Filed Pursuant to Rule 424(b)(4)
Registration No. 333-276500
Registration No. 333-271416
Prospectus Supplement No. 3 Dated November 15, 2024
(To Prospectus Dated April 5, 2024)
ABVC BioPharma, Inc.
11,714,683 Shares of Common Stock
This Prospectus Supplement No. 3 (the “Prospectus
Supplement”) updates and supplements the prospectus of ABVC BioPharma, Inc., a Nevada corporation (the “Company,” “we,”
“us,” or “our”) dated April 5, 2024, as later updated (the “Prospectus”), with the following attached
document which we filed with the Securities and Exchange Commission:
| A. |
Our Quarterly Report on Form 10-Q for the three months ended September 30, 2024, filed with the Securities Exchange Commission on November 14, 2024 |
This Prospectus Supplement
should be read in conjunction with the Prospectus, which is required to be delivered with this Prospectus Supplement. This Prospectus
Supplement updates, amends and supplements the information included in the Prospectus. If there is any inconsistency between the information
in the Prospectus and this Prospectus Supplement, you should rely on the information in this Prospectus Supplement.
This Prospectus Supplement
is not complete without, and may not be delivered or utilized except in connection with, the Prospectus, including any amendments or supplements
to it.
The purchase of the securities
offered through the Prospectus involves a high degree of risk. Before making any investment in our common stock and/or warrants, you should
carefully consider the risk factors section beginning on page 8 of the Prospectus.
You should rely only on
the information contained in the Prospectus, as supplemented or amended by this Prospectus Supplement and any other prospectus supplement
or amendment thereto. We have not authorized anyone to provide you with different information.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy
or accuracy of the Prospectus. Any representation to the contrary is a criminal offense.
The date of this Prospectus Supplement is November
15, 2024
Index to Filings
Annex A
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 ended September
30, 2024
☐ TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to
____________
Commission file number 001-40700
ABVC BioPharma, Inc.
(Exact name of Registrant as specified in its charter)
| Nevada |
|
26-0014658 |
State or jurisdiction of
incorporation or organization |
|
IRS Employer
Identification Number |
44370 Old Warm Springs Blvd.
Fremont, CA 94538
Tel: (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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ 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 ☒
As of November 13, 2024, there were 12,975,492
shares of common stock, par value per share $0.001, issued and outstanding.
TABLE OF CONTENTS
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 ABVC BioPharma, Inc. and its
subsidiaries, unless otherwise indicated.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ABVC BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
| | |
September 30,
2024 | | |
December 31,
2023 | |
| | |
(Unaudited) | | |
| |
| ASSETS | |
| | |
| |
| Current Assets | |
| | |
| |
| Cash and cash equivalents | |
$ | 137,344 | | |
$ | 60,155 | |
| Restricted cash | |
| 632,529 | | |
| 656,625 | |
| Accounts receivable, net | |
| 1,529 | | |
| 1,530 | |
| Accounts receivable - related parties, net | |
| 10,463 | | |
| 10,463 | |
| Due from related parties - current | |
| 1,204,362 | | |
| 747,573 | |
| Short-term investments | |
| 70,809 | | |
| 79,312 | |
| Prepaid expenses and other current assets | |
| 91,291 | | |
| 101,051 | |
| Total Current Assets | |
| 2,148,327 | | |
| 1,656,709 | |
| | |
| | | |
| | |
| Property and equipment, net | |
| 7,931,478 | | |
| 7,969,278 | |
| Operating lease right-of-use assets | |
| 507,659 | | |
| 809,283 | |
| Long-term investments | |
| 2,333,904 | | |
| 2,527,740 | |
| Prepaid expenses - non-current | |
| 75,898 | | |
| 78,789 | |
| Security deposits | |
| 60,916 | | |
| 62,442 | |
| Prepayment for long-term investments | |
| 1,280,512 | | |
| 1,274,842 | |
| Due from related parties - non-current, net | |
| 124,151 | | |
| 113,516 | |
| Total Assets | |
$ | 14,462,845 | | |
$ | 14,492,599 | |
| | |
| | | |
| | |
| LIABILITIES AND EQUITY | |
| | | |
| | |
| Current Liabilities | |
| | | |
| | |
| Short-term bank loans | |
$ | 866,250 | | |
$ | 899,250 | |
| Accrued expenses and other current liabilities | |
| 3,632,927 | | |
| 3,696,380 | |
| Contract liabilities | |
| 79,500 | | |
| 79,500 | |
| Taxes payables | |
| - | | |
| 112,946 | |
| Operating lease liabilities - current portion | |
| 365,458 | | |
| 401,826 | |
| Due to related parties | |
| 419,270 | | |
| 173,132 | |
| Convertible notes payable - third parties, net | |
| 952,237 | | |
| 569,456 | |
| Total
Current Liabilities | |
| 6,315,642 | | |
| 5,932,490 | |
| | |
| | | |
| | |
| Tenant security deposit | |
| 25,680 | | |
| 21,680 | |
| Operating lease liability - non-current portion | |
| 142,201 | | |
| 407,457 | |
| Total
Liabilities | |
| 6,483,523 | | |
| 6,361,627 | |
| 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, 100,000,000 authorized, 12,711,345 and 7,940,298 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively(1) | |
| 12,712 | | |
| 7,940 | |
| Additional paid-in capital | |
| 87,308,080 | | |
| 82,636,966 | |
| Stock subscription receivable | |
| - | | |
| (451,480 | ) |
| Stock to be issued | |
| 31,040 | | |
| - | |
| Accumulated deficit | |
| (70,552,277 | ) | |
| (65,420,095 | ) |
| Accumulated other comprehensive income | |
| 461,282 | | |
| 516,387 | |
| Treasury stock | |
| (8,902,371 | ) | |
| (8,901,668 | ) |
| Total
Stockholders’ equity | |
| 8,358,466 | | |
| 8,388,050 | |
| Noncontrolling interest | |
| (379,144 | ) | |
| (257,078 | ) |
| Total
Equity | |
| 7,979,322 | | |
| 8,130,972 | |
| | |
| | | |
| | |
| Total
Liabilities and Equity | |
$ | 14,462,845 | | |
$ | 14,492,599 | |
| (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 unaudited condensed consolidated financial statements.
ABVC BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
| | |
Three Months Ended | | |
Nine Months Ended | |
| | |
September 30, | | |
September 30, | |
| | |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| | |
| | |
| | |
| | |
| |
| Licensing revenues | |
$ | 380,000 | | |
$ | - | | |
$ | 496,000 | | |
$ | - | |
| Other revenues | |
| 9,276 | | |
| 15,884 | | |
| 11,623 | | |
| 150,265 | |
| Total revenues | |
| 389,276 | | |
| 15,884 | | |
| 507,623 | | |
| 150,265 | |
| Cost of revenues | |
| 296 | | |
| 29,614 | | |
| 763 | | |
| 162,831 | |
| Gross profit (loss) | |
| 388,980 | | |
| (13,730 | ) | |
| 506,860 | | |
| (12,566 | ) |
| Operating expenses | |
| | | |
| | | |
| | | |
| | |
| Selling, general and administrative expenses | |
| 301,208 | | |
| 1,182,093 | | |
| 1,772,916 | | |
| 3,841,633 | |
| Research and development expenses | |
| 37,825 | | |
| 141,310 | | |
| 147,292 | | |
| 990,731 | |
| Stock-based compensation | |
| - | | |
| 817,740 | | |
| 2,957,736 | | |
| 1,409,969 | |
| Total operating expenses | |
| 339,033 | | |
| 2,141,143 | | |
| 4,877,944 | | |
| 6,242,333 | |
| | |
| | | |
| | | |
| | | |
| | |
| Income (loss) from operations | |
| 49,947 | | |
| (2,154,873 | ) | |
| (4,371,084 | ) | |
| (6,254,899 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Other income (expense) | |
| | | |
| | | |
| | | |
| | |
| Interest income | |
| 44,261 | | |
| 40,246 | | |
| 75,451 | | |
| 147,998 | |
| Interest expense | |
| (219,533 | ) | |
| (1,218,624 | ) | |
| (1,164,248 | ) | |
| (1,390,039 | ) |
| Operating sublease income | |
| 12,000 | | |
| - | | |
| 36,478 | | |
| 53,900 | |
| Gain (loss) on foreign exchange | |
| 30,429 | | |
| (25,059 | ) | |
| 26,284 | | |
| (55,625 | ) |
| (Loss) on equity method investment | |
| (67,885 | ) | |
| - | | |
| (146,942 | ) | |
| - | |
| Other income (expense) | |
| 16,864 | | |
| (10,769 | ) | |
| 45,542 | | |
| (1,174 | ) |
| Total other income (expenses) | |
| (183,864 | ) | |
| (1,214,206 | ) | |
| (1,127,435 | ) | |
| (1,244,940 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Loss before income tax | |
| (133,917 | ) | |
| (3,369,079 | ) | |
| (5,498,519 | ) | |
| (7,499,839 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Provision for income tax expense (benefit) | |
| 355 | | |
| (999 | ) | |
| (110,539 | ) | |
| 80,696 | |
| | |
| | | |
| | | |
| | | |
| | |
| Net loss | |
| (134,272 | ) | |
| (3,368,080 | ) | |
| (5,387,980 | ) | |
| (7,580,535 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Net income (loss) attributable to noncontrolling interests | |
| 52,289 | | |
| (50,564 | ) | |
| (255,798 | ) | |
| (175,813 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Net loss attributable to ABVC and subsidiaries | |
| (186,561 | ) | |
| (3,317,516 | ) | |
| (5,132,182 | ) | |
| (7,404,722 | ) |
| Foreign currency translation adjustment | |
| 25,389 | | |
| (15,082 | ) | |
| (55,106 | ) | |
| 1,995 | |
| Comprehensive loss | |
$ | (161,172 | ) | |
$ | (3,332,598 | ) | |
$ | (5,187,288 | ) | |
$ | (7,402,727 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Net loss per share attributable to common stockholders | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted | |
$ | (0.02 | ) | |
$ | (0.82 | ) | |
$ | (0.46 | ) | |
$ | (2.08 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted average number of common shares outstanding (1) | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted | |
| 12,405,261 | | |
| 4,055,345 | | |
| 11,164,093 | | |
| 3,555,474 | |
| (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 unaudited condensed consolidated financial statements.
ABVC BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(UNAUDITED)
| | |
Nine Months Ended | |
| | |
September 30 | |
| | |
2024 | | |
2023 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | |
| | |
| |
| Net loss | |
$ | (5,387,980 | ) | |
$ | (7,580,535 | ) |
| Adjustments to reconcile net loss to net cash changes operating activities: | |
| | | |
| | |
| Depreciation | |
| 21,605 | | |
| 20,949 | |
| Stock-based compensation | |
| 2,957,736 | | |
| 1,409,969 | |
| Provision for doubtful accounts | |
| - | | |
| 38,500 | |
| Other non-cash income and expenses | |
| 1,134,029 | | |
| 1,422,362 | |
| Loss on investment in equity securities | |
| 146,942 | | |
| - | |
| Deferred tax expense | |
| - | | |
| (35,719 | ) |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Decrease in accounts receivable | |
| - | | |
| 191,265 | |
| Decrease in prepaid expenses and other deposits | |
| 14,177 | | |
| 27,924 | |
| Decrease (increase) in tenant security deposit | |
| 4,000 | | |
| (2,300 | ) |
| Decrease (increase) in due from related parties | |
| (467,424 | ) | |
| 189,755 | |
| Increase in accrued expenses and other current liabilities | |
| 128,189 | | |
| 648,626 | |
| Increase in contract liabilities | |
| - | | |
| 68,516 | |
| Increase (decrease) in due to related parties | |
| 246,138 | | |
| (155,697 | ) |
| Decrease in taxes payables | |
| (112,946 | ) | |
| - | |
| Net cash used in operating activities | |
| (1,315,534 | ) | |
| (3,756,385 | ) |
| | |
| | | |
| | |
| CASH FLOWS FROM INVESTING ACTIVITIES | |
| | | |
| | |
| Purchase of equipment | |
| - | | |
| (21,201 | ) |
| Increase in prepayment for long-term investments | |
| - | | |
| (493,158 | ) |
| Net cash used in investing activities | |
| - | | |
| (514,359 | ) |
| | |
| | | |
| | |
| CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
| Issuance of common stock | |
| - | | |
| 1,050,000 | |
| Proceeds from Issuance of warrant | |
| 394,071 | | |
| 2,429,028 | |
Proceeds from exercise of warrants | |
| 737,500 | | |
| - | |
| Proceeds from convertible notes | |
| 282,095 | | |
| 1,352,512 | |
Repayment of convertible notes | |
| (179,125 | ) | |
| - | |
| Proceeds from shares to be issued | |
| 164,772 | | |
| - | |
| Repayment of short-term loans | |
| - | | |
| (1,000,000 | ) |
| Net cash provided by financing activities | |
| 1,399,313 | | |
| 3,831,540 | |
| | |
| | | |
| | |
| Effects on changes in foreign exchange rate | |
| (30,686 | ) | |
| 168,413 | |
| | |
| | | |
| | |
| Net increase (decrease) in cash and cash equivalents, and restricted cash | |
| 53,093 | | |
| (270,791 | ) |
| | |
| | | |
| | |
| Cash and cash equivalents, and restricted cash - beginning of period | |
| 716,780 | | |
| 1,391,728 | |
| Cash and cash equivalents, and restricted cash - end of period | |
$ | 769,873 | | |
$ | 1,120,937 | |
| | |
| | | |
| | |
| Supplemental Cash Flow Disclosures | |
| | | |
| | |
| Cash paid for interest | |
$ | 59,519 | | |
$ | 27,525 | |
| Cash paid for income taxes | |
$ | 25,863 | | |
$ | - | |
| | |
| | | |
| | |
| Non-cash financing and investing activities | |
| | | |
| | |
| Issuance of common stock for conversion of debt | |
$ | 845,715 | | |
$ | - | |
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
ABVC BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2024 AND 2023
(UNAUDITED)
| | |
Common
Stock | | |
| | |
Stock | | |
Additional | | |
| | |
Accumulated
Other | | |
Treasury
Stock | | |
| | |
Stockholders’ | |
| | |
Number of
shares | | |
Amounts | | |
Stock to
be issued | | |
Subscription
Receivable | | |
Paid-in
Capital | | |
Accumulated
Deficit | | |
Comprehensive
Income | | |
Number of
Shares | | |
Amount | | |
Noncontrolling
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 subsidiaries' common shares for consulting service | |
| 22,341 | | |
| 22 | | |
| - | | |
| - | | |
| 140,727 | | |
| - | | |
| - | | |
| | | |
| - | | |
| - | | |
| 140,749 | |
| Issuance
of pre-funded 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 services | |
| 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
translation 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 | |
| | |
Common
Stock | | |
| | |
Stock | | |
Additional | | |
| | |
Accumulated
Other | | |
Treasury
Stock | | |
| | |
Stockholders’ | |
| | |
Number of
shares | | |
Amounts | | |
Stock to
be issued | | |
Subscription
Receivable | | |
Paid-in
Capital | | |
Accumulated
Deficit | | |
Comprehensive
Income | | |
Number of
Shares | | |
Amount | | |
Noncontrolling
Interest | | |
Equity
(Deficit) | |
| Balance
at December 31, 2023 | |
| 7,940,298 | | |
$ | 7,940 | | |
$ | - | | |
$ | (451,480 | ) | |
$ | 82,636,966 | | |
$ | (65,420,095 | ) | |
$ | 516,387 | | |
| (27,535 | ) | |
$ | (8,901,668 | ) | |
$ | (257,078 | ) | |
$ | 8,130,972 | |
| Issuance
of common stock upon exercise of convertible notes | |
| 905,303 | | |
| 905 | | |
| - | | |
| - | | |
| 810,269 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 811,174 | |
| Issuance
of subsidiaries' common shares for consulting service | |
| - | | |
| - | | |
| - | | |
| - | | |
| 383,500 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 383,500 | |
| Issuance
of pre-funded warrant | |
| - | | |
| - | | |
| - | | |
| - | | |
| 394,071 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 394,071 | |
| Repurchase
of common stock | |
| 703,496 | | |
| 703 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (703,496 | ) | |
| (703 | ) | |
| - | | |
| - | |
| Stock-based
compensation | |
| 1,502,726 | | |
| 1,504 | | |
| - | | |
| 451,480 | | |
| 2,121,252 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,574,236 | |
| Exercise
of common stock warrants | |
| 1,000,000 | | |
| 1,000 | | |
| - | | |
| - | | |
| 736,500 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 737,500 | |
| Stock
to be issued | |
| - | | |
| - | | |
| 31,040 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 100,000 | | |
| 131,040 | |
| Net
loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,945,621 | ) | |
| - | | |
| - | | |
| - | | |
| (308,087 | ) | |
| (5,253,708 | ) |
| Cumulative
translation adjustments | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (80,495 | ) | |
| - | | |
| - | | |
| - | | |
| (80,495 | ) |
| Balance
at June 30, 2024 | |
| 12,051,823 | | |
$ | 12,052 | | |
$ | 31,040 | | |
$ | - | | |
$ | 87,082,558 | | |
$ | (70,365,716 | ) | |
$ | 435,892 | | |
| (731,031 | ) | |
$ | (8,902,371 | ) | |
$ | (465,165 | ) | |
$ | 7,828,290 | |
| Issuance
of common stock upon exercise of convertible notes | |
| 400,000 | | |
| 400 | | |
| | | |
| | | |
| 34,140 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 34,540 | |
| Stock-based
compensation | |
| 259,522 | | |
| 260 | | |
| - | | |
| - | | |
| 191,382 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 191,642 | |
| Stock
to be issued | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 33,732 | | |
| 33,732 | |
| Net
loss for the period | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (186,561 | ) | |
| | | |
| | | |
| | | |
| 52,289 | | |
| (134,272 | ) |
| Cumulative
transaction adjustments | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 25,390 | | |
| | | |
| | | |
| | | |
| 25,390 | |
| Balance
at September 30, 2024 | |
| 12,711,345 | | |
$ | 12,712 | | |
$ | 31,040 | | |
$ | - | | |
$ | 87,308,080 | | |
$ | (70,552,277 | ) | |
$ | 461,282 | | |
| (731,031 | ) | |
$ | (8,902,371 | ) | |
$ | (379,144 | ) | |
$ | 7,979,322 | |
| (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 unaudited condensed consolidated financial statements.
