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, 2019
☐ 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 333-91436
American BriVision (Holding) Corporation.
(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)
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 ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of November 15, 2019, there were 19,478,168 shares of common stock, par value per share $0.001, issued and outstanding.
Securities registered pursuant to Section 12(b) of the Act: None
TABLE OF CONTENTS
i
CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” which discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” and negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements.
These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K and its amendment filed with the Securities and Exchange Commission (the “SEC”); 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: competition in the industry in which we operate and the impact of such competition on pricing, revenues and margins, volatility in the securities market due to the general economic downturn; SEC regulations which affect trading in the securities of “penny stocks,” and other risks and uncertainties. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward- looking statements, even if new information becomes available in the future. Depending on the market for our stock and other conditional tests, a specific safe harbor under the Private Securities Litigation Reform Act of 1995 may be available. Notwithstanding the above, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) expressly state that the safe harbor for forward-looking statements does not apply to companies that issue penny stock. Because we may from time to time be considered to be an issuer of penny stock, the safe harbor for forward-looking statements may not apply to us at certain times.
As used in this Report, the terms “we”, “us”, “our”, and “our Company” and “the Company” refer to American Brivision (Holding) Corporation and its subsidiaries, unless otherwise indicated.
ii
| Item 1. | Financial Statements. |
AMERICAN BRIVISION (HOLDING) CORPORATION AND SUBSIDIARIES
| September 30, 2019 | December 31, 2018 | |||||||
| ASSETS | (Unaudited) | |||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 1,035,678 | $ | 226,688 | ||||
| Restricted cash and cash equivalents | 16,122 | 16,093 | ||||||
| Accounts receivable, net | 131,439 | - | ||||||
| Accounts receivable - related parties, net | 142,215 | - | ||||||
| Other receivable | - | 39,005 | ||||||
| Due from related parties | 322,678 | 59,477 | ||||||
| Inventory | - | 1,318 | ||||||
| Prepaid expense and other current assets | 59,435 | 223,895 | ||||||
| Total Current Assets | 1,707,567 | 566,476 | ||||||
| Property and equipment, net | 514,449 | 510,066 | ||||||
| Operating lease right-of-use assets | 357,932 | - | ||||||
| Goodwill, net | - | - | ||||||
| Long-term investments | 3,270,410 | 3,488,169 | ||||||
| Deferred tax assets | 1,380,021 | 1,347,995 | ||||||
| Prepaid expenses – noncurrent | 131,261 | - | ||||||
| Security deposits | 43,253 | 27,418 | ||||||
| Total Assets | $ | 7,404,893 | $ | 5,940,124 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | 13,383 | - | ||||||
| Short-term bank loans | 1,885,500 | 899,250 | ||||||
| Long-term bank loans - current portion | 22,547 | 39,835 | ||||||
| Notes payable | 96,600 | 510,447 | ||||||
| Accrued expenses and other current liabilities | 1,757,001 | 1,243,158 | ||||||
| Advance from customers | 387,815 | - | ||||||
| Operating lease liabilities – current portion | 268,618 | - | ||||||
| Due to related parties | 376,460 | 7,745,096 | ||||||
| Convertible notes payable – current portion | 820,000 | 300,000 | ||||||
| Convertible notes payable – related parties, current portion | 250,000 | 250,000 | ||||||
| Total Current Liabilities | 5,877,924 | 10,987,786 | ||||||
| Long-term bank loan | - | 15,257 | ||||||
| Tenant security deposit | 2,880 | - | ||||||
| Operating lease liabilities – noncurrent portion | 106,398 | - | ||||||
| Convertible notes payable – related parties | 687,500 | 250,000 | ||||||
| Accrued interest | - | 27,467 | ||||||
| Total Liabilities | 6,674,702 | 11,280,510 | ||||||
| Equity | ||||||||
| Preferred stock, $0.001 par value, 20,000,000 authorized, nil shares issued and outstanding | - | - | ||||||
| Common stock, $0.001 par value, 20,000,000 authorized, 19,478,168 and 11,884,804 issued and outstanding, respectively | 19,478 | 11,885 | ||||||
| Additional paid-in capital | 28,180,123 | 14,983,714 | ||||||
| Stock subscription receivable | (4,289,060 | ) | - | |||||
| Accumulated deficit | (14,773,552 | ) | (12,209,446 | ) | ||||
| Other comprehensive income | 628,941 | 655,851 | ||||||
| Treasury stock | (9,100,000 | ) | (9,100,000 | ) | ||||
| Total Stockholders’ deficit | 665,930 | (5,657,996 | ) | |||||
| Noncontrolling interest | 64,261 | 317,610 | ||||||
| Total Equity (Deficit) | 730,191 | (5,340,386 | ) | |||||
| Total Liabilities and Equity (Deficit) | $ | 7,404,893 | $ | 5,940,124 | ||||
The accompanying notes are an integral part of these financial statements.
