Ainos, Inc.

Notes to Condensed Consolidated Financial Statements

1. Description of Business

Organization and Business

Ainos, Inc. (the “Company”) was incorporated in the State of Texas in 1984. The Company is a dual-platform company engaged in the development of artificial intelligence-enabled olfactory sensing technologies, which we refer to as “SmellTech” or “Smell AI”, and related applications, as well as the development of immune therapeutics.

Our core technology platform, AI Nose, is an AI-based electronic olfaction system that integrates gas sensor arrays with proprietary artificial intelligence models, which we refer to as a smell language model (“SLM”), to digitize scent and volatile organic compound (“VOC”) signals into Smell ID, a machine-readable data format. AI Nose is initially developed in healthcare-related settings, including point-of-care testing (“POCT”). These early healthcare applications shaped the platform’s sensor architecture, data models, and system calibration.

Building on this foundation, we are expanding the application of AI Nose into industrial environments, where we believe real-time environmental sensing, anomaly detection, and operational monitoring are important. Current and planned use cases include applications across semiconductor manufacturing, robotics, healthcare infrastructure and smart manufacturing settings. We believe the underlying scent digitization architecture of AI Nose is adaptable across a range of industrial and non-industrial verticals, and we continue to evaluate additional application opportunities based on partner engagement and deployment experience.

We are advancing the AI Nose platform through partner-led deployments, with a strategy focused on platform scalability, data-driven performance improvement, and integration into existing industrial ecosystems. Our approach emphasizes expanding the role of scent as a machine-readable data modality alongside vision and sound, while maintaining flexibility to address diverse operational requirements.

Separately, we continue to develop VELDONA®, our low-dose oral interferon platform, targeting selected rare, autoimmune, and infectious disease indications. Our VELDONA® programs include candidates for the treatment of oral warts in HIV-positive patients, Sjögren’s syndrome, and feline chronic gingivostomatitis (“FCGS”). We have conducted research and development activities related to VELDONA® since our inception.

Reverse Stock Splits

In connection with the Offering, the Company’s board of directors on April 29, 2022 and its shareholders on May 16, 2022 approved a 1-for-15 reverse stock split of the Company’s common stock that became effective on August 9, 2022. Further, to comply with Nasdaq’s minimum $1.00 per share continued listing rules, the Company filed a Certificate of Amendment to its Restated Certificate of Formation on November 27, 2023, to apply for another reverse stock split of the Company’s common stock at a ratio of 1-for-5 which was effectuated on December 14, 2023 after receiving required approvals. In addition, to comply with Nasdaq’s minimum $1.00 per share continued listing rules, the Company filed a Certificate of Amendment to its Restated Certificate of Formation on May 16, 2025, the Board approved for another reverse stock split of the Company’s common stock at a ratio of 1-for-5 which was effectuated on June 30, 2025 after receiving required approvals.

The par value of $0.01 and authorized shares of the Company’s common stock remain the same and were not adjusted as a result of the reverse stock splits. All issued and outstanding common stock, restricted stock units (RSUs), outstanding convertible notes, 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 splits for all periods presented.

At-the-Market Offering Agreement

On May 31, 2024, the Company entered into an At-the-Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC(the “Agent”), pursuant to which the Company may issue and sell, from time to time, shares of its Common Stock, depending on market demand, with the Agent acting as the sales agent or principal (the “ATM Offering”). Sales of the Common Stock may be 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 Act of 1933, as amended (the “Securities Act”), including, without limitation, sales made directly on or through the Nasdaq Capital Market. The Agent will use its commercially reasonable efforts to sell the Shares requested by the Company to be sold on its behalf, consistent with the Agent’s normal trading and sales practices, under the terms and subject to the conditions set forth in the ATM Agreement. The Company has no obligation to sell any 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 by the Company from time to time and the Company may at any time suspend sales pursuant to the ATM Agreement.

The Company will pay 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 has also agreed to reimburse the Agent for the fees and disbursements of its counsel, payable upon execution of the Sales Agreement, in an amount not to exceed $35,000 in addition to certain ongoing disbursements of its legal counsel up to $2,500 per calendar quarter. In addition, the Company has agreed to provide customary indemnification rights to the Agent.