ABVC BIOPHARMA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
ABVC BioPharma, Inc. (the “Company”),
formerly known as American BriVision (Holding) Corporation, 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 medical devices derived from plants. BriVision 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 to identify 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 as including Stanford University,
University of California San Fransisco (UCSF) and Cedar Sinai Medical Centre (CSMC). BriVision had no predecessor operations prior to
its formation on July 21, 2015.
The Company has three wholly-owned subsidiaries,
BriVision, BioLite Holding Inc. (“BioLite Holding”), and BioKey Inc. (“BioKey”), and a partially-owned subsidiary,
AiBtl BioPharma Inc. (“AiBtl”).
BioLite Holding was incorporated in the State
of Nevada with wholly owned subsidiary BioLite BVI, Inc. (“BioLite BVI”) that was incorporated in the British Virgin Islands.
BioLite BVI holds 73% ownership of BioLite Inc. (“BioLite Taiwan”), a Taiwanese corporation that was founded in February 2006.
BioLite Taiwan has been in the business of developing new drugs for over twelve years.
Incorporated in California on November 20, 2000,
BioKey has chosen to initially focus on developing generic drugs to ride the opportunity of the booming industry.
On November 12, 2023, the Company and BioLite Taiwan each entered into
a multi-year, global licensing agreement with AiBtl for the Company and BioLite Taiwan’s CNS drugs with the indications of MDD (Major
Depressive Disorder) and ADHD (Attention Deficit Hyperactivity Disorder) (collectively, the “Licensed Products”). The potential
license will cover the Licensed Products’ clinical trial, registration, manufacturing, supply, and distribution rights. 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 Taiwan received 23 million shares of AIBL stock and as a result, the Company has a controlling interest
over AiBtl, and the financial statements of AiBtl are included in the Company’s unaudited condensed consolidated financial statements.
2. LIQUIDITY AND GOING CONCERN
The accompanying unaudited interim condensed consolidated
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 liabilities are settled in the ordinary course of business at amounts
disclosed in the unaudited interim consolidated financial statements. The Company’s ability to continue as a going concern depends
upon its ability to market and sell its products to generate positive operating cash flows. For the nine months ended September 30, 2024,
the Company reported net loss of $5,387,980. As of September 30, 2024, the Company’s working capital deficit was $4,167,315. In
addition, the Company had net cash outflows of $1,315,534 from operating activities for the nine months ended September 30, 2024. 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 to improve
operations to generate positive cash flows and raise additional capital through private or public offerings. Notably, the Company has
generated cash inflow and reduced substantial amount of debts during the first nine months ended September 30, 2024. If the Company is
not able to generate positive operating cash flows, and raise additional capital, there is the risk that the Company may not be able to
meet its short-term obligations. Management is committed to enhancing operations to generate positive cash flows and plans to secure additional
capital through private or public offerings.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited interim condensed 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 8 of Regulation S-X. In the opinion of the Company’s management,
the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial
statements and include all adjustments, in a normal recurring nature, as necessary for the fair statement of the Company’s
financial position as of September 30, 2024, and results of operations and cash flows for the nine months ended September 30, 2024
and 2023. The unaudited interim condensed consolidated balance sheet as of September 30, 2024 has been derived from the audited
financial statements at December 31, 2023 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 full fiscal year or for any future period.
These financial statements should be read in conjunction with the audited consolidated financial statements as of and for the years
ended December 31, 2023 and 2022, and related notes included in the Company’s audited consolidated financial statements.
The accompanying unaudited condensed consolidated
interim financial statements have been prepared in accordance with the generally accepted accounting principles in the United States of
America (the “U.S. GAAP”). All significant intercompany transactions and account balances have been eliminated.
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 unaudited financial statements are expressed in U.S. dollars.
Reclassifications:
Certain amounts on the prior year’s condensed
consolidated balance sheets, condensed consolidated statements of operations and condensed cash flows were reclassified to conform to
the current-year presentation, with no effect on ending stockholders’ equity.
Use of Estimates
The preparation of financial statements in conformity
with accounting 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.
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 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 the NASDAQ Capital Market. All shares and related financial information in this Form 10-Q reflect
this 1-for-10 reverse stock split, unless otherwise specified.
Fair Value Measurements
FASB ASC 820, “Fair Value Measurements”
defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework
for measuring fair value and expands disclosures about fair value measurements. It requires that an entity measure its financial instruments
to base fair value on exit price, maximize the use of observable units and minimize the use of unobservable inputs to determine the exit
price. It establishes a 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 prioritizes
the inputs into three broad levels based on the reliability of the inputs as follows:
| |
● |
Level 1 Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available. |
| |
● |
Level 2 Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| |
● |
Level 3 Valuations are
based on inputs that are unobservable and not corroborated by market data. The fair value for such assets and liabilities is
generally determined using pricing models, discounted cash flow methodologies, or similar techniques that incorporate the
assumptions a market participant would use in pricing the asset or liability. |
The carrying values of certain assets and liabilities
of the Company, such as cash and cash equivalents, restricted cash, accounts receivable, due from related parties, prepaid expenses and
other current assets, accounts payable, accrued liabilities, and due to related parties’ approximate fair value due to their relatively
short maturities. The carrying value of the Company’s short-term bank loan, convertible notes payable, and accrued interest approximates
their fair value as the terms of the borrowing are consistent with current market rates and the duration to maturity is short. The carrying
value of the Company’s long-term bank loan approximates fair value because the interest rates approximate market rates that the
Company could obtain for debt with similar terms and maturities.
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 September 30, 2024 and December
31, 2023, the Company’s cash and cash equivalents, excluding restricted cash, amounted to $137,344 and $60,155, respectively.
Some of the Company’s cash deposits are held in financial institutions located in Taiwan where there is currently regulation
mandated on obligatory insurance of bank accounts. The Company believes this financial institution is of high credit quality.
Restricted Cash
Restricted cash primarily consist of certificate
of deposits as collateral of short-term loan held in CTBC Bank. As of September 30, 2024 and December 31, 2023, the Company’s restricted
cash amounted to $632,529 and $656,625, 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 the limit of $94,500 (NTD
3 million) covered by Taiwan Central Deposit Insurance Corporation, and the limit of $250,000 covered by the U.S. Federal Deposit
Insurance Corporation’s insurance limits. However, the Company does not anticipate any losses on excess deposits. The Company
does not enter into financial instruments for hedging, trading or speculative purposes.
The Company performs ongoing credit evaluations
of our customers and requires no collateral. Credit losses and allowance for unbilled receivables are 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, 2024, the most major client,
specializes in developing and commercializing of dietary supplements and therapeutics in dietary supplement industry, accounted for 87.2%
of the Company’s total account receivable.
As of December 31, 2023, the most major client,
specializes in developing and commercializing of dietary supplements and therapeutics in dietary supplement industry, accounted for 87.2%
of the Company’s total account receivable.
For the nine months ended September 30, 2024,
two major clients, manufacturing a wide range of pharmaceutical products, accounted for 58.31% and 39.40% of the Company’s total
revenues. 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.
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 $616,457 and $616,505 as of September 30, 2024 and December 31, 2023, respectively.
Revenue Recognition
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 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) 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 at a point in time when the license is transferred to the collaboration
partners and the collaboration partners are able to use and benefit from the license. Due to the uncertainty of the collection, the Company
only recognizes cash receipts according to the variable consideration principles outlined in ASC 606. 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 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.
Segment Reporting
ASC”) 280, “Segment Reporting,”
requires public companies to report financial and descriptive information about their reportable operating segments. We identify our
operating segments based on how our chief operating decision maker internally evaluates separate financial information, business activities
and management responsibility.
The Company currently have one reportable
segment.
Stock-based Compensation
The Company measures expense associated with all
employee stock-based compensation awards using a fair value method and recognizes such expense in the unaudited consolidated financial
statements on a straight-line basis over the requisite service period in accordance with FASB ASC Topic 718 “Compensation-Stock
Compensation”. Total employee stock-based compensation expenses were $0 and $0 for the three months ended September 30, 2024 and
2023, respectively, and were $1,935,756 and $0 for the nine months ended September 30, 2024 and 2023, respectively.
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 “Equity-Based
Payments to Non-Employees” which requires that the cost of services received from non-employees is measured at fair value at the
earlier of the performance commitment date or the date service is completed and recognized over the period the service is provided. Total
non-employee stock-based compensation expenses were $0 and $817,740 for the three months ended September 30, 2024 and 2023, respectively,
and were $1,021,980 and $1,409,969 for the nine months ended September 30, 2024 and 2023, respectively. The Company repaid its rent payable
by issuing common stocks in the value of $191,642 for the three and nine months ended September 30, 2024.
Recent Accounting Pronouncements
In August 2023, the FASB issued ASU 2023-05, Business
Combinations—Joint Venture Formations (Subtopic 805-60) which requires certain joint ventures to apply a new basis of accounting
upon formation by recognizing and initially measuring most of their assets and liabilities at fair value. The guidance does not apply
to joint ventures that may be proportionately consolidated and those that are collaborative arrangements. ASU 2023-05 is effective for
joint venture with a formation date on or after January 1, 2025, early adoption is permitted. The Company is currently evaluating the
impact that the standard will have on its unaudited consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09,
Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective
tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual
periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued
or made available for issuance. This ASU will likely result in the required additional disclosures being included in our consolidated
financial statements once adopted.
In November 2024, the FASB issued ASU No. 2024-03,
Expense Disaggregation Disclosures (Subtopic 220-40). The ASU requires disclosure of specified information about certain costs and expenses.
This includes purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The ASU is effective
on a prospective or retrospective basis for annual reporting period beginning after December 15, 2026, and interim reporting period beginning
after December 15, 2027. Early adoption is permitted. This ASU will likely result in the required additional disclosures being included
in our consolidated financial statements once adopted.
4. 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 intellectual property rights, and has developed it for
medicinal use in collaboration with outside researchers. The development costs shall be shared 50/50 between BHK and the Company. The
BHK Co-Development Agreement will remain in effect for fifteen years from the date of first commercial sale of the Product in in Asia
excluding Japan.
On July 27, 2016, BioLite Taiwan and BHK agreed
to amend the payment terms of the milestone payment in an aggregate amount of $10 million based on the following schedule:
| ● | Upon
the signing of the BHK Co-Development Agreement: $1 million, or 10% of total payment |
| ● | Upon
the first Investigational New Drug (IND) submission and BioLite Taiwan will deliver all data to BHK according to FDA Reviewing requirement:
$1 million, or 10% of total payment |
| ● | At
the completion of first phase II clinical trial: $1 million, or 10% of total payment |
| ● | At
the initiation of phase III of clinical trial research: $3 million, or 30% of total payment |
| ● | Upon
the New Drug Application (NDA) submission: $4 million, or 40% of total payment |
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 Company has received the second milestone payment of NT$31,649,000, approximately equivalent to $1 million, and recognized collaboration
revenue for the year ended December 31, 2016. As of the date of this report, the Company has not completed the first phase II clinical
trial.
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, 2024, 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 development costs shall be shared 50/50 between
BHK and the Company. The BHK Co-Development Agreement will remain in effect for fifteen years from the date of first commercial sale of
the Product in in Asia excluding Japan.
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 BHK Collaborative Agreements.
In addition to the total of NT$50 million, approximately
equivalent to $1.64 million, BioLite Taiwan is entitled to receive 50% of the future net licensing income or net sales profit. As of September
30, 2024, the Company has not earned the royalty under the BHK Collaborative Agreements.
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 10). 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 pay the
Company $3,000,000 in cash or stock of Rgene with equivalent value by August 15, 2017. The payment is for the compensation of BriVision’s
past research efforts and contributions made by BriVision before the Co-Dev Agreement was signed and it does not relate to any future
commitments made by BriVision and Rgene in this Co-Dev Agreement. In addition to $3,000,000, the Company is entitled to receive 50% of
the future net licensing income or net sales profit earned by Rgene, if any, and any development costs shall be equally shared by both
BriVision and 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 connection with the Co-Dev Agreement as additional paid-in capital during the year ended December 31, 2017. During
the year ended December 31, 2017, the Company received $450,000 in cash. On December 24, 2018, the Company received the remaining
balance of $2,550,000 in the form of newly issued shares of Rgene’s Common Stock, at the price of NT$50 (approximately
equivalent to $1.64 per share), for an aggregate number of 1,530,000 shares, which accounted for equity method long-term investment
as of December 31, 2018. On December 31, 2018, the Company determined to fully write off this investment based on the
Company’s assessment of the severity and duration of the impairment, and qualitative and quantitative analysis of the
operating performance of the investee, adverse changes in market conditions and the regulatory or economic environment, changes in
operating structure of Rgene, additional funding requirements, and Rgene’s ability to remain in business. All projects that
have been initiated will be managed and supported by the Company and Rgene.
The Company and Rgene signed an amendment to the
Co-Dev 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 Co-Dev Agreement remain in full force and effect.
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 certain regulatory milestones obtained during the agreement period. 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.
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 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.
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. As of September 30, 2024, the Company has not earned any net licensing income or net sales profit earned by Rgene under these collaborative
agreements.
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 Company because a controlling beneficiary shareholder of YuanGene Corporation and the Company is one
of the directors and Common Stock shareholders of BioFirst (See Note 10).
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 BriVision and
BioFirst.
On September 25, 2017, BioFirst delivered all
research, technical, data and development data to BriVision. The Company determined to fully expense the entire amount of $3,000,000 since
currently the related licensing rights do not have alternative future uses. According to ASC 730-10-25-1, 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
immediately. Hence, the entire amount of $3,000,000 is fully expensed as research and development expense during the year ended December
31, 2017.
On June 30, 2019, BriVision entered into a Stock
Purchase Agreement (the “Purchase Agreement”) with BioFirst Corporation. Pursuant to the Purchase Agreement, the Company issued
42,857 shares (post-split) of the Company’s common stock to BioFirst in consideration for $3,000,000 owed by the Company to BioFirst
(the “Total Payment”) in connection with a certain collaborative agreement between the Company and BioFirst dated July 24,
2017 (the “Collaborative Agreement”). Pursuant to the Collaborative Agreement, BioFirst granted the Company the global licensing
right to co-develop BFC-1401 or ABV-1701 Vitreous Substitute for Vitrectomy for medical purposes in consideration for the Total Payment.
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 41,470 shares (post-split) of the Company’s common stock to BioFirst in consideration for $2,902,911 owed by the Company
to BioFirst in connection with a loan provided to BriVision from BioFirst.
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.
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 vitreous substitutes by minimizing
medical complications and reducing the need for additional surgeries.
BioFirst has started the construction of a GMP
factory in Hsinchu Biomedical Science Park, Taiwan, with the aim at building a production base to supply the global market, and promote
the construction of bio-degradable vitreous substitute manufacturing centers in Taiwan. Completion of this factory would allow ABVC to
manufacture Vitargus with world-class technology in a GMP certified pharmaceutical factory. BioFirst is targeting to complete the construction
in 2024.
As of September 30, 2024, the Company has not earned any net licensing income or net sales profit earned by BioFirst under these collaborative
agreements.
Collaborative agreement with ForSeeCon Eye
Corporation, a related party
On March 25, 2024, the Company and BioFirst each
entered into a twenty-year, global definitive licensing agreement (the “FEYE Licensing Agreement”) with ForSeeCon Eye Corporation,
a company registered in the British Virgin Islands (“FEYE”) for the products in the Company and BioFirst’s Ophthalmology
pipeline, including Vitargus (the “Vitargus Products”). The license covers the Vitargus Products’ clinical trial, registration,
manufacturing, supply, and distribution rights; FEYE also has the rights to sublicense or partner with a third party to develop the Licensed
Products. As per each of the respective FEYE Licensing Agreements, each of the Company and BioFirst shall receive a total licensing fee
of $33,500,000, composed of an upfront payment of $30,000,000, which can instead be paid with 5 million shares of FEYE stock at $6 per
share within 30 days after the execution of the FEYE Licensing Agreement, and a $3,500,000 cash milestone payment, due 30 days upon completion
of next round fundraising. Additionally, each of the Company and BioFirst are eligible to receive royalties of 5% of net Sales. As
of September 30, 2024, the Company received 5,000,000 FEYE shares but did not recognize such licensing revenue since the fair value of
FEYE stock is uncertain.
On June 18, 2024, the Company and BioFirst, each
entered into an amendment (the “Amendment”) to the Licensing Agreement with FEYE, pursuant to which the Company and
BioFirst have agreed to allow FEYE to pay the second milestone payment in the amount of $3,500,000 per Licensing Agreement, incrementally
(such as $100,000), at any given time, rather than in one lump sum. During the three and nine months ended September 30, 2024, the Company
received in cash and recognized revenue of $180,000 and $296,000, respectively, pursuant to the Amendment.
Collaborative agreement with OncoX BiopPharma,
Inc., a related party
On April 16, 2024, the Company entered into a definitive agreement
with OncoX BioPharma, Inc., a private company registered in the British Virgin Islands (“Oncox”), pursuant to which the Company
will grant Oncox an exclusive right to develop and commercialize ABVC’s single-herb botanical drug extract from the dry fruit body
of Maitake Mushroom (Grifola Frondosa) for treatment of Non-Small Cell Lung Cancer (the “Lung Cancer Products”), within North
America for 20 years (the “April 2024 Oncox Agreement”). In consideration thereof, Oncox shall pay ABVC $6,250,000 (or 1,250,000
Oncox shares valued at $5 per share1) 30 days after entering into the agreement and $625,000, 30 days following the completion
of Oncox’s next round of fundraising, of which there is no guarantee; ABVC is also entitled to 5% royalties based on the Net Sales,
as defined in the April 2024 Oncox Agreement, from the first commercial sale of the Lung Cancer Product in North America, of which there
can be no guarantee. Oncox entered into another agreement with ABVC’s affiliate, Rgene Corporation, on the same terms. During the
three and nine months ended September 30, 2024, the Company received in cash and recognized revenue of $200,000 and $200,000, respectively,
pursuant to the agreement.