1
AMERICAN BRIVISION (HOLDING) CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Revenues | $ | 197,733 | $ | 747 | $ | 601,757 | $ | 3,976 | ||||||||
| Cost of revenues | 2,797 | 537 | 17,648 | 2,856 | ||||||||||||
| Gross profit | 194,936 | 210 | 584,109 | 1,120 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative expenses | 1,035,582 | 334,406 | 2,118,053 | 1,213,313 | ||||||||||||
| Research and development expenses | 269,239 | 54,514 | 778,964 | 359,322 | ||||||||||||
| Stock based compensation | 5,737 | 7,575 | 22,087 | 23,401 | ||||||||||||
| Total operating expenses | 1,310,558 | 396,495 | 2,919,104 | 1,596,036 | ||||||||||||
| Loss from operations | (1,115,622 | ) | (396,285 | ) | (2,334,995 | ) | (1,594,916 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest income | 6,024 | 1,507 | 7,279 | 3,761 | ||||||||||||
| Interest Expense | (111,968 | ) | (122,326 | ) | (374,540 | ) | (345,982 | ) | ||||||||
| Rental Income | 4,574 | 2,909 | 14,274 | 8,997 | ||||||||||||
| Rental Income – related parties | 1,600 | - | 1,600 | - | ||||||||||||
| Investment Loss | - | (201,590 | ) | - | (287,513 | ) | ||||||||||
| Gain (loss) on foreign exchange changes | (2 | ) | (67 | ) | 402 | 7,403 | ||||||||||
| Gain (loss) on investment in equity securities | (64,689 | ) | (39,166 | ) | (182,113 | ) | (164,649 | ) | ||||||||
| Other income (expense) | (1,047 | ) | (1,357 | ) | 851 | (4,305 | ) | |||||||||
| Total other income (expense) | (165,508 | ) | (360,090 | ) | (532,247 | ) | (782,288 | ) | ||||||||
| Loss before income tax | (1,281,130 | ) | (756,375 | ) | (2,867,242 | ) | (2,377,204 | ) | ||||||||
| Provision for income tax | 48,555 | (69,075 | ) | (49,788 | ) | (240,242 | ) | |||||||||
| Net loss | $ | (1,329,685 | ) | $ | (687,300 | ) | $ | (2,817,454 | ) | $ | (2,136,962 | ) | ||||
| Net loss attributable to noncontrolling interests | (114,826 | ) | (116,491 | ) | (253,349 | ) | (332,596 | ) | ||||||||
| Net loss attributable to ABVC and subsidiaries | (1,214,859 | ) | (570,809 | ) | (2,564,105 | ) | (1,804,366 | ) | ||||||||
| Foreign currency translation adjustment | (61,061 | ) | (12,040 | ) | (86,786 | ) | (81,100 | ) | ||||||||
| Comprehensive loss | $ | (1,275,920 | ) | $ | (582,849 | ) | $ | (2,650,891 | ) | $ | (1,885,466 | ) | ||||
| Net loss per share attributable to common stockholders | ||||||||||||||||
| Basic and diluted | $ | (0.07 | ) | $ | (0.06 | ) | $ | (0.16 | ) | $ | (0.18 | ) | ||||
| Weighted average number of common shares outstanding | ||||||||||||||||
| Basic and diluted | 19,020,824 | 11,884,804 | 17,333,902 | 11,881,657 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
2
AMERICAN BRIVISION (HOLDING) CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended | ||||||||
| September 30, 2019 | September 30, 2018 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (2,817,454 | ) | (2,136,962 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 43,893 | 33,240 | ||||||
| Loss on sale of investment | - | 287,513 | ||||||
| Stock-based compensation | 356,809 | 23,401 | ||||||
| Other non-cash income and expenses | (4,022 | ) | - | |||||
| Loss on investment in equity securities | 182,113 | 164,649 | ||||||
| Deferred tax | (52,638 | ) | (242,092 | ) | ||||
| Changes in assets and liabilities: | ||||||||
| Decrease (increase) in accounts receivable | (102,527 | ) | 685 | |||||
| Decrease (increase) in prepaid expenses and deposits | 23,965 | (79,172 | ) | |||||
| Decrease (increase) in due from related parties | (283,831 | ) | 30,600 | |||||
| Decrease (increase) in inventory | 1,298 | 11,293 | ||||||
| Increase (decrease) in accounts payable | 2,838 | - | ||||||
| Increase (decrease) in notes payable | (14,490 | ) | - | |||||
| Increase (decrease) in accrued expenses and other current liabilities | 572,969 | 560,478 | ||||||
| Increase (decrease) in advance from others | 376,639 | - | ||||||
| Increase (decrease) in due to related parties | 75,729 | 178,067 | ||||||
| Net cash used in operating activities | (1,638,709 | ) | (1,168,300 | ) | ||||
| Cash flows from investing activities | ||||||||
| Net proceeds from sale of investment in equity securities | - | 314,294 | ||||||
| Loan to related parties | (17,388 | ) | - | |||||
| Long-term equity investment | (17,691 | ) | - | |||||
| Net cash provided by (used in) investing activities | (35,079 | ) | 314,294 | |||||
| Cash flows from financing activities | ||||||||
| Issuance of common stock for acquisition | 531,147 | - | ||||||
| Proceeds from convertible notes | 957,500 | 550,000 | ||||||
| Proceeds from short-term bank loans | 1,000,000 | - | ||||||
| Proceeds from short-term borrowing from third-parties | 846,300 | 132,264 | ||||||
| Borrowings from related parties | - | 141,850 | ||||||
| Repayment of borrowings from related parties | (820,000 | ) | (157,000 | ) | ||||
| Repayment of long-term bank loans | (31,703 | ) | - | |||||
| Net cash provided by financing activities | 2,483,244 | 667,114 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (437 | ) | (3,285 | ) | ||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash equivalents | 809,019 | (190,177 | ) | |||||
| Cash, cash equivalents, and restricted cash equivalents | ||||||||
| Beginning | 242,781 | 406,836 | ||||||
| Ending | $ | 1,051,800 | $ | 216,659 | ||||
| Supplemental disclosure of cash flows | ||||||||
| Cash paid during the year for: | ||||||||
| Income tax | $ | 2,050 | $ | 1,850 | ||||
| Interest expense | $ | 103,099 | $ | 114,409 | ||||
| Non-cash financing and investing activities | ||||||||
| Common shares issued for employees and consultants | $ | - | $ | 80,000 | ||||
The accompanying notes are an integral part of these financial statements.
