UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedJuneSeptember 30, 20172023
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number333-91436001-40700
American BriVision (Holding) Corporation.ABVC BioPharma, Inc.
(Exact name of Registrant as specified in its charter)
| Nevada | 26-0014658 | |
State or jurisdiction of
| IRS Employer
|
11 Sawyers Peak Drive, Goshen, NY 1092444370 Old Warm Springs Blvd.
Fremont, CA 94538
Tel: 845-291-1291(510) 668-0881
(Address and telephone number of principal executive offices)
(Former name, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, par value $0.001 per share | ABVC | The Nasdaq Stock Market LLC |
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. Yes☒ No☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐No☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | Smaller reporting company | ☒ | |
| Emerging growth company | ☐ | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐ No☒
Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 18, 2017,November 9, 2023, there were 213,746,6477,231,940 shares of common stock, par value per share $0.001, issued and outstanding.
TABLE OF CONTENTS
| i |
CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” which discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” and negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements.
These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K and its amendment filed with the Securities and Exchange Commission (the “SEC” OR “Commission”); in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report, and information contained in other reports that we file with the SEC. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.
There are important factors that could cause actual results to vary materially from those described in this report as anticipated, estimated or expected, including, but not limited to: the effects of the COVID-19 outbreak, including on the demand for our products; the duration of the COVID-19 outbreak and severity of such outbreak in regions where we operate; the pace of recovery following the COVID-19 outbreak; our ability to implement cost containment and business recovery strategies; the adverse effects of the COVID-19 outbreak on our business or the market price of our ordinary shares; competition in the industry in which we operate and the impact of such competition on pricing, revenues and margins, volatility in the securities market due to the general economic downturn; SEC regulations which affect trading in the securities of “penny stocks,” and other risks and uncertainties. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward- looking statements, even if new information becomes available in the future. Depending on the market for our stock and other conditional tests, a specific safe harbor under the Private Securities Litigation Reform Act of 1995 may be available. Notwithstanding the above, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) expressly state that the safe harbor for forward-looking statements does not apply to companies that issue penny stock. Because we may from time to time be considered to be an issuer of penny stock, the safe harbor for forward-looking statements may not apply to us at certain times.
As used in this Report, the terms “we”, “us”, “our”, and “our Company” and “the Company” refer to American Brivision (Holding) Corporation (formerly known as Metu Brands,ABVC BioPharma, Inc.) and its subsidiaries, unless otherwise indicated.
| ii |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
American BriVision (Holding) Corporation.
(formerly METU BRANDS,ABVC BIOPHARMA, INC.) AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2017 | September 30, 2016 | |||||||
| (Audited) (Restated) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | 8,053 | $ | 173,537 | ||||
| Total Current Assets | 8,053 | 173,537 | ||||||
| Deposit | - | 3,815 | ||||||
| Total Assets | $ | 8,053 | $ | 177,352 | ||||
| Liabilities and Equity | ||||||||
| Accounts Payable | - | 18,370 | ||||||
| Accrued expenses | 103,130 | 38,100 | ||||||
| Due to related party | 953,000 | 6,500,000 | ||||||
| Total Liabilities | 1,056,130 | 6,556,470 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ equity (deficit) | ||||||||
| Common Stock 360,000,000 authorized at $0.001 par value; shares issued and outstanding 213,746,647 and 210,821,647 at June 30, 2017 and September 30, 2016 | 213,747 | 210,822 | ||||||
| Additional paid-in capital | 10,586,464 | 4,733,461 | ||||||
| Accumulated deficit | (11,848,288 | ) | (11,323,401 | ) | ||||
| Total equity (deficit) | (1,048,077 | ) | (6,379,118 | ) | ||||
| Total liabilities and equity (deficit) | $ | 8,053 | $ | 177,352 | ||||
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 500,069 | $ | 85,265 | ||||
| Restricted cash | 620,868 | 1,306,463 | ||||||
| Accounts receivable, net | 1,530 | 98,325 | ||||||
| Accounts receivable – related parties, net | 624,373 | 757,343 | ||||||
| Due from related party – current | 535,046 | 513,819 | ||||||
| Short-term Investment | 68,521 | 75,797 | ||||||
| Prepaid expenses and other current assets | 143,127 | 150,235 | ||||||
| Total Current Assets | 2,493,534 | 2,987,247 | ||||||
| Property and equipment, net | 7,953,936 | 573,978 | ||||||
| Operating lease right-of-use assets | 899,817 | 1,161,141 | ||||||
| Long-term investments | 2,677,395 | 842,070 | ||||||
| Deferred tax assets | 34,256 | 117,110 | ||||||
| Prepaid expenses – non-current | 128,898 | 135,135 | ||||||
| Security deposits | 44,259 | 58,838 | ||||||
| Prepayment for long-term investments | 1,429,016 | 2,838,578 | ||||||
| Due from related parties – non-current | 930,396 | 865,477 | ||||||
| Total Assets | $ | 16,591,507 | $ | 9,579,574 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current Liabilities | ||||||||
| Short-term bank loans | $ | 852,500 | $ | 1,893,750 | ||||
| Accrued expenses and other current liabilities | 3,558,213 | 2,909,587 | ||||||
| Contract liabilities | 79,501 | 10,985 | ||||||
| Operating lease liabilities – current portion | 392,666 | 369,314 | ||||||
| Due to related parties | 480,196 | 359,992 | ||||||
| Total Current Liabilities | 5,363,076 | 5,543,628 | ||||||
| Tenant security deposit | 5,680 | 7,980 | ||||||
| Operating lease liability – non-current portion | 507,151 | 791,827 | ||||||
| Convertible notes payable – third parties | 1,654,004 | - | ||||||
| Total Liabilities | 7,529,911 | 6,343,435 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Equity | ||||||||
| Preferred stock, $0.001 par value, 20,000,000 authorized, nil shares issued and outstanding | - | - | ||||||
| Common stock, $0.001 par value, 10,000,000 authorized, 4,823,043 and 3,286,190 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively(1) | 4,823 | 3,286 | ||||||
| Additional paid-in capital | 80,662,290 | 67,937,050 | ||||||
| Stock subscription receivable | (677,220 | ) | (1,354,440 | ) | ||||
| Accumulated deficit | (62,309,161 | ) | (54,904,439 | ) | ||||
| Accumulated other comprehensive income | 519,123 | 517,128 | ||||||
| Treasury stock | (9,100,000 | ) | (9,100,000 | ) | ||||
| Total Stockholders’ Equity | 9,099,855 | 3,098,585 | ||||||
| Noncontrolling interest | (38,259 | ) | 137,554 | |||||
| Total Equity | 9,061,596 | 3,236,139 | ||||||
| Total Liabilities and Equity | $ | 16,591,507 | $ | 9,579,574 | ||||
“
| (1) | Prior period results have been adjusted to reflect the 1-for-10 reverse stock split effected on July 25, 2023. |
The accompanying notes are an integral part of these condensedunaudited consolidated financial statements.”
| 1 |
American BriVision (Holding) Corporation.ABVC BIOPHARMA, INC. AND SUBSIDIARIES
(formerly METU BRANDS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)(UNAUDITED)
| For the three months ended June 30, 2017 | For the three months ended June 30, 2016 | |||||||
| Revenues | $ | 90,000 | $ | - | ||||
| Cost of sales | - | - | ||||||
| Gross loss | 90,000 | - | ||||||
| Operating expenses | ||||||||
| Selling, general and administrative expenses | 169,427 | 289,098 | ||||||
| Research and development expenses | 17,500 | - | ||||||
| Stock based compensation | 2,552 | - | ||||||
| Total operating expenses | 189,479 | 289,098 | ||||||
| Net loss from operations | (99,479 | ) | (289,098 | ) | ||||
| Other income(expense) | ||||||||
| Bank Interest Income | 100 | 361 | ||||||
| Gain on exchange differences | - | 89 | ||||||
| Interest Expense | (28,500 | ) | (3,753 | ) | ||||
| Total Other income (expenses) | (28,400 | ) | (3,303 | ) | ||||
| Loss from continuing operations before income taxes | (127,879 | ) | (292,401 | ) | ||||
| Income taxes expenses | - | (836 | ) | |||||
| Net loss | $ | (127,879 | ) | $ | (293,237 | ) | ||
| Basic and Diluted loss per share | ||||||||
| Basic and diluted loss per share | (0.00 | ) | (0.00 | ) | ||||
| Weighted average number of shares outstanding basic and diluted | 213,746,647 | 208,779,424 | ||||||
| Three months Ended September 30, | Nine months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | 15,884 | $ | 42,269 | $ | 150,265 | $ | 380,789 | ||||||||
| Cost of revenues | 29,614 | 10,741 | 162,831 | 21,004 | ||||||||||||
| Gross (loss) profit | (13,730 | ) | 31,528 | (12,566 | ) | 359,785 | ||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative expenses | 1,182,093 | 3,216,146 | 3,841,633 | 6,000,055 | ||||||||||||
| Research and development expenses | 141,310 | 305,483 | 990,731 | 1,197,669 | ||||||||||||
| Stock-based compensation | 817,740 | 225,740 | 1,409,969 | 5,143,483 | ||||||||||||
| Total operating expenses | 2,141,143 | 3,747,369 | 6,242,333 | 12,341,207 | ||||||||||||
| Loss from operations | (2,154,873 | ) | (3,715,841 | ) | (6,254,899 | ) | (11,981,422 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest income | 40,246 | 48,164 | 147,998 | 127,354 | ||||||||||||
| Interest expense | (1,218,624 | ) | (126,536 | ) | (1,390,039 | ) | (159,507 | ) | ||||||||
| Operating sublease income | (3,000 | ) | 21,597 | 53,900 | 78,523 | |||||||||||
| Gain/Loss on foreign exchange changes | (25,059 | ) | (177 | ) | (55,625 | ) | 17,865 | |||||||||
| Other (expense) income | (7,769 | ) | 491 | (1,174 | ) | (59,381 | ) | |||||||||
| Total other (expense) income | (1,214,206 | ) | (56,461 | ) | (1,244,940 | ) | 4,854 | |||||||||
| Loss before income tax | (3,369,079 | ) | (3,772,302 | ) | (7,499,839 | ) | (11,976,568 | ) | ||||||||
| Provision for (benefit from) income tax | (999 | ) | 4,222 | 80,696 | (165,096 | ) | ||||||||||
| Net loss | (3,368,080 | ) | (3,776,524 | ) | (7,580,535 | ) | (11,811,472 | ) | ||||||||
| Net loss attributable to noncontrolling interests | (50,564 | ) | (71,660 | ) | (175,813 | ) | (252,171 | ) | ||||||||
| Net loss attributed to ABVC and subsidiaries | (3,317,516 | ) | (3,704,864 | ) | (7,404,722 | ) | (11,559,301 | ) | ||||||||
| Foreign currency translation adjustment | (15,082 | ) | (190,019 | ) | 1,995 | (426,579 | ) | |||||||||
| Comprehensive loss | $ | (3,332,598 | ) | $ | (3,894,883 | ) | $ | (7,402,727 | ) | $ | (11,985,880 | ) | ||||
| Net loss per share: | ||||||||||||||||
| Basic and diluted | $ | (0.82 | ) | $ | (1.14 | ) | $ | (2.08 | ) | $ | (3.71 | ) | ||||
| Weighted average shares used in computing net loss per share of common stock(1): | ||||||||||||||||
| Basic and diluted | 4,055,345 | 3,257,912 | 3,555,474 | 3,119,795 | ||||||||||||
| (1) | Prior period results have been adjusted to reflect the 1-for-10 reverse stock split effected on July 25, 2023. |
“
The accompanying notes are an integral part of these condensedunaudited consolidated financial statements.”
| 2 |
American BriVision (Holding) Corporation.ABVC BIOPHARMA, INC. AND SUBSIDIARIES
(formerly METU BRANDS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSCASH FLOWS
(Unaudited)(UNAUDITED)
| For the nine months ended June 30, 2017 | For the nine months ended June 30, 2016 | |||||||
| (Restated) | ||||||||
| Revenues | $ | 160,000 | $ | - | ||||
| Cost of sales | - | 32 | ||||||
| Gross profit/(loss) | 160,000 | (32 | ) | |||||
| Operating expenses | ||||||||
| Selling, general and administrative expenses | 562,930 | 349,486 | ||||||
| Research and development expenses | 67,848 | 10,000,000 | ||||||
| Stock based compensation | 5,928 | - | ||||||
| Total operating expenses | 636,706 | 10,349,486 | ||||||
| Net loss from operations | (476,706 | ) | (10,349,518 | ) | ||||
| Other income(expense) | ||||||||
| Bank Interest Income | 149 | 361 | ||||||
| Gain on exchange differences | - | 141 | ||||||
| Interest Expense | (47,500 | ) | (3,753 | ) | ||||
| Total Other income (expenses) | (47,351 | ) | (3,251 | ) | ||||
| Loss from continuing operations before income taxes | (524,057 | ) | (10,352,769 | ) | ||||
| Income taxes expenses | (830 | ) | (836 | ) | ||||
| Net loss | $ | (524,887 | ) | $ | (10,353,605 | ) | ||
| Basic and Diluted loss per share | ||||||||
| Basic and diluted loss per share | (0.00 | ) | (0.05 | ) | ||||
| Weighted average number of shares outstanding basic and diluted | 212,203,790 | 208,779,424 | ||||||
| Nine months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (7,580,535 | ) | $ | (11,811,472 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 20,949 | 17,364 | ||||||
| Stock-based compensation for non-employees | 1,409,969 | 5,143,483 | ||||||
| Provision for doubtful accounts | 38,500 | 521,955 | ||||||
| Other non-cash expenses | 1,422,362 | 30,564 | ||||||
| Deferred tax expense | (35,719 | ) | (31,247 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease (increase) in accounts receivable | 191,265 | (31,909 | ) | |||||
| Decrease (increase) in prepaid expenses and security deposits | 27,924 | 243,065 | ||||||
| Decrease (increase) in tenant security deposit | (2,300 | ) | - | |||||
| Decrease (increase) in due from related parties | 189,755 | (983,707 | ) | |||||
| Decrease in inventory | - | 5,486 | ||||||
| Increase (decrease) in accrued expenses and other current liabilities | 648,626 | (99,306 | ) | |||||
| Increase (decrease) in contract liabilities | 68,516 | - | ||||||
| Increase (decrease) in due to related parties | (155,697 | ) | 58,402 | |||||
| Net cash used in operating activities | (3,756,385 | ) | (6,937,322 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of equipment | (21,201 | ) | (119,603 | ) | ||||
| Increase in prepayment for long-term investments | (493,158 | ) | (1,518,793 | ) | ||||
| Net cash used in investing activities | (514,359 | ) | (1,638,396 | ) | ||||
| Cash flows from financing activities | ||||||||
| Issuance of common stock | 1,050,000 | 3,917,425 | ||||||
| Proceeds from issuance of warrant | 2,429,028 | - | ||||||
| Proceeds from convertible notes payable – third parties | 1,352,512 | - | ||||||
| Proceeds from short-term loan | - | 350,000 | ||||||
| Repayment of short-term bank loans | (1,000,000 | ) | - | |||||
| Net cash provided by financing activities | 3,831,540 | 4,267,425 | ||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | 168,413 | (286,775 | ) | |||||
| Net decrease in cash and cash equivalents and restricted cash | (270,791 | ) | (4,595,068 | ) | ||||
| Cash and cash equivalents and restricted cash | ||||||||
| Beginning | 1,391,728 | 6,565,215 | ||||||
| Ending | $ | 1,120,937 | $ | 1,970,147 | ||||
| Supplemental disclosure of cash flows | ||||||||
| Cash paid during the year for: | ||||||||
| Interest expense paid | $ | 27,525 | $ | 161,741 | ||||
| Income taxes paid | $ | - | $ | 1,600 | ||||
“The accompanying notes are an integral part of these condensedunaudited consolidated financial statements.”