On May 8, 2024, the Company entered into a definitive
agreement with OncoX, pursuant to which the Company will grant Oncox an exclusive right to develop and commercialize ABVC’s BLEX
404 single-herb botanical drug extract from the dry fruit body of Maitake Mushroom (Grifola Frondosa) for treatment of Pancreatic (the
Pancreatic Product), within a certain territory, specified as 50% of the Worldwide Markets for 20 years (the “May 8, 2024 Oncox
Agreement”). In consideration thereof, Oncox shall pay ABVC a total of $6,250,000 (or 1,250,000 Oncox shares valued at $5 per share2)
within 30 days of entering into the May 8, 2024 Oncox Agreement, with an additional milestone payment of $625,000 in cash after OncoX’s
next round of fundraising, of which there can be no guarantee. Oncox may remit cash payments of at least $100,000 towards the licensing
fees and deductible from the second milestone payment; ABVC is also entitled to royalties of 5% of Net Sales, as defined in the May 8,
2024 Oncox Agreement, from the first commercial sale of the Pancreatic Product in the noted territory, which remains uncertain. The Company
will permit Oncox to pay the license fee in installments or in a lump sum and will allow Oncox to use its revenue to fund such payments.
Oncox entered into another agreement with ABVC’s affiliate, Rgene Corporation, on the same terms.
On May 14, 2024, the Company and its subsidiary,
BioLite Inc (collectively, the “licensor”), each entered into a licensing agreement with OncoX, on the same terms, pursuant
to which the licensors will grant Oncox an exclusive right to develop and commercialize ABVC’s BLEX 404 single-herb botanical drug
extract from the dry fruit body of Maitake Mushroom (Grifola Frondosa) for treatment of Tripple Negative Breast Cancer (the TNBC Product),
within a certain territory, specified as 50% of the Worldwide Markets for 20 years (the “May 14, 2024 Oncox Agreements”).
In each agreement for consideration thereof, Oncox shall pay each licensor a total of $6,250,000 (or 1,250,000 Oncox shares valued at
$5 per share3) within 30 days of entering into the May 14, 2024 Oncox Agreements, with an additional milestone payment of
$625,000 in cash after OncoX’s next round of fundraising, of which there can be no guarantee. Oncox may remit cash payments of at
least $100,000 towards the licensing fees and deductible from the second milestone payment; each licensor is also entitled to royalties
of 5% of Net Sales, from the first commercial sale of the TNBC Product in the noted territory, which remains uncertain. The Company will
permit Oncox to pay the license fee in installments or in a lump sum and will allow Oncox to use its revenue to fund such payments.
On May 23, 2024, the Company and its subsidiary,
BioLite Inc (collectively, the “licensor”), each entered into a licensing agreement with OncoX, on the same terms, pursuant
to which the licensors will grant Oncox an exclusive right to develop and commercialize ABVC’s BLEX 404 single-herb botanical drug
extract from the dry fruit body of Maitake Mushroom (Grifola Frondosa) for treatment of Myelodysplastic Syndrome (the “MS Products”),
within a certain territory, specified as 50% of the Worldwide Markets for 20 years (the “May 23, 2024 Oncox Agreements”).
In consideration thereof, Oncox shall pay each licensor a total of $6,250,000 (or 1,250,000 Oncox shares valued at $5 per share4)
30 days after entering the May 23, 2024 Oncox Agreements, with an additional milestone payment of $625,000 in cash after OncoX’s
next round of fundraising, of which there can be no guarantee. Oncox may remit cash payments of at least $100,000 towards the licensing
fees and deductible from the second milestone payment; each licensor is also entitled to royalties of 5% of Net Sales, from the first
commercial sale of the MS Product in the noted territory, which remains uncertain. Oncox may use its revenue to fund the licensing fees.
5. PROPERTY AND EQUIPMENT
Property and equipment as of September 30, 2024
and December 31, 2023 are summarized as follows:
| | |
September 30,
2024 | | |
December 31,
2023 | |
| | |
(Unaudited) | | |
| |
| Land | |
$ | 350,079 | | |
$ | 363,416 | |
| Construction-in-Progress | |
| 7,400,000 | | |
| 7,400,000 | |
| Buildings and leasehold improvements | |
| 2,222,965 | | |
| 2,227,431 | |
| Machinery and equipment | |
| 1,134,579 | | |
| 1,138,675 | |
| Office equipment | |
| 168,607 | | |
| 174,797 | |
| | |
| 11,276,230 | | |
| 11,304,319 | |
| Less: accumulated depreciation | |
| (3,344,752 | ) | |
| (3,335,041 | ) |
| Property and equipment, net | |
$ | 7,931,478 | | |
$ | 7,969,278 | |
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 property and a parcel of the
land, with a view to jointly develop the property into a healthcare center for senior living, long-term care, and medical care in the
areas of ABVC’s 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.
| 1 | Price was determined through
private negotiations between the parties; no third party valuation was completed. |
The valuation of such property is $37,000,000;
based on the Company’s 20% ownership, the Company acquired the value of $7,400,000. In exchange, the Company issued to Zhonghui
an aggregate of 370,000 shares of common stock, at a per share price of $20.0. The Shares are subject to a lock-up period of one year
following the closing date of the transaction. In addition, the parties agreed that, after one year following the closing of the transaction,
if the market value of the shares or the value of the property increases or decreases, the parties will negotiate in good faith to make
reasonable adjustments.
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 cooperation agreement, which is legally binding and enforceable.
The Construction-in-progress is planned to finish
before the end of 2024.
Depreciation expenses were $7,013 and $7,459 for
three months ended September 30, 2024 and 2023, respectively.
Depreciation expenses were $21,605 and $20,949 for
nine months ended September 30, 2024 and 2023, respectively.
6. LONG-TERM INVESTMENTS
| (1) |
The ownership percentages of each investee are listed as follows: |
| | |
Ownership percentage | | |
|
| | |
September 30, | | |
December 31, | | |
Accounting |
| Name of investee | |
2024 | | |
2023 | | |
treatments |
| Braingenesis Biotechnology Co., Ltd. | |
| 0.17 | % | |
| 0.17 | % | |
Cost Method |
| Genepharm Biotech Corporation | |
| 0.67 | % | |
| 0.67 | % | |
Cost Method |
| BioHopeKing Corporation | |
| 5.90 | % | |
| 5.90 | % | |
Cost Method |
| ForSeeCon Corporation (see Note 10) | |
| 19.78 | % | |
| -% | | |
Cost Method |
| BioFirst Corporation (see Note 10) | |
| 18.68 | % | |
| 18.68 | % | |
Equity Method |
| OncoX BioPharma, Inc. (see Note 10) | |
| 24.97 | % | |
| -% | | |
Equity Method |
| Rgene Corporation (see Note 10) | |
| 26.65 | % | |
| 26.65 | % | |
Equity Method |
| (2) |
The extent the investee relies on the company for its business are summarized as follows: |
| Name of investee |
|
The
extent the investee relies on the Company for its business |
| Braingenesis Biotechnology Co., Ltd. |
|
No
specific business relationship |
| Genepharm Biotech Corporation |
|
No
specific business relationship |
| BioHopeKing Corporation |
|
Collaborating
with the Company to develop and commercialize drugs |
| ForSeeCon Corporation |
|
Collaborating
with the Company to develop and commercialize ophthalmic medical devices (referring to Note 4, Collaborative Agreements) |
| OncoX BioPharma, Inc. |
|
Collaborating with the Company to develop and commercialize single-herb botanical drug for treatment of certain diseases (referring to Note 4, Collaborative Agreements) |
| BioFirst Corporation |
|
Loaned
from investee and provides research and development support service |
| Rgene Corporation |
|
Collaborating
with the Company to develop and commercialize drugs |
| BioLite Japan K.K. |
|
Prepaid
investment for a Joint Venture |
| (3) |
Long-term investment mainly consists of the following: |
| | |
September 30,
2024 | | |
December 31,
2023 | |
| | |
(Unaudited) | | |
| |
| Non-marketable Cost Method Investments, net | |
| | |
| |
| Braingenesis Biotechnology Co., Ltd. | |
$ | 6,948 | | |
$ | 7,213 | |
| Genepharm Biotech Corporation | |
| 21,213 | | |
| 22,021 | |
| BioHopeKing Corporation | |
| 787,999 | | |
| 818,018 | |
| ForSeeCon Corporation (See Note 4) | |
| - | | |
| - | |
| Sub total | |
| 816,160 | | |
| 847,252 | |
| Equity Method Investments, net | |
| | | |
| | |
| BioFirst Corporation (a) | |
| 1,517,744 | | |
| 1,680,488 | |
| Rgene Corporation (b) | |
| - | | |
| - | |
| Total | |
$ | 2,333,904 | | |
$ | 2,527,740 | |
| (a) |
BioFirst Corporation (the “BioFirst”): |
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, 2024 and
December 31, 2023, the Company owns 18.68% and 18.68% common stock shares of BioFirst, respectively. The Company made a prepayment for
equity investment in BioFirst to purchase additional shares to be issued by BioFirst in the aggregate amount of $2,688,578, recorded as
prepayment for long-term investments as of December 31, 2022. On July 19, 2023, the Company successfully completed the registration
process for this investment. The initial prepayment was $1,895,556, which is a portion of the prepayment as of December 31, 2022,
and was converted into 994,450 shares of BioFirst stock. As of September 30, 2024, the amount of prepayment for long-term investments
in BioFirst is $1,124,842.
| (b) |
Rgene Corporation (the “Rgene”) |
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, 2024 and
December 31, 2023, the Company owns 26.65% and 26.65% Common Stock shares of Rgene, respectively.
| (c) |
BioLite Japan K.K. (BioLite JP) |
In October 2021, 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. BioLite JP is a private
limited company incorporated on December 18, 2018. The business of the joint venture is the research and development of drugs, medical
device and digital media, investment, fund running and consulting, distribution and marketing of supplements carried on by BioLite JP
and its subsidiaries in Japan, or any other territory or businesses. At the date of the Agreement, BioLite JP has 10,000 ordinary
shares authorized, with 3,049 ordinary shares issued and outstanding (the “Ordinary Shares”). Pursuant to the Agreement
and the related share transfer agreement, Lucidaim shall own 1,555 Ordinary Shares (51%) and the Company shall own 1,494 Ordinary Shares
(49%). 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. This prepayment is booked in prepayment for investment. The Company is in the process of converting the
prepayment to the ownership and expects to complete within next six months.
| (4) |
Disposition of long-term investment |
During the nine months ended September
30, 2024 and 2023, there is no disposition of long-term investment.
| (5) |
Losses on Equity Investments |
The components of losses on equity
investments for each period were as follows:
| | |
Nine months Ended
September 30, | |
| | |
2024 | | |
2023 | |
| | |
(Unaudited) | |
| Share of equity method investee losses | |
$ | 146,942 | | |
$ | - | |
7. CONVERTIBLE NOTES PAYABLE
On February 23, 2023, the Company entered into
a 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, 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 $10.5 per share, subject to adjustment. The Lind Note
shall be due and payable on August 23, 2024 and bears no interest. The Company also issued Lind a common stock purchase warrant to purchase
up to 529,167 shares (post-split) of the Company’s common stock at an initial exercise price of $10.5 per share, subject to adjustment.
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 $308,651,
until the outstanding principal amount of the Lind Note has been paid in full prior to or on the Maturity Date or, if earlier, upon acceleration,
conversion or redemption of the Lind Note in accordance with the terms thereof (the “Monthly Payments”). At the Company’s
discretion, the Monthly Payments shall be made in (i) cash, (ii) shares of the Company’s common stock, or (iii) a combination of
cash and Shares; if made in shares, the number of shares shall be determined by dividing (x) the principal amount being paid in shares
by (y) 90% of the average of the 5 lowest daily VWAPs during the 20 trading days prior to the applicable payment date. The Lind Notes
sets forth certain conditions that must be satisfied before the Company may make any Monthly Payments in shares of common stock. If the
Company makes a Monthly Payment in cash, the Company must also pay Lind a cash premium of 5% of such Monthly Payment.
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. The principal amount was revised to $3,167,292 in the agreement. As of September 30, 2024,
the Company has fully repaid the Lind Note with issuance of the Company’s common stock in installments.
The warrant exercise price was reset to $3.5 in
accordance with the issuance of common stock in relation to securities purchase agreement in July 2023. On May 22, 2024, the exercise
price of these warrants was reset to $0.75 along with the immediate exercise of existing warrants and issuance of the New Warrants. As
of September 30, 2024, these warrants were fully exercised.
On November 17, 2023, the Company entered another
securities purchase agreement with Lind, pursuant to which the Company issued Lind a secured, convertible note (the “2nd
Lind Note”) in the principal amount of $1,200,000, for a purchase price of $1,000,000, that is convertible into shares of the Company’s
common stock at a conversion price, which shall be the lesser of (i) $3.50 and (ii) 90% of the average of the three lowest VWAPs during
the 20 trading days prior to conversion. The 2nd Lind Note shall be due and payable on May 19, 2025 and bear no interest. The
Company may prepay all, but not less than all, outstanding principal amount prior to the maturity, and Lind shall have the right to convert
up to one third of the principal amount when the Company prepays. Upon the occurrence of any Event of Default (as defined in the 2nd
Lind Note), the Company must pay Lind an amount equal to 120% of the then outstanding principal amount of the Lind Note, in addition to
any other remedies under the Note or the other transaction documents. Lind also received a 5-year common stock purchase warrant to purchase
up to 1,000,000 shares of the Company’s common stock at an initial exercise price of $2 per share for a period of 5 years. The warrants
were valued using the Black-Scholes model. The fair value of the warrants was determined to be $480,795, which was recorded to debt discount.
An amendment was filed with the SEC on February 29, 2024 to disclose that due to Nasdaq requirements, the parties entered into an amendment
to the Note, pursuant to which the conversion price shall have a floor price of $1.00. Additionally, the amendment requires the Company
to make a cash payment to Lind if in connection with a conversion, the conversion price is deemed to be the floor price. On July 12, 2024
and September 11, 2024, Lind converted $200,000 and $200,000, respectively, of 2nd Lind Note principal amounts into the Company’s
common stocks. Refer to the common stock issuance details in Note 12, Equity.
On January 17, 2024, the Company entered another
securities purchase agreement with Lind, pursuant to which the Company issued Lind a secured, convertible note (the “3rd
Lind Note”) in the principal amount of $1,000,000, for a purchase price of $833,333, that is convertible into shares of the Company’s
common stock at a conversion price, which shall be the lesser of (i) $3.50 and (ii) 90% of the average of the three lowest VWAPs during
the 20 trading days prior to conversion. The 3rd Lind Note shall be due and payable on July 17, 2025 and bear no interest.
The Company may prepay all, but not less than all, outstanding principal amount prior to the maturity, and Lind shall have the right to
convert up to one third of the principal amount when the Company prepays. Upon the occurrence of any Event of Default (as defined in the
3rd Lind Note), the Company must pay Lind an amount equal to 120% of the then outstanding principal amount of the Lind Note,
in addition to any other remedies under the Note or the other transaction documents Lind also received a 5-year, common stock purchase
warrant to purchase up to 1,000,000 shares of the Company’s common stock at an initial exercise price of $2 per share. The warrants
were valued using the Black-Scholes model. The fair value of the warrants was determined to be $394,071, which was recorded to debt discount.
An amendment was filed with the SEC on February 29, 2024 to disclose that due to Nasdaq requirements, the parties entered into an amendment
to the Note, pursuant to which the conversion price shall have a floor price of $1.00. Additionally, the amendment requires the Company
to make a cash payment to Lind if in connection with a conversion, the conversion price is deemed to be the floor price. No conversion
or repayment to 3rd Lind Note has occurred during the period ended September 30, 2024.
In connection with above three Lind Note offerings,
the Company and its subsidiaries: BioKey, BioLite, Biolite BVI, and American BriVision, jointly and severally guaranteed all of the obligations
of the Company in connection with the offering with certain collateral, as set forth in the related transaction documents.
On May 22, 2024, Lind has exercised 1,000,000
of the existing warrants to purchase shares of Common Stock at a reduced exercise price of $0.75 per share. Refer to the details in Note
12, Equity.
As of September 30, 2024 and December 31,
2023, the aggregate carrying values of the convertible debentures were $952,237 and $569,456, respectively, with unamortized debt discount
and issuance costs of $847,763 and $1,441,719, respectively. The estimated aggregate fair value (Level 2) of the convertible debentures
were $2,160,000 and $2,372,851, respectively.
Total interest expenses in connection with the
above convertible note payable were $209,022 and $1,198,290 for the three months ended September 30, 2024 and 2023, respectively; were
$1,082,936 and $1,323,032 for the nine months ended September 30, 2024 and 2023, respectively.
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities
consisted of the following as of the periods indicated:
| | |
September 30, | | |
December 31, | |
| | |
2024 | | |
2023 | |
| Accrued research and development expense | |
$ | 1,799,583 | | |
$ | 1,799,583 | |
| Accrued directors and officers (owners) compensation | |
| 1,027,080 | | |
| 988,959 | |
| Accrued royalties | |
| 263,972 | | |
| 274,028 | |
| Accrued employee compensation and benefits | |
| 89,902 | | |
| 41,426 | |
| Others | |
| 452,390 | | |
| 592,484 | |
| Total | |
$ | 3,632,927 | | |
$ | 3,696,380 | |
9. BANK LOANS
Short-term bank loan consists of the following:
| | |
September 30, | | |
December 31, | |
| | |
2024 | | |
2023 | |
| | |
(Unaudited) | | |
| |
| Cathay United Bank | |
$ | 236,250 | | |
$ | 245,250 | |
| CTBC Bank | |
| 630,000 | | |
| 654,000 | |
| Total | |
$ | 866,250 | | |
$ | 899,250 | |
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 NTD7,500,000,
equivalent to $236,250. The term started June 28, 2016 with maturity date of one year. The loan balance bears interest at a floating rate
of prime rate plus 1.31%. 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 and the next renewal date is September 6, 2025. As of September 30, 2024 and December 31, 2023, the effective
interest rates per annum was 3.01% and 2.87%, 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 $1,755 and $1,742 for
the three months ended September 30, 2024 and 2023, respectively.
Interest expenses were $5,275 and $5,136 for
the nine months ended September 30, 2024 and 2023, 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 NTD 10,000,000, equivalent to $315,000 for each loan. Both two loans with the same maturity date on January
19, 2018 and was combined into one agreement with a total credit limit of NTD 20,000,000, equivalent to $630,000, equivalent to $ in
February 2018. The Company renews the agreement with the bank every year, and the next renewal date is February 28, 2025. The loan
balances bear interest at a fixed rate of 2.5% per annum, and is secured by the money deposited in a savings account with the CTBC
Bank. This loan was also 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 $3,747 and $3,752 for the
three months ended September 30, 2024 and 2023, respectively.