3
AMERICAN BRIVISION (HOLDING) CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
(UNAUDITED)
| Common Stock | Stock | Additional | Treasury Stock | Stockholders’ | ||||||||||||||||||||||||||||||||||||
| Number of shares | Amounts | Subscription Receivable | Paid-in Capital | Accumulated Deficit | Comprehensive Income | Number of shares | Amounts | Noncontrolling Interest | Equity (Deficit) | |||||||||||||||||||||||||||||||
| Balance at December 31, 2017 | 11,874,814 | $ | 11,875 | $ | - | $ | 14,874,924 | $ | (6,634,067 | ) | $ | 743,763 | (275,347 | ) | $ | (9,100,000 | ) | $ | 806,761 | $ | 703,256 | |||||||||||||||||||
| Issuance of common shares | 9,990 | 10 | - | 79,990 | - | - | - | - | - | 80,000 | ||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | 5,626 | - | - | - | - | - | 5,626 | ||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (601,387 | ) | - | - | - | (112,235 | ) | (713,622 | ) | |||||||||||||||||||||||||||
| Cumulative transaction adjustments | - | - | - | - | - | 64,994 | - | - | - | 64,994 | ||||||||||||||||||||||||||||||
| Balance at March 31, 2018 | 11,884,804 | 11,885 | - | 14,960,540 | (7,235,454 | ) | 808,757 | (275,347 | ) | (9,100,000 | ) | 694,526 | 140,254 | |||||||||||||||||||||||||||
| Stock based compensation | - | - | - | 10,200 | - | - | - | - | - | 10,200 | ||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (632,170 | ) | - | - | - | (103,870 | ) | (736,040 | ) | |||||||||||||||||||||||||||
| Cumulative transaction adjustments | - | - | - | - | - | (134,054 | ) | - | - | - | (134,054 | ) | ||||||||||||||||||||||||||||
| Balance at June 30, 2018 | 11,884,804 | 11,885 | - | 14,970,740 | (7,867,624 | ) | 674,703 | (275,347 | ) | (9,100,000 | ) | 590,656 | (719,640 | ) | ||||||||||||||||||||||||||
| Stock based compensation | - | - | - | 7,577 | - | - | - | - | - | 7,577 | ||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (570,809 | ) | - | - | - | (116,491 | ) | (687,300 | ) | |||||||||||||||||||||||||||
| Cumulative transaction adjustments | - | - | - | - | - | (12,040 | ) | - | - | - | (12,040 | ) | ||||||||||||||||||||||||||||
| Balance at September 30, 2018 | 11,884,804 | $ | 11,885 | $ | - | $ | 14,978,317 | $ | (8,438,433 | ) | $ | 662,663 | (275,347 | ) | $ | (9,100,000 | ) | $ | 474,165 | $ | (1,411,403 | ) | ||||||||||||||||||
| Common Stock | Stock | Additional | Treasury Stock | Stockholders’ | ||||||||||||||||||||||||||||||||||||
| Number of shares | Amounts | Subscription Receivable | Paid-in Capital | Accumulated Deficit | Comprehensive Income | Number of shares | Amounts | Noncontrolling Interest | Equity (Deficit) | |||||||||||||||||||||||||||||||
| Balance at December 31, 2018 | 11,884,804 | $ | 11,885 | - | $ | 14,983,714 | $ | (12,209,446 | ) | $ | 655,851 | (275,347 | ) | $ | (9,100,000 | ) | $ | 317,610 | $ | (5,340,386 | ) | |||||||||||||||||||
| Issuance of common shares to BioKey | 1,642,291 | 1,642 | - | 692,577 | - | - | - | - | - | 694,219 | ||||||||||||||||||||||||||||||
| Issuance of common shares to BioLite | 4,166,530 | 4,167 | - | (4,167 | ) | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Issuance common stock for consulting service | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | 8,550 | - | - | - | - | - | 8,550 | ||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (791,671 | ) | - | - | - | (81,646 | ) | (873,317 | ) | |||||||||||||||||||||||||||
| Cumulative transaction adjustments | - | - | - | - | - | (15,412 | ) | - | - | - | (15,412 | ) | ||||||||||||||||||||||||||||
| Balance at March 31, 2019 | 17,693,625 | 17,694 | - | 15,680,674 | (13,001,117 | ) | 640,439 | (275,347 | ) | (9,100,000 | ) | 235,964 | (5,526,346 | ) | ||||||||||||||||||||||||||
| Issuance of common shares | 428,571 | 429 | - | 2,999,571 | - | - | - | - | - | 3,000,000 | ||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | 7,800 | - | - | - | - | - | 7,800 | ||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (557,577 | ) | - | - | - | (56,877 | ) | (614,453 | ) | |||||||||||||||||||||||||||
| Cumulative transaction adjustments | - | - | - | - | - | (8,429 | ) | - | - | - | (8,429 | ) | ||||||||||||||||||||||||||||
| Balance at June 30, 2019 | 18,122,196 | 18,123 | - | 18,688,045 | (13,558,694 | ) | 632,010 | (275,347 | ) | (9,100,000 | ) | 179,087 | (3,141,428 | ) | ||||||||||||||||||||||||||
| Issuance of common shares | 1,355,308 | 1,355 | (4,289,060 | ) | 9,486,339 | - | - | - | - | - | 5,198,634 | |||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | 5,739 | - | - | - | - | - | 5,739 | ||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (1,214,859 | ) | - | - | - | (114,826 | ) | (1,329,685 | ) | |||||||||||||||||||||||||||
| Cumulative transaction adjustments | - | - | - | - | - | (3,069 | ) | - | - | - | (3,069 | ) | ||||||||||||||||||||||||||||
| Balance at September 30, 2019 | 19,477,504 | $ | 19,478 | $ | (4,289,060 | ) | $ | 28,180,123 | $ | (14,773,552 | ) | $ | 628,941 | (275,347 | ) | $ | (9,100,000 | ) | $ | 64,261 | $ | 730,191 | ||||||||||||||||||
* All shares outstanding for all periods have been retroactively recast to reflect Company’s 1-for-18 stock reverse split, which was effective on May 8, 2019.