The aggregate market value of Shares eligible for sale in the ATM Offering and under the ATM Agreement will be subject to the limitations of General Instruction I.B.6 of Form S-3, to the extent required under such instruction. The prospectus supplement filed with the SEC on July 11, 2024, is offering Shares having an aggregate offering price of $1,840,350.

The Company intends to use the net proceeds from the offering to fund the continued development of its product candidate and for general corporate purposes and working capital. The precise amount and timing of the application of these proceeds will depend upon a number of factors, such as the timing and progress of our research and development efforts, our funding requirements and the availability and costs of other funds.

On September 5, 2025, the Company filed a prospectus supplement to amend the Prospectus to update the amount of shares the Company is eligible to sell pursuant to such prospectus. The Company increased the amount of shares of Common Stock it may offer and sell under the Sales Agreement to an aggregate offering price of up to $874,496 from time to time through Wainwright. Pursuant to General Instruction I.B.6 of 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 any 12-month calendar period so long as our public float remains below $75.0 million.

For the first half of the year 2026, the Company sold 283,336 shares of common stock under the ATM facility and received $601,600 in net proceeds after deducting commissions and expenses. As of June 30, 2026, the Company sold an aggregate of 1,017,550 shares of the Company’s common stock under the ATM facility and received $2,610,321 in net proceeds after deducting commissions and expenses.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (the “GAAP”) and pursuant to the accounting disclosure rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed financial statements should be read in conjunction with the financial statements and notes included in the Company’s audited financial statements as of and for the year ended December 31, 2025 contained in the Annual Report on Form 10-K filed with the SEC on March 30, 2026.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods. The results for the six months ended June 30, 2026 are not necessarily indicative of the results to be expected for any subsequent quarter, the year ending December 31, 2026, or any other period.

There have been no material changes to the Company’s significant accounting policies as described in the audited financial statements as of December 31, 2025.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosures as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on various factors, including historical experience, and on various other assumptions that are believed to be reasonable under the circumstances, when these carrying values are not readily available from other sources. Significant items subject to estimates and assumptions include useful lives of property and equipment, valuation of stock option, warrants and convertible notes measured at fair value, and impairment testing of intangible assets. Actual results may differ from these estimates.

Liquidity

As of June 30, 2026, the Company had cash and cash equivalents of $1,422,912. The Company plans to finance its operations and development needs with its existing cash and cash equivalents, additional equity, and/or debt financing arrangements. There can be no assurance that the Company will be able to obtain additional financing on terms acceptable to the Company, on a timely basis, or at all. If the Company is not able to obtain sufficient funds on acceptable terms when needed, the Company’s business, results of operations, and financial condition could be materially adversely impacted.

On May 31, 2024, the Company entered into an At-the-Market Offering Agreement, or sales agreement, with H.C. Wainwright & Co., LLC or Wainwright, pursuant to which the Company may issue and sell, from time to time, shares of its common stock, the aggregate market value of Shares eligible for sale in the Offering and under the ATM Agreement will be subject to the limitations of General Instruction I.B.6 of Form S-3, to the extent required under such instruction. The prospectus supplement filed with the SEC on July 11, 2024, is offering Shares having an aggregate offering price of $1,840,350.

On September 5, 2025, the Company filed a prospectus supplement to amend the Prospectus to update the amount of shares the Company is eligible to sell pursuant to such prospectus. The Company increased the amount of shares of Common Stock it may offer and sell under the Sales Agreement to an aggregate offering price of up to $874,496 from time to time through Wainwright. Pursuant to General Instruction I.B.6 of 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 any 12-month calendar period so long as our public float remains below $75.0 million.

For the first half of the year 2026, the Company sold 283,336 shares of common stock under the ATM facility and received $601,600 in net proceeds after deducting commissions and expenses. As of June 30, 2026, the Company sold 1,017,550 shares of common stock under At-the-Market Offering Agreement, resulting in net proceeds of approximately $2,610,321.

For the six months ended June 30, 2026, the Company generated a net loss of $7,054,531. The Company expects to continue incurring development expenses for the next twelve months as the Company advances its product development plans.

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. The Company has incurred net operating losses since inception and has an accumulated deficit as of June 30, 2026 of $74,574,859 and expects to incur additional losses and negative operating cash flows for at least the next twelve months. The Company’s ability to meet its obligations is dependent upon its ability to generate sufficient cash flows from operations and future financing transactions. Although management expects the Company will continue as a going concern, there is no assurance that management’s plans will be successful since the availability and amount of such funding is not certain. Accordingly, substantial doubt exists about the Company’s ability to continue as a going concern for at least one year from the issuance of these financial statements. The accompanying 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 the possible inability of the Company to continue as a going concern.