| 3 |
American BriVision (Holding) Corporation.ABVC BIOPHARMA, INC. AND SUBSIDIARIES
(formerly METU BRANDS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSTOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
| For the nine months ended June 30, 2017 | For the nine months ended June 30, 2016 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss from continuing operations | $ | (524,887 | ) | $ | (10,353,605 | ) | ||
| Issuance of common stocks for compensation | 5,928 | 897,521 | ||||||
| Income taxes paid | (830 | ) | - | |||||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
| (Increase) decrease in deposit | 3,815 | - | ||||||
| (Increase) decrease in prepayment | - | 3,815 | ||||||
| Increase (decrease) in other payable | - | (300,000 | ) | |||||
| Increase (decrease) in due to related party | (647,000 | ) | 6,477,483 | |||||
| Increase (decrease) in accounts payable | (17,540 | ) | 11,446 | |||||
| Increase (decrease) in accrued expenses | 65,030 | - | ||||||
| Net cash used in operating activities | (1,115,484 | ) | (3,263,340 | ) | ||||
| Cash flows from investing activities | ||||||||
| Net cash provided by (used in) investing activities | - | - | ||||||
| - | ||||||||
| Cash flows from financing activities | ||||||||
| (Decrease) increase in due to shareholder | - | (46,586 | ) | |||||
| Proceeds from short term loans | - | 2,050,000 | ||||||
| Borrowings from related party | 950,000 | - | ||||||
| Proceeds from subscription receivable | - | 350,000 | ||||||
| Net cash provided by financing activities | 950,000 | 2,353,414 | ||||||
| Effect of exchange rates of cash | - | - | ||||||
| Net decrease in cash | (165,484 | ) | (909,926 | ) | ||||
| Cash, beginning of period | 173,537 | 994,830 | ||||||
| Cash, end of period | $ | 8,053 | $ | 84,904 | ||||
Non cash investing and financing activities Prepayment | - | 900,000 | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Interest paid | $ | - | $ | - | ||||
| Income taxes paid | $ | - | $ | - | ||||
| Common Stock | Stock | Additional | Accumulated Other | Treasury Stock | Non | Total | ||||||||||||||||||||||||||||||||||
| Number of shares(1) | Amounts(1) | Subscription Receivable | Paid-in Capital(1) | Accumulated Deficit | Comprehensive Income | Number of Shares(1) | Amount | controlling Interest | Equity (Deficit) | |||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | 2,893,089 | $ | 2,893 | $ | (2,257,400 | ) | $ | 58,139,700 | $ | (38,481,200 | ) | $ | 539,660 | (27,535 | ) | $ | (9,100,000 | ) | $ | 26,689 | $ | 8,870,342 | ||||||||||||||||||
| Issuance of common stock for cash | 200,000 | 200 | 4,466,125 | 4,466,325 | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock for consulting service | 138,101 | 138 | - | 3,663,725 | - | - | - | - | - | 3,663,863 | ||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | 451,480 | - | - | - | - | - | - | 451,480 | ||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (7,854,437 | ) | - | - | - | (180,511 | ) | (8,034,948 | ) | |||||||||||||||||||||||||||
| Cumulative transaction adjustments | - | - | - | - | - | (236,560 | ) | - | - | - | (236,560 | ) | ||||||||||||||||||||||||||||
| Balance at June 30, 2022 | 3,231,190 | $ | 3,231 | $ | (1,805,920 | ) | $ | 66,269,550 | $ | (46,335,637 | ) | $ | 303,100 | (27,535 | ) | $ | (9,100,000 | ) | $ | (153,822 | ) | $ | 9,180,502 | |||||||||||||||||
| Issuance of common stock for consulting service | 32,500 | 33 | - | 253,467 | - | - | - | - | - | 253,500 | ||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | 225,740 | - | - | - | - | - | - | 225,740 | ||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (3,704,864 | ) | - | - | - | (71,660 | ) | (3,776,524 | ) | |||||||||||||||||||||||||||
| Cumulative transaction adjustments | - | - | - | - | - | (190,019 | ) | - | - | - | (190,019 | ) | ||||||||||||||||||||||||||||
| Balance at September 30, 2022 | 3,263,690 | $ | 3,264 | $ | (1,580,180 | ) | $ | 66,523,017 | $ | (50,040,501 | ) | $ | 113,081 | (27,535 | ) | $ | (9,100,000 | ) | $ | (225,482 | ) | $ | 5,693,199 | |||||||||||||||||
“
| Common Stock | Stock | Additional | Accumulated Other | Treasury Stock | Non | Total | ||||||||||||||||||||||||||||||||||
| Number of shares(1) | Amounts(1) | Subscription Receivable | Paid-in Capital(1) | Accumulated Deficit | Comprehensive Income | Number of Shares(1) | Amount | controlling Interest | Equity (Deficit) | |||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | 3,286,190 | $ | 3,286 | $ | (1,354,440 | ) | $ | 67,937,050 | $ | (54,904,439 | ) | $ | 517,128 | (27,535 | ) | $ | (9,100,000 | ) | $ | 137,554 | $ | 3,236,139 | ||||||||||||||||||
| Issuance of common stock for consulting service | 22,341 | 22 | - | 140,727 | - | - | - | - | - | 140,749 | ||||||||||||||||||||||||||||||
| Issuance of warrant | - | - | - | 1,729,028 | - | - | - | - | - | 1,729,028 | ||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | 451,480 | - | - | - | - | - | - | 451,480 | ||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | (4,087,206 | ) | - | - | - | (125,249 | ) | (4,212,455 | ) | ||||||||||||||||||||||||||||
| Cumulative transaction adjustments | - | - | - | - | - | 17,077 | - | - | - | 17,077 | ||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | 3,308,531 | $ | 3,308 | $ | (902,960 | ) | $ | 69,806,805 | $ | (58,991,645 | ) | $ | 534,205 | (27,535 | ) | $ | (9,100,000 | ) | $ | 12,305 | $ | 1,362,018 | ||||||||||||||||||
| Issuance of common stock for cash | 300,000 | 300 | - | 1,049,700 | - | - | - | - | - | 1,050,000 | ||||||||||||||||||||||||||||||
| Issuance of common stock for consulting service | 29,600 | 30 | - | 591,970 | - | - | - | - | - | 592,000 | ||||||||||||||||||||||||||||||
| Issuance of common stock for acquiring of Property | 370,000 | 370 | - | 7,399,630 | - | - | - | - | - | 7,400,000 | ||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of convertible notes | 614,912 | 615 | - | 1,814,185 | - | - | - | - | - | 1,814,800 | ||||||||||||||||||||||||||||||
| Issuance of pre-funded warrant | - | - | - | 700,000 | - | - | - | - | - | 700,000 | ||||||||||||||||||||||||||||||
| Exercise of pre-funded warrant | 200,000 | 200 | - | (700,000 | ) | - | - | - | - | - | (699,800 | ) | ||||||||||||||||||||||||||||
| Stock-based compensation | - | - | 225,740 | - | - | - | - | - | - | 225,740 | ||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | (3,317,516 | ) | - | - | - | (50,564 | ) | (3,368,080 | ) | ||||||||||||||||||||||||||||
| Cumulative transaction adjustments | - | - | - | - | - | (15,082 | ) | - | - | - | (15,082 | ) | ||||||||||||||||||||||||||||
| Balance at September 30, 2023 | 4,823,043 | $ | 4,823 | $ | (677,220 | ) | $ | 80,662,290 | $ | (62,309,161 | ) | $ | 519,123 | (27,535 | ) | $ | (9,100,000 | ) | $ | (38,259 | ) | $ | 9,061,596 | |||||||||||||||||
| (1) | Prior period results have been adjusted to reflect the 1-for-10 reverse stock split effected on July 25, 2023. |
The accompanying notes are an integral part of these condensedunaudited consolidated financial statements.”
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ABVC BIOPHARMA, INC. AND SUBSIDIARIES
American BriVision (Holding) Corporation.
(formerly METU BRANDS, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2017, AND SEPTEMBER 30, 2016(UNAUDITED)
(Unaudited)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
ABVC BioPharma, Inc. (the “Company”), formerly known as American BriVision (Holding) Corporation, (the “Company” or “Holding entity”), a Nevada corporation, through the Company’s operating entity, American BriVision Corporation (“BriVision”), which was incorporated in July 2015 in the State of Delaware, engages in biotechnology to fulfill unmet medical needs and focuses on the development of new drugs and innovative medical devices to fulfill unmetderived from plants. BriVision develops its pipeline by carefully tracking new medical needs. The businessdiscoveries or medical device technologies in research institutions in the Asia-Pacific region. Pre-clinical, disease animal model ofand Phase I safety studies are examined closely by the Company is to integrate research achievementsidentify drugs that BriVision believes demonstrate efficacy and safety. Once a drug appears to be a good candidate for development and ultimately commercialization, BriVision licenses the drug or medical device from the original researchers and begins to introduce the drugs clinical plan to highly respected principal investigators in the United States, Australia and Taiwan to conduct a Phase II clinical trial. At present, clinical trials for the Company’s drugs and medical devices are being conducted at such world-famous institutions (such as Memorial Sloan Kettering Cancer Center (“MSKCC”) and MD Anderson Cancer Center), conduct clinical trials of translational medicine for Proof of Concept (“POC”), out-licenseCenter. BriVision had no predecessor operations prior to international pharmaceutical companies, and exploit global markets.its formation on July 21, 2015.
REVERSE MERGERGoing Concern
On February 8, 2016, a Share Exchange Agreement (“Share Exchange Agreement”) was entered into by and among the Company, BriVision, Euro-Asia Investment & Finance Corp. Limited, a company incorporated under the laws of Hong Kong Special Administrative Region of People Republic of China (“Euro-Asia”), being the owners of record of 52,336,000 shares of common stockThe accompanying unaudited financial statements have been prepared in conformity with U.S. GAAP which contemplates continuation of the Company on a going concern basis. The going concern basis assumes that assets are realized, and the owners of record of all of the issued share capital of BriVision (the “BriVision Stock”). Pursuant to the Share Exchange Agreement, upon surrender by the BriVision Shareholders and the cancellation by BriVision of the certificates evidencing the BriVision Stock as registeredliabilities are settled in the nameordinary course of each BriVision Shareholder,business at amounts disclosed in the unaudited financial statements. The Company’s ability to continue as a going concern depends upon its ability to market and pursuantsell its products to generate positive operating cash flows. For the registration ofthree and nine months ended September 30, 2023, the Company in the registerreported net loss of members maintained by BriVision as the new holder$3,368,080 and $7,580,535, respectively. As of the BriVision Stock and the issuance of the certificates evidencing the aforementioned registration of the BriVision Stock in the name of the Company, the Company should issue 52,936,583 shares (the “Acquisition Stock”) (subject to adjustment for fractionalized shares as set forth below) ofSeptember 30, 2023, the Company’s common stock to the BriVision Shareholders (or their designees), and 51,945,225 shares of the Company’s common stock owned by Euro-Asia should be cancelled and retired to treasury. The Acquisition Stock collectively should represent 79.70% of the issued and outstanding common stock of the Company immediately after the Closing, in exchange for the BriVision Stock, representing 100% of the issued shareworking capital of BriVision. Because of the exchange of the BriVision Stock for the Acquisition Stock (the “Share Exchange”), BriVision became a wholly owned subsidiary (the “Subsidiary”) of the Company and theredeficit was a change of control of the Company following the closing. There were no warrants, options or other equity instruments issued in connection with the share exchange agreement.
Because of the consummation of the Share Exchange, as of February 8, 2016, BriVision is now our wholly owned subsidiary and its shareholders own approximately 79.70% of our issued and outstanding common stock.
Following the Share Exchange, we have abandoned our prior business plan and we are now pursuing BriVision’s historical businesses and proposed businesses, which focus on the development of new drugs and innovative medical devices to fulfill unmet medical needs. The business model of the Company is to integrate research achievements from world-famous institutions, conduct clinical trials of translational medicine for Proof of Concept (“POC”), out-license to international pharmaceutical companies, and exploit global markets.
Accounting Treatment of the Reverse Merger
For financial reporting purposes, the Share Exchange represents a “reverse merger” rather than a business combination and BriVision is deemed the accounting acquirer in the transaction. The Share Exchange is being accounted for as a reverse-merger and recapitalization. BriVision is the acquirer for financial reporting purposes and the Company is the acquired company. Consequently, the assets and liabilities and the operations reflected in the historical financial statements prior to the Share Exchange will be those of BriVision and recorded at the historical cost basis of BriVision.$2,869,542. In addition, the consolidated financial statements after completionCompany had net cash outflows of the Share Exchange will include the assets and liabilities of the Company and BriVision, and the historical operations of BriVision and operations of the Combined Company$3,756,385 from the closing date of the Share Exchange.
2. CORRECTIONS TO PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
The Company has filed an amendment to its Quarterly Report, originally filed on August 15, 2016, on Form 10-Q for the period ended June 30, 2016 on February 22, 2017.
The Company discovered that there was a delay of accrual for the two payments in total of $10,000,000 as set forth in the Collaborative Agreement: 1) 3.5% of total payment related to the upfront payment shall be made upon the execution of the Collaborative Agreement; and 2) 6.5% of the total payment shall be made upon the first IND submission (which was submitted in March 2016). It had erroneously stated that the research and development expenses were $0 and $0operating activities for the nine months ended JuneSeptember 30, 2016. Instead, our research2023. These conditions give rise to substantial doubt as to whether the Company will be able to continue as a going concern.
Management’s plan is to continue improve operations to generate positive cash flows and development expenses were $6,500,000raise additional capital through private of public offerings. If the Company is not able to generate positive operating cash flows, and $10,000,000raise additional capital, there is the risk that the Company may not be able to meet its short-term obligations.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited interim consolidated financial statements do not include all the information and footnotes required by the U.S. GAAP for complete financial statements. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with the U.S. GAAP have been condensed or omitted consistent with Article 10 of Regulation S-X. In the opinion of the Company’s management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, in normal recurring nature, as necessary for the fair statement of the Company’s financial position as of September 30, 2023, and results of operations and cash flows for the nine months ended JuneSeptember 30, 2016.
2023 and 2022. The Company restatedunaudited interim consolidated balance sheet as of December 31, 2022 has been derived from the consolidatedaudited financial statements at that date but does not include all the information and footnotes required by the U.S. GAAP. Interim results of operations are not necessarily indicative of the results expected for the above periodfull fiscal year or for any future period. These financial statements should be read in order to recordconjunction with the related liability and expense in the correct period, as well as providing necessary revision for the footnotes of related parties transactions and commitments and contingencies to reflect a more accurate disclosure. No other sections were affected, but for the convenience of the reader, the Company included the following tables that present the effect of the correction discussed above and other adjustments on selected line items of our previously reportedaudited consolidated financial statements as of and for the periodyears ended June 30, 2016.