Interest expenses were $11,668 and $11,681 for
the nine months ended September 30, 2024 and 2023, respectively.
10. RELATED PARTIES TRANSACTIONS
The related parties of the Company with whom transactions
are reported in these financial statements are as follows:
| Name of entity or Individual |
|
Relationship with the Company and its subsidiaries |
| BioFirst Corporation (the “BioFirst”) |
|
Entity controlled by controlling beneficiary shareholder of YuanGene |
| BioFirst (Australia) Pty Ltd. (the “BioFirst (Australia)”) |
|
100% owned by BioFirst; Entity controlled by controlling beneficiary shareholder of YuanGene |
| Rgene Corporation (the “Rgene”) |
|
Shareholder of the Company; Entity controlled by controlling beneficiary shareholder of YuanGene; the Chairman of Rgene is Mr. Tsung-Shann Jiang |
| ForSeeCon Corporation (the “FEYE”) |
|
Cost method investment |
| OncoX BioPharma Inc. |
|
Equity method investment |
| YuanGene Corporation (the “YuanGene”) |
|
Controlling beneficiary shareholder of the Company |
| GenePharm Inc. (the “GenePharm”) |
|
Dr. George Lee, Board Director of BioKey, is the Chairman of GenePharm. |
| The Jiangs |
|
Mr. Tsung-Shann Jiang, the controlling beneficiary shareholder of the Company; the Chairman of Rgene; the Chairman and CEO of the BioLite Holding Inc. and BioLite Inc. and the President and a member of board of directors of BioFirst |
| |
|
|
| |
|
Ms. Shu-Ling Jiang, Mr. Tsung-Shann Jiang’s wife, and a member of board of directors of BioLite Inc. |
| |
|
|
| |
|
Mr. Eugene Jiang is Mr. and Ms. Jiang’s son. Mr. Eugene Jiang is the chairman, and majority shareholder of the Company and a member of board of directors of BioLite Inc. |
| |
|
|
| |
|
Mr. Chang-Jen Jiang is Mr. Tsung-Shann Jiang’s sibling and the director of the Company. |
| |
|
|
| |
|
Ms. Mei-Ling Jiang is Ms. Shu-Ling Jiang’s sibling. |
| BioLite Japan |
|
Entity controlled by controlling beneficiary shareholder of ABVC |
| BioHopeKing Corporation (“BHK”) |
|
Entity controlled by controlling beneficiary shareholder of ABVC |
Revenues – related parties
During the three and nine months ended
September 30, 2024, the Company received $180,000 and $296,000, respectively, pursuant to the licensing agreement and related
amendment with FEYE, and recognized $180,000 and $296,000 revenue correspondingly. In addition, the Company received $200,000 during the three and nine months ended September pursuant to the licensing agreement with OncoX,
and recognized revenue correspondingly. Please refer to Note 4, Collaborative Agreements
for details.
| | |
Three
Months Ended | | |
Nine Months Ended | |
| | |
September
30, | | |
September 30, | | |
September 30, | | |
September 30, | |
| | |
2024
| | |
2023 | | |
2024 | | |
2023 | |
| | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
| OncoX | |
$ | 200,000 | | |
$ | - | | |
$ | 200,000 | | |
$ | - | |
| FEYE | |
| 180,000 | | |
$ | - | | |
| 296,000 | | |
$ | - | |
| Total | |
$ | 380,000 | | |
$ | - | | |
$ | 496,000 | | |
$ | - | |
Accounts receivable - related parties
Accounts receivable due from related parties consisted
of the following as of the periods indicated:
| | |
September 30, | | |
December 31, | |
| | |
2024 | | |
2023 | |
| | |
(Unaudited) | | |
| |
| Rgene | |
$ | 10,463 | | |
$ | 10,463 | |
| Total | |
$ | 10,463 | | |
$ | 10,463 | |
Due from related parties
Amount due from related parties consisted of the
following as of the periods indicated:
Due from related-party - Current
| | |
September 30, | | |
December 31, | |
| | |
2024 | | |
2023 | |
| | |
(Unaudited) | | |
| |
| Rgene (1) | |
$ | 559,489 | | |
$ | 541,486 | |
| BioFirst (2) | |
| 644,873 | | |
| 206,087 | |
| Total | |
$ | 1,204,362 | | |
$ | 747,573 | |
Due from related parties - Non-Current
| | |
September 30, | | |
December 31, | |
| | |
2024 | | |
2023 | |
| | |
(Unaudited )
| | |
| |
| BioFirst (Australia) (3) | |
$ | 839,983 | | |
$ | 839,983 | |
| BioHopeKing Corporation (4) | |
| 124,151 | | |
| 113,516 | |
| Total | |
| 964,134 | | |
| 953,499 | |
| Less: allowance for expected credit losses accounts | |
| (839,983 | ) | |
| (839,983 | ) |
| Net | |
$ | 124,151 | | |
$ | 113,516 | |
| (1) |
On June 16, 2022, the Company entered into a one-year convertible loan with Rgene, with a principal amount of $1,000,000 to Rgene which bears interest at 5% per annum for the use of working capital that, if fully converted, would result in ABVC owning an additional 6.4% 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 convertible note if not cured after 5 business days of written notice regarding the breach is provided. |
As of September 30, 2024 and December 31,
2023, the outstanding loan balance were $506,216 and $500,000, respectively; and accrued interest was $51,319 and $38,819, respectively.
The Company expects to receive the repayment within next 12 months once Rgene receives the licensing fees from OncoX.
As of September 30, 2024 and December 31,
2023, the Company has other receivables amounted $1,954 and $2,667, respectively, from Rgene due to daily operations.
| (2) |
On December 31, 2023, BioLite Taiwan entered
into a loan agreement with BioFirst, with a principal amount of $348,779 (NTD 11,072,360) to BioFirst which bears interest at 12% per
annum for the use of working capital. During the period ended September 30, 2024, the Company entered into another loan agreement with
BioFirst, with a principal amount of $359,289 (NTD 11,406,000) to BioFirst which bears interest at 12% per annum for the use of working
capital. As of September 30, 2024 and December 31, 2023, the outstanding loan balance were $606,323 (NTD 19,248,360) and $206,087
(NTD 6,302,360), respectively; accrued interest was $37,520 and $0, respectively. The Company has received $100,076 (NTD 3,230,000) repayment
and expects to receive other repayment within next 12 months. As of September 30, 2024 and December 31, 2023, the Company has other
receivables from BioFirst amounted $1,030 and $0, respectively, due to daily operations.
|
| (3) |
The balances mainly represent advances to BioFirst
(Australia) for research and development purposes. The business conditions of BioFirst (Australia) deteriorated and, as a result, the
Company recognized expected credit losses of $839,983 for the year ended December 31, 2023.
|
| (4) |
On February 24, 2015, BioLite Taiwan and BioHopeKing Corporation (the
“BHK”) entered into a co-development agreement, (the “BHK Co-Development Agreement”, see Note 3). The development
costs shall be shared 50/50 between BHK and the Company. Under the term of the agreement, BioLite issued relevant development cost to
BHK. As of September 30, 2024 and December 31, 2023, due from BHK was $124,151 and $113,516, respectively. |
The Company’s due from related parties are subject to certain
risks that our collaborative parties, including OncoX and ForSeeCon, would face. Such risks exist in future market conditions, macro economy,
legal and regulatory, results of clinical trials and product developments, and among others. As of September 30, 2024, the Company’s
comprehensive review of these due from related party balances indicates that there are no expected losses. This conclusion is based on
the business relationships with our related parties and the absence of any significant indicators of potential default. Consequently,
no provision for credit loss has been recorded in our financial statements for the current period.
Due to related parties
Amount due to related parties consisted of the
following as of the periods indicated:
| | |
September 30, | | |
December 31, | |
| | |
2024 | | |
2023 | |
| | |
(Unaudited) | | |
| |
| The Jiangs (1) | |
$ | 242,338 | | |
$ | 19,789 | |
| Shareholders (2) | |
| 176,772 | | |
| 152,382 | |
| Directors (3) | |
| 160 | | |
| 961 | |
| Total | |
$ | 419,270 | | |
$ | 173,132 | |
| (1) |
Since 2019, the Jiangs advanced funds to the Company for working capital purpose. These loans bear interest rate of 0% to 1% per month, and are due on demand. |
| |
|
| (2) |
Since 2018, the Company’s shareholders have advanced funds to
the Company for working capital purpose. The advances bear interest rate of 12% per annum. Interest expenses in connection with these
loans were $11,836 and $5,015 for the three months ended September 30, 2024 and 2023, respectively, and were $21,973 and $15,082 for the
nine months ended September 30, 2024 and 2023, respectively. |
| |
|
| (3) |
The Director of AiBtl has been paying on behalf of the company, for
setup fees and certain operating expenses. |
11. INCOME TAXES
Deferred tax assets as of September 30, 2024 and
December 31, 2023 consist approximately of:
| | |
September 30,
2024 | | |
December 31,
2023 | |
| | |
(Unaudited) |
|
|
| |
| Loss on impairment of Assets | |
$ | 648,716 | | |
$ | 713,223 | |
| Net operating loss carryforwards | |
| 5,625,854 | | |
| 5,568,391 | |
| Operating lease liabilities | |
| 213,482 | | |
| 213,482 | |
| Operating lease assets | |
| (213,482 | ) | |
| (213,482 | ) |
| Deferred tax assets, Gross | |
| 6,274,570 | | |
| 6,281,614 | |
| Valuation allowance | |
| (6,274,570 | ) | |
| (6,281,614 | ) |
| Deferred tax assets, net | |
$ | - | | |
$ | - | |
12. EQUITY
On January 3, 2023, the Company issued 22,341
shares (post-split) of common stock to a consultant for providing consulting services on listing to NASDAQ in 2021.
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 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.
On August 14, 2023, the Company entered into a
cooperation agreement with Zhonghui. Pursuant thereto, the Company acquired 20% of the ownership of a property and the parcel of the land
owned by Zhonghui in Leshan, Sichuan, China. During the third quarter of 2023, the Company issued to Zhonghui, an aggregate of 370,000
shares of the Company’s common stock, at a per share price of $20.
On January 27, 2024, the Company granted 1,302,726
restricted shares to its employees and directors under the 2016 Equity Incentive Plan, with an issuance date of February 2, 2024. These
shares are subject to a three-year restriction period.
On February 6, 2024, the Company entered into
a definitive agreement with Shuling Jiang (“Shuling”), pursuant to which Shuling shall transfer the ownership of certain land
she owns located at Taoyuan City, Taiwan (the “Land”) to the Company (the “Agreement”). Shuling is a director
of the Company, is married to TS Jiang, the Company’s Chief Strategic Officer and owns approximately 15.4% of the Company’s
issued and outstanding shares of common stock. In consideration for the Land, the Company was to pay Shuling (i) 703,496 restricted shares
of the Company’s common stock (the “Shares”) at a price of $3.50 per share and (ii) five-year warrants to purchase up
to 1,000,000 shares of the Company’s common stock, with an exercise price of $2.00 per share. Under the Agreement, Shuling was to
also transfer outstanding liability owed on the Land (approximately $500,000) to the Company. On May 16, 2024, the Company’s board
of directors determined that it was in the best interest of the Company and its shareholders to terminate the Agreement and not proceed
with the transfer of land ownership; the Company may reconsider the transaction at a later date. The shares were returned and booked as
treasury stock, and the warrants were not issued.
On May 24, 2024, the Company issued 200,000 shares
of common stock to a consultant for providing business and funding opportunities.
In June 2024, the Company entered into a stock purchase agreement with
an investor, which the Company will issue 41,387 shares of common stock at $0.75 per share to the investor for cash. As of September 30,
2024, the proceeds were received. Due to certain stock transfer processes, one of the Company’s shareholders transferred such shares
to the investor on behalf of the company in July 2024; the company plans to issue the same number of shares to the transferring shareholder
soon.
In July 2024, the Company entered into an agreement with its landlord
in California, pursuant that the Company will issue 169,992 shares of common stock for the rent payable through July 2024, in total of
$127,494. The Company will also issue a variable number of shares equivalent to the August and September 2024 rent amount in total of
$64,147 at the average VWAP (Volume Weighted Average Price) of last five trading days of July 2024. These shares are restricted for six
months from the issuance but no later than February 15, 2025. 169,992 shares were issued on July 25, 2024 for the rent payables through
July 2024, 43,458 shares were issued on August 14, 2024 for the August 2024 rent, and 46,072 shares were issued on September 3, 2024 for
the September 2024 rent.
Noncontrolling Interests
On March 14, 2024, AiBtl issued 1,610,700 AiBtl’s
common stocks to a land acquisition transaction in Taiwan, including the consulting fee of $383,500 and the cost of land of $7,670,000.
Due to certain administrative processes and restrictions, AiBtl has not acquired ownership of the land and no asset was recognized. In
November 2024, the title transfer process was completed, and AiBtl now possesses the land through a fully owned Taiwan-based subsidiary.
On April 11, 2024, May 10, 2024, and August 15, 2024, AiBtl entered
into share purchase agreements with an investor to sell 127,270 shares of AiBtl common stocks at an average of $1.05 per share. As of
the issuance date of the interim financial statements, the stock has not been issued.
Lind Offerings and Repayments
On February 23, 2023, in connection with the issuance of the Lind Note
(referring to Note 7), the Company also issued Lind a common stock purchase warrant to purchase up to 529,167 shares (post-split) of the
Company’s common stock at an initial exercise price of $10.5 per share, subject to adjustment. During the period ended March 31,
2024, the Company has been repaying Lind with securities for 751,795 shares, totaling $681,000. During the three months ended June 30,
2024, the Company further repaid Lind with securities for 153,508 shares of common stock, totaling $130,175. As of June 30, 2024, this
convertible note was fully repaid. During July 2023, the warrant exercise price was reset to $3.5 in accordance with the issuance of common
stock in relation to securities purchase agreement in July 2023. On May 22, 2024, the exercise price of these warrants was reset to $0.75
along with the immediate exercise of existing warrants and issuance of the New Warrants.
On November 17, 2023, in connection with the issuance
of the 2nd Lind Note (referring to Note 7, Convertible Notes Payable), Lind also received a 5-year, common stock purchase warrant
to purchase up to 1,000,000 shares of the Company’s common stock at an initial exercise price of $2 per share for a period of 5
years. The warrants were valued using the Black-Scholes model and the fair value was determined to be $480,795, which was recorded as
a debt discount.
On January 17, 2024, in connection with the issuance
of the 3rd Lind Note (referring to Note 7, Convertible Notes Payable), Lind also received a 5-year, common stock purchase warrant
to purchase up to 1,000,000 shares of the Company’s common stock at an initial exercise price of $2 per share.
On May 22, 2024, the Company and Lind entered
into a letter agreement, pursuant to which Lind will exercise, for cash, 1,000,000 of its Pre-Existing Warrants (all of the warrants issued
to Lind on February 23, 2023, November 17, 2023 and January 17, 2024 are hereinafter referred to as the “Pre-Existing Warrants”),
to purchase shares of Common Stock at a reduced exercise price of $0.75 per share. Such 1,000,000 Pre-Existing Warrants exercised include 529,167 warrants issued in February 2023 and 470,833 warrants issued in November
2023. Concurrently, the exercise price of all Pre-Existing
Warrants was reduced to $0.75 per share according to this agreement. Lind will also receive a new warrant to purchase 1,000,000 shares
of common stock, exercisable at any time on or after the date of its issuance and until the five-year anniversary thereof, for $1.00 per
share (the “New Warrant”). The fair value of the New Warrants was determined to be $925,210 using the Black-Scholes
model. The New Warrant may be exercised via cashless exercise or resale pursuant to the registration statement that was declared effective.
As of September 30, 2024, Lind has exercised 1,000,000 shares of Pre-Existing Warrants and received 1,000,000 shares of New Warrants according
to this agreement. All warrants issued to Lind may be exercised via cashless exercise.
On July 12, 2024, the Company issued Lind
200,000 shares of the Company’s common stock as a repayment of $200,000 principal of 2nd Lind Note. According to
the amended agreement pursuant to Nasdaq requirements, the conversion price is subject to $1.00 floor price if the conversion price
was below such floor. Based on the conversion price of $0.7907, the Company made an additional $88,403 cash repayment in addition to
the issuance of 200,000 shares.
On September 11, 2024, the Company issued
Lind 200,000 shares of the Company’s common stock as a repayment of $200,000 principal of 2nd Lind Note. According
to the amended agreement pursuant to Nasdaq requirements, the conversion price is subject to $1.00 floor price if the conversion
price was below such floor. Based on the conversion price of $0.6575, the Company made an additional $90,722 cash repayment in
addition to the issuance of 200,000 shares.
Warrants issued and outstanding in connection with above Lind convertible
notes as of September 30, 2024, and their activities during the nine months ended are as follows:
| | |
Number of
Underlying
Shares | | |
Weighted-
Average
Exercise
Price
Per Share | | |
Weighted-
Average
Contractual
Life
Remaining
in Years | | |
Aggregate
Intrinsic
Value | |
| Outstanding as of January 1, 2024 | |
| 1,529,167 | | |
$ | 0.75 | | |
| 3.88 | | |
$ | - | |
| Issued | |
| 2,000,000 | | |
$ | 0.88 | | |
| 4.47 | | |
| - | |
| Exercised | |
| (1,000,000 | ) | |
| - | | |
| - | | |
| - | |
| Outstanding as of September 30, 2024 | |
| 2,529,167 | | |
$ | 0.85 | | |
| 4.35 | | |
$ | - | |
13. STOCK OPTIONS
On
October 30, 2020, the Company issued an aggregate of 54,518 (post-split, thereafter in this note for number of options and the exercise
price) shares of common stock in lieu of unpaid salaries of certain employees and unpaid consulting fees under the 2016 Equity Incentive
Plan, as amended, at a conversion price of $20 per share; the total amount of converted salaries and consulting fees was $1,090,361.
On November 21, 2020, the Company entered into acknowledgement agreements and stock option purchase agreements with these employees and
consultant; pursuant to which the Company granted stock options to purchase 54,518 shares of the Company’s common stock in lieu
of common stock. The options were vested at the grant date and become exercisable for 10 years from the grant date.