The accompanying notes are an integral part of these financial statements.
4
AMERICAN BRIVISION (HOLDING) CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
American BriVision (Holding) Corporation (the “Company” or “Holding entity”), a Nevada corporation, through the Company’s operating entity, American BriVision Corporation (the “BriVision”), which was incorporated in July 2015 in the State of Delaware, engages in biotechnology and focuses on the development of new drugs and innovative medical devices to fulfill unmet medical needs. The business model of the Company is to integrate research achievements from world-famous institutions (such as Memorial Sloan Kettering Cancer Center (“MSKCC”) and MD Anderson Cancer Center), conduct clinical trials of translational medicine for Proof of Concept (“POC”), out-license to international pharmaceutical companies, and exploit global markets. BriVision had to predecessor operations prior to its formation on July 21, 2015.
Reverse Merger
On February 8, 2016, a Share Exchange Agreement (the “Share Exchange Agreement”) was entered into by and among American BriVision (Holding) Corporation, American BriVision Corporation (“BriVision”), and Euro-Asia Investment & Finance Corp. Limited, a company incorporated under the laws of Hong Kong Special Administrative Region of the People’s Republic of China (“Euro-Asia”), being the owners of record of 164,387,376 (52,336,000 pre-stock split) shares of Common Stock of the Company, and the owners of record of all of the issued share capital of BriVision (the “BriVision Stock”).
Pursuant to the Share Exchange Agreement, upon surrender by the BriVision Shareholders and the cancellation by BriVision of the certificates evidencing the BriVision Stock as registered in the name of each BriVision Shareholder, and pursuant to the registration of the Company in the register of members maintained by BriVision as the new holder of the BriVision Stock and the issuance of the certificates evidencing the aforementioned registration of the BriVision Stock in the name of the Company, the Company issued 166,273,921(52,936,583 pre-stock split) shares (the “Acquisition Stock”) (subject to adjustment for fractionalized shares as set forth below) of the Company’s Common Stock to the BriVision Shareholders (or their designees), and 163,159,952 (51,945,225 pre-stock split) shares of the Company’s Common Stock owned by Euro-Asia were cancelled and retired to treasury. The Acquisition Stock collectively represented 79.70% of the issued and outstanding Common Stock of the Company immediately after the Closing, in exchange for the BriVision Stock, representing 100% of the issued share capital of BriVision in a reverse merger (the “Merger”).
Pursuant to the Merger, all of the issued and outstanding common shares of BriVision were converted, at an exchange ratio of 0.2536-for-1, into an aggregate of 166,273,921(52,936,583pre-stock split) common shares of the Company and BriVision had become a wholly owned subsidiary of the Company. The holders of Company’s Common Stock as of immediately prior to the Merger held an aggregate of 205,519,223(65,431,144 pre-stock split) shares of Company’s Common Stock. Because of the exchange of the BriVision Stock for the Acquisition Stock (the “Share Exchange”), BriVision had become a wholly owned subsidiary (the “Subsidiary”) of the Company and there was a change of control of the Company following the closing. There were no warrants, options or other equity instruments issued in connection with the share exchange agreement.
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Upon the consummation of the Share Exchange, BriVision became our wholly owned subsidiary of the Company.
Following the Share Exchange, we have abandoned our prior business plan and we are now pursuing BriVision’s historically proposed businesses, which focus on the development of new drugs and innovative medical devices to fulfill unmet medical needs. The business model of the Company is to integrate research achievements from world-famous institutions, conduct clinical trials of translational medicine for Proof of Concept (“POC”), out-license to international pharmaceutical companies, and explore global markets.
Accounting Treatment of the Reverse Merger
For financial reporting purposes, the Share Exchange represents a “reverse merger” rather than a business combination and BriVision is deemed the accounting acquirer in the transaction. The Share Exchange is being accounted for as a reverse-merger and recapitalization. BriVision is the acquirer for financial reporting purposes and the Company is the acquired company. Consequently, the assets and liabilities and the operations reflected in the historical financial statements prior to the Share Exchange will be those of BriVision and recorded at the historical cost basis of BriVision. In addition, the consolidated financial statements after completion of the Share Exchange will include the assets and liabilities of the Company and BriVision, and the historical operations of BriVision and operations of the Combined Company from the closing date of the Share Exchange.
Merger
On February 8, 2019, the Company, BioLite Holding, Inc. (“BioLite”), BioKey, Inc. (“BioKey”), BioLite Acquisition Corp., a direct wholly-owned subsidiary of Parent (“Merger Sub 1”), and BioKey Acquisition Corp., a direct wholly-owned subsidiary of Parent (“Merger Sub 2”) (collectively referred to as the “Parties”) completed the business combination pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) dated as of January 31, 2018 where ABVC acquired BioLite and BioKey via issuing additional Common Stock of ABVC to the shareholders of BioLite and BioKey.
Pursuant to the terms of the Merger Agreement, BioLite and BioKey became two wholly-owned subsidiaries of the Company on February 8, 2019. ABVC issued an aggregate of 104,558,777 shares (prior to the reverse stock split in 2019) 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.
BioLite Holding, Inc. (the “BioLite Holding”) was incorporated under the laws of the State of Nevada on July 27, 2016. BioLite BVI, Inc. (the “BioLite BVI”), a wholly owned subsidiary of BioLite Holding, was incorporated in the British Virgin Islands on September 13, 2016. BioLite Holding and BioLite BVI are holding companies and have not carried out substantive business operations of their own.
BioLite, Inc., (the “BioLite Taiwan”) was incorporated on February 13, 2006 under the laws of Taiwan. BioLite is in the business of developing and commercialization of new botanical drugs with application in central nervous system, autoimmunity, inflammation, hematology, and oncology. In addition, BioLite Taiwan distributes dietary supplements made from extracts of Chinese herbs and Maitake mushroom.