For presentation purpose, certain items on the consolidated statements of cash flow for the period ended June 30, 2016 were changed according to the changesDecember 31, 2022 and 2021, and related notes included in the consolidated balance sheet. In addition, certain items were reclassified from financing activities to operating activities or from operating activities to financing activities. Details of changes are presented in the following tables.
| As of and for the Period Ended June 30, 2016 | ||||||||||||
| ITEMS | Previously Reported | Adjustments | Restated | |||||||||
| Consolidated Statements of Balance Sheets | ||||||||||||
| Prepayment | 3,500,000 | (3,500,000 | ) | - | ||||||||
| Due to related party | - | 6,500,000 | 6,500,000 | |||||||||
| Accumulated deficit | (669,207 | ) | (10,000,000 | ) | (10,669,207 | ) | ||||||
| Consolidated Statements of Operations and Comprehensive Loss | ||||||||||||
| For the nine months ended June 30, 2016 | ||||||||||||
| Research and development expenses | - | 10,000,000 | 10,000,000 | |||||||||
| Net Loss | (352,796 | ) | (10,000,000 | ) | (10,352,796 | ) | ||||||
| Basic and diluted loss per share | (0.00 | ) | (0.05 | ) | (0.05 | ) | ||||||
| Consolidated Statements of Cash Flow | ||||||||||||
| Net loss from operating activities | (353,605 | ) | (10,000,000 | ) | (10,353,605 | ) | ||||||
| Issuance of common stock for compensation | - | 897,521 | 897,521 | |||||||||
| (Increase) decreases in prepayment | (3,496,185 | ) | 3,500,000 | 3,815 | ||||||||
| (Increase) decrease in due from related party | 350,000 | (350,000 | ) | - | ||||||||
| Increase (decrease) in due to related party | (22,517 | ) | 6,500,000 | 6,477,483 | ||||||||
| Increase (decrease) in due to shareholder | (46,586 | ) | 46,586 | - | ||||||||
| Net cash used in operating activities | (3,857,447 | ) | 594,107 | (3,263,340 | ) | |||||||
| (Increase) decrease in due to shareholder | - | (46,586 | ) | (46,586 | ) | |||||||
| Proceeds from subscription receivable | - | 350,000 | 350,000 | |||||||||
| Proceeds from issuance of common stock | 897,521 | (897,521 | ) | - | ||||||||
| Net cash used in financing activities | 2,947,521 | (594,107 | ) | (2,353,414 | ) | |||||||
The Company discovered that it had erroneously stated that the research and development expenses were understated during the year ended September 30, 2016. Instead, our research and development expenses were $10,000,000 for the year ended September 30, 2016 and were restated in the Adjustments No. 1 column. Moreover, there were typographical errors on Selling, General and Administration expenses which were corrected in the Adjustments No. 2 column. For the year ended September 30, 2015, the Net cash used in the operating activities was mistyped from $(715) to $(517) and was corrected in this restatement.
The following tables present the effect of the corrections discussed above and other adjustments on selected line items of our previously reportedCompany’s audited consolidated financial statements as of and for the year ended September 30, 2016,statements.
| Previously Reported on Form 10K | Adjustments No.1 | Adjustments No.2 | Restated | |||||||||||||
| Consolidated Balance Sheet | ||||||||||||||||
| As of September 30, 2016 | ||||||||||||||||
| Due to related party | - | 6,500,000 | - | 6,500,000 | ||||||||||||
| Total Liabilities | 56,470 | 6,500,000 | - | 6,556,470 | ||||||||||||
| Additional paid-in capital | 4,733,401 | - | 60 | 4,733,461 | ||||||||||||
| Accumulated deficit | (4,823,401 | ) | (6,500,000 | ) | - | (11,323,401 | ) | |||||||||
| Total equity (deficit) | 120,882 | (6,500,000 | ) | - | (6,379,118 | ) | ||||||||||
| Consolidated Statements of Operations and Comprehensive Loss | ||||||||||||||||
| For the year ended September 30, 2016 | ||||||||||||||||
| Selling, general and administrative expenses | 4,497,263 | (3,500,060 | ) | 60 | 997,263 | |||||||||||
| Research and development expenses | - | 10,000,000 | - | 10,000,000 | ||||||||||||
| Net loss from operations | (4,497,295 | ) | (6,499,940 | ) | (60 | ) | (10,997,295 | ) | ||||||||
| Loss from continuing operations before income taxes | (4,506,963 | ) | (6,499,940 | ) | (60 | ) | (11,006,963 | ) | ||||||||
| Net Loss | (4,507,799 | ) | (6,499,940 | ) | (60 | ) | (11,007,799 | ) | ||||||||
| Basic and diluted loss per share | (0.00 | ) | (0.06 | ) | (0.00 | ) | (0.06 | ) | ||||||||
| Consolidated Statements of Cash Flow | ||||||||||||||||
| For the year ended September 30, 2016 | ||||||||||||||||
| Net loss from continuing operations | (4,507,799 | ) | (6,499,940 | ) | (60 | ) | (11,007,799 | ) | ||||||||
| Issuance of common stock for compensation | 1,295,324 | (60 | ) | 60 | 1,295,324 | |||||||||||
| (Decrease) increase in due to related party | (22,517 | ) | 6,500,000 | 6,477,483 | ||||||||||||
| Consolidated Statements of Cash Flow | �� | |||||||||||||||
| For the year ended September 30, 2015 | ||||||||||||||||
| Net cash used in operating activities | (517 | ) | - | (198 | ) | (715 | ) | |||||||||
As a result of the restatement of the consolidated balance sheets as of September 30, 2016, Due to related party and Total liabilities were increased by $6,500,000; changed from $0 to $6,500,000 and from $56,470 to $6,556,470. Additional paid in capital was increased by $60 and changed from $4,733,401 to $4,733,461. Accumulated deficit was increased by $6,500,000 and changed from $(4,823,401) to $(11,323,401). Total equity (deficit) was decreased by $6,500,000 and changed from $120,882 to $(6,379,118).
As a result of the restatement of the consolidated statements of operations and comprehensive loss for the year ended September 30, 2016, Selling, general and administrative expenses were decreased by $3,500,000 and changed from $4,497,263 to $997,263. Research and development expenses were increased by $10,000,000 and changed from $0 to $10,000,000. Net loss from operations was increased by $6,500,000 and changed from $(4,497,295) to $(10,997,295) Loss from continuing operations before taxes was increased by $6,500,000 and changed from $(4,506,963) to $(11,006,963). Net loss was increased by $6,500,000 and changed from $(4,507,799) to $(11,007,799). Basic and diluted loss per share were also increased by 0.06 and changed from $0 to $(0.06).
As a result of the restatement of the consolidated statements of cash flow for the year ended September 30, 2016, Net loss from continuing operations was increased by $6,500,000; changed from $(4,507,799) to $(11,007,799). Issuance of common stock for compensation did not have changes and stated as $1,295,324. (Decrease) increase in due to related party was increased by $6,500,000 and changed from $(22,517) to $6,477,483. There were no changes in Net cash used in operating activities.
As a result of the restatement of the consolidated statements of cash flow for the year ended September 30, 2015, Net cash used in operating activities was increased by $198 and changed from $(517) to $(715).
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying auditedunaudited consolidated financial statements and related notes have been prepared in accordance with the generally accepted accounting principles in the United States of America (U.S. GAAP)(the “U.S. GAAP”). All significant intercompany transactions and account balances have been eliminated.
This basis of accounting involves the application of accrual accounting. Consequently,accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred. The Company’s unaudited financial statements are expressed in U.S. dollars. The condensed financial statements include all adjustments that, in the opinion
Reclassifications of management, are necessary in order not to make the financial statements misleading.Prior Year Presentation
Certain informationprior year unaudited consolidated balance sheet and footnote disclosure normally included in financial statements prepared in accordance with US GAAPunaudited consolidated cash flow statement amounts have been condensed or omitted. Thereclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations for the periods ended June 30, 2017 are not necessarily indicative of the operating results for the full year.operations.
Basis of Consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiary, BriVision. All intercompany transactions, balances and any unrealized profit and losses have been eliminated on consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAPaccounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the amount of revenues and expenses during the reporting periods. Actual results could differ materially from those results.
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Reclassifications
We have reclassified certain prior period amounts within our consolidated financial statements and accompanying notes to conform to our current period presentation. These reclassifications did not affect total revenue, operating income, operating cash flows or net loss.
Forward Stock splitSplit
On March 21, 2016, the Board of Directors of the Company approved an amendment to Articles of Incorporation to effect a forward split at a ratio of 1 to 3.141 and increase the number of our authorized shares of common stock,Common Stock, par value $0.001 per share, to 360,000,000, which was effective on April 8, 2016. The majority
Stock Reverse Split
On March 12, 2019, the Board of the shareholdersDirectors of the Company by unanimous written consent in lieu of a meeting approved to i) effect a stock reverse split at the ratio of 1-for-18 (the “Reverse Split”) of both the authorized common stock of the Company (the “Common Stock”) and the issued and outstanding Common Stock and ii) to amend the articles of incorporation of the Company to reflect the Reverse Split. The Board approved and authorized the Reverse Split without obtaining approval of the Company’s shareholders pursuant to Section 78.207 of Nevada Revised Statutes. On May 3, 2019, the Company filed a certificate of amendment to the Company’s articles of incorporation (the “Amendment”) to effect the Reverse Split with the Secretary of State of Nevada. The Financial Industry Regulatory Authority (“FINRA”) informed the Company that the Reverse Split was effective on May 8, 2019.
On July 25, 2023, the Company filed a Certificate of Amendment to its Articles of Incorporation authorizing a 1-for-10 reverse stock split of the issued and outstanding shares of its common stock. The Company’s stockholders previously approved the amendmentReverse Stock Split at the Company’s Special Shareholder Meeting held on July 7, 2023. The Reverse Stock Split was effected to Articlesreduce the number of Incorporation.issued and outstanding shares and to increase the per share trading value of the Company’s common stock, although that outcome is not guaranteed. In turn, the Company believes that the Reverse Stock Split will enable the Company to restore compliance with certain continued listing standards of NASDAQ Capital Market. All shares and related financial information in this Form 10-Q reflect this 1-for-10 reverse stock split.
Fair Value Measurements
The Company applies the provisions ofFASB ASC Subtopic 820-10,820, “Fair Value Measurements”, for defines fair value measurements offor certain financial and nonfinancial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosedrecorded at fair value, in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.
Fair value is defined as the price It requires that would be receivedan entity measure its financial instruments to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining thebase fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
ASC 820 establishes a fair value hierarchy that requires an entity toon exit price, maximize the use of observable inputsunits and minimize the use of unobservable inputs when measuring fair value. ASC 820to determine the exit price. It establishes three levels ofa hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy givesprioritizes the highest priority to unadjustedinputs into three broad levels based on the reliability of the inputs as follows:
| ● | Level 1 Inputs are quoted prices in active markets
Cash and Cash Equivalents The Company considers highly liquid investments with maturities of three months or less, when purchased, to be cash equivalents. As of Restricted Cash Restricted cash primarily consist of certificate of deposits as a collateral of short-term loan held in CTBC Bank. As of September 30, 2023 and December 31, 2022, the Company’s restricted cash amounted $620,868 and $1,306,463, respectively. Concentration of Credit Risk The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments in high quality credit institutions, but these investments may be in excess of Taiwan Central Deposit Insurance Corporation and the U.S. Federal Deposit Insurance Corporation’s insurance limits. The Company does not enter into financial instruments for hedging, trading or speculative purposes. The Company performs ongoing credit evaluation of our customers and requires no collateral. An allowance for doubtful accounts is provided based on a review of the collectability of accounts receivable. The Company determines the amount of allowance for doubtful accounts by examining its historical collection experience and current trends in the credit quality of its customers as well as its internal credit policies. Actual credit losses may differ from our estimates. Concentration of clients As of September 30, 2023, the most major client, who specializes in developing and commercializing dietary supplements and therapeutics in the dietary supplement industry, accounted for 99.76% of the Company’s total account receivables. As of December 31, 2022, the most major client, who specializes in developing and commercializing dietary supplements and therapeutics in the dietary supplement industry, accounted for 71.89% of the Company’s total account receivable; the second major client, with its Chairman also having a position as one of the Board of Directors of BioKey, accounted for 16.62% of the Company’s total account receivable. For the nine months ended September 30, 2023, the most major client, manufacturing drugs, dietary supplements, and medical products, accounted for 81.19% of the Company’s total revenues. For the nine months ended September 30, 2022, one major client, who is a Shareholder of the Company that works in development and commercialization of new drugs in Taiwan, accounted for 79.18% of the Company’s total revenues.
Accounts receivable and allowance for expected credit losses accounts Accounts receivable is recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. The Company make estimates of expected credit and collectability trends for the allowance for credit losses and allowance for unbilled receivables based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of customers, current economic conditions reasonable and supportable forecasts of future economic conditions, and other factors that may affect our ability to collect from customers. The provision is recorded against accounts receivable balances, with a corresponding charge recorded in the consolidated statements of income. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. Allowance for expected credit losses accounts was 113,694 and 194,957 as of September 30, 2023 and December 31, 2022, respectively. Revenue Recognition During the fiscal year 2018, the Company adopted Accounting Standards Codification (“ASC”), Topic 606 (ASC 606), Revenue from Contracts with Customers, using the modified retrospective method to all contracts that were not completed as of January 1, 2018, and applying the new revenue standard as an adjustment to the opening balance of accumulated deficit at the beginning of 2018 for the cumulative effect. The results for the Company’s reporting periods beginning on and after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. Based on the Company’s review of existing collaborative agreements as of January 1, 2018, the Company concluded that the adoption of the new guidance did not have a significant change on the Company’s revenue during all periods presented. Pursuant to ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines is within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration the Company is entitled to in exchange for the goods or services the Company transfers to the customers. At inception of the contract, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. The following are examples of when the Company recognizes revenue based on the types of payments the Company receives. Collaborative Revenues — The Company recognizes collaborative revenues generated through collaborative research, development and/or commercialization agreements. The terms of these agreements typically include payment to the Company related to one or more of the following: non-refundable upfront license fees, development and commercial milestones, partial or complete reimbursement of research and development costs, and royalties on net sales of licensed products. Each type of payments results in collaborative revenues except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues. To date, the Company has not received any royalty revenues. Revenue is recognized upon satisfaction of a performance obligation by transferring control of a good or service to the collaboration partners. As part of the accounting for these arrangements, the Company applies judgment to determine whether the performance obligations are distinct, and develop assumptions in determining the stand-alone selling price for each distinct performance obligation identified in the collaboration agreements. To determine the stand-alone selling price, the Company relies on assumptions which may include forecasted revenues, development timelines, reimbursement rates for R&D personnel costs, discount rates and probabilities of technical and regulatory success. The Company had multiple deliverables under the collaborative agreements, including deliverables relating to grants of technology licenses, regulatory and clinical development, and marketing activities. Estimation of the performance periods of the Company’s deliverables requires the use of management’s judgment. Significant factors considered in management’s evaluation of the estimated performance periods include, but are not limited to, the Company’s experience in conducting clinical development, regulatory and manufacturing activities. The Company reviews the estimated duration of its performance periods under its collaborative agreements on an annually basis, and makes any appropriate adjustments on a prospective basis. Future changes in estimates of the performance period under its collaborative agreements could impact the timing of future revenue recognition.
