Related Party Transactions

12 Months Ended

Dec. 31, 2023

Related Party Transactions

Related Party Transactions

12.  Related Party Transactions

During the years ended December 31, 2023 and 2022, other than disclosed elsewhere, the Company had the following material related party and related party transactions:

Related Party

Controlling shareholders

Taiwan Carbon Nano Technology Corporation (the “TCNT”) is the controlling shareholder of the Company through its controlling interests in Ainos KY who is an immediate controlling shareholder of the Company as of December 31, 2023. The Company acquired the POCT intellectual properties from Ainos KY. TCNT manufactures COVID-19 antigen test kits sold by the Company and has a product development agreement with the Company. The Company relies on TCNT to manufacture or develop POCT products and has a concentration risk on the sole supplier.

Entity under common control

AI Nose Corporation, a wholly owned subsidiary of Ainos KY is under common control with the Company.

Related Party Transactions

Purchase

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 TCNT, a controlling shareholder of Ainos KY (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.

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.

Due to the expiration of EUA to TCNT, excess materials, supplies and mode purchased by TCNT were sold back to the Company. As a result, the Company absorbed $33,002 of losses which was recorded in the cost of revenues.

Manufacturing Service Agreement with TCNT for the VELDONA Pet Cytoprotein Supplements

On August 28, 2023, the Company entered into a manufacturing service agreement with TCNT, together with another third-party vendor, to manufacture pet supplement products. The Company incurred costs totaling $38,860 for the year ended December 31, 2023.

As of December 31, 2023 and 2022, the accounts payable to TCNT for the above two products were $323 and $24,365, 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. In October 2023, the Company prepaid TCNT the estimated development expenses for the amount of $67,970. As of December 31, 2023, the remaining prepayment was $26,511. As of December 31, 2022, the accounts payable to TCNT for the development was $70,113. Under the Product Development Agreement, the Company made deposits of $31,511 and $31,490 to TCNT as of 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 a five-years development commencing from January 2024. The Company prepaid the full amount of the fee on January 10, 2024 at TCNT’s request.

Product sales

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.

Miscellaneous

On April 26, 2023, the Company issued a total of 12,231 shares of common stock to Ting-Chuan Lee, a director of the Company, pursuant to a purchase and sale agreement relating to the Company’s acquisition of a vehicle. The purchase price was in the amount of $48,559.

The Company engaged Ms. Chien-Hsuan Huang as a medical device development consultant in September 2022 for one year. Ms. Huang is the spouse of one of the members of the board of directors of the Company. The R&D expense was $51,143 and $81,321 for the years ended December 31, 2023 and 2022, respectively.