integration partner that includes a contracted minimum order commitment of 600\nAI Nose units targeting deployment in front-end wafer fabrication environments, expanding AI Nose’s reach upstream within the semiconductor\nvalue chain. In validation activities conducted in Japanese semiconductor facilities, AI Nose achieved approximately 80% classification\naccuracy across more than 20 volatile organic compounds, supporting environmental monitoring, anomaly detection, and process awareness.\nThese deployments generated structured scent data used to refine models and support broader commercialization.\n\n \n\nAs\npart of our robotics-related expansion, we initiated pilot deployments of AI Nose across seven operational sites in Japan through a collaboration\nwith a Japanese service robotics partner. These pilots are designed to evaluate real-world performance in continuous monitoring and facility\noperations and to generate deployment data supporting further model refinement and commercial scaling.\n\n \n\n35\n\n \n\n \n\n**Progress\nin healthcare-adjacent and senior care applications.**\n\n** **\n\nIn\nparallel with industrial deployments, we continued to advance healthcare-adjacent applications of AI Nose, including senior care–oriented\nuse cases that leverage non-invasive and continuous sensing for hygiene monitoring. We also continued to evaluate performance and usability\nin women’s health applications.\n\n \n\n**Progress\nin VELDONA® therapeutic programs.**\n\n** **\n\nFor\nVELDONA®, we continued to focus on selected rare, autoimmune, and infectious disease indications with unmet medical needs, including\noral warts in HIV-seropositive patients, Sjögren’s syndrome, and feline chronic gingivostomatitis (FCGS). During 2025, we\nadvanced clinical preparation and ongoing studies in Taiwan for these indications and maintained discussions with potential partners\nregarding out-licensing opportunities. Subject to regulatory review and study progress, we currently expect key clinical and partnering\nmilestones to occur over the 2026–2027 timeframe. We also marketed Veldona Pet supplement in Taiwan on a limited scale.\n\n \n\n**Factors\nAffecting Our Business**\n\n \n\nOur\nbusiness activities in 2025 were shaped primarily by our strategic emphasis on scaling the AI Nose platform and managing healthcare-related\nprograms in a selective and capital-efficient manner.\n\n \n\n**Shift\ntoward industrial and infrastructure-oriented applications.**\n\n** **\n\nWe\ncontinued to prioritize the expansion of AI Nose into industrial environments where continuous sensing, anomaly detection, and operational\nmonitoring are critical. Partner-led deployments in semiconductor manufacturing, robotics, and smart manufacturing settings allowed us\nto validate the platform under demanding real-world conditions and to begin establishing commercial pathways through existing industrial\necosystems. The pace of adoption, partner execution, and customer conversion may affect our near-term results.\n\n \n\n**Data-driven\nplatform development.**\n\n \n\nAI\nNose deployments generate Smell ID data across diverse environments. We use this data to refine models, improve classification performance,\nand broaden the range of detectable patterns. We believe this data-driven feedback loop strengthens the long-term scalability of the\nplatform, although the benefits may not be immediately reflected in revenue.\n\n \n\n**Senior\ncare and healthcare-adjacent opportunities.**\n\n \n\nIn\nsenior care and hospital-adjacent environments, we continued to evaluate use cases where non-invasive and continuous sensing may support\nhygiene monitoring and environmental control. These efforts remain exploratory and are influenced by regulatory pathways, partner engagement,\nand operational validation.\n\n \n\n**VELDONA®\nprogram management.**\n\n \n\nFor\nVELDONA®, we focused on selected indications with unmet medical needs, including oral warts in HIV-seropositive patients, Sjögren’s\nsyndrome, and feline chronic gingivostomatitis. In 2025, we advanced ongoing and planned clinical studies in Taiwan while continuing\nto pursue strategic partnerships and out-licensing opportunities. Clinical outcomes, regulatory progress, and partner interest may affect\nthe timing and direction of these programs.\n\n \n\n**Strategy\nOutlook**\n\n** **\n\nOur\nstrategy centers on scaling AI Nose as a SmellTech platform that digitizes scent as a machine-readable data modality. Following initial\nindustrial validation in 2025, our priorities include expanding partner-led deployments, increasing scent data volume to refine the smell\nlanguage model, and advancing commercialization through a combination of hardware sales and service-based offerings. In parallel, we\nplan to manage healthcare-related programs, including VELDONA®, in a selective and capital-efficient manner, with an emphasis on\npartnerships and out-licensing.