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In January 2017, BioLite Holding, 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 have sold their equity in BioLite Taiwan and were using the proceeds from such sales to purchase shares of Common Stock of BioLite Holding at the same price per share, resulting in their owning the same number of shares of Common Stock as they owned in the BioLite Taiwan. Upon closing of the Share Purchase/ Exchange Agreement in August 2017, BioLite Holding ultimately owns via BioLite BVI approximately 73% of BioLite Taiwan. The other shareholders who did not enter this Share Purchase/ Exchange Agreement retain their equity ownership in BioLite Taiwan.
BioKey, Inc. 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.
Accounting Treatment of the Merger
The Company adopted ASC 805, “Business Combination” to record the merger transactions of BioKey. Since the Company and BioLite Holding are the entities under Dr. Tsung-Shann Jiang’s common control, the transaction is accounted for as a restructuring transaction. All the assets and liabilities of BioLite Holding, BioLite BVI, and BioLite Taiwan were transferred to the Company at their respective carrying amounts on the closing date of the Merger. The Company has recast prior period financial statements to reflect the conveyance of BioLite Holding’s common shares as if the restructuring transaction had occurred as of the earliest date of the financial statements. All material intercompany accounts, transactions, and profits have been eliminated in consolidation. The nature of and effects on earnings per share (EPS) of nonrecurring intra-entity transactions involving long-term assets and liabilities is not required to be eliminated and EPS amounts have been recast to include the earnings (or losses) of the transferred net assets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated 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 financial statements are expressed in U.S. dollars.
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Fiscal Year
The Company changed its fiscal year from the period beginning on October 1st and ending on September 30th to the period beginning on January 1st and ending on December 31st, beginning January 1, 2018. All references herein to a fiscal year prior to December 31, 2017 refer to the twelve months ended September 30th of such year.
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 consolidated financial statements and the amount of revenues and expenses during the reporting periods. Actual results could differ materially from those results.
Inventory
Inventory consists of raw materials, work-in-process, finished goods, and merchandise. Inventories are stated at the lower of cost or market and valued on a moving weighted average cost basis. Market is determined based on net realizable value. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and incurs a charge to operations for known and anticipated inventory obsolescence.
Reclassifications
Certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.
Forward Stock Split
On March 21, 2016, the Board of Directors of the Company approved an amendment to Articles of Incorporation to effect a forward split at a ratio of 1 to 3.141 and increase the number of our authorized shares of Common Stock, par value $0.001 per share, to 360,000,000, which was effective on April 8, 2016.
Stock Reverse Split
On March 12, 2019, the Board of Directors of the Company by unanimous written consent in lieu of a meeting approved to i) effect a stock reverse split at the ratio of 1-for-18 (the “Reverse Split”) of both the authorized common stock of the Company (the “Common Stock”) and the issued and outstanding Common Stock and ii) to amend the articles of incorporation of the Company to reflect the Reverse Split. The Board approved and authorized the Reverse Split without obtaining approval of the Company’s shareholders pursuant to Section 78.207 of Nevada Revised Statutes. On May 3, 2019, the Company filed a certificate of amendment to the Company’s articles of incorporation (the “Amendment”) to effect the Reverse Split with the Secretary of State of Nevada. The Financial Industry Regulatory Authority (“FINRA”) informed the Company that the Reverse Split was effective on May 8, 2019. All shares and related financial information in this Form 10-Q reflect this 1-for-18 reverse stock split.
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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 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, inventory, 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, 2019 and December 31, 2018, the Company’s cash and cash equivalents amounted $1,035,678 and $226,688, 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 Equivalents
Restricted cash equivalents primarily consist of cash held in a reserve bank account in Taiwan. As of September 30, 2019 and December 31, 2018, the Company’s restricted cash equivalents amounted $16,122 and $16,093 respectively.
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Concentration of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments in high quality credit institutions, but these investments may be in excess of Taiwan Central Deposit Insurance Corporation and the U.S. Federal Deposit Insurance Corporation’s insurance limits. The Company does not enter into financial instruments for hedging, trading or speculative purposes.
Revenue Recognition
During the fiscal year 2018, the Company adopted Accounting Standards Codification (“ASC”), Topic 606 (ASC 606), Revenue from Contracts with Customers, using the modified retrospective method to all contracts that were not completed as of January 1, 2018, and applying the new revenue standard as an adjustment to the opening balance of accumulated deficit at the beginning of 2018 for the cumulative effect. The results for the Company’s reporting periods beginning on and after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. Based on the Company’s review of existing collaborative agreements as of January 1, 2018, the Company concluded that the adoption of the new guidance did not have a significant change on the Company’s revenue during all periods presented.
Pursuant to ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines is within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration the Company is entitled to in exchange for the goods or services the Company transfers to the customers. At inception of the contract, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
The following are examples of when the Company recognizes revenue based on the types of payments the Company receives.
Merchandise Sales — The Company recognizes net revenues from dietary supplements product sales when customers obtain control of the Company’s products, which typically occurs upon delivery to customer. Product revenues are recorded at the net sales price, or “transaction price,” which includes applicable reserves for variable consideration, including discounts, allowances, and returns.
Trade discount and allowances: The Company generally provides invoice discounts on product sales to its customers for prompt payment. The Company estimates that, based on its experience, its customers will earn these discounts and fees, and deducts the full amount of these discounts and fees from its gross product revenues and accounts receivable at the time such revenues are recognized.
Product returns: The Company estimates the amount of each product that will be returned and deducts these estimated amounts from its gross revenues at the time the revenues are recognized. The Company’s customers have the right to return unopened packages, subject to contractual limitations.
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To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal.
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: nonrefundable 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, 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 collaboration partners.