(i) Non-refundable upfront payments If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in an arrangement, the Company recognizes revenue from the related non-refundable upfront payments based on the relative standalone selling price prescribed to the license compared to the total selling price of the arrangement. The revenue is recognized when the license is transferred to the collaboration partners and the collaboration partners are able to use and benefit from the license. To date, the receipt of non-refundable upfront fees was solely for the compensation of past research efforts and contributions made by the Company before the collaborative agreements entered into and it does not relate to any future obligations and commitments made between the Company and the collaboration partners in the collaborative agreements. (ii) Milestone payments The Company is eligible to receive milestone payments under the collaborative agreement with collaboration partners based on achievement of specified development, regulatory and commercial events. Management evaluated the nature of the events triggering these contingent payments, and concluded that these events fall into two categories: (a) events which involve the performance of the Company’s obligations under the collaborative agreement with collaboration partners, and (b) events which do not involve the performance of the Company’s obligations under the collaborative agreement with collaboration partners. The former category of milestone payments consists of those triggered by development and regulatory activities in the territories specified in the collaborative agreements. Management concluded that each of these payments constitute substantive milestone payments. This conclusion was based primarily on the facts that (i) each triggering event represents a specific outcome that can be achieved only through successful performance by the Company of one or more of its deliverables, (ii) achievement of each triggering event was subject to inherent risk and uncertainty and would result in additional payments becoming due to the Company, (iii) each of the milestone payments is non-refundable, (iv) substantial effort is required to complete each milestone, (v) the amount of each milestone payment is reasonable in relation to the value created in achieving the milestone, (vi) a substantial amount of time is expected to pass between the upfront payment and the potential milestone payments, and (vii) the milestone payments relate solely to past performance. Based on the foregoing, the Company recognizes any revenue from these milestone payments in the period in which the underlying triggering event occurs. (iii) Multiple Element Arrangements The Company evaluates multiple element arrangements to determine (1) the deliverables included in the arrangement and (2) whether the individual deliverables represent separate units of accounting or whether they must be accounted for as a combined unit of accounting. This evaluation involves subjective determinations and requires management to make judgments about the individual deliverables and whether such deliverables are separate from other aspects of the contractual relationship. Deliverables are considered separate units of accounting provided that: (i) the delivered item(s) has value to the customer on a standalone basis and (ii) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially within its control. In assessing whether an item under a collaboration has standalone value, the Company considers factors such as the research, manufacturing, and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. The Company also considers whether its collaboration partners can use the other deliverable(s) for their intended purpose without the receipt of the remaining element(s), whether the value of the deliverable is dependent on the undelivered item(s), and whether there are other vendors that can provide the undelivered element(s). The Company recognizes arrangement consideration allocated to each unit of accounting when all of the revenue recognition criteria in ASC 606 are satisfied for that particular unit of accounting. In the event that a deliverable does not represent a separate unit of accounting, the Company recognizes revenue from the combined unit of accounting over the Company’s contractual or estimated performance period for the undelivered elements, which is typically the term of the Company’s research and development obligations. If there is no discernible pattern of performance or objectively measurable performance measures do not exist, then the Company recognizes revenue under the arrangement on a straight-line basis over the period the Company is expected to complete its performance obligations. Conversely, if the pattern of performance in which the service is provided to the customer can be determined and objectively measurable performance measures exist, then the Company recognizes revenue under the arrangement using the proportional performance method. Revenue recognized is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the straight-line method or proportional performance method, as applicable, as of the period ending date.
At the inception of an arrangement that includes milestone payments, the Company evaluates whether each milestone is substantive and at risk to both parties on the basis of the contingent nature of the milestone. This evaluation includes an assessment of whether: (1) the consideration is commensurate with either the Company’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from its performance to achieve the milestone, (2) the consideration relates solely to past performance and (3) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone and the level of effort and investment required to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether a milestone satisfies all of the criteria required to conclude that a milestone is substantive. Milestones that are not considered substantive are recognized as earned if there are no remaining performance obligations or over the remaining period of performance, assuming all other revenue recognition criteria are met. (iv) Royalties and Profit Sharing Payments Under the collaborative agreement with the collaboration partners, the Company is entitled to receive royalties on sales of products, which is at certain percentage of the net sales. The Company recognizes revenue from these events based on the revenue recognition criteria set forth in ASC 606. Based on those criteria, the Company considers these payments to be contingent revenues, and recognizes them as revenue in the period in which the applicable contingency is resolved. Revenues Derived from Research and Development Activities Services — Revenues related to research and development and regulatory activities are recognized when the related services or activities are performed, in accordance with the contract terms. The Company typically has only one performance obligation at the inception of a contract, which is to perform research and development services. The Company may also provide its customers with an option to request that the Company provides additional goods or services in the future, such as active pharmaceutical ingredient, API, or IND/NDA/ANDA/510K submissions. The Company evaluates whether these options are material rights at the inception of the contract. If the Company determines an option is a material right, the Company will consider the option a separate performance obligation. If the Company is entitled to reimbursement from its customers for specified research and development expenses, the Company accounts for the related services that it provides as separate performance obligations if it determines that these services represent a material right. The Company also determines whether the reimbursement of research and development expenses should be accounted for as revenues or an offset to research and development expenses in accordance with provisions of gross or net revenue presentation. The Company recognizes the corresponding revenues or records the corresponding offset to research and development expenses as it satisfies the related performance obligations. The Company then determines the transaction price by reviewing the amount of consideration the Company is eligible to earn under the contracts, including any variable consideration. Under the outstanding contracts, consideration typically includes fixed consideration and variable consideration in the form of potential milestone payments. At the start of an agreement, the Company’s transaction price usually consists of the payments made to or by the Company based on the number of full-time equivalent researchers assigned to the project and the related research and development expenses incurred. The Company does not typically include any payments that the Company may receive in the future in its initial transaction price because the payments are not probable. The Company would reassess the total transaction price at each reporting period to determine if the Company should include additional payments in the transaction price. The Company receives payments from its customers based on billing schedules established in each contract. Upfront payments and fees may be recorded as contract liabilities upon receipt or when due, and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the right of the Company to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customers and the transfer of the promised goods or services to the customers will be one year or less.
Property and Equipment Property and equipment is carried at cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Expenditures that improve the functionality of the related asset or extend the useful life are capitalized. When property and equipment is retired or otherwise disposed of, the related gain or loss is included in operating income. Leasehold improvements are depreciated on the straight-line method over the shorter of the remaining lease term or estimated useful life of the asset. Depreciation is calculated on the straight-line method, including property and equipment under capital leases, generally based on the following useful lives:
Construction-in-Progress The Company acquires constructions that constructs certain of its fixed assets. All direct and indirect costs that are related to the construction of fixed assets and incurred before the assets are ready for their intended use are capitalized as construction-in-progress. No depreciation is provided in respect of construction-in-progress. Construction in progress is transferred to specific fixed asset items and depreciation of these assets commences when they are ready for their intended use. Impairment of Long-Lived Assets The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell. Long-term Equity Investment The Company acquires the equity investments to promote business and strategic objectives. The Company accounts for non-marketable equity and other equity investments for which the Company does not have control over the investees as:
Significant judgment is required to identify whether an impairment exists in the valuation of the Company’s non-marketable equity investments, and therefore the Company considers this a critical accounting estimate. Its yearly analysis considers both qualitative and quantitative factors that may have a significant impact on the investee’s fair value. Qualitative analysis of its investments involves understanding the financial performance and near-term prospects of the investee, changes in general market conditions in the investee’s industry or geographic area, and the management and governance structure of the investee. Quantitative assessments of the fair value of its investments are developed using the market and income approaches. The market approach includes the use of comparable financial metrics of private and public companies and recent financing rounds. The income approach includes the use of a discounted cash flow model, which requires significant estimates regarding the investees’ revenue, costs, and discount rates. The Company’s assessment of these factors in determining whether an impairment exists could change in the future due to new developments or changes in applied assumptions.
Other-Than-Temporary Impairment The Company’s long-term equity investments are subject to a periodic impairment review. Impairments affect earnings as follows:
Goodwill The Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. In testing goodwill for impairment, the Company may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that goodwill impairment is more likely than not, the Company performs a two-step impairment test. The Company tests goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting units. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. The Company estimates the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions. The Company completed the required testing of goodwill for impairment as of September 30, 2023, and determined that goodwill was impaired because of the current financial condition of the Company and the Company’s inability to generate future operating income without substantial sales volume increases, which are highly uncertain. Furthermore, the Company anticipates future cash flows indicate that the recoverability of goodwill is not reasonably assured. Convertible Notes The Company accounts for the convertible notes issued at a discount, by comparing the principal amount and book value, with the calculation of discounted method. The Company assess the discount per month. The amortization period of the promissory note is 18 months. Research and Development Expenses The Company accounts for the cost of using licensing rights in research and development cost according to ASC Topic 730-10-25-1. This guidance provides that absent alternative future uses the acquisition of product rights to be used in research and development activities must be charged to research and development expenses when incurred. For CDMO business unit, the Company accounts for R&D costs in accordance with Accounting Standards Codification (“ASC”) 730, Research and Development (“ASC 730”). Research and development expenses are charged to expense as incurred unless there is an alternative future use in other research and development projects or otherwise. Research and development expenses are comprised of costs incurred in performing research and development activities, including personnel-related costs, facilities-related overhead, and outside contracted services including clinical trial costs, manufacturing and process development costs for both clinical and preclinical materials, research costs, and other consulting services. Non-refundable advance payment for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. In instances where the Company enters into agreements with third parties to provide research and development services, costs are expensed as services are performed.
Post-retirement and post-employment benefits The Company’s subsidiaries in Taiwan adopted the government mandated defined contribution plan pursuant to the Labor Pension Act (the “Act”) in Taiwan. Such labor regulations require that the rate of contribution made by an employer to the Labor Pension Fund per month shall not be less than 6% of the worker’s monthly salaries. Pursuant to the Act, the Company makes monthly contribution equal to 6% of employees’ salaries to the employees’ pension fund. The Company has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $2,566 and $3,302 for the three months ended September 30, 2023 and 2022, respectively, and $7,825 and $9,948 for the nine months ended September 30, 2023 and 2022, respectively. Other than the above, the Company does not provide any other post-retirement or post-employment benefits. Stock-based Compensation The Company measures expense associated with all employee The Company accounted for stock-based compensation to non-employees in accordance with FASB ASC Topic 718 “Compensation-Stock Compensation” and FASB ASC Topic 505-50
Beneficial Conversion Feature From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of the warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in Income Taxes The Company accounts for income taxes using the asset and liability approach which allows the recognition and measurement of deferred tax assets to be based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will expire before the Company is able to realize their benefits, or future deductibility is uncertain. Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigations based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefits recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer satisfied. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the year incurred. No significant penalty or interest relating to income taxes has been incurred
On December 22, 2017, the SEC issued Staff Accounting Bulletin (“SAB 118”), which provides guidance on accounting for tax effects of Valuation of Deferred Tax Assets A valuation allowance is recorded to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized. In assessing the need for the valuation allowance, management considers, among other things, projections of future taxable income and ongoing prudent and feasible tax planning strategies. If the Company determines that sufficient negative evidence exists, then it will consider recording a valuation allowance against a portion or all of the deferred tax assets in that jurisdiction. If, after recording a valuation allowance, the Company’s projections of future taxable income and other positive evidence considered in evaluating the need for a valuation allowance prove, with the benefit of hindsight, to be inaccurate, it could prove to be more difficult to support the realization of its deferred tax assets. As a result, an additional valuation allowance could be required, which would have an adverse impact on its effective income tax
The Company Commitments and Contingencies The Company has adopted ASC Topic 450 “Contingencies” subtopic 20, in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available before financial statements are issued or are available to be issued indicates that it is probable that an
Translation Adjustment
The accounts of Recent Accounting Pronouncements In August
3. COLLABORATIVE AGREEMENTS Collaborative agreements with BHK, a related party (i) On February 24, 2015, BioLite Taiwan and BioHopeKing Corporation (the “BHK”) entered into a co-development agreement, (the “BHK Co-Development Agreement”), pursuant to which it is collaborative with BHK to develop and commercialize BLI-1401-2 (Botanical Drug) Triple Negative Breast Cancer (TNBC) Combination Therapy (BLI-1401-2 Products) in Asian countries excluding Japan for all related
On July 27, 2016, BioLite Taiwan and BHK agreed to amend the payment terms of
In December 2015, BHK has paid a non-refundable upfront cash payment of $1 million, or 10% of $10,000,000, upon the signing of BHK Co-Development Agreement. The Company concluded that the deliverables are considered separate units of accounting as the delivered items have value to the customer on a standalone basis and recognized this cash receipt as collaboration revenue when all research, technical, and development data was delivered to BHK in 2015. The receipt is for the compensation of past research efforts and contributions made by BioLite Taiwan before this collaborative agreement was signed and it does not relate to any future commitments made by BioLite Taiwan and BHK in this collaborative agreement. In August 2016, the In addition to the milestone payments, BioLite Taiwan is entitled to receive royalty on 12% of BHK’s net sales related to BLI-1401-2 Products. As of September 30, 2023 and December 31, 2022, the Company has not earned the royalty under the BHK Co-Development Agreement. (ii) On December 9, 2015, BioLite Taiwan entered into another two collaborative agreements (the “BHK Collaborative Agreements”), pursuant to which it is collaborative with BHK to co-develop and commercialize BLI-1005 for “Targeting Major Depressive Disorder” (BLI-1005 Products) and BLI-1006 for “Targeting Inflammatory Bowel Disease” (BLI-1006 Products) in Asia excluding Japan for all related intellectual property rights, and has developed it for medicinal use in collaboration with outside researchers. The In 2015, the Company recognized the cash receipt in a total of NT$50 million, approximately equivalent to $1.64 million, as collaboration revenue when all research, technical, and development data was delivered to BHK. The Company concluded that the deliverables are considered separate units of accounting as the delivered items have value to the customer on a standalone basis and recognized this payment as collaboration revenue when all research, technical, data and development data was delivered to BHK. The cash receipt is for the compensation of past research efforts and contributions made by BioLite Taiwan before this BHK Collaborative Agreements was signed and it does not relate to any future commitments made by BioLite Taiwan and BHK in this In addition to
Co-Development agreement with Rgene Corporation, a related party On May 26, 2017, BriVision entered into a co-development agreement (the “Co-Dev Agreement”) with Rgene Corporation (the “Rgene”), a related party under common control by controlling beneficiary shareholder of YuanGene Corporation and the Company (See Note 8). Pursuant to Co-Dev Agreement, BriVision and Rgene agreed to co-develop and commercialize ABV-1507 HER2/neu Positive Breast Cancer Combination Therapy, ABV-1511 Pancreatic Cancer Combination Therapy and ABV-1527 Ovary Cancer Combination Therapy. Under the terms of the Co-Dev Agreement, Rgene is required to
On
The Company and Rgene signed an amendment to the Co-Dev Agreement On June 10, 2022, the Company expanded its co-development partnership with Rgene. On that date, BioKey, ABVC has entered into a Clinical Development Service Agreement with Rgene to guide three Rgene drug products, RGC-1501 for the treatment of Non-Small Cell Lung Cancer (NSCLC), RGC-1502 for the treatment of pancreatic cancer and RGC 1503 for the treatment of colorectal cancer patients, through completion of Phase II clinical studies under the U.S. FDA IND regulatory requirements. Under the terms of the new Services Agreement, BioKey is eligible to receive payments totaling $3.0 million over a 3-year period with each payment amount to be determined by Through a series of transactions over the past 5 years, the Company and Rgene have co-developed the three drug products covered by the Service Agreement, which has resulted in the Company owning 31.62% of Rgene.