\n\n \n\n36\n\n \n\n \n\n**Recent\nFinancing**\n\n \n\nOn\nMay 31, 2024, the Company entered into an At-the-Market Offering Agreement, or sales agreement, with H.C. Wainwright & Co., LLC (“Wainwright”),\npursuant to which the Company may issue and sell, from time to time, shares of its common stock. The aggregate market value of Shares\neligible for sale in the Offering and under the ATM Agreement will be subject to the limitations of General Instruction I.B.6 of Form\nS-3 to the extent required under such instruction. The prospectus supplement filed with the SEC on July 11, 2024 is offering Shares having\nan aggregate offering price of $1,840,350.\n\n \n\nOn\nSeptember 5, 2025, the Company filed a prospectus supplement to amend the Prospectus to update the amount of shares the Company is eligible\nto sell pursuant to such prospectus. The Company increased the amount of shares of Common Stock it may offer and sell under the Sales\nAgreement to an aggregate offering price of up to $874,496 from time to time through Wainwright. Pursuant to General Instruction I.B.6\nof Form S-3, in no event will we sell securities in a public primary offering with a value exceeding one-third of our public float in\nany 12-month calendar period so long as our public float remains below $75.0 million.\n\n \n\nAs\nof December 31, 2025, the Company sold 734,214 shares of common stock under At-the-Market Offering Agreement, resulting in net proceeds\nof approximately $2,008,721.\n\n \n\nDuring\nthe period from January 1, 2026 to March 30, 2026, the Company sold 283,336 shares of common stock under the At-the-Market Offering Agreement,\nresulting in net proceeds of approximately $601,600.\n\n \n\nOn\nMarch 12, 2025, the Company entered into an amendment to the Convertible Note (the “Convertible Note Amendment”) with Li-Kuo\nLee to extend the maturity date to May 13, 2025. On April 30, 2025, the Company repaid the full principal with accrued interest aggregate\namount of $1,132,650.\n\n \n\n**Results\nof Operations**\n\n \n\nThe\nfollowing table summarizes our results of operations for the years ended December 31, 2025 and 2024:\n\n \n\n  \nYears ended December 31,  \nChange \n\n  \n2025  \n2024  \nAmount  \n% \n\nRevenues \n$124,157  \n$20,729  \n$103,428  \n 499%\n\nCost of revenues \n (21,246) \n (52,595) \n 31,349  \n (60)%\n\nGross profit (loss) \n 102,911  \n (31,866) \n 134,777  \n (423)%\n\n  \n    \n    \n    \n   \n\nOperating expenses: \n    \n    \n    \n   \n\nResearch and development expenses \n 7,749,772  \n 8,413,923  \n (664,151) \n (8)%\n\nSelling, general and administrative expenses \n 6,343,547  \n 5,395,415  \n 948,132  \n 18%\n\nTotal operating expenses \n 14,093,319  \n 13,809,338  \n 283,981  \n 2%\n\n  \n    \n    \n    \n   \n\nLoss from operating \n (13,990,408) \n (13,841,204) \n (149,204) \n 1%\n\n  \n    \n    \n    \n   \n\nNon-operating (expenses) income \n    \n    \n    \n   \n\nInterest expense \n (711,903) \n (616,467) \n (95,436) \n 15%\n\nIssuance cost of senior secured convertible note measured at fair value \n -  \n (308,336) \n 308,336  \n (100)%\n\nFair value change for senior secured convertible note \n -  \n (275,624) \n 275,624  \n (100)%\n\nOther income (expenses), net \n (67,901) \n 179,270  \n (247,171) \n (138)%\n\nTotal non-operating expenses, net \n (779,804) \n (1,021,157) \n 241,353  \n (24)%\n\nNet loss before income taxes \n (14,770,212) \n (14,862,361) \n 92,149  \n (1)%\n\nProvision for income taxes \n 800  \n 800  \n -  \n - \n\nNet loss \n$(14,771,012) \n$(14,863,161) \n$92,149  \n (1)%\n\n \n\n37\n\n \n\n \n\n**Revenues,\nCost and Gross Loss**\n\n \n\nThe\nCompany reported $124,157 of revenues for the year ended December 31, 2025, as compared to $20,729 for the year ended December 31, 2024. The increase of revenue in 2025 was primarily caused by a change in product mix; the Company generated $123,360\nand nil in revenues from AI Nose related programs, and $797 and $20,321 from pet supplements, and nil and $408 in revenues from COVID-19\nAntigen Rapid Test Kits in 2025 and 2024, respectively. The Company has ceased selling COVID-19 Antigen Rapid Test Kit since first quarter\nof 2024.\n\n \n\nThe\ncost of revenues relating to product sales for the year ended December 31, 2025 was $21,246 compared to $52,595 for the year ended December\n31, 2024. The decrease of cost of revenues was primarily caused by the aforementioned change in product mix.