Segments

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the chief operating decision maker (the “CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the Company’s CODM. The CODM reviews financial information prepared on the basis of accounting policy disclosed in its annual financial statement for purposes of making operating decisions, allocating resources, and evaluating financial performance of the Company. As such, the Company has determined that it operates as one operating segment.

Impairment of Intangible Assets

The Company reviews its definite-lived intangibles and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. When such events occur, management determines whether there has been impairment by comparing the anticipated undiscounted future net cash flows to the carrying value of the asset or asset group. If impairment exists, the assets are written down to their estimated fair value. No impairment of definite-lived intangible and long-lived assets was recorded for the three and six months ended June 30, 2026 and 2025.

Fair Value Option

ASC 825-10,Financial Instruments, provides a fair value option (the “FVO”) election that allows companies an irrevocable election to use fair value as the initial and subsequent accounting measurement attribute for certain financial assets and liabilities. ASC 825-10 permits entities to elect to measure eligible financial assets and liabilities at fair value on an ongoing basis. Unrealized gains and losses on items for which the FVO has been elected are reported in earnings, except for the effect of changes in own credit, which are recognized in other comprehensive income/loss. The decision to elect the FVO is determined on an instrument-by-instrument basis, must be applied to an entire instrument and is irrevocable once elected. Assets and liabilities measured at fair value pursuant to ASC 825-10 are required to be reported separately from those instruments measured using another accounting method.

Recent Accounting Pronouncements Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07, which is applicable to entities with a single reportable segment, will primarily require enhanced disclosures about significant segment expenses and enhanced disclosures in interim periods. The guidance in ASU 2023-07 will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023 and interim reporting periods in fiscal years beginning after December 31, 2024, with early adoption permitted. The Company adopted the ASU for the fiscal year ended December 31, 2025 on a retrospective basis for all prior periods presented in the financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 is intended to improve income tax disclosure requirements by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) the disaggregation of income taxes paid by jurisdiction. The guidance makes several other changes to the income tax disclosure requirements. The guidance in ASU 2023-09 will be effective for annual reporting periods in fiscal years beginning after December 15, 2024. The Company adopted the ASU for the fiscal year ended December 31, 2025 on a retrospective basis for all prior periods presented in the financial statements.

Accounting Standards Issued but Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to provide more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain expense captions presented on the statement of operations. The guidance in this ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact that the adoption of ASU 2024-03 will have on its financial statements and disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) (“ASU 2025-06”). ASU 2025-06 updates the accounting guidance for internal-use software by eliminating references to software development project stages, thereby requiring companies to start capitalizing software costs when (i) management has authorized and committed to funding the project, and (ii) it is probable the project will be completed and the software will be used as intended. ASU 2025-06 is effective for annual periods beginning after December 15, 2027, with early adoption permitted. Amendments can be applied either (i) prospectively, (ii) through a modified transition approach based on the status projects and whether software costs were capitalized before the date of adoption, or (iii) retrospectively. The Company is currently evaluating the impact of ASU 2025-06 on the Company’s financial condition and results of operations.

In December 2025, the FASB issued ASU 2025-10 to provide specific authoritative guidance about the recognition, measurement, and presentation of a grant received by a business entity from a government. The amendments in this guidance require that a government grant received by a business entity should not be recognized until (1) it is probable that a business entity will comply with the conditions attached to the grant and the grant will be received and (2) a business entity meets the recognition guidance for a grant related to an asset or a grant related to income. Adoption of this standard is required using either a modified prospective, modified retrospective, or a retrospective approach. This standard is effective for the Company for both interim and annual reporting for the year ended December 31, 2029. The Company is currently evaluating the impact of ASU 2025-10 on the Company’s financial condition and results of operations.

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.