As part of the accounting for these arrangements, the Company applies judgment to determine whether the performance obligations are distinct, and develop assumptions in determining the stand-alone selling price for each distinct performance obligation identified in the collaboration agreements. To determine the stand-alone selling price, the Company relies on assumptions which may include forecasted revenues, development timelines, reimbursement rates for R&D personnel costs, discount rates and probabilities of technical and regulatory success.
The Company had multiple deliverables under the collaborative agreements, including deliverables relating to grants of technology licenses, regulatory and clinical development, and marketing activities. Estimation of the performance periods of the Company’s deliverables requires the use of management’s judgment. Significant factors considered in management’s evaluation of the estimated performance periods include, but are not limited to, the Company’s experience in conducting clinical development, regulatory and manufacturing activities. The Company reviews the estimated duration of its performance periods under its collaborative agreements on an annually basis, and makes any appropriate adjustments on a prospective basis. Future changes in estimates of the performance period under its collaborative agreements could impact the timing of future revenue recognition.
(i) 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 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.
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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.
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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 advance from customers 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.
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Property and Equipment
Property and equipment is carried at cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Expenditures that improve the functionality of the related asset or extend the useful life are capitalized. When property and equipment is retired or otherwise disposed of, the related gain or loss is included in operating income. Leasehold improvements are depreciated on the straight-line method over the shorter of the remaining lease term or estimated useful life of the asset. Depreciation is calculated on the straight-line method, including property and equipment under capital leases, generally based on the following useful lives:
| Estimated Life in Years | ||
| Buildings and leasehold improvements | 5 ~ 50 | |
| Machinery and equipment | 5 ~ 10 | |
| Office equipment | 3 ~ 6 |
Impairment of Long-Lived Assets
The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.
Long-term Equity Investment
The Company acquires the equity investments to promote business and strategic objectives. The Company accounts for non-marketable equity and other equity investments for which the Company does not have control over the investees as:
| ● | Equity method investments when the Company has the ability to exercise significant influence, but not control, over the investee. Its proportionate share of the income or loss is recognized monthly and is recorded in gains (losses) on equity investments. |
| ● | Non-marketable cost method investments when the equity method does not apply. |
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Significant judgment is required to identify whether an impairment exists in the valuation of the Company’s non-marketable equity investments, and therefore the Company considers this a critical accounting estimate. Its yearly analysis considers both qualitative and quantitative factors that may have a significant impact on the investee’s fair value. Qualitative analysis of its investments involves understanding the financial performance and near-term prospects of the investee, changes in general market conditions in the investee’s industry or geographic area, and the management and governance structure of the investee. Quantitative assessments of the fair value of its investments are developed using the market and income approaches. The market approach includes the use of comparable financial metrics of private and public companies and recent financing rounds. The income approach includes the use of a discounted cash flow model, which requires significant estimates regarding the investees’ revenue, costs, and discount rates. The Company’s assessment of these factors in determining whether an impairment exists could change in the future due to new developments or changes in applied assumptions.
Other-Than-Temporary Impairment
The Company’s long-term equity investments are subject to a periodic impairment review. Impairments affect earnings as follows:
• Marketable equity securities include the consideration of general market conditions, the duration and extent to which the fair value is below cost, and our ability and intent to hold the investment for a sufficient period of time to allow for recovery of value in the foreseeable future. The Company also considers specific adverse conditions related to the financial health of, and the business outlook for, the investee, which may include industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in the investee’s credit rating. The Company records other-than-temporary impairments on marketable equity securities and marketable equity method investments in gains (losses) on equity investments.
• Non-marketable equity investments 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 or management of the investee; additional funding requirements; and the investee’s ability to remain in business. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred that is other than temporary and that shall be recognized even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method. A loss in value of an investment that is other than a temporary decline shall be recognized. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. The Company records other-than-temporary impairments for non-marketable cost method investments and equity method investments in gains (losses) on equity investments. Other-than-temporary impairments of equity investments were $0 for the three months and nine months ended September 30, 2019 and 2018, respectively.
Goodwill
The Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. In testing goodwill for impairment, the Company may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that goodwill impairment is more likely than not, the Company performs a two-step impairment test. The Company tests goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting units. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. The Company estimates the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions.
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The Company completed the required testing of goodwill for impairment as of September 30, 2019, and determined that goodwill was impaired because of the current financial condition of the Company and the Company’s inability to generate future operating income without substantial sales volume increases, which are highly uncertain. Furthermore, the Company anticipates future cash flows indicate that the recoverability of goodwill is not reasonably assured.
Research and Development Expenses
The Company accounts for the cost of using licensing rights in research and development cost according to ASC Topic 730-10-25-1. This guidance provides that absent alternative future uses the acquisition of product rights to be used in research and development activities must be charged to research and development expenses when incurred.
For CDMO business unit, the Company accounts for R&D costs in accordance with Accounting Standards Codification (“ASC”) 730, Research and Development (“ASC 730”). Research and development expenses are charged to expense as incurred unless there is an alternative future use in other research and development projects or otherwise. Research and development expenses are comprised of costs incurred in performing research and development activities, including personnel-related costs, facilities-related overhead, and outside contracted services including clinical trial costs, manufacturing and process development costs for both clinical and preclinical materials, research costs, and other consulting services. Non-refundable advance payment for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. In instances where the Company enters into agreements with third parties to provide research and development services, costs are expensed as services are performed.
Post-retirement and post-employment benefits
The Company’s subsidiaries in Taiwan adopted the government mandated defined contribution plan pursuant to the Labor Pension Act (the “Act”) in Taiwan. Such labor regulations require that the rate of contribution made by an employer to the Labor Pension Fund per month shall not be less than 6% of the worker’s monthly salaries. Pursuant to the Act, the Company makes monthly contribution equal to 6% of employees’ salaries to the employees’ pension fund. The Company has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $3,646 and $4,806 for the three months ended September 30, 2019 and 2018, respectively. The total amounts for such employee benefits, which were expensed as incurred, were $12,365 and $14,827 for the nine months ended September 30, 2019 and 2018, respectively. Other than the above, the Company does not provide any other post-retirement or post-employment benefits.