The Service Agreement shall remain in effect until the expiration date of the last patent and automatically renew for 5 more years unless terminated earlier by either party with six months written notice. Either party may terminate the Service Agreement for cause by providing 30 days written notice. Rgene has further agreed, effective July 1, 2022, to provide the Company with a seat on Rgene’s Board of Directors until the loan is repaid in full. The Company has nominated Dr. Jiang, its Chief Strategy Officer and Director to occupy that seat; Dr. Jiang is also one of the Company’s largest shareholders, owning 12.8% of the Company. The Rgene Studies is a related party transaction. Collaborative agreement with BioFirst Corporation, a related party On Pursuant to the BioFirst Collaborative Agreement,
On September 25, 2017, BioFirst has delivered all research, technical, data and development data to BriVision. The Company determined to fully expense the entire amount of On On
On November 4, 2020, the Company executed an amendment to the BioFirst Agreement with BioFirst to add ABV-2001 Intraocular Irrigation Solution and ABV-2002 Corneal Storage Solution to the agreement. ABV-2002 is utilized during a corneal transplant procedure to replace a damaged or diseased cornea while ABV-2001 has broader utilization during a variety of ocular procedures. Initially the Company will focus on ABV-2002, a solution utilized to store a donor cornea prior to either penetrating keratoplasty (full thickness cornea transplant) or endothelial keratoplasty (back layer cornea transplant). ABV-2002 is a solution comprised of a specific poly amino acid that protects ocular tissue from damage caused by external osmolarity exposure during pre-surgery storage. The specific polymer in ABV-2002 can adjust osmolarity to maintain a range of 330 to 390 mOsM thereby permitting hydration within the corneal stroma during the storage period. Stromal hydration results in (a) maintaining acceptable corneal transparency and (b) prevents donor cornea swelling. ABV-2002 also contains an abundant phenolic phytochemical found in plant cell walls that provides antioxidant antibacterial properties and neuroprotection. Early testing by BioFirst indicates that ABV-2002 may be more effective for protecting the cornea and retina during long-term storage than other storage media available today and can be manufactured at lower cost. Further clinical development was put on hold due to the lack of funding. In addition, BioFirst was incorporated Vitargus has started the construction of a GMP factory in Hsinchu Biomedical Science Park, Taiwan, with the aim at building a production base to The above-mentioned equity is before the reverse stock split in 2023. 4. PROPERTY AND EQUIPMENT Property and equipment as of September 30, 2023 and December 31, 2022 are summarized as follows:
Construction-in-progress consists of the property recently acquired in Chengdu, China. The Company entered into a cooperation agreement on August 14, 2023, with Zhong Hui Lian He Ji Tuan, Ltd. (the “Zhonghui”). Pursuant thereto, the Company acquired 20% of the ownership of certain
The asset ownership certification is in the application process. However, the Company's ownership rights to the property and the associated land parcel, or a suitable replacement property, are safeguarded under the terms of the
The Depreciation expenses were $7,459 and $6,462 for three months ended September 30, 2023 and 2022, respectively. Depreciation expenses were $20,949 and $17,364 for nine months ended September 30, 2023 and 2022, respectively. 5. LONG-TERM INVESTMENTS
The Company holds an equity interest in BioFirst Corporation, accounting for its equity interest using the equity method to accounts for its equity investment as prescribed in ASC 323, Investments—Equity Method and Joint Ventures (“ASC 323”). Equity method adjustments include the Company’s proportionate share of investee’s income or loss and other adjustments required by the equity method. As of September 30, 2023 and December 31, 2022, the Company owns 23.53% and 21.77% common stock shares of BioFirst, respectively. The Company made a Summarized financial information for the Company’s equity method investee, BioFirst, is as follows: Balance Sheets
Statement of Operations
Both Rgene and the Company are under common control by Dr. Tsung-Shann Jiang, the CEO and Chairman of the BioLite Inc. Since Dr. Tsung-Shann Jiang is able to exercise significant influence, but not control, over the Rgene, the Company determined to use the equity method to account for its equity investment as prescribed in ASC 323, Investments—Equity Method and Joint Ventures (“ASC 323”). Equity method adjustments include the Company’s proportionate share of investee’s income or loss and other adjustments required by the equity method. As of September 30, 2023 and December 31, 2022, the Company owns 28.85% and 28.85% Common Stock shares of Rgene, respectively. On March 31, 2023, Dr. Tsung-Shann Jiang has been elected to become the Chairman of Rgene. Summarized financial information for the Company’s equity method investee, Rgene, is as follows: Balance Sheets
Statement of Operations
During the nine months ended September 30, 2023 and 2022, there is no disposition of long-term investment.
The components of losses on equity investments for each period were as follows:
6. CONVERTIBLE NOTES PAYABLE On February 23, 2023, the Company entered into a securities purchase agreement (the “Lind Securities Purchase Agreement”) with Lind Global Fund II, LP (“Lind”), pursuant to which the Company issued Lind a secured, convertible note in the principal amount of $3,704,167 (the “Lind Offering”), for a purchase price of $3,175,000 (the “Lind Note”), that is convertible into shares of the Company’s common stock at an initial conversion price of $1.05 per share, subject to adjustment (the “Note Shares”). The Company also issued Lind a common stock purchase warrant (the “Lind Warrant”) to purchase up to 5,291,667 shares of the Company’s common stock at an initial exercise price of $1.05 per share, subject to adjustment (each, a “Warrant Share,” together with the Note, Note Shares and Warrants, the “Lind Securities”). Beginning with the date that is six months from the issuance date of the Lind Note and on each one (1) month anniversary thereafter, the Company shall pay Lind an amount equal to $308,650.58, until the outstanding principal amount of the Lind Note has Upon the occurrence of any Event of Default (as defined in the Lind Note), the Company must pay Lind an amount equal to 120% of the then outstanding principal amount of the Lind Note (the “Mandatory Default Amount”), in addition to any other remedies under the Note or the other Transaction Documents. The Company and Lind entered into a letter agreement on September 12, 2023, pursuant to which the Mandatory Default Amount was reduced to 115% of the then outstanding principal amount of the Lind Note; pursuant to the letter agreement, Lind also agreed to waive any default associated with the Company’s market capitalization being below $12.5 million for 10 consecutive days through February 23, 2024, but retained its right to convert its Note. In addition, if the Company is unable to increase its market capitalization and is unable to obtain a further waiver or amendment to the Lind Note, then the Company could experience an event of default under the Lind Note, which could have a material adverse effect on the Company’s liquidity, financial condition, and results of operations. The Company cannot make any assurances regarding the likelihood, certainty, or exact timing of the Company’s ability to increase its market capitalization, as such metric is not within the immediate control of the Company and depends on a variety of factors outside the Company’s control. The Lind Warrant may be exercised via cashless exercise. During July 2023, the warrant exercise price was reset to $3.5 in accordance to the issuance of common stock in relation to securities purchase agreement on July 2023. As of September 30, 2023 and December 31, 2022, the aggregate carrying values of the convertible debentures were $1,654,004 and $0, respectively. Total interest expenses in connection with the above convertible note payable were $1,323,032 and $0 for the nine months ended September 30, 2023 and 2022, respectively.
7. BANK LOANS
Cathay United Bank On June 28, 2016, BioLite Taiwan and Cathay United Bank entered into a one-year bank loan agreement (the “Cathay United Loan Agreement”) in a credit limit amount of NT$7,500,000, equivalent to $232,500. The term started June 28, 2016 with maturity date at June 28, 2017. The loan balance bears interest at a floating rate of prime rate plus 1.15%. The prime rate is based on term deposit saving interest rate of Cathay United Bank. The Company renews the agreement with the bank every year. On September 6, 2022, BioLite Taiwan extended the Cathay United Loan Agreement with the same principal amount of NT$7,500,000, equivalent to $232,500 for one year, which is due on September 6, 2023. On September 6, 2023, BioLite Taiwan extended the Cathay United Loan Agreement with the same principal amount of NT$7,500,000, equivalent to $232,500 for one year, which is due on September 6, 2024. As of September 30, 2023 and December 31, 2022, the effective interest rates per annum was 2.85% and 2.67%, respectively. The loan is collateralized by the building and improvement of BioLite Taiwan, and is also personal guaranteed by the Company’s chairman. Interest expenses were $1,742 and $1,604 for the three months ended September 30, 2023 and 2022, respectively. Interest expenses were $5,136 and $4,401 for the nine months ended September 30, 2023 and 2022, respectively. CTBC Bank On June 12, 2017 and July 19, 2017, BioLite Taiwan and CTBC Bank entered into two short-term saving secured bank loan agreements (the “CTBC Loan Agreements”) in a credit limit amount of NT$10,000,000, equivalent to $310,000, and NT$10,000,000, equivalent to $310,000, respectively. Both two loans with the same maturity date at January 19, 2018. In February 2018, BioLite Taiwan combined two loans and extended the loan contract with CTBC for one year. The Company renews the agreement with the bank every year. The loan balances bear interest at a fixed rate of 2.5% per annum. The loan is secured by the money deposited in a savings account with the CTBC Bank. This loan was also personal guaranteed by the Company’s chairman and BioFirst. During the year ended December 31, 2020, BioLite Taiwan has opened a TCD account with CTBC bank to guarantee the loan going forward. Interest expenses were $3,752 and $3,289 for the three months ended September 30, 2023 and 2022, respectively. Interest expenses were $11,681 and $9,002 for the nine months ended September 30, 2023 and 2022, respectively.
Cathay Bank On January 21, 2019, the Company received a loan in the amount of $500,000 from Cathay Bank (the “Bank”) pursuant to a business loan agreement (the “Loan Agreement”) entered by and between the Company and Bank on January 8, 2019 and a promissory note (the “Note”) executed by the Company on the same day. The Loan Agreement provides for a revolving line of credit in the principal amount of $1,000,000 with a maturity date (the “Maturity Date”) of January 1, 2020. The Note executed in connection with the Loan Agreement bears an interest rate (the “Regular Interest Rate”) equal to the sum of one percent (1%) and the prime rate as published in the Wall Street Journal (the “Index”) and the accrued interest shall become payable each month from February 1, 2019. Pursuant to the Note, the Company shall pay the entire outstanding principal plus accrued unpaid interest on the Maturity Date and may prepay portion or all of the Note before the Maturity Date without penalty. If the Company defaults on the Note, the default interest rate shall become five percent (5%) plus the Regular Interest Rate. In connection with the Note and Loan Agreement, on January 8, 2019, each of Dr. Tsung Shann Jiang and Dr. George Lee, executed a commercial guaranty (the “Guaranty”) to guaranty the loans for the Company pursuant to the Loan Agreement and Note, severally and individually, in the amount not exceeding $500,000 each until the entire Note plus interest are fully paid and satisfied. Dr. Tsung Shann Jiang is the Chairman and Chief Executive Officer of BioLite Holding, Inc. and Dr. George Lee serves as the Chairman of the board of directors of BioKey. On December 29, 2020, the Company entered into a new loan extension agreement and assignment of deposit account with the In addition, on January 8, 2019, each of the Interest expenses were $0 and $12,446 for the three months ended September 30, 2023 and 2022, respectively. Interest expenses were $10,209 and $28,109 for the nine months ended September 30, 2023 and 2022, respectively.
8. RELATED PARTIES TRANSACTIONS The related parties of the company with whom transactions are reported in these financial statements are as follows:
Accounts receivable - related parties Accounts receivable due
Due from related parties Amount due from related parties consisted of the following as of the periods indicated: Due from related–party - Current
Due from related parties – Non-Current
Due to related parties Amount due to related parties consisted of the following as of the periods indicated:
9. INCOME TAXES Income tax expense for the nine-month period ended September 30, 2023 and 2022 consisted of the following:
10. EQUITY In January 2022, the Company agreed to pay the deferred service fees related to Public Offering amounted $4,296,763 by issuing 1,306,007 shares of
In March 2022, the Company issued 75,000 common stock to BarLew Holdings, LLC for consulting and advisory services amounted to $169,500, valued at $2.26 per share. In May 2022, the Company and an institutional investor entered into On July 10, 2022, the Board approved the issuance of 75,000 shares of common stock to Barlew Holdings, LLC pursuant to the consulting agreement by and between Barlew Holdings, LLC and the Company dated July 1, 2022, and 250,000 shares of common stock to Inverlew Advisors, LLC, in accordance with the consulting agreement by and between Inverlew Advisors, LLC and the Company dated July 1, 2022. On December 1, 2022, the Company issued 125,000 and 100,000 common stock to Euro-Asia Investment & Finance Corp Ltd. and Thalia Media Ltd. for consulting and advisory services. On January 3, 2023, the Company issued 223,411 common stock to a consultant for providing consulting services on listing to NASDAQ in 2021. On February 23, 2023, the Company entered into
On
On August The above-mentioned equity is before the reverse stock split in 2023. 11. STOCK OPTIONS On October 30, 2020, the Company issued an aggregate of 545,182 shares of common stock in lieu of unpaid salaries of certain
converted salaries and consulting fees was $1,090,361. On On October 15, 2021, the Company entered into stock option agreements with 11 directors and 3 employees, pursuant to which the Company granted options to purchase an aggregate of On April 16, 2022, the Company entered into stock option agreements with 5 directors, pursuant to Options issued and
The fair value of stock options granted for the year ended December 31, 2022 was calculated using the Black-Scholes option-pricing model applying the following assumptions:
The weighted average grant date fair value of options granted during the years ended December 31, 2022 was $2.79. There are 3,860,211 options available for grant under the 2016
2023.
Basic
Diluted
13. LEASE The Company adopted FASB Accounting Standards Codification, Topic 842, Leases (“ASC 842”) using the modified retrospective approach, electing the practical expedient that allows the Company not to restate its comparative periods prior to the adoption of the standard on January 1, 2019. The Company applied the following practical expedients in the transition to the new standard and allowed under ASC 842:
The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating
The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, unamortized lease incentives provided by lessors, and restructuring liabilities. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in Selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur. The Company has no finance leases. The Company’s leases primarily include various office and laboratory spaces, copy machine, and vehicles under
Supplemental Information The following provides details of the Company’s lease expenses:
Other information related to leases is presented below:
The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:
14. SUBSEQUENT EVENTS During the period from Oct 1, 2023 until the date of this report, the Company has been repaying Lind, pursuant to the
The Company
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Caution Regarding Forward-Looking Information FORWARD-LOOKING INFORMATION The following Forward-looking statements are subject to risks and uncertainties, certain of which are beyond our control. Actual results could differ materially from those anticipated as a result of the factors described in the “Risk Factors” and detailed in our other Securities and Exchange Commission (“SEC”) filings. Risks and uncertainties can include, among others, international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to obtain sufficient financing to continue and expand business operations; the ability to develop technology and products; changes in technology and the development of technology and intellectual property by competitors; the ability to protect technology and develop intellectual property; and other factors referenced in this and previous filings. Consequently, investors should not place undue reliance on forward-looking statements as predictive of future results. Because of these risks and uncertainties, the forward-looking events and circumstances discussed in this report or incorporated by reference might not transpire. Factors that cause actual results or conditions to differ from those anticipated by these and other forward-looking statements include those more fully described elsewhere in this report and in the “Risk Factors” section of our annual report on The Company disclaims any obligation to update the
Medicines derived from plants have a long history of relieving or preventing many diseases and, typically, have exhibited fewer side effects than drugs developed from animals or chemical ingredients. Perhaps the most famous example is aspirin, which evolved from a compound found in the bark and leaves of the willow tree and was later marketed by Bayer starting in 1899. Aspirin has very few serious side effects and has proven to The Company develops its pipeline by carefully tracking new medical discoveries or medical device technologies in research institutions in the Asia-Pacific region. Pre-clinical, disease animal model and Phase I safety studies are examined closely by the Company’s scientists and other specialists known to the Company to identify drugs that it believes demonstrate efficacy and safety based on the Company’s internal qualifications. Once a drug is shown to be a good candidate for further development and ultimately commercialization, BriVision licenses the drug or medical device from the original researchers and begins to introduce the drugs clinical plan to highly respected principal investigators in the United States, Australia and Taiwan. In almost all cases, we have
Currently, institutions conducting phase II clinical trials in partnership with ABVC include:
Upon successful completion of the Phase II trial, the Company will seek a partner – a large pharmaceutical company – to complete a Phase III study, submit the New Drug Application (NDA), and commercialize the drug upon approval by the FDA and Taiwan FDAs. The Company expects to seek its first commercialization partner in 2023 for Vitargus, its vitreous substitute that helps to maintain a round shape and retinal location during vitrectomy surgery. Another part of the Company’s business On February 8, 2019, the
On July 25, 2023, the Company BioLite was incorporated under the laws of BioLite and BioLite BVI are holding companies and have not carried out substantive business operations of their own. In January 2017, BioLite, BioLite BVI, BioLite Taiwan, and certain shareholders of BioLite Taiwan entered into a share purchase / exchange agreement (the “BioLite Share Purchase / Exchange Agreement”). Pursuant to the BioLite Share Purchase / Exchange Agreement, the shareholder participants to the BioLite Share Purchase / Exchange Agreement sold their equity in BioLite Taiwan and used the proceeds from such sales to purchase shares of Common Stock of BioLite at the same price per share, resulting in share ownership in BioLite Common Stock equal to the number of shares they had held in BioLite Taiwan Common Stock. Upon closing of the Share Purchase/ Exchange Agreement in August 2017, BioLite owned, via BioLite BVI, approximately 73% of BioLite Taiwan. The other shareholders who did not enter this Share Purchase/ Exchange Agreement retained their equity ownership in BioLite Taiwan. BioKey was incorporated on August 9, 2000 in the State of California. It is engaged primarily in research and development, manufacturing, and distribution of generic drugs and nutraceuticals with strategic partners. BioKey provides a wide range of services, including, API characterization, pre-formulation studies, formulation development, analytical method development, stability studies, IND/NDA/ANDA/510K submissions, and manufacturing clinical trial materials (phase 1 through phase 3) and commercial manufacturing. It also licenses out its technologies and initiates joint research and development processes with other biotechnology, pharmaceutical, and nutraceutical companies.