\n\n \n\nThe\nshare-based compensation expense and the depreciation expense for manufacturing in the year ended December 31, 2025 and 2024 were nil\nand $9,032, respectively. When excluding these non-cash costs, cost of revenue decreased to $21,246 during the year ended December 31,\n2025 compared to $43,563 for the same period in 2024.\n\n \n\nGross\nprofit (loss) from product sales for the year ended December 31, 2025 was $102,911 as compared to $(31,866) for the year ended December\n31, 2024. The gross profit was due to the aforementioned change in product mix.\n\n \n\nWhen\nexcluding these non-cash costs, gross profit (loss) increased to $102,911 during the year ended December 31, 2025 compared to $(22,834)\nfor the same period in 2024.\n\n \n\n**Research\nand Development (R&D) Expenses**\n\n \n\nR&D\nexpenses for the years ended December 31, 2025 and 2024 were $7,749,772 and $8,413,923, respectively. The decrease of $664,151 (8%) was\ndue to decreased staffing expenditures (including share-based compensation) and co-research expenses but offset by an increase in patent\napplication & maintenance expenses. We expect that our R&D expenses will continue to grow as we further develop AI Nose programs\nand VELDONA drug candidates.\n\n \n\nThe\nshare-based compensation expense and the depreciation and amortization expense in 2025 and 2024 were $5,260,915 and $5,600,037, respectively.\nWhen excluding these non-cash expenses, R&D expenses decreased to $2,488,857 in 2025 from that of $2,813,886 in 2024 primarily caused\nby decreased co-development expenses.\n\n \n\n**Selling,\nGeneral and Administrative (SG&A) Expenses**\n\n \n\nSG&A\nexpenses were $6,343,547 and $5,395,415 for the years ended December 31, 2025 and 2024, respectively. The $948,132 (18%) increase was\ndue to increase in staffing expenditures (including share-based compensation), public relations and investor relations fees, and advertising\nexpense, but offset by decreased professional expenses and D&O insurance expenses.\n\n \n\nThe\nshare-based compensation expense and the depreciation and amortization expense in 2025 and 2024 were $3,942,820 and $2,824,743, respectively.\nWhen excluding these non-cash expenses, SG&A expenses slightly decreased to $2,400,727 in 2025 compared to $2,570,672 in 2024 mainly\ndue to decreased professional expenses and D&O insurance expenses.\n\n \n\n**Operating\nLoss**\n\n \n\nThe\nCompany’s operating loss was $13,990,408 and $13,841,204 during the years ended December 31, 2025 and 2024, respectively, reflecting\na $149,204 slight increase in operating losses between the years. We continued to invest resources to execute our growth strategy and\nproduct roadmap to improve our profitability.\n\n \n\n**Non-operating\nexpenses**\n\n \n\nInterest\nexpense was $711,903 and $616,467 during the years ended December 31, 2025 and 2024, respectively. The increase in interest expense was\ndue to accrued interest for compounded convertible notes issued in May 2024, for which the face value increases in the second year due\nto the compounding feature.\n\n \n\n38\n\n \n\n \n\n**Net\nLoss**\n\n \n\nNet\nloss was $14,771,012 in 2025 compared to $14,863,161 in 2024, resulting in a $92,149 (1%) slight decrease in net loss attributable to\ncommon stockholders due decrease in co-research expenses and D&O insurance expenses.\n\n \n\n**Liquidity\nand Capital Resources**\n\n \n\nAs\nof December 31, 2025 and 2024, the Company had available cash and cash equivalents of $417,353 and $3,892,919, respectively.\n\n \n\nThe\nfollowing table summarizes our cash flow during the years ended December 31, 2025 and 2024:\n\n \n\n  \nYears ended December 31,  \nChange \n\n  \n2025  \n2024  \nAmount  \n% \n\nNet cash used in operating activities \n$(4,614,697) \n$(5,808,267) \n$1,193,570  \n (21)%\n\nNet cash used in investing activities \n$(2,223) \n$(125,292) \n$123,069  \n (98)%\n\nNet cash provided by financing activities \n$1,008,461  \n$8,025,746  \n$(7,017,285) \n (87)%\n\n** **\n\n**Operating\nactivities**\n\n \n\nNet\ncash used in operating activities decreased by $1,193,570 during the year of 2025 compared to the year of 2024. The decrease in cash\nused in operations primarily resulted from our net loss for the year of 2025 due to increase in cash inflow contributed by the operating\nassets and liabilities.\n\n \n\n**Investing\nactivities**\n\n \n\nNet\ncash used in investing activities during the year of 2025 was $2,223 compared to $125,292 during the year of 2024. The decrease was due\nto increase in refundable deposits and other noncurrent assets offset by decrease in purchase of property and equipment.