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 128,000
shares of common stock under the 2016 Equity Incentive Plan, as amended, at an exercise price of $30 per share. The options were vested
at the grant date and become exercisable for 10 years from the grant date.
On April 16, 2022, the Company entered into stock
option agreements with 5 directors, pursuant to which the Company agreed to grant options to purchase an aggregate of 76,192 shares of
common stock under the 2016 Equity Incentive Plan, at an exercise price of $30 per share, exercisable for 10 years from the grant date.
As of September 30, 2024, these stock options have not been granted.
Options issued and outstanding as of September
30, 2024, and their activities during the nine months ended are as follows:
| |
|
Number of
Underlying
Shares
(post-split) |
|
|
Weighted-
Average
Exercise
Price
Per Share |
|
|
Weighted-
Average
Contractual
Life
Remaining
in Years |
|
|
Aggregate
Intrinsic
Value |
|
| Outstanding as of January 1, 2024 |
|
|
258,710 |
|
|
$ |
27.9 |
|
|
|
- |
|
|
$ |
- |
|
| Granted |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Forfeited |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Outstanding as of September 30, 2024 |
|
|
258,710 |
|
|
$ |
27.9 |
|
|
|
6.99 |
|
|
$ |
- |
|
| Exercisable as of September 30, 2024 |
|
|
258,710 |
|
|
$ |
27.9 |
|
|
|
6.99 |
|
|
$ |
- |
|
| Vested and expected to vest |
|
|
258,710 |
|
|
$ |
27.9 |
|
|
|
6.99 |
|
|
$ |
- |
|
There are 386,021 options available for grant
under the 2016 Equity Incentive Plan as of September 30, 2024. Compensation costs associated with the Company’s stock options are
recognized, based on the grant-date fair values of these options over vesting period. Accordingly, the Company recognized $0 stock-based
compensation expense in connection with employee stock options for the nine months ended September 30, 2024 and 2023, respectively. There
were no options exercised during the nine months ended September 30, 2024. As of September 30, 2024, there were no unvested options.
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:
| | |
Year ended
December 31,
2022 | |
| | |
| |
| Risk free interest rate | |
| 2.79 | % |
| Expected term (in years) | |
| 5.00 | |
| Dividend yield | |
| 0 | % |
| Expected volatility | |
| 83.86 | % |
14. LOSS PER SHARE
Basic loss per share is computed by dividing net
loss by the weighted-average number of common stock outstanding during the year. Diluted loss per share is computed by dividing net loss
by the weighted-average number of common stock and dilutive potential common stock outstanding during the three and nine months ended
September 30, 2024 and 2023.
| | |
For the Three Months
Ended | |
| | |
September 30,
2024 | | |
September 30,
2023 | |
| | |
(Unaudited) | |
| Numerator: | |
| | |
| |
| Net loss attributable to ABVC’s common stockholders | |
$ | (186,561 | ) | |
$ | (3,317,516 | ) |
| | |
| | | |
| | |
| Denominator: | |
| | | |
| | |
| Weighted-average shares outstanding: | |
| | | |
| | |
| Weighted-average shares outstanding - Basic | |
| 12,405,261 | | |
| 4,055,345 | |
| Stock options | |
| - | | |
| - | |
| Weighted-average shares outstanding - Diluted | |
| 12,405,261 | | |
| 4,055,345 | |
| | |
| | | |
| | |
| Loss per share | |
| | | |
| | |
| -Basic and Diluted | |
$ | (0.02 | ) | |
$ | (0.82 | ) |
| | |
For the Nine months
Ended | |
| | |
September
30,
2024 | | |
September 30,
2023 | |
| | |
(Unaudited) | |
| Numerator: | |
| | |
| |
| Net loss attributable to ABVC’s common stockholders | |
$ | (5,132,182 | ) | |
$ | (7,404,722 | ) |
| | |
| | | |
| | |
| Denominator: | |
| | | |
| | |
| Weighted-average shares outstanding: | |
| | | |
| | |
| Weighted-average shares outstanding - Basic | |
| 11,164,093 | | |
| 3,555,474 | |
| Stock options | |
| - | | |
| - | |
| Weighted-average shares outstanding - Diluted | |
| 11,164,093 | | |
| 3,555,474 | |
| | |
| | | |
| | |
| Loss per share | |
| | | |
| | |
| -Basic and Diluted | |
$ | (0.46 | ) | |
$ | (2.08 | ) |
Diluted loss per share takes into account the
potential dilution that could occur if securities or other contracts to issue Common Stock were exercised and converted into Common Stock.
15. 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:
| |
● |
Reassessment of expired or existing contracts: The Company elected not to reassess, at the application date, whether any expired or existing contracts contained leases, the lease classification for any expired or existing leases, and the accounting for initial direct costs for any existing leases. |
| |
● |
Use of hindsight: The Company elected to use hindsight in determining the lease term (that is, when considering options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of right-to-use assets. |
| |
● |
Reassessment of existing or expired land easements: The Company elected not to evaluate existing or expired land easements that were not previously accounted for as leases under ASC 840, as allowed under the transition practical expedient. Going forward, new or modified land easements will be evaluated under ASU No. 2016-02. |
| |
● |
Separation of lease and non- lease components: Lease agreements that contain both lease and non-lease components are generally accounted for separately. |
| |
● |
Short-term lease recognition exemption: The Company also elected the short-term lease recognition exemption and will not recognize ROU assets or lease liabilities for leases with a term less than 12 months. |
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 lease ROU assets and operating lease
liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date.
The Company’s future minimum based payments used to determine the Company’s lease liabilities mainly include minimum
based rent payments. As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated
incremental borrowing rate based on the information available at commencement date in determining the present value of lease
payments.
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 machines, and vehicles under various operating lease arrangements.
The Company’s operating leases have remaining lease terms of up to approximately five years.
| | |
September 30,
2024 | | |
December 31,
2023 | |
| | |
(Unaudited) | | |
| |
| ASSETS | |
| | |
| |
| Operating lease right-of-use assets | |
$ | 507,659 | | |
$ | 809,283 | |
| LIABILITIES | |
| | | |
| | |
| Operating lease liabilities (current) | |
| 365,458 | | |
| 401,826 | |
| Operating lease liabilities (non-current) | |
| 142,201 | | |
| 407,457 | |
Supplemental Information
The following provides details of the Company’s
lease expenses:
| | |
Three Months Ended
September 30, | |
| | |
2024 | | |
2023 | |
| | |
(Unaudited) | |
| Operating lease expenses | |
$ | 134,795 | | |
$ | 96,875 | |
| | |
Nine months Ended
September 30, | |
| | |
2024 | | |
2023 | |
| | |
(Unaudited) | |
| Operating lease expenses | |
$ | 397,262 | | |
$ | 288,751 | |
Other information related to leases is presented
below:
| | |
Nine months Ended
September 30, | |
| | |
2024 | | |
2023 | |
| | |
(Unaudited) | |
| Cash paid for amounts included in the measurement of operating lease liabilities | |
$ | 205,621 | | |
$ | 288,751 | |
| Stock paid for amounts included in the measurement of operating lease liabilities | |
$ | 191,641 | | |
$ | - | |
| | |
September 30,
2024 | | |
December 31,
2023 | |
| Weighted Average Remaining Lease Term: | |
| | |
| |
| Operating leases | |
| 1.36 years | | |
| 1.73 years | |
| | |
| | | |
| | |
| Weighted Average Discount Rate: | |
| | | |
| | |
| Operating leases | |
| 0.46 | % | |
| 1.5 | % |
The minimum future annual payments under non-cancellable
leases during the next five years and thereafter, at rates now in force, are as follows:
| | |
Operating
leases | |
| 2024 (excluding nine months ended September 30, 2024) | |
$ | 101,130 | |
| 2025 | |
| 350,088 | |
| 2026 | |
| 56,916 | |
| 2027 | |
| - | |
| 2028 | |
| - | |
| Thereafter | |
| - | |
| Total future minimum lease payments, undiscounted | |
| 508,933 | |
| Less: Imputed interest | |
| (1,274 | ) |
| Present value of future minimum lease payments | |
$ | 507,659 | |
16. SUBSEQUENT EVENTS
In October 2024, the Company entered into an agreement
with its landlord in California, pursuant that the Company will issue 64,147 shares of common stock for the rent payable for October 2024,
at the average VWAP (Volume Weighted Average Price) of last five trading days of October 2024 in total of $32,074. These shares are restricted
for six months from the issuance but no later than April 30, 2025. The November 2024 rent of $32,074 will also be paid in the form of
the Company’s common stock, at the average of last five trading days of November 2024. These shares are restricted for six months
from the issuance but no later than May 31, 2025.
On October 18, 2024, the Company issued Lind
200,000 shares of the Company’s common stock as a repayment of $200,000 principal of 2nd Lind Note. According to
the amended agreement pursuant to Nasdaq requirements, the conversion price is subject to $1.00 floor price if the conversion price
was below such floor. Based on the conversion price of $0.4229, the Company made an additional $147,892 cash repayment in addition
to the issuance of 200,000 shares.
In November 2024, the Company and Lind entered
into a letter agreement, pursuant to which Lind will exercise, for cash, 500,000 of its Pre-Existing Warrant, to purchase shares of Common
Stock at a reduced exercise price of $0.42 per share.
In October 2024, the title transfer process of
the land acquired by AiBtl was completed, and AiBtl now possesses the land through a fully owned Taiwan-based subsidiary.
In October 2024, AiBtl entered an agreement
with an investor that AiBtl will issue a convertible note for $30,000. The note has a 1-year term, bears no interest, and can be
converted to AiBtl’s common shares at $5 per share any time prior to maturity. AiBtl can repay the note at any time prior to
the maturity date without penalty.
Except as disclosed above, the Company has evaluated
subsequent events and transactions that occurred after September 30, 2024 up through the date the Company issued these unaudited consolidated
financial statements on November 14, 2024. All subsequent events requiring recognition as of September 30, 2024 have been incorporated
into these unaudited consolidated financial statements and there are no other subsequent events that require disclosure in accordance
with FASB ASC Topic 855, “Subsequent Events.”
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Caution Regarding Forward-Looking Information
FORWARD-LOOKING INFORMATION
The following information should be read in conjunction
with ABVC BioPharma, Inc. and its subsidiaries (“we”, “us”, “our”, or the “Company”) condensed
unaudited financial statements and the notes thereto contained elsewhere in this report. Information in this Item 2, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Form 10-Q that does not consist
of historical facts, are “forward-looking statements.” Statements accompanied or qualified by, or containing words such as
“may,” “will,” “should,” “believes,” “expects,” “intends,” “plans,”
“projects,” “estimates,” “predicts,” “potential,” “outlook,” “forecast,”
“anticipates,” “presume,” and “assume” constitute forward-looking statements, and as such, are not
a guarantee of future performance.
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 form 10-K.
The Company disclaims any obligation to update
the forward-looking statements in this report.
Overview
ABVC BioPharma Inc., which was incorporated under
the laws of the State of Nevada on February 6, 2002, is a clinical stage biopharmaceutical company focused on development of new drugs
and medical devices, all of which are derived from plants.
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 be one of the most successful
drugs in medical history. Some 50 years later, scientists identified anticancer compounds in the rosy periwinkle, which Eli Lilly subsequently
produced for the treatment of leukemia and Hodgkins disease. Other well-known examples of successful botanical drugs include the cancer-fighting
Taxol, isolated from the Pacific yew tree.
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 found that research institutions in each of those countries are eager to work with
the Company to move forward with Phase II clinical trials.
Institutions that have or are now conducting phase
II clinical trials in partnership with ABVC include:
| |
● |
Drug: ABV-1504, Major Depressive Disorder (MDD), Phase II completed. NCE drug Principal Investigators: Charles DeBattista M.D. and Alan F. Schatzberg, MD, Stanford University Medical Center, Cheng-Ta Li, MD, Ph.D - Taipei Veterans General Hospital |
| |
● |
Drug: ABV-1505, Adult Attention-Deficit Hyperactivity Disorder (ADHD), Phase II Part 1 completed. Principal Investigators: Keith McBurnett, Ph.D. and Linda Pfiffner, Ph.D., University of California San Francisco (UCSF), School of Medicine. Phase II, Part 2 clinical study sites include UCSF and 5 locations in Taiwan. The Principal Investigators are Keith McBurnett, Ph.D. and Linda Pfiffner, Ph.D., University of California San Francisco (UCSF), School of Medicine; Susan Shur-Fen Gau, M.D., National Taiwan University Hospital; Xinzhang Ni, M.D. Linkou Chang Gung Memorial Hospital; Wenjun Xhou, M.D.; Kaohsiung Chang Gung Memorial Hospital; Ton-Ping Su, M.D., Cheng Hsin General Hospital; Cheng-Ta Li, M.D., Taipei Veterans General Hospital. Phase II, Part 2 began in the 1st quarter of 2022 at the 5 Taiwan sites. The UCSF site joined the study in the 2nd quarter of 2023. The subjects enrolled in the study has reached the number for interim analysis in December 2023, and the interim analysis of the study is in progress. |
| |
● |
Drug: ABV-1601, Major
Depression in Cancer Patients, Phase I/II, NCE drug Principal Investigator: Scott Irwin, MD, Ph.D. - Cedars Sinai Medical Center
(CSMC). The Phase I clinical study will be initiated in the fourth quarter of 2024. |
| |
● |
Medical Device: ABV-1701, Vitargus® in vitrectomy surgery, Phase II Study has been initiated in Australia and Thailand, Principal Investigator: Duangnate Rojanaporn, M.D., Ramathibodi Hospital; Thuss Sanguansak, M.D., Srinagarind Hospital of the two Thailand Sites and Professor/Dr. Matthew Simunovic, Sydney Eye Hospital; Dr. Elvis Ojaimi, East Melbourne Eye Group & East Melbourne Retina. The Phase II study started in the 2nd quarter of 2023, and the company is working on improvements to the Vitargus Product through the new batch of investigational product. |
The following trials are expected to begin in
the fourth quarter of 2024:
| |
● |
Drug: ABV-1519, Non-Small Cell Lung Cancer treatment, Phase I/II Study in Taiwan, Principal Investigator: Dr. Yung-Hung Luo, M.D., Taipei Veterans General Hospital (TVGH) |
| |
● |
Drug: ABV-1703, Advanced Inoperable or Metastatic Pancreatic Cancer, Phase II, Principal Investigator: Andrew E. Hendifar, MD - Cedars Sinai Medical Center (CSMC) |
Upon successful completion of a Phase II trial,
ABVC will seek a partner, typically a large pharmaceutical company, to complete a Phase III study and commercialize the drug or medical
device upon approval by the US FDA, Taiwan TFDA and other country regulatory authorities.
Another part of the Company’s business is
conducted by BioKey, a wholly-owned subsidiary, that is engaged in 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 I through phase III) and commercial manufacturing.
On February 8, 2019, the Company, BioLite Holding,
Inc. (“BioLite”), BioKey, Inc. (“BioKey”), BioLite Acquisition Corp., a direct wholly-owned subsidiary of the
Company (“Merger Sub 1”), and BioKey Acquisition Corp., a direct wholly-owned subsidiary of the Company (“Merger Sub
2”) (collectively referred to as the “Parties”) completed the business combination pursuant to that certain Agreement
and Plan of Merger (the “Merger Agreement”), dated January 31, 2018, pursuant to which the Company acquired BioLite and BioKey
via issuing shares of the Company’s Common Stock to the shareholders of BioLite and BioKey. As a result, BioLite and BioKey became
two wholly-owned subsidiaries of the Company on February 8, 2019. The Company issued an aggregate of 104,558,777 shares of Common Stock
(prior to the reverse stock split in 2019 and 2023) to the shareholders of both BioLite and BioKey under a registration statement on Form
S-4 (file number 333-226285), which became effective by operation of law on or about February 5, 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 “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.
BioLite was incorporated under the laws of the
State of Nevada on July 27, 2016, with 500,000,000 shares authorized, par value $0.0001. BioLite’s key subsidiaries include BioLite
BVI, Inc. (“BioLite BVI”), which was incorporated in the British Virgin Islands on September 13, 2016 and BioLite, Inc. (“BioLite
Taiwan”), a Taiwanese corporation that was founded in February 2006. BioLite Taiwan has been in the business of developing new drugs
for over ten years.
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.
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.
As of June 21, 2023, Dr. Howard Doong resigned
as the Company’s CEO and was replaced by Dr. Uttam Patil. The Company and its CFO, Leeds Chow have been negotiating the terms of
his employment agreement since the end of July 2024; due to disagreements regarding salaries due and payable, Mr. Chow informed the Company
that he is suspending his work as CFO. The disagreement relates solely to salary owed and payable to Mr. Chow and is not the result of
any disagreements with the Company on any matter related to the Company’s disclosures in its public filings. The Company’s
CEO, Uttam Patil, will assume the duties of interim Chief Financial Officer until the parties settle the disagreement and Leeds resumes
his position as CFO.
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 (“Zhonghui”).
Pursuant thereto, the Company acquired 20% of the ownership of a property and the parcel of the land (the “Property”)
owned by Zhonghui in Leshan, Sichuan, China. The valuation of the Property as of April 18, 2023, which was assessed by an independent
third party, is estimated to be approximately RMB 264,299,400 or approximately $37,000,000. In exchange, the Company agreed to issue to
Zhonghui, an aggregate of 370,000 shares of the Company’s common stock, at a per share price of $20 (the “Zhonghui Shares”).
On September 4, 2023, the Company and Zhonghui entered into an amendment to the Agreement to clarify that, in no event will the Company
issue to Zhonghui shares of common stock, in connection with the Transaction, in an amount exceeding 19.99% of the issued and outstanding
shares as of the date of the Agreement.
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 received 23 million shares of AIBL stock at $10 per share, and if certain milestones are
met, shall receive $3,500,000 and royalties equaling 5% of net sales, up to $100 million, which is not guaranteed. Upon the issuance of
the shares, AIBL became a subsidiary of ABVC. On June 23, 2024, the Company and BioLite, each entered into an amendment (the “Amendment”)
to the Licensing Agreement with AIBL, pursuant to which the Company and BioLite have agreed to allow AIBL to pay the second milestone
payment in the amount of $3,500,000 per Licensing Agreement, incrementally (such as $50,000), at any given time, rather than in one lump
sum.