As of June 21, 2023, Dr. Howard Doong resigned as the Company’s CEO and was replaced by Dr. Uttam Patil. On August 14, 2023, the Company entered into a cooperation agreement (the “Agreement”, the transaction contemplated therein the “Transaction”) with Zhonghui United Technology (Chengdu) Group Co., Ltd., a Company established under the Law of People’s Republic of China (“ The Company and Zhonghui plan to jointly develop the Property into a healthcare center for senior living, long-term care, and medical care in the areas of ABVCs’ special interests, such as Ophthalmology, Oncology, and Central Nervous Systems. The plan is to establish a base for the China market and global development of these interests. The asset ownership certification is in the application process and pending approval from the Chinese government. During the third quarter of 2023, the Company issued the Zhonghui Shares. The Zhonghui Shares are subject to a lock-up period of one year following the closing date of this Transaction. In addition, the parties agreed that, after one year following the closing of the Transaction, the market value of the shares issued or the value of the Property increase or decrease, the parties will negotiate in good faith to make reasonable adjustment. On July 31, 2023, the Company entered into a binding term sheet with Xinnovation Therapeutics Co., Ltd., a Company incorporated under the Law of People’s Republic of China. The term sheet contemplates that, pursuant to definitive agreements, Xinnovation will be granted an exclusive license to develop, manufacture, market, and distribute ABV-1504 for Major Depressive Disorder (MDD) and ABV-1505 for Attention-Deficit/Hyperactivity Disorder, in the Chinese market and shall bear the costs for clinical trials and product registration in China and the Company would receive an initial license fee and royalty payments ranging from 5% to 12% based on the projected annual net sales of the licensed drugs by Xinnovation in China. This transaction remains subject to the negotiation of definitive documents and therefore there is no guarantee that this transaction will occur. In November 2023, the Company and one of its subsidiaries, BioLite, Inc. (“BioLite”) each entered into a multi-year, global licensing agreement with AIBL for the Company and BioLite’s CNS drugs with the indications of MDD (Major Depressive Disorder) and ADHD (Attention Deficit Hyperactivity Disorder) (the “Licensed Products”). The potential license will cover the Licensed Products’ clinical trial, registration, manufacturing, supply, and distribution rights. The Licensed Products for MDD and ADHD, owned by ABVC and BioLite, were valued at $667M by a third-party evaluation. The parties are determined to collaborate on the global development of the Licensed Products. The parties are also working to strengthen new drug development and business collaboration, including technology, interoperability, and standards development. As per each of the respective agreements, each of ABVC and BioLite shall receive 23 million shares of AIBL stock at $10 per share, and if certain milestones are met, $3,500,000 and royalties equaling 5% of net sales, up to $100 million. Common Stock Reverse Split On March 12, 2019, the Board, by unanimous written consent in lieu of a meeting, approved to i) implement a stock reverse split at the ratio of 1-for-18 (the “Reverse Split”) of both the authorized common stock of the Company and the On May 3, 2019, the Company filed a certificate of amendment to the Company’s articles of incorporation (the On July 25, 2023, the Company filed a Certificate of Amendment to its Articles of Incorporation authorizing a 1-for-10 reverse stock split of the issued On July 14, 2023, the Company filed a certificate of amendment to the Series A Convertible Preferred Stock On June 28, 2019, the Company filed a certificate of designation (the “Series A COD”) of Series A Convertible Preferred Stock (the “Series A Stock”) with the Secretary of the State of Nevada. Pursuant to the Series A COD, the Company designated 3,500,000 shares of preferred stock as Series A Stock, par value of $0.001 per share. Subject to the laws of Nevada, the Company will pay cumulative dividends on the Series A Stock on each anniversary from the date of original issue for a period of four calendar years. The Series A Stock will rank senior to the outstanding common stock of the Company, par value $0.001 (the “Common Stock”) with respect to dividend rights, rights upon liquidation, dissolution or winding up in the amount of accrued but unpaid dividend. Holders of the Series A Stock will have the same voting rights as the Company’s Common Stock holders. Each share of Series A Stock is initially convertible at any time at the option of the holder into one share of Common Stock and automatically converts into one share of Common Stock on the four-year anniversary of its issuance.
As of December 31, 2022, no Series A Convertible Preferred Stock has been issued by the Company. NASDAQ Listing On August 5, 2021, we closed a public offering (the “Offering”) of 1,100,000 units (the “Units”), with each Unit consisting of one share of our common stock (the “Common Stock”), one Series A warrant (the “Series A Warrants”) to purchase one share of common stock at an exercise price equal to $6.30 per share, exercisable until the fifth anniversary of the issuance date, and one Series B warrant (the “Series B Warrants,” and together with the Series A Warrants, the “Public Warrants”) to purchase one share of common stock at an exercise price equal to $10.00 per share, exercisable until the fifth anniversary of the issuance date; the exercise price of the Public Warrants are subject to certain adjustment and cashless exercise provisions as described therein. The Company completed the Offering pursuant to its registration statement on Form S-1 (File No. 333-255112), originally filed with the Securities and Exchange Commission (the “SEC”) on April 8, 2021 (as amended, the “Original Registration Statement”), that the SEC declared effective on August 2, 2021 and the registration statement on Form S-1 (File No. 333-258404) that was filed and automatically effective on August 4, 2021 (the “S-1MEF,” together with the Original Registration Statement, the “Registration Statement”). The Units were priced at $6.25 per Unit, before underwriting discounts and offering expenses, resulting in gross proceeds of $6,875,000. The Offering was conducted on a firm commitment basis. The Common Stock was approved for listing on The Nasdaq Capital Market and commenced trading under the ticker symbol “ABVC” on August 3, 2021. The above-mentioned equity is before the reverse stock split in 2023. On July 25, 2023, the Company filed a Certificate of Amendment to its Articles of Incorporation authorizing a 1-for-10 reverse stock split of the issued and outstanding shares of its common stock (the “2023 Split”). The Company’s stockholders previously approved the Reverse Stock Split at the Company’s Special Shareholder Meeting held on July 7, 2023. The Reverse Stock Split was effected to reduce the number of issued and outstanding shares and to increase the per share trading value of the Company’s common stock, although that outcome is not guaranteed. In turn, the Company believes that the Reverse Stock Split will enable the Company to restore compliance with certain continued listing standards of NASDAQ Capital Market. In August 2022, we received a deficiency letter from the Nasdaq Listing Qualifications Department (the “Staff”) notifying us that, for the last 30 consecutive business days, the closing bid price for our common stock was below the minimum $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (“Rule 5550(a)(2)”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were initially given until February 14, 2023 to regain compliance with Rule 5550(a)(2). Since the Company did not regain compliance by such date, it requested and received an additional 180 days, until August 14, 2023, to comply with Rule 5550(a)(2). The deficiency has no immediate effect on the listing of the Company’s common stock, and its common stock continues to trade on The Nasdaq Capital Market under the symbol “ABVC” at this time. If at any time before August 14, 2023, the bid price of the Company’s common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, the Staff will provide written confirmation that the Company has achieved compliance and the matter will be closed. If the Company does not regain compliance with Rule 5550(a)(2) by August 14, 2023, the Staff will provide written notification that the Company’s securities will be delisted, although the Company maintains the right to appeal such determination. The Company intends to actively monitor the closing bid price for its common stock and will consider available options to resolve the deficiency and regain compliance with Rule 5550(a)(2). On May 24, 2023, we received a deficiency letter from the Nasdaq Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it is not currently in compliance with the minimum stockholders’ equity requirement, or the alternatives of market value of listed securities or net income from continuing operations, for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) requires listed companies to maintain stockholders’ equity of at least $2,500,000, and the Company’s stockholders’ equity was $1,734,507 as of March 31, 2023. In accordance with Nasdaq rules, the Company has 45 calendar days, or until July 10, 2023, to submit a plan to regain compliance. After submitting a plan to regain compliance, Nasdaq granted the Company an extension to comply with Listing Rule 5550(b)(1). The Company must now achieve compliance with this rule on or before August 31, 2023. If the Company fails to evidence compliance upon filing its periodic report for the quarter ending September 30, 2023, the Company may be subject to delisting. If Nasdaq determines to delist the Company’s securities, the Company will have an opportunity to appeal Nasdaq’s decision. Based on a series of transactions, we believe we regained compliance with the stockholders’ equity requirement as of August 31, 2023. Nasdaq informed us that it will continue to monitor our ongoing compliance with the stockholders’ equity requirement, and if we do not evidence compliance in this Quarterly Report, we may be subject to delisting. As of September 30, 2023, our stockholders’ equity was $7,548,308, which exceeds Nasdaq’s minimum requirement. Joint Venture Agreement On October 6, 2021 (the “Completion Date”), ABVC BioPharma, Inc. (the “Company”), Lucidaim Co., Ltd., a Japanese corporation (“Lucidaim,” together with the Company, the “Shareholders
Pursuant to the Agreement and the related share transfer agreement, the Company shall transfer 54 of its Ordinary Shares to Lucidaim for no consideration, such that following the transfer, Lucidaim shall own 1,555 Ordinary Shares (51%) and the Company shall own 1,494 Ordinary Shares (49%). Also pursuant to the Agreement, there shall be 3 directors of Biolite JP, consisting of 1 director appointed by the Company and 2 appointed by Lucidiam. The Company shall appoint Eugene Jiang, the Company’s current Chairman and Chief Business Officer and Lucidaim shall appoint Michihito Onishi; the current director of Biolite JP, Toru Seo (who is also a director of BioLite Japan’s other shareholder), is considered the second Lucidaim director. The Agreement further provides that the Company and Biolite JP shall assign the research collaboration and license agreement between them to Biolite JP or prepare the same (the “License Agreement”). The aforementioned transactions occurred on the Completion Date. As per the Agreement, the Shareholders shall supervise and manage the business and operations of Biolite JP. The directors shall not be entitled to any renumeration for their services as a director and each Shareholder can remove and replace the director he/she/it appointed. If a Shareholder sells or disposes of all of its Ordinary Shares, the Shareholder-appointed director must tender his/her resignation. The Agreement also sets forth certain corporate actions that must be pre-approved by all Shareholders (the “Reserved Matters”). If the Shareholders are unable to make a decision on any Reserved Matter, then either Shareholder can submit a deadlock notice to the other shareholder, 5 days after which they must refer the matter to each Shareholder’s chairman and use good faith to resolve the dispute. If such dispute is not resolved within 10 days thereafter, then either Shareholder can offer to buy all of the other Shareholder’s Ordinary Shares for cash at a specified price; if there is not affirmative acceptance of the sale, the sale shall proceed as set forth in the sale offer. Each of the Shareholders maintains a pre-emptive right to purchase such number of additional Ordinary Shares as would allow such Shareholder to maintain its ownership percentage in Biolite JP if Biolite JP issues any new Ordinary Shares. However, the Agreement provides that the Company shall lose its pre-emptive rights under certain conditions. The Shareholders also maintain a right of first refusal if the other Shareholder receives an offer to buy such shareholder’s Ordinary Shares. The Agreement also requires Biolite JP to obtain a bank facility in the amount of JPY 30,460,000 (approximately USD272,000), for its initial working capital purposes. Pursuant to the Agreement, each Shareholder agrees to guarantee such bank facility if the bank requires a guarantee. Accordingly, the Company may be liable for the bank facility in an amount up to JPY 14,925,400 (approximately USD134,000), which represents 49% of the maximum bank facility. The Agreement further provides that Biolite JP shall issue annual dividends at the rate of at least 1.5% of Biolite JP’s profits, if it has sufficient cash to do so. Pursuant to the Agreement, the Company and Biolite JP agree to use their best efforts to execute the License Agreement by the end of December 2021. The Company agreed that any negotiation on behalf of Biolite JP regarding the terms of the License Agreement shall be handled by the directors appointed by Lucidaim. If the Company and such Lucidaim directors do not reach agreement on the terms, Biolite JP may at its sole discretion determine not to execute the License Agreement without any liability to the Company. The Agreement contains non-solicitation and non-compete clauses for a period of 2 years after a Shareholder or its subsidiaries ceases to be a Shareholder, with such restrictive covenants limited to business within the ophthalmologic filed or central neurological field. Any rights to intellectual property that arise from Biolite JP’s activities, shall belong to Biolite JP. The Agreement contains standard indemnification terms, except that no indemnifying party shall have any liability for an individual liability unless it exceeds JPY 500,000 (approximately USD4,500) and until the aggregate amount of all liabilities exceeds JPY 2,000,000 (approximately USD18,000) and then only to the extent such liability exceed such limit. The Company paid $150,000 towards the setup of the joint venture and BioLite Japan’s other shareholder paid $150,000 after the Letter of Intent was signed. The Agreement shall continue for 10 years, unless earlier terminated and shall continue until terminated by: (i) either party by giving the other party at least 6 months written notice, until the end of the 10 years, after which the parties can terminate at any time or (ii) or by written agreement of all Shareholders, in which case it shall terminate automatically on the date upon which all Ordinary Shares are owned by one Shareholder. The Agreement also allows a Shareholder to terminate the agreement upon certain defaults committed by another Shareholder, as set forth in the Agreement. This was a relatedparty transaction and was conducted at arm’s length. In addition to the Company’s board of directors providing approval for the Company to enter into the Agreement, the Company’s audit committee approved the Company’s entry into the Agreement. The Board believes that this joint venture will enhance the Company’s ability to provide therapeutic solutions to significant unmet medical needs and to develop innovative botanical drugs to treat central nervous system (“CNS”) and oncology/ hematology diseases. The Company’s Board of Directors believes that the joint venture has the potential to provide the Company with access to additional early-stage product candidates that it would not otherwise have access to and to introduce the Company to early-stage opportunities, and therefore the Board believes the joint venture is in the best interest of the Company and its shareholders.