3. Cash and Cash Equivalents

As of June 30, 2026 and December 31, 2025, cash and cash equivalents consisted of cash on hand and cash in bank which is potentially subject to concentration of credit risk. Such balance is maintained at financial institutions that management determines to be of high credit quality. Cash accounts at each institution are insured by the Federal Deposit Insurance Corporation (FDIC) in the U.S.A or Central Deposit Insurance Corporation in Taiwan up to certain limits. At times, such deposits may be in excess of the insurance limit. Accounts are guaranteed by the FDIC up to $250,000. As of June 30, 2026 and December 31, 2025, the Company had approximatelynil in excess of FDIC insured limits. The Company maintains cash in state-owned banks in Taiwan. In Taiwan, the insurance coverage of each bank is NTD$3,000,000 (approximately US$94,200). As of June 30, 2026 and December 31, 2025, the Company had $1,225,500 and $242,000, respectively, of cash in excess of the insured amount. The Company has not experienced any losses in such accounts.

4. Inventory

Inventory stated at cost, net of reserve, consisted of the following:

5. Convertible Notes Payable and Loan Payable

As of June 30, 2026 and December 31, 2025, the respective notes payable were as follows:

On May 3, 2024, The Company entered into Convertible Note and Warrant Purchase Agreement with the ASE Test, Inc. (“ASE”), for the issuance of convertible promissory notes with 6% compound interest in the aggregate principal amount of $9,000,000 (collectively the “Notes”) convertible into shares of common stock, par value $0.01 per share, of the Company, payable three (3) years from May 3, 2024 as well as the issuance of warrants for the purchase of up to 500,000 shares of common stock at a price per share of $22.50, exercisable until May 3, 2029. The full $9,000,000 principal amount under the agreement was received from ASE in May 2024.

March 2025 Convertible Notes

On March 13, 2023, the Company entered into two convertible promissory note purchase agreements pursuant to Regulation S of the Securities Act of 1933, as amended, in the total principal amount of $3,000,000 with the following investors (the “March 2025 Convertible Notes”).

Convertible Note Issued to Li-Kuo Lee (the “Lee Note”)

The Company issued a convertible note in the principal amount of $1,000,000 to an unrelated party, Li-Kuo Lee, in exchange for $1,000,000 in cash. The full $1,000,000 principal amount under the agreement was received from LEE in March 2023.

On March 12, 2025, the Company entered into an amendment to the Convertible Note (the “Lee Convertible Note Amendment”) with Li-Kuo Lee to extend the maturity date to May 13, 2025.

On April 30, 2025, the Company repaid the full principal with accrued interest aggregate amount of $1,132,650.

Convertible Note Issued to ASE Test, Inc. (the “ASE Note”)

Pursuant to one of the aforementioned agreements, ASE Test, Inc., committed to pay a total aggregate amount of $2,000,000 to the Company in exchange for convertible promissory note(s) in three tranches in the amounts of $1,000,000 (the “First Tranche”), $500,000 (the “Second Tranche”), and $500,000 (the “Third Tranche”) conditioned, among other things, on the Company achieving certain business milestones. The Company received the full amount of the payment in September 2023.

On March 10, 2025, the Company entered into an amendment to the Convertible Note (the “ASE Convertible Note Amendment”) with ASE Test to (1) extend the maturity date to March 12, 2027, and (2) change the conversion price from $37.50 per share (adjusted for the 1-for-5 reverse stock split of the Company’s common stock on December 14, 2023 and another adjusted for the 1-for-5 reverse stock split of the Company’s common stock on June 30, 2025) to a price of the lower of (a) $37.50 per share and (b) the higher of (x) the average closing price per share of Common Stock for the period of thirty (30) trading days prior to the day when the noteholder exercises the conversion right or (y) $22.50.

The March 2025 Convertible Notes bear 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 stock of the Company at the conversion price from $22.50 to $37.50 per share, subject to anti-dilutive 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 Notes shall be an unsecured general obligation of the Company.

The total interest expense of convertible notes payable and other notes payable for the three and six months ended June 30, 2026 was $182,554 and $359,362, respectively, compared with the same period in year 2025 was $177,762 and $357,991, respectively. As of June 30, 2026 and December 31, 2025, the unpaid accrued interest expense was $1,589,205 and $1,229,843, respectively.

March 2026 Loan agreement

On March 27, 2026, the Company entered into a loan agreement with ASE Test, Inc., pursuant to which ASE Test, Inc. agreed to lend the Company an aggregate principal amount of NT$90 million (the “Loan”) (approximately US$2,812,940). As of June 30, 2026 the Company received the full amount of the loan agreement.