On February 6, 2024, the Company entered into
a definitive agreement with Shuling Jiang (“Shuling”), pursuant to which Shuling shall transfer the ownership of certain land
she owns located at Taoyuan City, Taiwan (the “Land”) to the Company (the “Agreement”). Shuling is a director
of the Company, is married to TS Jiang, the Company’s Chief Strategic Officer and owns approximately 15.4% of the Company’s
issued and outstanding shares of common stock. In consideration for the Land, the Company was to pay Shuling (i) 703,496 restricted shares
of the Company’s common stock (the “Shares”) at a price of $3.50 per share and (ii) five-year warrants to purchase up
to 1,000,000 shares of the Company’s common stock, with an exercise price of $2.00 per share. Under the Agreement, Shuling was to
also transfer outstanding liability owed on the Land (approximately $500,000) to the Company. On May 16, 2024, the Company’s board
of directors determined that it was in the best interest of the Company and its shareholders to terminate the Agreement and not proceed
with the transfer of land ownership; the Company may reconsider the transaction at a later date. The shares were returned and the warrants
were not issued.
On March 25, 2024, the Company, and one of its
co-development partners, BioFirst Corporation, a company registered in Taiwan (“BioFirst”), each entered into a twenty-year,
global definitive licensing agreement (the “Licensing Agreement”) with ForSeeCon Eye Corporation, a company registered in
the British Virgin Islands (“FEYE”) for the products in the Company and BioFirst’s Ophthalmology pipeline, including
Vitargus (the “Licensed Products”). The license covers the Licensed Products’ clinical trial, registration, manufacturing,
supply, and distribution rights; FEYE also has the rights to sublicense or partner with a third party to develop the Licensed Products.
As per each of the respective FEYE Licensing Agreements, each of the Company and BioFirst shall receive a total licensing fee of $33,500,000,
composed of an upfront payment of $30,000,000, which can instead be paid with 5 million shares of FEYE stock at $6 per share within 30
days after the execution of the FEYE Licensing Agreement, and a $3,500,000 cash milestone payment, due 30 days upon completion of next
round fundraising. Additionally, each of the Company and BioFirst are eligible to receive royalties of 5% of net Sales. As of September
30, 2024, the Company received 5,000,000 FEYE shares but did not recognize such licensing revenue since the fair value of FEYE stock is
uncertain.
On June 18, 2024, the Company and BioFirst, each
entered into an amendment (the “Amendment”) to the Licensing Agreement with FEYE, pursuant to which the Company and
BioFirst have agreed to allow FEYE to pay the second milestone payment in the amount of $3,500,000 per Licensing Agreement, incrementally
(such as $100,000), at any given time, rather than in one lump sum. For the period ended September 30, 2024, the Company has received
$296,000 as the partial second milestone payment and recognized as licensing revenue according to ASC 606.
On April 16, 2024, the Company entered into a
definitive agreement with OncoX BioPharma, Inc., a private company registered in the British Virgin Islands (“Oncox”), pursuant
to which the Company will grant Oncox an exclusive right to develop and commercialize ABVC’s single-herb botanical drug extract
from the dry fruit body of Maitake Mushroom (Grifola Frondosa) for treatment of Non-Small Cell Lung Cancer (the “Licensed Products”),
within North America for 20 years (the “Oncox Agreement”). In consideration thereof, Oncox shall pay ABVC $6,250,000 (or 1,250,000
Oncox shares valued at $5 per share5) 30 days after entering into the Oncox Agreement and $625,000 30 days following the
completion of Oncox’s next round of fundraising, of which there is no guarantee; ABVC is also entitled to 5% royalties based on
the Net Sales, as defined in the Oncox Agreement, from the first commercial sale of the Licensed Product in North America, of which there
can be no guarantee. Oncox entered into another agreement with ABVC’s affiliate, Rgene Corporation, on the same terms. For the period
ended September 30, 2024, the Company has received $200,000 as the partial second milestone payment and recognized as licensing revenue
according to ASC 606.
On May 8, 2024, the Company entered into a definitive
agreement with OncoX BioPharma, Inc., a private company registered in the British Virgin Islands (“Oncox”), pursuant to which
the Company will grant Oncox an exclusive right to develop and commercialize ABVC’s BLEX 404 single-herb botanical drug extract
from the dry fruit body of Maitake Mushroom (Grifola Frondosa) for treatment of Pancreatic Cancer (the “Licensed Products”),
within a certain territory, specified as 50% of the Worldwide Markets for 20 years (the “May 2024 Oncox Agreement”). In consideration
thereof, Oncox shall pay ABVC a total of $6,250,000 (or 1,250,000 Oncox shares valued at $5 per share6 ) within 30 days of
entering into the May 2024 Oncox Agreement, with an additional milestone payment of $625,000 in cash after OncoX’s next round of
fundraising, of which there can be no guarantee. Oncox may remit cash payments of at least $100,000 towards the licensing fees and deductible
from the second milestone payment; ABVC is also entitled to royalties of 5% of Net Sales, as defined in the May 2024 Oncox Agreement,
from the first commercial sale of the Licensed Product in the noted territory, which remains uncertain. The Company will permit Oncox
to pay the license fee in installments or in a lump sum and will allow Oncox to use its revenue to fund such payments. Oncox entered into
another agreement with ABVC’s affiliate, Rgene Corporation, on the same terms.
On May 14, 2024, the Company and its subsidiary,
BioLite Inc (collectively, the “licensor”), each entered into a licensing agreement with OncoX, on the same terms, pursuant
to which the licensors will grant Oncox an exclusive right to develop and commercialize ABVC’s BLEX 404 single-herb botanical drug
extract from the dry fruit body of Maitake Mushroom (Grifola Frondosa) for treatment of Tripple Negative Breast Cancer (the TNBC Product),
within a certain territory, specified as 50% of the Worldwide Markets for 20 years (the “May 14, 2024 Oncox Agreements”).
In each agreement for consideration thereof, Oncox shall pay each licensor a total of $6,250,000 (or 1,250,000 Oncox shares valued at
$5 per share7) within 30 days of entering into the May 14, 2024 Oncox Agreements, with an additional milestone payment of
$625,000 in cash after OncoX’s next round of fundraising, of which there can be no guarantee. Oncox may remit cash payments of at
least $100,000 towards the licensing fees and deductible from the second milestone payment; each licensor is also entitled to royalties
of 5% of Net Sales, from the first commercial sale of the TNBC Product in the noted territory, which remains uncertain. The Company will
permit Oncox to pay the license fee in installments or in a lump sum and will allow Oncox to use its revenue to fund such payments.
On May 23, 2024, the Company and its subsidiary,
BioLite Inc (collectively, the “licensor”), each entered into a licensing agreement with OncoX, on the same terms, pursuant
to which the licensors will grant Oncox an exclusive right to develop and commercialize ABVC’s BLEX 404 single-herb botanical drug
extract from the dry fruit body of Maitake Mushroom (Grifola Frondosa) for treatment of Myelodysplastic Syndrome (the “Licensed
Products”), within a certain territory, specified as 50% of the Worldwide Markets for 20 years (the “Oncox Agreements”).
In consideration thereof, Oncox shall pay each licensor a total of $6,250,000 (or 1,250,000 Oncox shares valued at $5 per share8)
30 days after entering the May 23, 2024 Oncox Agreement, with an additional milestone payment of $625,000 in cash after OncoX’s
next round of fundraising, of which there can be no guarantee. Oncox may remit cash payments of at least $100,000 towards the licensing
fees and deductible from the second milestone payment; each licensor is also entitled to royalties of 5% of Net Sales, from the first
commercial sale of the Licensed Product in the noted territory, which remains uncertain. Oncox may use its revenue to fund the licensing
fees.
| 5 | Price was determined through
private negotiations between the parties; no third-party valuation was completed. |
Common Stock Reverse Split
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.
On July 14, 2023, the Company filed a certificate
of amendment to the Company’s articles of incorporation (the “Amendment”) to implement the 2023 Split with the Secretary
of State of the State of Nevada. The 2023 Split took effect on July 25, 2023.
Series A Convertible Preferred Stock
As of September 30, 2024, no Series A Convertible
Preferred Stock has been issued by the Company.
NASDAQ Listing
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 had 45 calendar days, or until July 10, 2023,
to submit a plan to regain compliance. After submitting a plan to regain compliance, on July 10, 2023, Nasdaq granted the Company an extension
until August 30, 20203, to comply with Listing Rule 5550(b)(1). On July 31, 2023, the Company issued 300,000 shares of Common Stock and
200,000 pre-funded warrants, at an exercise price of $0.01 per share, in a registered direct offering. Pursuant to this transaction, the
stockholders’ equity was increased by $1.75M. On August 1, 2023, $500,000 of Notes were converted at $3.50 per share and the holder
received 142,857 shares of Common Stock. As a result of this conversion, the stockholders’ equity was increased by $0.5 million.
Additionally, on August 14, 2023, the Company entered into a cooperation agreement with Zhonghui United Technology (Chengdu) Group Co.,
Ltd., pursuant to which the Company acquired a 20% ownership of certain property and a parcel of the land owned by Zhonghui in exchange
for an aggregate of 370,000 shares of Common Stock. Accordingly, stockholders’ equity increased by $7.4M. On February 23, 2023,
the Company entered into a securities purchase agreement with 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 Common Stock at an initial conversion price of $1.05 per share, subject to adjustment. On August 24,
2023, the Company started repaying Lind the monthly installments due under the Lind Notes; $308,000 was repaid via the issuance of 176,678
shares of Common Stock (the “Monthly Shares”) at the Redemption Share Price (as defined in the Lind Note) of $1.698 per share.
Pursuant to the terms of the Lind Note, Lind increased the amount of the next monthly payment to one million dollars, such that as of
September and together with the Monthly Shares, the Company repaid Lind a total of $1 million by September 2023. As a result, the stockholders’
equity increased by an additional $1 million. As a result of the four transactions referenced above, the Company’ estimated that
its stockholders’ equity would increase by approximately $10.65 million. On September 6, 2023, Nasdaq issued a letter that the Company
is in compliance with Rule 5550(b)(1), but noted that if at the time of the Company’s next periodic report the Company does not
evidence compliance, it may be subject to delisting.
On July 10, 2024, we received a notification letter
from the Nasdaq notifying the Company that the minimum bid price per share for its common shares has been below $1.00 for a period of
30 consecutive business days and the Company therefore no longer meets the minimum bid price requirements set forth in Nasdaq Listing
Rule 5550(a)(2). The notification received has no immediate effect on the listing of the Company’s common stock on Nasdaq. Under
the Nasdaq Listing Rules, the Company has until January 6, 2025, to regain compliance. If at any time during such 180-day period the closing
bid price of the Company’s common shares is at least $1 for a minimum of 10 consecutive business days, Nasdaq will provide the Company
written confirmation of compliance. If the Company does not regain compliance during such 180-day period, the Company may be eligible
for an additional 180 calendar days, provided that the Company meets the continued listing requirement for market value of publicly held
shares and all other initial listing standards for Nasdaq except for Nasdaq Listing Rule 5550(a)(2), and provide a written notice of its
intention to cure this deficiency during the second compliance period, by effecting a reverse stock split, if necessary.
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”), 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 Kabushiki
Kaisha) incorporated on December 18, 2018 and at the date of the Agreement had 10,000 ordinary shares authorized, with 3,049 ordinary
shares issued and outstanding (the “Ordinary Shares”). Immediately prior to the execution of the Agreement, Lucidaim
owned 1,501 ordinary shares and the Company owned 1,548 ordinary shares. The Shareholders entered into the joint venture to formally reduce
to writing their intention to invest in and operate Biolite JP as a joint venture. The business of the joint venture shall be the research
and development of drugs, medical device and digital media, investment, fund raising and consulting, distribution and marketing of supplements
carried by Biolite JP and its subsidiaries in Japan, or any other territory or business, as the Agreement may with mutual consent be amended
from time to time. The closing of the transaction was conditioned upon the approval and receipt of all necessary government approvals,
which have all been received.
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 $272,000), 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 $134,000), 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
$4,500) and until the aggregate amount of all liabilities exceeds JPY 2,000,000 (approximately $18,000) 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 related party 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
Vitargus® Phase II Study has been initiated
in Australia and Thailand, Principal Investigator: Duangnate Rojanaporn, M.D., Ramathibodi Hospital; Thuss Sanguansak, M.D., Srinagarind
Hospital of the two Thailand sites and Professor/Dr. Matthew Simunovic, Sydney Eye Hospital; Dr. Elvis Ojaimi, East Melbourne Eye Group&
East Melbourne Retina of the two Australian sites. The Phase II study has started in the 2nd quarter of 2023. The company is
working on improvements to the Vitargus product through the new batch of investigational product.
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). Designated ABV-2002 under the Company’s product identification system, the solution
is 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 task 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 vitreous substitutes
by minimizing medical complications and reducing the need for additional surgeries.
Vitargus has started the construction of a GMP
factory in Hsinchu Biomedical Science Park, Taiwan, with the aim at building a production base to supply the global market, and promote
the construction of bio-degradable vitreous substitute manufacturing centers in Taiwan. Completion of this factory would allow ABVC to
manufacture Vitargus with world-class technology in a GMP certified pharmaceutical factory. BioFirst is targeting to complete the construction
in 2025.
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.
Public Offering & Financings
2024 Financings
On October 18, 2024, the Company issued Lind
200,000 shares of the Company’s common stock as a repayment of $200,000 principal of 2nd Lind Note. According to
the amended agreement pursuant to Nasdaq requirements, the conversion price is subject to $1.00 floor price if the conversion price
was below such floor. Based on the conversion price of $0.4229, the Company made an additional $147,892 cash repayment in addition
to the issuance of 200,000 shares.
On September 11, 2024, the Company issued
Lind 200,000 shares of the Company’s common stock as a repayment of $200,000 principal of 2nd Lind Note. According
to the amended agreement pursuant to Nasdaq requirements, the conversion price is subject to $1.00 floor price if the conversion
price was below such floor. Based on the conversion price of $0.6575, the Company made an additional $90,722 cash repayment in
addition to the issuance of 200,000 shares.
On July 12, 2024, the Company issued Lind
200,000 shares of the Company’s common stock as a repayment of $200,000 principal of 2nd Lind Note. According to
the amended agreement pursuant to Nasdaq requirements, the conversion price is subject to $1.00 floor price if the conversion price
was below such floor. Based on the conversion price of $0.7907, the Company made an additional $88,403 cash repayment in addition to
the issuance of 200,000 shares.
On May 22, 2024, the Company and Lind entered
into a letter agreement (the “Letter Agreement”), pursuant to which Lind Global Fund II, LP (“Lind”) exercised,
for cash, 1,000,000 of its Pre-Existing Warrants (all of the warrants issued to Lind on February 23, 2023, November 17, 2023 and January
17, 2024 are hereinafter referred to as the “Pre-Existing Warrants”) to purchase shares of Common Stock at a reduced exercise
price of $0.75 per share. Lind also received a new warrant to purchase 1,000,000 shares Common Stock, exercisable at any time on or after
the date of its issuance and until the five-year anniversary thereof, for $1.00 per share (the “New Lind Warrant”).
On January 17, 2024, the Company entered into
a 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 $1,000,000, for a purchase price of $833,333 (the “3rd Lind Note”),
that is convertible into shares of the Company’s common stock at a conversion price, which shall be the lesser of (i) $3.50 (the
“Fixed Price”) and (ii) 90% of the average of the three lowest VWAPs (as defined in the 3rd Lind Note) during the
20 trading days prior to conversion (“Variable Price”), subject to adjustment (the “Note Shares”). Notwithstanding
the foregoing, provided that no Event of Default (as defined in the 3rd Lind Note) shall have occurred, conversions under the
3rd Lind Note shall be at the Fixed Price for the first 180 days following the closing date. Lind will also receive a 5-year,
common stock purchase warrant (the “3rd Lind Warrant”) to purchase up to 1,000,000 shares of the Company’s
common stock at an initial exercise price of $2.00 per share, subject to adjustment (each, a “Warrant Share,” together with
the 3rd Lind Note, Note Shares and 3rd Lind Warrant, the “Securities”). The parties later agreed to
a floor price of $1.00 for the Variable Price and that the Company would compensate Lind in cash if the Variable Price was less than such
floor price at the time of conversion.
Upon the occurrence of any Event of Default (as
defined in the 3rd Lind Note), the Company must pay Lind an amount equal to 120% of the then outstanding principal amount of
the 3rd Lind Note, in addition to any other remedies under the 3rd Lind Note or the other Transaction Documents
(as defined below).
The 3rd Lind Warrant may be exercised
via cashless exercise in the event a registration statement covering the Warrant Shares is not available for the resale of such Warrant
Shares or upon exercise of the 3rd Lind Warrant in connection with a Fundamental Transaction (as defined in the 3rd
Lind Warrant).
Pursuant to the terms of the securities purchase
agreement, if at any time prior to a date that is 18 months following the closing of the 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 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 offering
(the “Guaranty”) with certain collateral, as set forth in the related Transaction Documents (as hereinafter defined). The
sale of the 3rd Lind Note and the terms of the offering, including the Guaranty are set forth in the securities purchase agreement,
the 3rd Lind Note, the 3rd Lind Warrant, the Second Amendment to Guaranty, the Second Amendment to Security Agreement,
and the Second Amendment to Guarantor Security 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 offering. the Company has agreed to pay certain expenses
of the placement agent in connection with the offering and issued them a warrant to purchase up to 25,000 shares of common stock, on the
same terms as set forth in the 3rd Lind Warrant.
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.
The foregoing description of the Transaction Documents
is qualified by reference to the full text of the forms of the Transaction Documents, which are filed as Exhibits hereto and incorporated
herein by reference.
Financing in 2023
On November 17, 2023, the Company entered into
a securities purchase agreement (the “2nd 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 $1,200,000 (the “2nd
Lind Offering”), for a purchase price of $1,000,000 (the “2nd Lind Note”), that is convertible into shares
of the Company’s common stock at a conversion price, which shall be the lesser of (i) $3.50 (the “Fixed Price”) and
(ii) 90% of the average of the three lowest VWAPs (as defined in the 2nd Lind Note) during the 20 trading days prior to conversion,
subject to adjustment. Notwithstanding the foregoing, provided that no Event of Default (as defined in the 2nd Lind Note) shall
have occurred, conversions under the 2nd Lind Note shall be at the Fixed Price for the first 180 days following the closing
date. Lind will also receive a 5-year, common stock purchase warrant (the “2nd Lind Warrant”) to purchase up to
1,000,000 shares of the Company’s common stock at an initial exercise price of $2 per share, subject to adjustment. The parties
later agreed to a floor price of $1.00 for the Variable Price and that the Company would compensate Lind in cash if the variable price
was less than such floor price at the time of conversion.