Recent Research Results On October 20, 2022, the Company received a Notice of Allowance for ABV-1504 from the US Patent and Trademark Office that extends the existing patent life of ABV-1504 from 2021 to the year 2041. The patent, entitled “Polygala Extract for the Treatment of Major Depressive Disorder,” outlines a method for treating major depressive disorder by oral administration of a composition, ABV-1504, containing Radix Polygalae (Polygala tenuifolia Willd). The polygala extract, designated PDC-1421, is the key active ingredient in ABV-1504 which was orally administered to healthy volunteers and proved to be safe and well-tolerated for a daily dose from 380 mg to 3800 mg. On September 9, 2020 the Company issued a full clinical study report (CSR) of Vitargus® First-in-Human Phase I Clinical Trial. The safety and preliminary efficacy findings from this study, combined with the unique properties of Vitargus® (BFC-1401), are supportive of further development for its use during vitrectomy surgery in patients requiring vitreous replacement. The study was an open label, Phase I study undertaken at a single study center in Sydney, Australia. A total of 11 participants were enrolled for the study in which each participant had been diagnosed with either (1) a complex or rhegmatogenous retinal detachment or chronic retinal detachment with failure of gas or silicone oil treatment or (2) a vitreous hemorrhage that requires vitrectomy surgery. The study found that Vitargus® was well-tolerated as a vitreous substitute without any apparent toxicity to ocular tissues. Further, there was no indication of an increased overall safety risk with Vitargus®. On August 2, 2022 the Company received the formal approval from Central Research Ethics Committee (CREC) of The National Research Council of Thailand for Vitargus® Phase II Study Protocol (ABV-1701-02) to be conducted at Ramathibodi Hospital, Mahidol University and Srinagarind Hospital, Khon Kaen University of Thailand. On November 2, 2022, both hospitals received Thai FDA investigational product (IP) import licenses allowing them to initiate the clinical study in Thailand. The Phase II clinical study entitled “A Prospective Multi-Site Randomized Controlled Clinical Investigation of the Safety and Effectiveness of the ABV1701 Ocular Endotamponade (OE)” was initiated in Thailand in March 2023. The Vitargus® Phase II study was put on hold due to Serious Adverse Events (SAEs) observed in patients with retinal detachment treated with either Vitargus or SF6 comparator after vitrectomy surgeries at the Thailand sites. By comparing the Thailand study with the First-in-Human (FIH) study completed in Australia in 2018, the SAEs derived from the patients in the Thailand study may be due to the modified in-situ hydrogel procedure which allows a longer surgical time window for the study. The Company is investigating the root causes of the events and is working towards developing a safe device in-situ procedure before reinstating the study. In parallel, Vitargus® Phase II Study protocol documents were accepted by the Australian Bellberry Human Research Ethics Committee (HREC) and a Clinical Trial Notification (“CTN”) was approved by the Australian Therapeutic Goods Administration (TGA) in February 2023. The study approvals by the research governance officers (RGO) of each participating sites, Sydney Eye Hospital and East Melbourne Eye Group are in progress. On November 9, 2020 the Company issued a full clinical study report (CSR) of its ABV-1505 Phase II Part I clinical trial conducted at the University of California, San Francisco (UCSF) for the treatment of adult Attention-Deficit Hyperactivity Disorder (ADHD). The Phase II Part I clinical study for treating ADHD found that the PDC-1421 Capsule was safe, well tolerated and efficacious during its treatment and the follow-up period with six adult patients. For the primary endpoints, the percentages of improvement in Adult Attention-Deficit/Hyperactivity Disorder Rating Scale-Investigator Rated-IV (ADHD-RS-IV) score from baseline to 8 weeks treatment were 83.3% (N=5) in the Intention-To-Treat (ITT) population and 80.0% (N=4) in the Per-Protocol (PP) population. Both low and high doses of PDC-1421 Capsule met the primary end points by passing the required 40% population in ADHD-RS-IV test scores.
Overall, the results from this study, which demonstrate the therapeutic value of PDC-1421, support further clinical development of ABV-1505 for the treatment of adult ADHD. On July 12, 2022, the Company announced the enrollment progress in the Phase II Part II clinical study of the company’s ADHD medicine (ABV-1505). Since the first-treated subject reported on May 10, 2022, a total of sixty-nine (69) subjects have been enrolled in the study, including 50 who have completed the 56-day treatment. The study, a randomized, double-blind, placebo-controlled study entitled “A Phase II Tolerability and Efficacy Study of PDC-1421 Treatment in Adult Patients with Attention-Deficit Hyperactivity Disorder (ADHD), Part II, is expected to eventually involve approximately 100 patients. Five prestigious research hospitals in Taiwan and the research hospital at the University of California, San Francisco (UCSF) are participating in the study which is a continuation of the Phase II part 1 study of ABV-1505 completed successfully at UCSF and accepted by the U.S. Food & Drug Administration in October of 2020. The UCSF Medical Center Institutional Review Board has approved participation in the Part II study, and the site initiation visit was conducted in March 2023. The Cedars-Sinai Medical Center (CSMC, West Hollywood CA) Institutional Review Board (IRB) has approved their institution joining the Phase I study of ABV-1601 for treating depression in cancer patients. The Principal Investigator of the CSMC study will be Dr. Scott A. Irwin, MD, PhD., an eminent Professor of Psychiatry & Behavioral Neurosciences. The Phase I study is open label and will be conducted with 12 cancer patients with moderate to severe depressive symptoms. The main objective of the study is to evaluate the safety of PDC-1421, the primary active ingredient in ABV-1601. The second objective is to determine the most effective dosages for a randomized, double-blind, non-inferiority Phase II trial of PDC-1421 comparing with Wellbutrin XL, a commonly used medicine to treat cancer patients suffering with depression. The site initiation visit of the Phase I study was conducted in March 2023. Public Offering & Financings Financing in 2023 On February 23, 2023, the Company entered into a securities purchase agreement (the “Lind Securities Purchase Agreement”) with Lind Global Fund II, LP (“Lind”), pursuant to which the Company issued Lind a secured, convertible note in the principal amount of $3,704,167 (the “Lind Offering”), for a purchase price of $3,175,000 (the “Lind Note”), that is convertible into shares of the Company’s common stock The Lind Note does not carry any interest. Beginning with the date that is six months from the issuance date of the Lind Note and on each one (1) month anniversary thereafter, the Company Upon the occurrence of any Event of Default (as defined in the Lind Note), the Company must pay Lind an amount equal to 120% of the then outstanding principal amount of the Lind Note (the “Mandatory Default Amount”), in addition to any other remedies under the Note or the other Transaction Documents. The Company and Lind entered into a letter agreement on September 12, 2023, pursuant to which the Mandatory Default Amount was reduced to 115% of the then outstanding principal amount of the Lind Note; pursuant to the letter agreement, Lind also agreed to waive any default associated with the Company’s market capitalization being below $12.5 million for 10 consecutive days through February 23, 2024, but retained its right to convert its Note. In addition, if the The Lind Warrant may be exercised via cashless exercise.
Pursuant to the terms of the Lind Securities Purchase Agreement, if at any time prior to a date that is 18 months following the closing of the Lind Offering, the Company proposes to offer or sell any additional securities in a subsequent financing, the Company shall first offer Lind the opportunity to purchase up to 10% of such new securities. In connection with the Lind Offering, the Company and its subsidiaries: (i) BioKey, Inc., a California corporation (“BioKey”), (ii) Biolite Holding, Inc., a Nevada corporation (“BioLite”), (iii) Biolite BVI, Inc., a British Virgin Islands corporation (“BioLite BVI”) and (iv) American BriVision Corporation, a Delaware corporation (“American BriVision” and, collectively with the Company, BioKey, BioLite, and BioLite BVI, the “Guarantors”), jointly and severally guaranteed all of the obligations of the Company in connection with the Lind Offering (the “Guaranty”) with certain collateral, as set forth in the related Transaction Documents (as hereinafter defined). The sale of the Lind Note and the terms of the Lind Offering, including the Guaranty are set forth in the Lind Securities Purchase Agreement, the Note, the Warrant, a Security Agreement, Guarantor Security, Guaranty, a Trademark Security Agreement with Rgene Corporation, a Trademark Security Agreement with BioFirst, a Patent Security Agreement, a Copyright Security Agreement and a Stock Pledge Agreement (collectively, the “Transaction Documents”). Allele Capital Partners, LLC (“Allele”) together with its executing broker dealer, Wilmington Capital Securities, LLC (together with its affiliates, “Wilmington”), served as the exclusive placement agent (the “Placement Agent”) of the Lind Offering. As a result of the Lind Offering, the Company will pay the Placement Agent (i) a cash fee of 6% of the gross proceeds from the sale of the Securities, and (ii) common stock purchase warrants to purchase 6% of the number of shares of common stock issuable under the Lind Note. We also agreed to pay certain expenses of the placement agent in connection with the Lind Offering. Pursuant to the Lind Securities Purchase Agreement, the Company agreed to register all of the Lind Securities and the shares of common stock underlying the warrant issued to the placement agent. The Securities Purchase Agreement also contains customary representation and warranties of the Company and the Investors, indemnification obligations of the Company, termination provisions, and other obligations and rights of the parties. On September 12, 2023, the Company and Lind entered into a letter agreement (the “Letter Agreement”) pursuant to which Lind agreed to waive any default, any Event of Default, and any Mandatory Default Amount (each as defined in the Note) associated with the Company’s market capitalization being below $12.5 million for 10 consecutive days through February 23, 2024. Notwithstanding the waiver, Lind retains its right to exercise conversion rights under 2.2(a), 2.2(c)(2)(x) and 3.1 of the Note, which could result in a substantial amount of common stock issued at a significant discount to the trading price of the Company’s common stock. In addition, if the Company is unable to increase its market capitalization and is unable to obtain a further waiver or amendment to the Note, then the Company could experience an event of default under the Note, which could have a material adverse effect on the Company’s liquidity, financial condition, and results of operations. The Company cannot make any assurances regarding the likelihood, certainty, or exact timing of the Company’s ability to increase its market capitalization, as such metric is not within the immediate control of the Company
On August 1, 2023, Lind converted $500,000 convertible notes into 142,857 shares of On July 27, 2023, the Company entered into that certain securities purchase agreement. relating to the offer and sale of 300,000 shares of common stock, par value $0.001 per share and 200,000 pre-funded warrants, at an exercise price of $0.001 per share, in a registered direct offering. Pursuant to the Purchase Agreement, the Company agreed to sell the Shares and/or Pre-funded Warrants at a per share purchase price of $3.50, for gross proceeds of $1,750,000, before deducting any estimated offering expenses. On August 1, 2023, the pre-funded warrants were exercised. The transaction contemplated by the SPA was closed on July 31, 2023, as all the closing conditions have been satisfied. The Company paid to the placement agents an aggregate cash fee equal to 6% of the aggregate sales price of the securities sold and warrants to purchase up to 30,000 shares of Common Stock, on the same terms as the Pre-Funded Warrants. The above-mentioned equity is
The above-mentioned equity is before the reverse stock split in 2023. Strategy Key elements of our business strategy include:
We plan to augment our core research and development capability and assets by conducting Phase I and II clinical trials for investigational new drugs and medical devices in the fields of CNS, Hematology/Oncology and Ophthalmology. Our management team has extensive experiences across a wide range of new drug and Business Objectives The Company is operating its core business based on collaborative activities that can generate current and future revenues through research, development and/or commercialization joint venture agreements. The terms of these agreements typically include payment to the Company related to one or more of the following:
Each type of payments results in revenue except for revenue from royalties on net sales of licensed products, which are classified as royalty revenues. To date, we have not received any royalty revenues. Revenue is recognized upon satisfaction of a performance obligation by transferring control of a good or service to the joint venture partner. As part of the accounting for these arrangements, the Company applies judgment to determine whether the performance obligations are distinct and develop assumptions in determining the stand-alone selling price for each distinct performance obligation identified in the collaboration agreements. To determine the stand-alone selling price, the Company relies on assumptions which may include forecasted revenues, development timelines, reimbursement rates for R&D personnel costs, discount rates and probabilities of technical and regulatory success. The Company had multiple deliverables under the collaborative agreements, including deliverables relating to grants of technology licenses, regulatory and clinical development, and marketing activities. Estimation of the performance periods of the Company’s deliverables requires the use of management’s judgment. Significant factors considered in management’s evaluation of the estimated performance periods include, but are not limited to, the Company’s experience in conducting clinical development, regulatory and manufacturing activities. The Company reviews the estimated duration of its performance periods under its collaborative agreements on an annual basis, and makes any appropriate adjustments on a prospective basis. Future changes in estimates of the performance period under its collaborative agreements could impact the timing of future revenue recognition. (i) Nonrefundable upfront payments If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in an arrangement, the Company recognizes revenue from the related nonrefundable upfront payments based on the relative standalone selling price prescribed to the license compared to the total selling price of the arrangement. The revenue is recognized when the license is transferred to the collaboration partners and the collaboration partners are able to use and benefit from the license. To date, the receipt of nonrefundable upfront fees was solely for (ii) Milestone payments The Company is eligible to receive milestone payments under the collaborative agreement with collaboration partners based on achievement of specified development, regulatory and commercial events. Management evaluated the nature of the events triggering these contingent payments, and concluded that these events fall into two categories: (a) events which involve the performance of the Company’s obligations under the collaborative agreement with collaboration partners, and (b) events which do not involve the performance of the Company’s obligations under the collaborative agreement with collaboration partners. The former category of milestone payments consists of those triggered by development and regulatory activities in the territories specified in the collaborative agreements. Management concluded that each of these payments constitute substantive milestone payments. This conclusion was based primarily on the facts that (i) each triggering event represents a specific outcome that can be achieved only through successful performance by the Company of one or more of its deliverables, (ii) achievement of each triggering event was subject to inherent risk and uncertainty and would result in additional payments becoming due to the Company, (iii) each of the milestone payments is nonrefundable, (iv) substantial effort is required to complete each milestone, (v) the amount of each milestone payment is reasonable in relation to the value created in achieving the milestone, (vi) a substantial amount of time is expected to pass between the upfront payment and the potential milestone payments, and (vii) the milestone payments relate solely to past performance. Based on the foregoing, the Company recognizes any revenue from these milestone payments in the period in which the underlying triggering event occurs.
(iii) Multiple Element Arrangements The Company evaluates multiple element arrangements to determine (1) the deliverables included in the arrangement and (2) whether the individual deliverables represent separate units of accounting or whether they must be accounted for as a combined unit of accounting. This evaluation involves subjective determinations and requires management to make judgments about the individual deliverables and whether such deliverables are separate from other aspects of the contractual relationship. Deliverables are considered separate units of accounting provided that: (i) the delivered item(s) has value to the customer on a standalone basis and (ii) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially within its control. In assessing whether an item under a collaboration has standalone value, the Company considers factors such as the research, manufacturing, and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. The Company also considers whether its collaboration partners can use the other deliverable(s) for their intended purpose without the receipt of the remaining element(s), whether the value of the deliverable is dependent on the undelivered item(s), and whether there are other vendors that can provide the undelivered element(s). The Company recognizes arrangement consideration allocated to each unit of accounting when all of the revenue recognition criteria in ASC 606 are satisfied for that particular unit of accounting. In the event that a deliverable does not represent a separate unit of accounting, the Company recognizes revenue from the combined unit of accounting over the Company’s contractual or estimated performance period for the undelivered elements, which is typically the term of the Company’s research and development obligations. If there is no discernible pattern of performance or objectively measurable performance measures do not exist, then the Company recognizes revenue under the arrangement on a straight-line basis over the period the Company is expected to complete its performance obligations. Conversely, if the pattern of performance in which the service is provided to the customer can be determined and objectively measurable performance measures exist, then the Company recognizes revenue under the arrangement using the proportional performance method. Revenue recognized is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the straight-line method or proportional performance method, as applicable, as of the period ending date. At the inception of an arrangement that includes milestone payments, the Company evaluates whether each milestone is substantive and at risk to both parties on the basis of the contingent nature of the milestone. This evaluation includes an assessment of whether: (1) the consideration is commensurate with either the Company’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from its performance to achieve the milestone, (2) the consideration relates solely to past performance and (3) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone and the level of effort and investment required to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether a milestone satisfies all of the criteria required to conclude that a milestone is substantive. Milestones that are not considered substantive are recognized as earned if there are no remaining performance obligations or over the remaining period of performance, assuming all other revenue recognition criteria are met. (iv) Royalties and Profit-Sharing Payments Under the collaborative agreement with the collaboration partners, the Company is entitled to receive royalties on sales of products, Revenues Derived from Research and Development Activities Services — Revenues related to research and development and regulatory activities are recognized when the related services or activities are performed, in accordance with the contract terms. The Company typically has only one performance obligation at the inception of a contract, which is to perform research and development services. The Company may also provide its customers with an option to request that the Company provides additional goods or services in the future, such as active pharmaceutical ingredient, API, or IND/NDA/ANDA/510K submissions. The Company evaluates whether these options are material rights at the inception of the contract. If the Company determines an option is a material right, the Company will consider the option a separate performance obligation.