The Loan bears interest at a rate of 2.5% per annum, accruing daily based on a 365-day year. The loan and the accrued interest are payable in full on the date falling exactly one (1) year after the drawdown date.

The total interest expense on the loan was $17,581 for the three and six months ended June 30, 2026. As of June 30, 2026 the unpaid accrued interest expense was $17,581.

6. Stockholders’ Equity

Reverse Stock Splits

To comply with Nasdaq’s minimum $1.00 per share continued listing rules, the Company filed a Certificate of Amendment to its Restated Certificate of Formation on May 16, 2025, to apply for reverse stock split of the Company’s common stock at a ratio of 1-for-5 which was effectuated on June 30, 2025 after receiving required approvals.

Preferred Stock

The Company increased authorized shares of preferred stock from 10,000,000 shares to 50,000,000 shares upon the filing of an amendment to the Company’s Certificate of Formation with the Secretary of State of Texas on November 27, 2023. No shares of preferred stock were issued and outstanding as of June 30, 2026 and December 31, 2025.

Common Stock

During the six months ended June 30, 2026, the Company issued an additional 1,561,398 shares of common stock as a result of delivering 283,336 shares to settle for the ATM Offering,1,239,000 shares to settle vested RSUs,39,062 shares to compensate consultant. As of June 30, 2026, there were 8,544,073 shares of common stock legally issued and 7,384,073 shares of common stock outstanding.

Warrants

Warrants issued and outstanding in connection with financing as of June 30, 2026 and December 31, 2025 are summarized as below:

The Company issued the Lind Warrants on September 28, 2023 in connection with the private placement of the Lind Note. The Company further issued 4,125 shares of warrants with an exercise price of $41.25 per share to the placement agent as the agent fee. Each warrant has a contractual term of 5 years and can be exercised for the purchase of one share of common stock of the Company. The carrying amount of the Lind Warrant is nil after allocating proceeds to the Lind Note measured at fair value. The fair value of the placement agent warrant is estimated to be $21,479 using the Black-Scholes Model.

The Company issued public warrants together with common stock in connection with its underwritten public offering effective August 8, 2022. The Company further issued private warrants to Maxim Group LLC as representative of the underwriter pursuant to an underwriting agreement. Each warrant has a contractual term of 5 years, expiring on August 8, 2027, and can be exercised for the purchase of one share of common stock of the Company.

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480,Distinguishing Liabilities from Equity (the “ASC 480”), and ASC 815,Derivatives and Hedging (the “ASC 815”). The assessment considers whether the instruments are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding. Management has concluded that the warrants issued in connection with the underwritten public offering and the private placement of Lind Note qualify for equity accounting treatment and are recorded as additional paid-in capital.

As of June 30, 2026, none of the warrants have been exercised nor have they expired.

7. Revenue

Revenue is recognized upon shipment of products based upon contractually stated pricing at standard payment terms within 30 to 60 days. The revenue generated by product sales is recognized at a point in time.

The Company generated revenue from sales of VELDONA Pet supplements in the Taiwan market through online platforms that were recognized after the expiration of right of return which was offered for a limited time. Revenue from sales through off-line distribution channels was recognized based on the amount of consideration that we expected to receive, reduced by estimates for return allowances, promotional discounts, and fees.

$350,000 of contract liabilities was recorded for the cash received in advance from customers as of June 30, 2026 and December 31, 2025.

The Company recognized nil revenue from sales of AI Nose programs that was included in the contract liability balance at the first half of the year 2026, compared with $106,329 recognized in the same period at the first half of the year 2025, offset by exchange rate fluctuation.

Return Allowances

Return allowances, which reduce revenue and cost of sales, are estimated using historical experience. Liabilities for return allowances are included in “Accrued expenses and other current liabilities”.

Variable Consideration

We record revenue from customers in an amount that reflects the transaction price we expect to be entitled to after transferring control of those goods. From time to time, we offer product sales promotions such as discounts. Variable consideration is estimated at contract inception only to the extent that it is probable that a significant reversal of revenue will not occur.