Upon the occurrence of any Event of Default (as
defined in the 2nd Lind Note), the Company must pay Lind an amount equal to 120% of the then outstanding principal amount of
the 2nd Lind Note, in addition to any other remedies under the 2nd Lind Note or the other Transaction Documents
(as defined below).
Pursuant to the terms of the 2nd Lind
Securities Purchase Agreement, if at any time prior to a date that is 18 months following the closing of the 2nd 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 2nd 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 2nd Lind Offering (the “Guaranty”) with certain collateral, as set forth in the related Transaction Documents
(as hereinafter defined).
The sale of the Note and the terms of the 2nd
Lind Offering, including the Guaranty are set forth in the 2nd Lind Securities Purchase Agreement, the 2nd Lind
Note, the 2nd Lind Warrant, the First Amendment to Guaranty, the First Amendment to Security Agreement, and the First Amendment
to Guarantor Security 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 2nd Lind Offering. We have agreed to pay
certain expenses of the placement agent in connection with the 2nd Lind Offering.
An amendment was filed on February 29, 2024 to
disclose that due to Nasdaq requirements, the parties entered into an amendment to the Note, pursuant to which the conversion price shall
have a floor price of $1.00 (the “Amendment”). Additionally, the Amendment requires the Company to make a cash payment to
Lind if in connection with a conversion, the conversion price is deemed to be the floor price.
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.
The foregoing description of the Transaction Documents
is qualified by reference to the full text of the forms of the Transaction Documents, which are filed as Exhibits hereto and incorporated
herein by reference.
As of June 30, 2024, this February 2023 Lind Note
was fully repaid. 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 $10.5 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 529,1,67 shares (post-split) of the Company’s common stock at an initial exercise price of $10.5 per share, subject to adjustment
(each, a “Warrant Share,” together with the Note, Note Shares and Warrants, the “Lind Securities”).
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
shall pay Lind an amount equal to $308,651, until the outstanding principal amount of the Lind Note has been paid in full prior to or
on the Maturity Date or, if earlier, upon acceleration, conversion or redemption of the Lind Note in accordance with the terms thereof
(the “Monthly Payments”). At the Company’s discretion, the Monthly Payments shall be made in (i) cash, (ii) shares of
the Company’s common stock, or (iii) a combination of cash and Shares; if made in shares, the number of shares shall be determined
by dividing (x) the principal amount being paid in shares by (y) 90% of the average of the 5 lowest daily VWAPs during the 20 trading
days prior to the applicable payment date. The Lind Notes sets forth certain conditions that must be satisfied before the Company may
make any Monthly Payments in shares of common stock. If the Company makes a Monthly Payment in cash, the Company must also pay Lind a
cash premium of 5% of such Monthly Payment.
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.
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 and depends on a variety of factors outside the Company’s
control.
The foregoing description of the Transaction Documents
is qualified by reference to the full text of the forms of the Transaction Documents, which are filed as Exhibits hereto and incorporated
herein by reference.
On August 1, 2023, Lind converted $500,000 convertible
notes into 142,857 shares of Common Stock, at a conversion price of $3.50 per share, as an installment repayment to the Lind Note.
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.
Strategy
Key elements of our business strategy include:
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Advancing to the pivotal trial phase of ABV-1701 Vitargus® for the treatments of Retinal Detachment or Vitreous Hemorrhage, which we expect to generate revenues in the future. |
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Focusing on licensing ABV-1504 for the treatment of major depressive disorder, MDD, after the successful completion of its Phase II clinical trials. |
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Completing Phase II, Part 2 clinical trial for ABV-1505 for the treatment of attention deficit hyperactivity disorder, ADHD. |
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Out licensing drug candidates and medical device candidates to major pharmaceutical companies for phase III and pivotal clinical trials, as applicable, and further marketing if approved by the FDA. |
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 medical device development, and we have in-licensed new drug and medical device candidates from large
research institutes and universities in both the U.S. and Taiwan. Through an assertive product development approach, we expect that we
will build a substantial portfolio of Oncology/ Hematology, CNS and Ophthalmology products. We primarily focus on Phase I and II research
of new drug candidates and out license the post-Phase-II products to pharmaceutical companies; we do not expect to devote substantial
efforts and resources to building the disease-specific distribution channels.
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:
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nonrefundable upfront license fees, |
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development and commercial milestones, |
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partial or complete reimbursement of research and development costs and |
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royalties on net sales of licensed products. |
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
the compensation of past research efforts and contributions made by the Company before the collaborative agreements were entered into
and 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 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, 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 fulfills 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
| |
(i) |
In February and December of 2015, BioLite, Inc. entered into a total of three joint venture agreements with BioHopeKing to jointly develop ABV-1501 for Triple Negative Breast Cancer (TNBC), ABV-1504 for MDD and ABV-1505 for ADHD. The agreements granted marketing rights to BioHopeKing for certain Asian countries in return for a series of milestone payments totaling $10 million in cash and equity of BioHopeKing or equity securities owned by BioHopeKing. |
The milestone payments are determined by a schedule
of BioLite development achievements as shown below:
| Milestone | |
Payment | |
| Execution of BHK Co-Development Agreement | |
$ | 1,000,000 | |
| Investigational New Drug (IND) Submission | |
$ | 1,000,000 | |
| Phase II Clinical Trial Complete | |
$ | 1,000,000 | |
| Initiation of Phase III Clinical Trial | |
$ | 3,000,000 | |
| New Drug Application (NDA) Submission | |
$ | 4,000,000 | |
| Total | |
$ | 10,000,000 | |
| |
(ii) |
In December of 2015, BHK paid the initial cash payment of $1 million upon the execution of the BHK Agreement. The Company concluded that certain deliverables are considered separate units of accounting as the delivered items have value to the customer on a standalone basis and recognized this cash payment as collaboration revenue when all research, technical, and development data was delivered to BHK in 2015. The payment included compensation for past research efforts and contributions made by BioLite Taiwan before the BHK agreement was signed and does not relate to any future commitments made by BioLite Taiwan and BHK in the BHK Agreement. |
| |
(iii) |
In August 2016, the Company received the second milestone payment of $1 million, and recognized collaboration revenue for the year ended December 31, 2016. The Company completed the phase II clinical trial for ABV-1504 MDD on October 31, 2019, but has not yet completed the phase II clinical trial for ABV-1505 ADHD. |
| |
(iv) |
In addition to the milestone payments, BioLite Inc. is entitled to receive a royalty equal to 12% of BHK’s net sales related to ABV-1501, ABV-1504 and ABV-1505 Products. As of September 30, 2024, the Company has not earned royalties under the BHK Co-Development Agreement. |
| |
(v) |
The BHK Co-Development Agreement will remain in effect for fifteen years from the date of first commercial sale of the Product in in Asia excluding Japan. |
Collaborative agreement with BioLite, Inc.,
our subsidiary
The Company entered into a collaborative agreement
with BioLite, Inc. on December 29, 2015, and then entered into two addendums to such agreement, as amended and revised, (the “BioLite
Agreement”). The majority shareholder of BioLite is one of the Company’s subsidiaries, Mr. Jiang, the Company’s Chairman
is a director of BioLite and Dr. Jiang, the Company’s Chief Strategy Officer and a director, is the Chairman of BioLite.
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 approved for sale in the licensed territories. If BioLite fails to reach any of the milestones in a timely manner, it
may not receive the rest of the payments from the Company.
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 party transaction.
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 4). 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 pay the
Company $3,000,000 in cash or stock of Rgene with equivalent value by August 15, 2017. The payment is for the compensation of BriVision’s
past research efforts and contributions made by BriVision before the Co-Dev Agreement was signed and it does not relate to any future
commitments made by BriVision and Rgene in this Co-Dev Agreement. In addition to $3,000,000, the Company is entitled to receive 50% of
the future net licensing income or net sales profit earned by Rgene, if any, and any development costs shall be equally shared by both
BriVision and 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 connection with the Co-Dev Agreement as additional paid-in capital during the year ended December 31, 2017. During the year ended December
31, 2017, the Company received $450,000 in cash. On December 24, 2018, the Company received the remaining balance of $2,550,000 in
the form of newly issued shares of Rgene’s Common Stock, at the price of NTD$50 (approximately equivalent to $1.64 per share), for
an aggregate number of 1,530,000 shares, which accounted for equity method long-term investment as of December 31, 2018. On December 31, 2018, the Company determined to fully write
off this investment based on the Company’s assessment of the severity and duration of the impairment, and qualitative and quantitative
analysis of the operating performance of the investee, adverse changes in market conditions and the regulatory or economic environment,
changes in operating structure of Rgene, additional funding requirements, and Rgene’s ability to remain in business. All projects
that have been initiated will be managed and supported by the Company and Rgene.
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 Rgene. The Company’s subsidiary, BioKey, entered into a Clinical Development Service Agreement with Rgene (“Service
Agreement”) to guide certain 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 U.S. FDA IND regulatory requirements (the “Rgene Studies”). Under the terms of the Service Agreement, BioKey
is eligible to receive payments totaling up to $3.0 million over a 3-year period with each payment amount to be determined by certain
regulatory milestones obtained during the agreement period. 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.
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 Company because a controlling beneficiary shareholder of YuanGene Corporation and the Company is one
of the directors and Common Stock shareholders of BioFirst (See Note 10).
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 BriVision and
BioFirst.
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 $3,000,000
since currently the related licensing rights do not have alternative future uses. According to ASC 730-10-25-1, 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
immediately. Hence, the entire amount of $3,000,000 is fully expensed as research and development expense during the year ended December
31, 2017.
On June 30, 2019, BriVision entered into a Stock
Purchase Agreement (the “Purchase Agreement”) with BioFirst Corporation. Pursuant to the Purchase Agreement, the Company issued
42,857 shares (post-split) of the Company’s common stock to BioFirst in consideration for $3,000,000 owed by the Company to BioFirst
(the “Total Payment”) in connection with a certain collaborative agreement between the Company and BioFirst dated July 24,
2017 (the “Collaborative Agreement”). Pursuant to the Collaborative Agreement, BioFirst granted the Company the global licensing
right to co-develop BFC-1401 or ABV-1701 Vitreous Substitute for Vitrectomy for medical purposes in consideration for the Total Payment.
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 41,470 shares (post-split) of the Company’s common stock to BioFirst in consideration for $2,902,911 owed by the Company
to BioFirst in connection with a loan provided to BriVision from BioFirst.
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 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 vitreous
substitutes by minimizing medical complications and reducing the need for additional surgeries.
Vitargus has started the construction of a GMP
factory in Hsinchu Biomedical Science Park, Taiwan, with the aim at building a production base to supply the global market, and promote
the construction of bio-degradable vitreous substitute manufacturing centers in Taiwan. Completion of this factory would allow ABVC to
manufacture Vitargus with world-class technology in a GMP certified pharmaceutical factory. BioFirst is targeting to complete the construction
in 2024.
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 Kabushiki Kaisha) incorporated on December 18, 2018 and at the date of the
Agreement has 10,000 ordinary shares authorized, with 3,049 ordinary shares issued and outstanding (the “Ordinary Shares”).
Immediately prior to the execution of the Agreement, Lucidaim owned 1,501 ordinary shares and the Company owned the 1,548 ordinary shares.
The Shareholders entered into the joint venture to formally reduce to writing their desire to invest in and operate BioLite JP as a joint
venture. The business of the joint venture shall be the research and development of drugs, medical device and digital media, investment,
fund running and consulting, distribution and marketing of supplements carried on by BioLite JP and its subsidiaries in Japan, or any
other territory or businesses as may from time to time be agreed by an amendment to the Agreement. The closing of the transaction is conditioned
upon the approval and receipt of all necessary government approvals, which have been received.
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 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 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 $272,000), 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 $134,000), 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 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 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’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 $4,500) and until
the aggregate amount of all liabilities exceeds JPY 2,000,000 (approximately $18,000) 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.
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
The Company has identified critical accounting
policies that, as a result of judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operation
involved could result in material changes to our financial position or results of operations under different conditions or using different
assumptions.
The Company uses the same accounting policies
in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in the annual consolidated
financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) have been condensed or omitted. These unaudited consolidated financial statements should be read in conjunction with the
Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2023, filed with the SEC on March 13, 2024 (“2023 Form 10-K.”)
Estimates and Assumptions
In preparing our consolidated financial statements,
we use estimates and assumptions that affect the reported amounts and disclosures. Our estimates are often based on complex judgments,
probabilities and assumptions that we believe to be reasonable, but that are inherently uncertain and unpredictable. We are also subject
to other risks and uncertainties that may cause actual results to differ from estimated amounts.
Recent Accounting Pronouncements
In August 2023, the FASB issued ASU 2023-05, Business
Combinations—Joint Venture Formations (Subtopic 805-60) which requires certain joint ventures to apply a new basis of accounting
upon formation by recognizing and initially measuring most of their assets and liabilities at fair value. The guidance does not apply
to joint ventures that may be proportionately consolidated and those that are collaborative arrangements. ASU 2023-05 is effective for
joint venture with a formation date on or after January 1, 2025, early adoption is permitted. The Company is currently evaluating the
impact that the standard will have on its unaudited consolidated financial statements.
Results of Operations - Three Months Ended
September 30, 2024 Compared to Three Months Ended September 30, 2023.
The following table presents, for the three months
indicated, our unaudited consolidated statements of operations information.
| | |
Three Months Ended
September 30, | | |
Increase | | |
| |
| | |
2024 | | |
2023 | | |
(Decrease) | | |
% | |
| | |
| | |
| | |
| | |
| |
| Revenue | |
$ | 389,276 | | |
$ | 15,884 | | |
$ | 373,392 | | |
| 2351 | % |
| Gross Profits (Loss) | |
$ | 388,980 | | |
$ | (13,730 | ) | |
$ | 402,710 | | |
| -2933 | % |
| Operating Expenses | |
$ | 339,033 | | |
$ | 2,141,143 | | |
$ | (1,802,110 | ) | |
| -84 | % |
| Income (Loss) from Operations | |
$ | 49,947 | | |
$ | (2,154,873 | ) | |
$ | 2,204,820 | | |
| -102 | % |
| Interest (Expense), Net | |
$ | (175,272 | ) | |
$ | (1,178,378 | ) | |
$ | 1,003,106 | | |
| -85 | % |
| Other Expense | |
$ | (8,592 | ) | |
$ | (35,828 | ) | |
$ | 27,236 | | |
| -76 | % |
| Net Loss | |
$ | (134,272 | ) | |
$ | (3,369,080 | ) | |
$ | 3,234,808 | | |
| -96 | % |
Revenues. We generated $389,276
and $15,884 in revenues for the three months ended September 30, 2024 and 2023, respectively. The increase in revenues was mainly due
to the revenue recognized from licensing to ForSeeCon and OncoX. In addition to FDA application service revenue generated in both periods, the licensing revenues contributed the main growth in the revenue.
Please refer to the above collaborative agreements for details.
Operating Expenses. Our
operating expenses have decreased by $1,802,110 or 84%, to $339,033 for the three months ended September 30, 2024 from $,2141,143
for the three months ended September 30, 2023. Such a decrease in operating expenses was mainly attributable to the decrease in
selling, general and administrative expenses and research and development expenses.
Interest income (expense), net.
was $(175,272) for the three months ended September 30, 2024, compared to ($1,178,378) for the three months ended September 30, 2023.
The decrease in net interest expense of $1,003,106, or approximately 85%, was primarily due to the decrease in interest expense due to
recognition of interest expense for the converted notes for proper accounting purposes.
Other Expense. Our other expense
was $8,592 for the three months ended September 30, 2024, compared to other expense of $35,828 for the three months ended September 30,
2023. The change was principally caused by the increase in loss on equity investment and offsetting by increase in gain on foreign exchanges
in the three months ended September 30, 2024.
Net Loss. As a result of the
above factors, our net loss was $134,272 for the three months ended September 30, 2024 compared to $3,369,080 for the three months ended
September 30, 2023, representing a decrease of $3,234,808, or 96%.
Results of Operations - Nine months Ended September
30, 2024 Compared to Nine months Ended September 30, 2023.
The following table presents, for the nine months
indicated, our unaudited consolidated statements of operations information.
| | |
Nine Months Ended
September 30, | | |
Increase | | |
| |
| | |
2024 | | |
2023 | | |
(Decrease) | | |
% | |
| | |
| | |
| | |
| | |
| |
| Revenue | |
$ | 507,623 | | |
$ | 150,265 | | |
$ | 357,358 | | |
| 238 | % |
| Gross Profits (Loss) | |
$ | 506,860 | | |
$ | (12,566 | ) | |
$ | 519,426 | | |
| -4134 | % |
| Operating Expenses | |
$ | 4,877,944 | | |
$ | 6,242,333 | | |
$ | (1,364,389 | ) | |
| -22 | % |
| Loss from Operations | |
$ | (4,371,084 | ) | |
$ | (6,254,899 | ) | |
$ | 1,883,815 | | |
| -30 | % |
| Interest (Expense), Net | |
$ | (1,088,797 | ) | |
$ | (1,242,041 | ) | |
$ | 153,244 | | |
| -12 | % |
| Other Expense | |
$ | (38,638 | ) | |
$ | (2,899 | ) | |
$ | (35,739 | ) | |
| 1233 | % |
| Net Income Loss | |
$ | (5,387,980 | ) | |
$ | (7,580,535 | ) | |
$ | 2,192,555 | | |
| -29 | % |
Revenues. We generated $507,623 and
$150,265 in revenues for the nine months ended September 30, 2024 and 2023, respectively. The increase in revenues was mainly due to
the revenue recognized from licensing to ForSeeCon and OncoX. In addition to FDA application service revenue generated in both periods, the licensing revenues contributed the main growth in the revenue.
Please refer to the above collaborative agreements for details.