If the Company is entitled to reimbursement from its customers for specified research and development expenses, the Company accounts for the related services that it provides as separate performance obligations if it determines that these services represent a material right. The Company also determines whether the reimbursement of research and development expenses should be accounted for as revenues or an offset to research and development expenses in accordance with provisions of gross or net revenue presentation. The Company recognizes the corresponding revenues or records the corresponding offset to research and development expenses as it satisfies the related performance obligations. The Company then determines the transaction price by reviewing the amount of consideration the Company is eligible to earn under the contracts, including any variable consideration. Under the outstanding contracts, consideration typically includes fixed consideration and variable consideration in the form of potential milestone payments. At the start of an agreement, the Company’s transaction price usually consists of the payments made to or by the Company based on the number of full-time equivalent researchers assigned to the project and the related research and development expenses incurred. The Company does not typically include any payments that the Company may receive in the future in its initial transaction price because the payments are not probable. The Company would reassess the total transaction price at each reporting period to determine if the Company should include additional payments in the transaction price. The Company receives payments from its customers based on billing schedules established in each contract. Upfront payments and fees may be recorded as contract liabilities upon receipt or when due, and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the right of the Company to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customers and the transfer of the promised goods or services to the customers will be one year or less. Examples of collaborative agreements the Company has entered into are as follows: Collaborative agreements with BHK, a related party
The milestone payments are determined by a schedule of BioLite development achievements as shown below:
Collaborative agreement with BioLite, Inc., a related party The Company entered into a collaborative agreement with BioLite, Inc. Pursuant to the BioLite Agreement, the Company acquired the sole licensing rights to develop and commercialize for therapeutic purposes six compounds from BioLite. In accordance with the terms of the Agreement, the Company shall pay BioLite (i) milestone payments of up to $100 million in cash and equity of the Company or equity securities owned by it at various stages on a schedule dictated by BioLite’s achievements of certain milestones, as set forth in the Agreement (the “Milestone Payments”) and (ii) a royalty payment equal to 5% of net sales of the drug products when ABV-1501 is According to the BioLite Agreement, after Phase II clinical trials are completed, 15% of the Milestone Payment becomes due and shall be paid in two stages: (i) 5% no later than December 31, 2021 (the “December 2021 Payment”) and (ii) 10% no later than December 31, 2022. On February 12, 2022, the Company’s Board of Directors determined that the December 2021 Payment, which is equal to $5,000,000, shall be paid via the cancellation of certain outstanding debt, in the amount of $5,000,000, that BioLite owes the Company as of December 31, 2021. On February 22, 2022, the parties entered into an amendment to the BioLite Agreement allowing the Company to make all payments due under the Agreement via the forgiveness of debt, in equal value, owed by BioLite to the Company. On September 13, 2023, the BioLite received a new patent granted notice (application no. 109130285) for PDC-1421 from the Intellectual Property Office of Taiwan. This was a related Co-Development agreement with Rgene Corporation, a related party
On May 26, 2017,
Rgene Corporation (the “Rgene”), a related party under common control by controlling beneficiary shareholder of YuanGene Corporation and the Company (See Note 8). Pursuant to Co-Dev Agreement, BriVision and Rgene agreed to co-develop and commercialize ABV-1507 HER2/neu Positive Breast Cancer Combination Therapy, ABV-1511 Pancreatic Cancer Combination Therapy and ABV-1527 Ovary Cancer Combination Therapy. Under the terms of the Co-Dev Agreement, Rgene On June 1, 2017, the Company has delivered all research, technical, data and development data to Rgene. Since both Rgene and the Company are related parties and under common control by a controlling beneficiary shareholder of YuanGene Corporation and the Company, the Company has recorded the full amount of $3,000,000 in The Company and Rgene signed an amendment to the Rgene Agreement on November 10, 2020, pursuant to which both parties agreed to delete AB-1507 HER2/neu Positive Breast Cancer Combination Therapy and AB-1527 Ovary Cancer Combination Therapy and add ABV-1519 EGFR Positive Non-Small Cell Lung Cancer Combination Therapy and ABV-1526 Large Intestine / Colon / Rectal Cancer Combination Therapy to the products to be co-developed and commercialized. Other provisions of the Rgene Agreement remain in full force and effect.
Clinical Development Service Agreement with Rgene Corporation, a related party On June 10, 2022, the Company expanded its co-development partnership with Through a series of transactions over the past 5 years, the Company and Rgene have co-developed the three drug products covered by the Service Agreement, which has resulted in the Company owning 31.62% of Rgene. As part of the Rgene Studies, the Company agreed to loan $1.0 million to Rgene, for which Rgene has provided the Company with a 5% working capital convertible loan (the “Note”). If the Note is fully converted, the Company will own an additional 6.4% of Rgene. The Company is expected to receive the outstanding loan from the related party by the 2023 Q4, either by cash or conversion of shares of Rgene. The Company may convert the Note at any time into shares of Rgene’s common stock at either (i) a fixed conversion price equal to $1.00 per share or (ii) 20% discount of the stock price of the then most recent offering, whichever is lower; the conversion price is subject to adjustment as set forth in the Note. The Note includes standard events of default, as well as a cross default provision pursuant to which a breach of the Service Agreement will trigger an event of default under the Note if not cured after 5 business days of written notice regarding the breach is provided. Upon an event of default, the outstanding principal and any accrued and unpaid interest shall be immediately due and payable. The Service Agreement shall remain in effect until the expiration date of the last patent and automatically renew for 5 more years unless terminated earlier by either party with six months written notice. Either party may terminate the Service Agreement for cause by providing 30 days written notice. Rgene has further agreed, effective July 1, 2022, to provide the Company with a seat on Rgene’s Board of Directors until the loan is repaid in full. The Company has nominated Dr. Jiang, its Chief Strategy Officer and Director to occupy that seat; Dr. Jiang is also one of the Company’s largest shareholders, owning 12.8% of the Company. The Rgene Studies is a related party transaction. Collaborative agreement with BioFirst Corporation, a related party On July 24, 2017, BriVision entered into a collaborative agreement (the “BioFirst Collaborative Agreement”) with BioFirst Corporation (“BioFirst”), pursuant to which BioFirst granted the Company the global licensing right for medical use of the product (the “Product”): BFC-1401 Vitreous Substitute for Vitrectomy. BioFirst is a related party to the Pursuant to the BioFirst Collaborative Agreement, the Company will co-develop and commercialize the Product with BioFirst and pay BioFirst in a total amount of $3,000,000 in cash or stock of the Company before September 30, 2018. The amount of $3,000,000 is in connection with the compensation for BioFirst’s past research efforts and contributions made by BioFirst before the BioFirst Collaborative Agreement was signed and it does not relate to any future commitments made by BioFirst and BriVision in this BioFirst Collaborative Agreement. In addition, the Company is entitled to receive 50% of the future net licensing income or net sales profit, if any, and any development cost shall be equally shared by both
On September 25, 2017, BioFirst has delivered all research, technical, data and development data to BriVision. The Company determined to fully expense the On June 30, 2019, BriVision entered into a Stock Purchase Agreement
On August 5, 2019, BriVision entered into a second Stock Purchase Agreement (“Purchase Agreement 2”) with BioFirst Corporation. Pursuant to Purchase Agreement 2, the Company issued 414,702 shares of
Initially, the Company will focus on ABV-2002, a solution utilized to store a donor cornea prior to either penetrating keratoplasty (full thickness cornea transplant) or endothelial keratoplasty (back layer cornea transplant). ABV-2002 is a solution comprised of a specific poly amino acid that is intended to protect ocular tissue from damage caused by external osmolarity exposure during pre-surgery storage. The specific polymer in ABV-2002 can adjust osmolarity to maintain a range of 330 to 390 mOsM, thereby permitting hydration within the corneal stroma during the storage period. Stromal hydration typically results in (a) maintaining acceptable corneal transparency and (b) prevents donor cornea swelling. ABV-2002 also contains an abundant phenolic phytochemical found in plant cell walls that provides antioxidant antibacterial properties and neuroprotection. Early testing by BioFirst indicates that ABV-2002 may be more effective for protecting the cornea and retina during long-term storage than other storage media available today and can be manufactured at lower cost. Further clinical development was put on hold due to the lack of funding. In addition, BioFirst was incorporated on November 7, 2006, focusing on the R&D, manufacturing, and sales of innovative patented pharmaceutical products. The technology of BioFirst comes from the global exclusive licensing agreements BioFirst maintains with domestic R & D institutions. Currently, BioFirst’s main research and development product is the vitreous substitute (Vitargus®), licensed by the National Health Research Institutes. Vitargus is the world’s first bio-degradable vitreous substitute and offers a number of advantages over current
The above-mentioned equity is
Co-Development agreement with BioLite Japan K.K. On October 6, 2021 (the “Completion Date”), the Company, Lucidaim Co., Ltd., a Japanese corporation (“Lucidaim,” together with the Company, the “Shareholders”), and BioLite Japan K.K., a Japanese corporation (“BioLite JP”) entered into a Joint Venture Agreement (the “Agreement”). BioLite JP is a private limited company (a Japanese
Pursuant to the Agreement and
As per the Agreement, the Shareholders shall supervise and manage the business and operations of BioLite JP. The directors shall not be entitled to any renumeration for their services as a director and each Shareholder can remove and replace the director he/she/it appointed. If a Shareholder sells or disposes of all of its Ordinary Shares, the director such Shareholder appointed must tender his/her resignation. The Agreement also sets forth certain corporate actions that must be pre-approved by all Shareholders (the “Reserved Matters”). If the Shareholders are unable to make a decision on any Reserved Matter, then either Shareholder can submit a deadlock notice to the Each of the Shareholders maintains a pre-emptive right to purchase such number of additional Ordinary Shares as would allow such Shareholder to maintain its ownership percentage in BioLite JP if BioLite JP issues any new Ordinary Shares. However, the Agreement provides that the Company shall lose its pre-emptive rights under certain conditions. The Shareholders also maintain a right of first refusal if the other Shareholder receives an offer to buy such shareholder’s Ordinary Shares. The Agreement also requires BioLite JP to obtain a bank facility in the amount of JPY 30,460,000 (approximately USD272,000), for its initial working capital purposes. Pursuant to the Agreement, each Shareholder agrees to guarantee such bank facility if the bank requires a guarantee. Accordingly, the Company may be liable for the bank facility in an amount up to JPY 14,925,400 (approximately USD134,000), which represents 49% of the maximum bank facility. The Agreement further provides that BioLite JP shall issue annual dividends at the rate of at least 1.5% of Biolite’s profits, if it has sufficient cash to do so. Pursuant to the Agreement, the Company and
The Agreement contains non-solicitation and non-compete clauses for a period of 2 years after a Shareholder or its subsidiaries ceases to be a Shareholder, with such restrictive covenants limited to business within the ophthalmologic filed or central neurological field. Any rights to intellectual property that arise from Biolite’s activities, shall belong to BioLite JP. The Agreement contains standard indemnification terms, except that no indemnifying party shall have any liability for an individual liability unless it exceeds JPY 500,000 (approximately USD4,500) and until the aggregate amount of all liabilities exceeds JPY 2,000,000 (approximately USD18,000) and then only to the extent such liability exceed such limit. The Company paid $150,000 towards the setup of the joint venture; BioLite Japan’s other shareholder also paid $150,000 after the Letter of Intent was signed. The Agreement shall continue for 10 years, unless earlier terminated. The Agreement also allows a Shareholder to terminate the agreement upon certain defaults committed by another Shareholder, as set forth in the Agreement. This was a related party transaction. In November 2021, the Company received $4,244,452 in gross proceeds from the exercise of warrants issued in the Company’s August 3, 2021, public offering of securities. Investors exercised a total of 673,405 Series A warrants at a price of $6.30 per share, and 200 Series B warrants at a price of $10 per share. BioKey Revenues In addition to collaborative agreements, ABVC earns revenue through its wholly-owned BioKey subsidiary which provides a wide range of Contract Development & Manufacturing Organization (“CDMO”) services including API characterization, pre-formulation studies, formulation development, analytical method development, stability studies, IND/NDA/ANDA/510K submissions, and manufacturing clinical trial materials (from Phase I through Phase III) and commercial manufacturing of pharmaceutical products. In addition, BioKey provides a variety of regulatory services tailored to the needs of its customers, which include proofreading and regulatory review of submission documents related to formulation development, clinical trials, marketed products, generics, nutraceuticals and OTC products and training presentations. In addition to supporting ABVC’s new drug development, BioKey submits INDs, NDAs, ANDAs, and DMFs to the FDA, on ABVC’s behalf in compliance with new electronic submission guidelines of the FDA. Impact of COVID-19 Outbreak On January 30, 2020, the World Health Organization declared the coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While the closures and limitations on movement, domestically and internationally, are expected to be temporary, if the outbreak continues on its current trajectory the duration of the supply chain disruption could reduce the availability, or result in delays, of materials or supplies to and from the Company, which in turn could materially interrupt the Company’s business operations. Given the speed and frequency of the continuously evolving developments with respect to this pandemic, the Company cannot reasonably estimate the magnitude of the impact to its consolidated results of operations. We have taken every precaution possible to ensure the safety of our employees.
The COVID-19 pandemic, including variants, has adversely affected, and is expected to continue to adversely affect, elements of our CDMO business sector. The COVID-19 pandemic government imposed restrictions constrained researcher access to labs globally. These constraints limited scientific discovery capacity and we observed that demand in those labs fell well below historic levels. As constraints on social distancing were gradually lifted around the world recently, labs have been able to increase research activity. While we believe that underlying demand is still not yet at pre-COVID-19 levels since lab operations remain below their normal capacity, we are hopeful that the vaccination programs that are underway combined with policy changes planned for the summer will further increase research activity and support a return to pre-COVID-19 demand levels worldwide. The global pandemic of COVID-19 continues to evolve rapidly, and we will continue to monitor the situation closely, including its potential effect on our plans and timelines. Additionally, it is reasonably possible that estimates made in the financial statements have been, or will be, materially and adversely impacted in the near term as a result of these conditions, including losses on inventory; impairment losses related to goodwill and other long-lived assets and current obligations. Summary of Critical Accounting Policies Basis of Presentation The accompanying This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred. The Company’s financial statements are expressed in U.S. dollars.
Use of Estimates The preparation of Stock Reverse Split On March 12, 2019, the Board of Directors of the Company by unanimous written consent in lieu of a meeting approved to i) effect a stock reverse split at the ratio of 1-for-18 (the “Reverse Split”) of both the authorized common stock of the Company (the “Common Stock”) and the issued and outstanding Common Stock and ii) to amend the articles of incorporation of the Company to reflect the Reverse Split. The Board approved and authorized the Reverse Split without obtaining approval of the Company’s shareholders pursuant to Section 78.207 of Nevada Revised Statutes. On May 3, 2019, the Company filed a certificate of amendment to the Company’s articles of incorporation (the “Amendment”) to effect the Reverse Split with the Secretary of State of Nevada. The Financial Industry Regulatory Authority (“FINRA”) informed the Company that the Reverse Split was effective on May 8, 2019.
Fair Value Measurements
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