Stock-based Compensation
The Company measures expense associated with all employee stock-based compensation awards using a fair value method and recognizes such expense in the 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 for the three months and nine months ended September 30, 2019 and 2018.
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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 $5,737 and $7,575 for the three months ended September 30, 2019 and 2018, respectively. Total non-employee stock-based compensation expenses were $22,808 and $21,075 for the nine months ended September 30, 2019 and 2018, respectively.
Beneficial Conversion Feature
From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of the warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.
Income Taxes
The Company accounts for income taxes using the asset and liability approach which allows the recognition and measurement of deferred tax assets to be based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will expire before the Company is able to realize their benefits, or future deductibility is uncertain.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigations based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefits recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer satisfied. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the year incurred. No significant penalty or interest relating to income taxes has been incurred for the nine months ended September 30, 2019 and 2018. GAAP also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transition.
On December 22, 2017, the SEC issued Staff Accounting Bulletin (“SAB 118”), which provides guidance on accounting for tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate to be included in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provision of the tax laws that were in effect immediately before the enactment of the Tax Act. While the Company is able to make reasonable estimates of the impact of the reduction in corporate rate and the deemed repatriation transition tax, the final impact of the Tax Act may differ from these estimates, due to, among other things, changes in our interpretations and assumptions, additional guidance that may be issued by the I.R.S., and actions the Company may take. The Company is continuing to gather additional information to determine the final impact.
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Valuation of Deferred Tax Assets
A valuation allowance is recorded to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized. In assessing the need for the valuation allowance, management considers, among other things, projections of future taxable income and ongoing prudent and feasible tax planning strategies. If the Company determines that sufficient negative evidence exists, then it will consider recording a valuation allowance against a portion or all of the deferred tax assets in that jurisdiction. If, after recording a valuation allowance, the Company’s projections of future taxable income and other positive evidence considered in evaluating the need for a valuation allowance prove, with the benefit of hindsight, to be inaccurate, it could prove to be more difficult to support the realization of its deferred tax assets. As a result, an additional valuation allowance could be required, which would have an adverse impact on its effective income tax rate and results. Conversely, if, after recording a valuation allowance, the Company determines that sufficient positive evidence exists in the jurisdiction in which the valuation allowance was recorded, it may reverse a portion or all of the valuation allowance in that jurisdiction. In such situations, the adjustment made to the deferred tax asset would have a favorable impact on its effective income tax rate and results in the period such determination was made.
Loss Per Share of Common Stock
The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share”. Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive. Diluted earnings per share excludes all dilutive potential shares if their effect is anti-dilutive.
Commitments and Contingencies
The Company has adopted ASC Topic 450 “Contingencies” subtopic 20, in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available before financial statements are issued or are available to be issued indicates that it is probable that an assets had been impaired or a liability had been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.
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Foreign-currency Transactions
For the Company’s subsidiaries in Taiwan, the foreign-currency transactions are recorded in New Taiwan dollars (“NTD”) at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under the Statements of Stockholders’ Equity (Deficit).
Translation Adjustment
The accounts of the Company’s subsidiaries in Taiwan were maintained, and their financial statements were expressed, in New Taiwan Dollar (“NT$”). Such financial statements were translated into U.S. Dollars (“$” or “USD”) in accordance ASC 830, “Foreign Currency Matters”, with the NT$ as the functional currency. According to the Statement, all assets and liabilities are translated at the current exchange rate, stockholder’s deficit are translated at the historical rates and income statement items are translated at an average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income (loss) as a component of stockholders’ equity (deficit).
Recent Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (“Topic 820”): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The ASU modifies the disclosure requirements in Topic 820, Fair Value Measurement, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019. The Company is currently evaluating the effect, if any, that the ASU 2018-13 will have on its consolidated financial statements.
3. GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred losses since its inception resulting in an accumulated deficit of $14,773,552 and $12,209,446 as of September 30, 2019 and December 31, 2018, respectively, and incurred net loss of $2,817,454 and $2,136,962 for the nine months ended September 30, 2019 and 2018, respectively. The Company also had working capital deficient of $4,170,357 and $10,421,310 at September 30, 2019 and December 31, 2018, respectively. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company upon signing of that agreement.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its equity securities (2) short-term and long-term borrowings from banks and third-parties, and (3) short-term borrowings from stockholders or other related party(ies) when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.
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4. COLLABORATIVE AGREEMENTS
Collaborative agreements with BHK
(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, 2019 and 2018, the Company has not earned the royalty under the BHK Co-Development Agreement.
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(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 $1.6 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 $1.60 million, BioLite Taiwan is entitled to receive 50% of the future net licensing income or net sales profit. As of September 30, 2019 and 2018, 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, American BriVision Corporation 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 11). Pursuant to Co-Dev Agreement, BriVision and Rgene agreed to co-develop and commercialize certain products that are included in the Sixth Product as defined in the Addendum. Under the terms of the Co-Dev Agreement, Rgene should 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. Besides of $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 cost 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 September 30, 2017. During the year ended December 31, 2017, the Company has 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 $1.60 per share), for an aggregate number of 1,530,000 shares, which accounted for equity method long-term investment as of December 31, 2018. During the year ended December 31, 2018, the Company has recognized investment loss of $549. On December 31, 2018, the Company has 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. However, all projects that have been initiated and scheduled will be continuously managed and supported by the Company and Rgene.
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Collaborative agreement with BioFirst Corporation, a related party
On July 24, 2017, American BriVision Corporation 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 11).
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 September 30, 2017.