\n\n \n\n**Financing\nactivities**\n\n \n\nCash\nreceived from financing activities were $1,008,461 and $8,025,746 during the years of 2025 and 2024, respectively. The $7,017,285 decrease\nwas primarily reflected by the following:\n\n \n\n \n●\nRepayment\nof convertible notes and other notes payable decreased by $751,754;\n\n \n●\nProceeds\nfrom convertible notes and other notes payable financing decreased by $9,875,000;\n\n \n●\nProceeds\nfrom at-the-market offering, net of issuance costs increased by $2,008,721;\n\n \n●\nPayments\nof issuance cost of senior secured convertible note measured at fair value decreased by $97,500; and\n\n \n●\nFractional\nshares paid out in cash for the reverse stock split increase by $260.\n\n \n\nAs\ndisclosed in Note 6 (Debt) to our accompanying financial statements, we received $875,000 in proceeds from the Lind Note transaction\nin January 2024.\n\n \n\nAs\ndisclosed in Note 6 (Debt) to our accompanying financial statements, we received $9,000,000 in proceeds from the ASE Note transaction\nin May 2024.\n\n \n\nAs\ndisclosed in Note 6 (Debt) to our accompanying financial statements, we repaid $1,439,754 in cash to retired senior secured convertible\nnotes from the Lind Note transaction in August 2024.\n\n \n\nAs\ndisclosed in Note 6 (Debt) to our accompanying financial statements, we repaid $42,000 to retire the i2China Note transaction in August\n2024.\n\n \n\n39\n\n \n\n \n\nAs\ndisclosed in Note 6 (Debt) to our accompanying financial statements, we repaid $270,000 to retire the KY Note transaction in October\n2024.\n\n \n\nAs\ndisclosed in Note 6 (Debt) to our accompanying financial statements, we repaid $1,000,000 to retire the Lee Note transaction in April\n2025.\n\n \n\nAs\ndiscussed in Note (At The Market) to our accompanying financial statements, we received $2,008,721 in proceeds from ATM transactions\nin 2025.\n\n \n\nThe\nCompany anticipates that cash reserves, business revenues, and potential debt financing through convertible and non-convertible notes\nwill fund the Company’s operations over the next twelve months. There can be no assurance that we will be successful in our efforts\nto make the Company profitable. If those efforts are not successful, the Company may raise additional capital through the issuance of\nequity securities, debt financings or other sources to further implement its business plan. However, if such financing is not available\nwhen needed and at adequate levels, the Company will need to reevaluate its operating plan.\n\n \n\n**At\nThe Market Offering Agreement**\n\n \n\nOn\nMay 31, 2024, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”), with H.C. Wainwright &\nCo., LLC or the Agent, pursuant to which the Company may issue and sell, from time to time, shares of its Common Stock, depending on\nmarket demand, with the Agent acting as the sales agent or principal (the “ATM Offering”). Sales of the Common Stock may\nbe made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities\nAct, including, without limitation, sales made directly on or through the Nasdaq Capital Market. The Agent will use its commercially\nreasonable efforts to sell the Shares requested by the Company to be sold on its behalf, consistent with the Agent’s normal trading\nand sales practices, under the terms and subject to the conditions set forth in the ATM Agreement. The Company has no obligation to sell\nany of the Shares. The Company may instruct the Agent not to sell the Shares if the sales cannot be effected at or above the price designated\nby the Company from time to time, and the Company may at any time suspend sales pursuant to the ATM Agreement.\n\n \n\nThe\nCompany paid the Agent placement fee of 3.0% of the gross sales price of the Shares sold by the Agent under the ATM Agreement. The Company\nhas reimbursed the Agent for the fees and disbursements of its counsel, payable upon execution of the Sales Agreement, in an amount not\nto exceed $35,000 in addition to certain ongoing disbursements of its legal counsel up to $2,500 per calendar quarter. In addition, the\nCompany has agreed to provide customary indemnification rights to the Agent.\n\n \n\nThe\naggregate market value of Shares eligible for sale in the ATM Offering and under the ATM Agreement will be subject to the limitations\nof General Instruction I.B.6 of Form S-3, to the extent required under such instruction. The prospectus supplement filed with the SEC\non July 11, 2024 is offering Shares having an aggregate offering price of $1,840,350.\n\n \n\nThe\nCompany used the net proceeds from the offering to fund the continued development of its product candidate and for general corporate\npurposes and working capital. The precise amount and timing of the application of these proceeds will depend upon a number of factors,\nsuch as the timing and progress of our research and development efforts, our funding requirements and the availability and costs of other\nfunds.