Operating Expenses. Our
operating expenses have decreased by $1,364,389, or 22%, to $4,877,944 for the nine months ended September 30, 2024 from $6,242,333
for the nine months ended September 30, 2023. Such a decrease in operating expenses was mainly attributable to the decrease in
stock-based compensation expenses by $2,957,736 which relates to costs in conjunction with employee compensation and non-employee
share-based payments.
Interest income (expense), net.
was $(1,088,797) for the nine months ended September 30, 2024, compared to $(1,242,041) for the nine months ended September 30, 2023. The
decrease of $153,244, or approximately 12%, was primarily due to the decrease in interest expense due to recognition of interest expense
for the converted notes for proper accounting purpose.
Other Expense. Our other expense
was $38,638 for the nine months ended September 30, 2024, compared to other expense of $2,899 for the nine months ended September 30,
2023. The change was principally caused by the increase in loss on equity method investment, while being offset by the increase in foreign
exchange income for the nine months ended September 30, 2024.
Net Loss. As a result of the
above factors, our net loss was $5,387,980 for the nine months ended September 30, 2024 compared to $7,580,535 for the nine months ended
September 30, 2023, representing an decrease of $2,192,555, or 29%.
Liquidity and Capital Resources
Working Capital
| | |
As of
September 30,
2024 | | |
As of
December 31,
2023 | |
| | |
(Unaudited) | | |
| |
| Current Assets | |
$ | 2,148,327 | | |
$ | 1,656,709 | |
| Current Liabilities | |
$ | 6,315,642 | | |
$ | 5,932,490 | |
| Working Capital (Deficit) | |
$ | (4,167,315 | ) | |
$ | (4,275,781 | ) |
Going Concern and
Liquidity Consideration
For the nine months ended September 30, 2024, the Company reported net loss of $5,387,980. As
of September 30, 2024, the Company’s working capital deficit was $4,167,315. In addition, the Company had net cash outflows of $1,315,534
from operating activities for the nine months ended September 30, 2024. 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 to improve operations to generate positive
cash flows by 1) ensuring our cash consideration from our licensing agreements be fully collected soon, 2) raising additional capital
through private or public offerings, 3) strictly controlling cash operating expenses, and 4) reducing debts and interest expense.
Notably,
the Company has generated cash inflow and reduced a substantial amount of debts during the first nine months ended September 30, 2024,
from $2.2 million to $1.6 million. We also reduced our outstanding warrants from 2.5 million shares to 2 million shares in October, receiving
around $210,000 in cash. If the Company is not able to generate positive operating cash flows, and raise additional capital, there is
the risk that the Company may not be able to meet its short-term obligations. Management is committed to enhancing operations to generate
positive cash flows to meet our operation needs.
Cash Flow from Operating Activities
During the nine months ended September 30, 2024 and 2023, the net cash
used in operating activities were $1,315,534 and $3,756,385, respectively. The decrease was primarily due to the increase in licensing
cash payment from ForSeeCon and OncoX, and the decrease in operating expenses. Company has been strictly controlling the operating cash outflow,
such as making certain payments with shares in lieu of cash, extending vendors’ payment terms, and other initiatives to save the
cash burn.
Cash Flow from Investing Activities
During the nine months ended September 30, 2024
and 2023, the net cash used in investing activities were $0 and $514,359 respectively. The increases were mainly due to the increase in
prepayment for long-term investments during the nine months ended September 30, 2024.
Cash Flow from Financing Activities
During the nine months ended September 30, 2024
and 2023, the net cash provided by financing activities were $1,399,313 and $3,831,540, respectively. The decrease in net cash provided
by financing activities were primarily due to the proceeds from issuance of convertible notes, Lind’s exercise of warrants, and
common stock subscription in advance.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, we are not required
to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation
of our management, including our Chief Executive Officer (who also serves as acting interim Chief Financial Officer), we have evaluated
the effectiveness of the design and operation of our “disclosure controls and procedures,” as such term is defined in Rule
13a-15(e) or Rule 15d-15(e) promulgated under the Exchange Act as of the end of the period covered by this report. Based upon that evaluation,
our Chief Executive Officer (who also serves as acting interim Chief Financial Officer) has concluded that our disclosure controls and
procedures were not effective as of September 30, 2024 to provide reasonable assurance that material information required to be disclosed
by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms due to the material weakness described in our Annual Report on Form 10-K for the year ended December
31, 2023, as filed with the SEC on March 13, 2024.
Changes in Internal Control over Financial
Reporting
There has been no change in our internal control
over financial reporting during the nine months ended September 30, 2024.
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We may be subject to, from time to time, various
legal proceedings relating to claims arising out of our operations in the ordinary course of our business. We are not currently a party
to any legal proceedings, the adverse outcome of which, individually or in the aggregate, would have a material adverse effect on the
business, financial condition, or results of operations of the Company
ITEM 1A. RISK FACTORS.
We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS.
During the period covered by this report, the
Company has not issued unregistered securities to any person, except as described below. None of these transactions involved any underwriters,
underwriting discounts or commissions, except as specified below, or any public offering, and, unless otherwise indicated below, the Registrant
believes that each transaction was exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof
and/or Rule 506 of Regulation D promulgated thereunder, and/or Regulation S promulgated thereunder regarding offshore offers and sales.
All recipients had adequate access, though their relationships with the Registrant, to information about the Registrant.
In July 2024, the Company entered into an agreement
with its landlord in California, pursuant that the Company will issue 169,992 shares of common stock for the rent payable through July
2024, in total of $127,494. and The Company will also issue variable number of shares equivalent to the August and September 2024 rent
amount in total of $64,147 at the average VWAP (Volume Weighted Average Price) of last five trading days of July 2024. These shares are
restricted for six months from the issuance but no later than February 15, 2025. 169,992 shares were issued on July 25, 2024 for the rent
payables through July 2024, 43,458 shares were issued on August 14, 2024 for the August 2024 rent, and 46,072 shares were issued on September
for the September 2024 rent. In October, 64,147 shares were issued for October rent payable in the amount of $32,074.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS
The following exhibits are filed herewith:
| Exhibit
No. |
|
Description |
| 2.1 |
|
Share Exchange Agreement, dated February 8, 2016 (1) |
| 3.1 |
|
Articles of Incorporation of the Company (2) |
| 3.2 |
|
Bylaws of the Company, as amended (44) |
| 3.3 |
|
Certificate of Amendment to Articles of Incorporation filed on March 21, 2016 (4) |
| 3.4 |
|
Certificate of Amendment to Articles of Incorporation filed on December 21, 2016 (5) |
| 3.5 |
|
Certificate of Amendment to Articles of Incorporation filed on March 30, 2020 (6) |
| 3.6 |
|
Certificate of Amendment to Articles of Incorporation filed on February 17, 2021 (29) |
| 3.7 |
|
Certificate of Amendment to Articles of Incorporation filed on July 24, 2023 (45) |
| 3.8 |
|
Amendment to Bylaws (46) |
| 4.1 |
|
Form of Warrant (7) |
| 4.2 |
|
Form of Investor Warrant dated May 16, 2022 (32) |
| 10.1 |
|
Collaboration Agreement dated December 29, 2015 (8) |
| 10.2 |
|
Collaborative Agreement and Milestone Payment Agreement dated June 9, 2016 (9) |
| 10.3 |
|
Employment Agreement with Kira Huang (10) |
| 10.4 |
|
Addendum to the Collaboration Agreement dated January 12, 2017 (11) |
| 10.5 |
|
Collaboration Agreement with BioFirst dated July 24, 2017 (12) |
| 10.6 |
|
Co-Development Agreement with Rgene dated May 26, 2017 (13) |
| 10.7 |
|
Lind Letter Agreement dated May 22, 2024 (52) |
| 10.8 |
|
Lind Form of Warrant dated May 22, 2024 (52) |
| 10.9 |
|
Reserved |
| 10.10 |
|
Business Loan Agreement entered by and between Cathay Bank and American BriVision (Holding) Corporation (16) |
| 10.11 |
|
Promissory Note entered by American BriVision (Holding) Corporation (17) |
| 10.12 |
|
Form of Commercial Security Agreement (18) |
| 10.13 |
|
Form of Exchange Agreement entered into by and between the Company and non-US person (19) |
| 10.14 |
|
Form of Exchange Agreement entered into by and between the Company and US person (20) |
| 10.15 |
|
Form of Securities Purchase Agreement entered into by and between the Company and U.S. investors (21) |
| 10.16 |
|
Form of Securities Purchase Agreement entered into by and between the Company and non-U.S. investors (22) |
| 10.17 |
|
Amended and Restated American BriVision (Holding) Corporation 2016 Equity Incentive (26) |
| 10.18 |
|
Form of Securities Purchase Agreement (27) |
| 10.19 |
|
Form of Convertible Promissory Note (27) |
| 10.20 |
|
Amendment No. 1 to Promissory Note (28) |
| 10.21 |
|
Joint Venture Agreement between the Company, Lucidiam Co., Ltd. And BioLite Japan K.K. (30) |
| 10.22 |
|
Amendment to the Collaboration Agreement dated December 29, 2015 (34) |
| 10.23 |
|
Clinical Development Service Agreement with Rgene (portions of the exhibit have been omitted because they (i) are not material and (ii) is the type of information that the registrant treats as private or confidential.)(31) |
| 10.24 |
|
Promissory Note issued to Regene, dated June 16, 2022 (31) |
| 10.25 |
|
Form of Securities Purchase Agreement dated May 12, 2022 (32) |
| 10.26 |
|
Securities Purchase Agreement(33) |
| 10.27 |
|
Form of Note(33) |
| 10.28 |
|
Form of Warrant(33) |
| 10.29 |
|
Security Agreement(33) |
| 10.30 |
|
Guarantor Security Agreement(33) |
| 10.31 |
|
Guaranty(33) |
| 10.32 |
|
Trademark Security Agreement with Rgene Corporation(33) |
| 10.33 |
|
Trademark Security Agreement with BioFirst Corporation(33) |
| 10.34 |
|
Patent Security Agreement(33) |
| 10.35 |
|
Copyright Security Agreement(33) |
| 10.36 |
|
Stock Pledge Agreement(33) |
| 10.37 |
|
The Cooperation Agreement between the Company and Zhong Hui Lian He Ji Tuan, Ltd. dated August 14, 2023 (35) |
| 10.38 |
|
Amendment to the Cooperation Agreement (36) |
| 10.39 |
|
Letter Agreement (37) |
| 10.40 |
|
License Agreement between the Company and AiBtl BioPharma, Inc (47) |
| 10.41 |
|
License Agreement between the BioLite and AiBtl BioPharma, Inc (47) |
| 10.42 |
|
Definitive License Agreement between the Company and OncoX BioPharma, Inc. May 8, 2024 (51) |
| 10.43 |
|
Definitive License Agreement between Rgene and OncoX BioPharma, Inc. dated May 8, 2024 (51) |
| 10.44 |
|
Form of 2nd Lind Note (38) |
| 10.45 |
|
Form of 2nd Lind Warrant (38) |
| 10.46 |
|
Securities Purchase Agreement dated November 17, 2023 (38) |
| 10.47 |
|
First Amendment To Security Agreement (38) |
| 10.48 |
|
First Amendment To Guarantor Security Agreement (38) |
| 10.49 |
|
First Amendment to Guaranty (38) |
| 10.50 |
|
Securities Purchase Agreement dated January 17, 2024 (39) |
| 10.51 |
|
Form of 3rd Placement Agent Warrant (40) |
| 10.52 |
|
Second Amendment To Security Agreement (39) |
| 10.53 |
|
Second Amendment To Guarantor Security Agreement (39) |
| 10.54 |
|
Second Amendment to Guaranty (39) |
| 10.55 |
|
Form of 3rd Lind Note (39) |
| 10.56 |
|
Form of 3rd Lind Warrant (39) |
| 10.57 |
|
Amendment No. 1 to 2nd Lind Note (41) |
| 10.58 |
|
Amendment No. 2 to 2nd Lind Note (42) |
| 10.59 |
|
Amendment No. 1 to 3rd Lind Note (43) |
| 10.60 |
|
Definitive License Agreement between the Company and OncoX BioPharma, Inc. (48) |
| 10.61 |
|
Definitive License Agreement between Rgene and OncoX BioPharma, Inc. (48) |
| 10.62 |
|
Definitive License Agreement between the Company and ForSeeCon Eye Corporation (49) |
| 10.63 |
|
Definitive License Agreement between BioFirst Corporationand ForSeeCon
Eye Corporation (49) |
| 10.64 |
|
Form of Amendment (50) |
| 10.65 |
|
Definitive License Agreement between the Company and OncoX BioPharma, Inc. May 23, 2024 (53) |
| 10.66 |
|
Definitive License Agreement between Biolite, Inc. and OncoX BioPharma, Inc. dated May 23, 2024 (53) |
| 10.67 |
|
Amendment to the Definitive License Agreement between the Company and ForSeeCon Eye Corporation (54) |
| 10.68 |
|
Amendment to the Definitive License Agreement between BioFirst Corporation
and ForSeeCon Eye Corporation (54) |
| 10.69 |
|
Amendment to the License Agreement between the Company and AiBtl BioPharma Inc. (55) |
| 10.70 |
|
Amendment to the License Agreement between BioLite, Inc. and AiBtl BioPharma Inc. (55) |
| 31.1 |
|
Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+ |
| 31.2 |
|
Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+ |
| 32.1 |
|
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*+ |
| 32.2 |
|
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*+ |
| 101.INS |
|
Inline XBRL Instance Document.+ |
| 101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document.+ |
| 101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.+ |
| 101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document.+ |
| 101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document.+ |
| 101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document.+ |
| 104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained
in Exhibit 101). |
| * | In
accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed. |
| (1) |
Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February 16, 2016. |
| (2) |
Incorporated by reference to Exhibit 3.01 to the Company’s Form SB-2 filed on June 28, 2002 |
| (3) |
Incorporated by reference to Exhibit 3.02 to the Company’s Form SB-2, filed on June 28, 2002 |
| (4) |
Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on March 28, 2016. |
| (5) |
Incorporated by reference to Exhibit 3.4 to the Company’s Form S-1, filed on September 13, 2016. |
| (6) |
Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K, filed on April 7, 2020 |
| (7) |
Incorporated by reference to Exhibit 4.1 the Company’s Current Report on Form 8-K, filed on April 24, 2020 |
| (8) |
Incorporated by reference to Exhibit 10.2 the Company’s Current Report on Form 8-K, filed on February 16, 2016. |
| (9) |
Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on June 9, 2016. |
| (10) |
Incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K, filed on January 12, 2017. |
| (11) |
Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on February 22, 2017. |
| (12) |
Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on July 24, 2017. |
| (13) |
Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on May 30, 2017. |
| (15) |
Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on September 20, 2017. |
| (16) |
Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February 1, 2019. |
| (17) |
Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on February 1, 2019. |
| (18) |
Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on February 1, 2019. |
| (19) |
Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on April 24, 2020. |
| (20) |
Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed April 14, 2020. |
| (21) |
Incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K, filed May 15, 2020. |
| (22) |
Incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K, filed May 15, 2020 |
| (23) |
Incorporated by reference to Exhibit 14.1 to the Company’s Amendment No.1 to Form S-1, filed on November 14, 2016. |
| (24) |
Incorporated by reference to 21.1 to the Company’s Form S-1,
filed on September 13, 2016. |
| (25) |
Incorporated by reference to Exhibit 10.9 to the Company’s Annual
Report on Form 10-K, filed May 15, 2020. |
| |
|
| (26) |
Incorporated by reference to Exhibit 10.17 to the Company’s Annual
Report on Form 10-K, filed March 16, 2021. |
| |
|
| (27) |
Incorporated by reference to the Current Report on Form 8-K filed on
November 5, 2020. |
| |
|
| (28) |
Incorporated by reference to the Current Report on Form 8-K filed on June 8, 2021. |
| (29) |
Incorporated by reference to the Quarterly Report on Form 10-Q filed on May 10, 2021. |
| (30) |
Incorporated by reference to the Current Report on Form 8-K filed on October 8, 2021. |
| |
|
| (31) |
Incorporated by reference to the Current Report on Form 8-K filed on June 21, 2022. |
| |
|
| (32) |
Incorporated by reference to the Current Report on Form 8-K filed on May 12, 2022. |
| |
|
| (33) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on February 24, 2023. |
| (34) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on February 22, 2022. |
| |
|
| (35) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on August 17, 2023. |
| |
|
| (36) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on September 6, 2023. |
| |
|
| (37) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on September 13, 2023. |
| |
|
| (38) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on November 20, 2023. |
| |
|
| (39) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on January 17, 2024. |
| |
|
| (40) |
Incorporated by reference to the Amendment No.1 to Form S-1, filed on February 9, 2024. |
| |
|
| (41) |
Incorporated by reference to the Company’s Current Report on Form 8-K/A, filed on January 17, 2024. |
| |
|
| (42) |
Incorporated by reference to the Company’s Current Report on Form 8-K/A, filed on February 29, 2024. |
| |
|
| (43) |
Incorporated by reference to the Company’s Current Report on Form 8-K/A, filed on February 29, 2024. |
| |
|
| (44) |
Incorporated by reference to the Company’s Annual Report on Form 10-K/A, filed on June 6, 2022 |
| |
|
| (45) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on July 24, 2023. |
| |
|
| (46) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on March 14, 2024 |
| |
|
| (47) |
Incorporated by reference to the Company’s Quarterly Report on Form 10-Q, filed on November 15, 2023 |
| |
|
| (48) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on April 17, 2024 |
| |
|
| (49) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on March 26, 2024 |
| |
|
| (50) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on February 29, 2024 |
| |
|
| (51) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on May 9, 2024 |
| |
|
| (52) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on May 23, 2024 |
| |
|
| (53) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on May 24, 2024 |
| |
|
| (54) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on June 24, 2024 |
| |
|
| (55) |
Incorporated by reference to the Company’s Current Report on Form 8-K, filed on June 25, 2024 |
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| |
ABVC BioPharma, Inc. |
| |
|
|
| Dated: November 14, 2024 |
By: |
/s/ Uttam Patil |
| |
|
Uttam Patil |
| |
|
Chief Executive Officer
(Principal Executive Officer) |
| |
|
|
| |
ABVC BioPharma, Inc. |
| |
|
|
| Dated: November 14, 2024 |
By: |
/s/ Uttam Patil |
| |
|
Uttam Patil |
| |
|
Interim Chief Financial Officer
(Principal Financial Officer) |
60
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