8. Share-Based Compensation

2023 Stock Incentive Plan

The Company effectuated 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 Plan will be equal to up to twenty percent (20%) of shares of outstanding common stock of the Company existing as of December 31 st of the previous calendar year (the “Plan Share Reserve”). Upon the effectiveness of the 2023 SIP on June 14, 2023, the aggregate number of shares which may be issued pursuant to awards under the Plan is 174,215 shares of common stock, including shares that remained available for grant under the 2021 Stock Incentive Plan. On July 19, 2024, the Company filed Form S-8 to increase the aggregate number of shares may be issued to 189,286 shares of common stock including shares that remained available for grant under the 2021 Stock Incentive Plan. On April 4, 2025, the Company filed Form S-8 to increase the aggregate number of shares that may be issued to 617,095 shares of common stock. On February 13, 2026, the Company filed a Form S-8 to register the increased the aggregate number of shares that may be issued under the 2023 SIP to 1,396,630 shares of common stock. As of June 30, 2026,2,376,826 shares have been granted under the 2023 SIP.

Restricted Stock Units (“RSUs”)

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 RSUs activity and related information for the three and six months ended June 30, 2026 and for the three and six months ended June 30, 2025 were as follows:

Stock Options and Warrants

During the three and six months ended June 30, 2026 and 2025, no shares were granted, forfeited, expired, or exercised. As of June 30, 2026, there were 1,466 shares in the form of stock options outstanding, and 1,466 shares of the options are vested and exercisable.

Share-Based Compensation Expense

Shared-based compensation expense for the three and six months ended June 30, 2026 was $2,012,621 compared to the three and six months ended June 30, 2025 amount of $1,324,529 and $1,379,699 ,respectively.

As of June 30, 2026, the total unrecognized compensation cost related to outstanding RSUs, stock options and warrants was $235,744, which the Company expects to recognize over a weighted-average period of 2.79 years.

9. Income Taxes

The Company did not record a federal, state, or foreign income tax provision or benefit for the six months ended June 30, 2026 and 2025 due to the expected loss before income taxes to be incurred for the years ended December 31, 2026 and 2025, as well as the Company’s continued maintenance of a full valuation allowance against its net deferred tax assets due to its historical deficit.

10. Net Loss per Common Share

The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders:

The following potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding because they would be anti-dilutive:

11. Related Party Transactions

The following is a summary of related party transactions that met our disclosure threshold:

Product Co-development Agreement

Pursuant to a five-year Product Co-development Agreement effective on August 1, 2021 (the “Product Co-Development Agreement”) with Taiwan Carbon Nano Technology Corporation (“TCNT”), the development expenses incurred were $70,175 and $150,041 for the three and six months ended June 30, 2026, compared to $76,977 and $173,672 for the three and six months ended June 30, 2025. The fee for non-exclusive use of patents was $150,444 and $299,529 for the three and six months ended June 30, 2026, compared to $158,447 and $308,013 for the three and six months ended June 30, 2025. Advance payments totaled $85,886 and $92,014 as of June 30, 2026 and December 31, 2025, respectively.

Manufacturing Service Agreement with TCNT for the AI Nose hardware products

On November 14, 2025, the Company entered into a manufacturing service agreement with TCNT to manufacture AI Nose hardware products. A deposit equal to 50% of the contract price was prepaid by the Company totaling $50,793 and $53,063 as of June 30, 2026 and December 31, 2025, respectively.

Lease agreement with director

The Company lease its office in Taiwan with a director of the Company for NT$50,000 (approximately US$1,570) per month. On June 1, 2026, the Company renew the office lease agreement forone year with the same lease amount till May 31, 2027.

12. Commitments and Contingencies

The Company operates in an industry characterized by extensive patent litigation. Competitors may claim that the Company’s products infringe upon their intellectual property. Resolution of patent litigation or other intellectual property claims is typically time consuming and costly and can result in significant damage awards and injunctions that could prevent the manufacture and sale of the affected products or require the Company to make significant royalty payments in order to continue selling the affected products. As of June 30, 2026, there were no such commitments or contingencies.

13. Subsequent Events

As previously disclosed, on March 27, 2026, the Company entered into a loan agreement with ASE Test, Inc., pursuant to which ASE Test, Inc. agreed to lend the Company an aggregate principal amount of NT$90 million (approximately US$2,812,940) (the “Loan”). The Loan was scheduled to mature on March 27, 2027. On July 10, 2026, the parties agreed to extend the maturity date of NT$62 million (approximately US$1,937,800) of the outstanding principal amount of the Loan to July 31, 2027. The maturity date of the balance of the loan, an aggregate principal amount of NT$28 million (approximately US$875,140), remains March 27, 2027.