\n\n \n\nOn\nSeptember 5, 2025, the Company filed a prospectus supplement to amend the Prospectus to update the amount of shares the Company is eligible\nto sell under the Sales Agreement to an aggregate of $874,496 of additional shares of common stock. Pursuant to General Instruction I.B.6\nof Form S-3, in no event will we sell securities in a public primary offering with a value exceeding one-third of our public float in\nany 12-month calendar period so long as our public float remains below $75.0 million.\n\n \n\nAs\nof December 31, 2025, the Company sold an aggregate of 734,214 shares of the Company’s common stock under the ATM facility and\nreceived $2,008,721 in net proceeds, after deducting commissions and expenses.\n\n \n\n40\n\n \n\n \n\n**Sources\nof Liquidity**\n\n \n\nSince\nour uplisting and public offering in August 2022, our operations have been financed primarily by proceeds from private placements of\nconvertible notes issued to third parties or related parties. As disclosed in Note 6 Debts to our accompanying financial statements,\nwe received $3,000,000 in proceeds from the March 2025 convertible note financing, $3,875,000 in proceeds from the Lind Note financing\nin September and December of 2023 and January 2024 out of total of $10 million financing agreement and $9,000,000 in proceeds from the\nMay 2027 convertible note financing.\n\n \n\nOn\nMay 31, 2024 the Company entered into the ATM Agreement with H.C. Wainwright & Co., LLC, filed the prospectus supplement with the\nSEC on July 11, 2024, is offering Shares having an aggregate offering price of $1,840,350. On September 5, 2025, the Company filed a\nprospectus supplement under the Agreement for an aggregate of $874,496 of additional shares of Common Stock.\n\n \n\nAs\nof December 31, 2025, the Company sold an aggregate of 734,214 shares of the Company’s common stock under the ATM facility and\nreceived $2,008,721 in net proceeds, after deducting commissions and expenses.\n\n \n\nWe\nanticipate that cash reserves, business revenues, and potential debt financing through convertible and non-convertible notes will fund\nour operations over the next twelve months. There can be no assurance that we will be successful in our efforts to make the Company profitable.\nIf those efforts are not successful, we may raise additional capital through the issuance of equity securities, debt financings or other\nsources to further implement its business plan. However, if such financing is not available when needed and at adequate levels, we will\nneed to reevaluate our operating plan.\n\n \n\n**Uses\nof Liquidity**\n\n \n\nIn\nthe near term, we expect to allocate liquidity primarily toward advancing the AI Nose platform, to support industrial deployments and\npartner-led commercialization. We also plan to fund selective clinical and development activities related to our healthcare programs,\nincluding AI Nose and VELDONA®, while managing these investments in a disciplined manner.\n\n \n\nFor\nfuture liquidity consideration, we expect primary uses of cash are to fund our operations as we continue to grow our business. We may\nrequire a significant amount of cash to fund working capital and capital expenditures as we grow our commercial infrastructure. We may\ncontinue to incur operating losses in the near term as our operating expenses will be increased to support the growth of our business.\nWe expect that our selling, general and administrative expenses and research and development expenses will continue to increase as our\ninternal sales force to move forward our product development and commercialization roadmaps. We may also have cash requirements related\nto capital expenditures to support the planned growth of our business, including investments in corporate facilities and equipment.\n\n \n\n**Going\nConcern**\n\n** **\n\nAs\nof December 31, 2025, the Company had cash and cash equivalents of $417,353. The Company plans to finance its operations and development\nneeds with its existing cash and cash equivalents, additional equity and/or debt financing arrangements, and expected revenue primarily\nfrom the sale of AI Nose to support the Company’s operation and product development activities. There can be no assurance that\nthe Company will be able to obtain additional financing on terms acceptable to the Company, on a timely basis, or at all. If the Company\nis not able to obtain sufficient funds on acceptable terms when needed, the Company’s business, results of operations, and financial\ncondition could be materially adversely impacted.\n\n \n\nFor\nthe year ended December 31, 2025, the Company generated a net loss of $14,771,012. The Company expects to continue incurring development\nexpenses for the next twelve months as the Company advances product pipeline.\n\n \n\n41\n\n \n\n \n\nThe\nfinancial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of\nliabilities in the normal course of business. The Company has incurred net operating losses and has an accumulated deficit as of December\n31, 2025 of $67,520,328 and expects to incur additional losses and negative operating cash flows for at least the next twelve months.\nThe Company’s ability to meet its obligations is dependent upon its ability to generate sufficient cash flows from operations and\nfuture financing transactions. Although management expects the Company will continue as a going concern, there is no assurance that management’s\nplans will be successful since the availability and amount of such funding is not certain. Accordingly, substantial doubt exists about\nthe Company’s ability to continue as a going concern for at least one year from the issuance of these financial statements. The\naccompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability of assets\nor the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.\n\n \n\nFor\na discussion of our contractual obligations and commitments, refer to Part II, Item 8, Note 13, “Commitments and Contingencies”\nto the financial statements in this Annual Report on Form 10-K.\n\n \n\n**Critical\nAccounting Policies and Estimate**\n\n \n\nManagement’s\ndiscussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared\nin accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial\nstatements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related\ndisclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the\ncircumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not\nreadily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any\nsuch differences may be material.\n\n \n\nWhile\nour significant accounting policies are more fully described in Note 2 to our financial statements appearing elsewhere in this Annual\nReport on Form 10-K, we believe the following discussion addresses our most critical accounting policies, which are those that are most\nimportant to our financial condition and results of operations and require our most difficult, subjective and complex judgments.\n\n \n\n**Impairment\nTesting of Intangible Assets**\n\n \n\nOur\nintangible assets mainly consist of acquired patents which are initially recorded at fair value and stated net of accumulated amortization\nand, if applicable, impairments. We amortize our intangible assets that have finite lives using the straight-line method. Amortization\nis recorded over the estimated useful lives ranging from 5 to 19 years. We evaluate the recoverability of the definite lived intangible\nassets whenever events or changes in circumstances or business conditions indicate that the carrying value of these assets may not be\nrecoverable based on expectations of future undiscounted cash flows for each asset group in accordance with ASC 360-10, *Property,\nPlant and Equipment—Impairment or Disposal of Long-Lived Assets*(ASC 360-10). If the carrying value of an asset or asset group\nexceeds its undiscounted cash flows, we estimate the fair value of the assets using market participant assumptions pursuant to ASC 820,\n*Fair Value Measurements*.\n\n \n\nDuring\nthe fourth quarter of 2025, we reassessed our short-term and long-term commercial plans for the VOC POCT related products which is identified\nas an asset group being assigned the major intangible assets and identified that an impairment testing is warranted for the intangible\nassets. As a result, we performed an undiscounted cash flow analysis pursuant to ASC 360-10 to determine if the cash flows expected to\nbe generated by the VOC POCT products over the estimated remaining useful life of its primary assets were sufficient to recover the carrying\nvalue of the asset group. Based on this analysis, the undiscounted cash flows were sufficient to recover the carrying value of the intangible\nassets. Thus, no impairment loss was recorded.\n\n \n\nTo\nestimate the undiscounted cash flow of the asset group, we used assumptions requiring significant judgment, including judgment about\nwhen the in-development product can be commercialized, estimated selling price and sales volume of the in-development product and the\namount and timing of other cash outflows required to complete the development, commercialization and sales of the product. The forecasted\ncash flows were based on the Company’s most recent strategic plan, and for periods beyond the strategic plan, our estimates were\nbased on assumed growth rates expected as of the measurement date. We believe our assumptions were consistent with the strategic plans\nand business goals.\n\n \n\n**Off-Balance\nSheet Arrangements**\n\n \n\nWe\nhad no off-balance sheet arrangements as of December 31, 2025.\n\n \n\n42"}