On June 30, 2019, BriVision entered into a Stock Purchase Agreement (the “Purchase Agreement”) with BioFirst Corporation (“BioFirst”). Pursuant to the Purchase Agreement, the Company issued 428,571 shares of the Company’s common stock (the “Shares”) 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 Stock Purchase Agreement (the “Purchase Agreement”) with BioFirst Corporation (“BioFirst”). Pursuant to the Purchase Agreement, the Company issued 414,702 shares of the Company’s common stock (the “Shares”) to BioFirst in consideration for $2,902,911 owed by the Company to BioFirst (the “Total Payment”) in connection with a sunk payments that were due to related party prior to the conversion.
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5. INVENTORY
Inventory consists of the following:
| September 30, 2019 | December 31, 2018 | |||||||
| (Unaudited) | ||||||||
| Merchandise | $ | - | $ | 1,318 | ||||
| Finished goods | 91,341 | 100,736 | ||||||
| Work-in-process | 19,937 | 20,243 | ||||||
| Raw materials | 55,835 | 56,691 | ||||||
| Allowance for inventory valuation and obsolescence loss | (167,113 | ) | (177,670 | ) | ||||
| Inventory, net | $ | - | $ | 1,318 | ||||
6. PROPERTY AND EQUIPMENT
Property and equipment as of September 30, 2019 and December 31, 2018 are summarized as follows:
September 30, | December 31, 2018 | |||||||
| (UNAUDITED) | ||||||||
| Land | $ | 357,927 | $ | 363,416 | ||||
| Buildings and leasehold improvements | 2,220,943 | 290,403 | ||||||
| Machinery and equipment | 962,296 | 87,356 | ||||||
| Office equipment | 193,220 | 21,292 | ||||||
| Subtotal | 3,734,386 | 762,467 | ||||||
| Less: accumulated depreciation | (3,219,937 | ) | (252,401 | ) | ||||
| Property and equipment, net | $ | 514,449 | $ | 510,066 | ||||
Depreciation expenses were $14,262 and $10,569 for the three months ended September 30, 2019 and 2018, respectively. Depreciation expenses were $43,893 and $33,240 for the nine months ended September 30, 2019 and 2018, respectively.
7. LONG-TERM INVESTMENTS
| (1) | The ownership percentages of each investee are listed as follows: |
| Ownership percentage | ||||||||||
| September 30, | December 31, | Accounting | ||||||||
| Name of related party | 2019 | 2018 | treatments | |||||||
| Braingenesis Biotechnology Co., Ltd. | 0.17 | % | 0.17 | % | Cost Method | |||||
| Genepharm Biotech Corporation | 0.72 | % | 0.72 | % | Cost Method | |||||
| BioHopeKing Corporation | 9.71 | % | 7.13 | % | Cost Method | |||||
| BioFirst Corporation | 16.14 | % | 15.84 | % | Equity Method | |||||
| Rgene Corporation | 31.63 | % | 31.62 | % | Equity Method | |||||
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| (2) | The extent the investee relies on the company for its business are summarized as follows: |
| Name of related party | 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 | |
| BioFirst Corporation | Loaned from the investee and provides research and development support service | |
| Rgene Corporation | Collaborating with the Company to develop and commercialize drugs |
| (3) | Long-term investment mainly consists of the following: |
| September 30, 2019 | December 31, 2018 | |||||||
| Non-marketable Cost Method Investments, net | (Unaudited) | |||||||
| Braingenesis Biotechnology Co., Ltd. | $ | 7,213 | $ | 7,213 | ||||
| Genepharm Biotech Corporation | 22,021 | 22,021 | ||||||
| BioHopeKing Corporation | 1,926,067 | 1,956,429 | ||||||
| Sub total | 1,955,301 | 1,985,663 | ||||||
| Equity Method Investments, net | ||||||||
| BioFirst Corporation | 1,315,109 | 1,502,506 | ||||||
| Rgene Corporation | - | - | ||||||
| Total | $ | 3,270,410 | $ | 3,488,169 | ||||
| (a) | BioFirst Corporation (the “BioFirst): |
The Company holds an equity interest in BioFirst Corporation, (the “BioFirst”), 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, 2019 and December 31, 2018, the Company owns 16.14% and 15.84% common stock shares of BioFirst, respectively.
Summarized financial information for the Company's equity method investee, BioFirst, is as follows:
Balance Sheet
| September 30, 2019 | December 31, 2018 | |||||||
| (Unaudited) | ||||||||
| Current Assets | $ | 1,239,738 | $ | 7,551,898 | ||||
| Noncurrent Assets | 7,243,928 | 1,608,460 | ||||||
| Current Liabilities | 1,903,098 | 1,648,206 | ||||||
| Noncurrent Liabilities | 25,880 | - | ||||||
| Shareholders' Equity | 6,554,688 | 7,512,152 | ||||||
Statement of operation
| Nine Months Ended September 30, | ||||||||
| 2019 | 2018 | |||||||
| (Unaudited) | ||||||||
| Net sales | $ | 32,235 | $ | 33,304 | ||||
| Gross profit | 5,048 | 6,590 | ||||||
| Net loss | (842,838 | ) | (766,425 | ) | ||||
| Share of losses from investments accounted for using the equity method | (182,113 | ) | (164,649 | ) | ||||
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| (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 Company. 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 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, 2019 and December 31, 2018, the Company owns 31.63% and 31.62% Common Stock shares of Rgene, respectively.
Summarized financial information for the Company’s equity method investee, Rgene, is as follows:
Balance Sheets
September
30, | December 31, 2018 | |||||||
| (Unaudited) | ||||||||
| Current Assets | $ | 29,869 | $ | 98,168 | ||||
| Noncurrent Assets | 93,031 | 14,779 | ||||||
| Current Liabilities | 324,694 | 261,685 | ||||||
| Noncurrent Liabilities | 4,565 | - | ||||||
| Shareholders’ Equity (Deficit) | (206,359 | ) | (148,738 | ) | ||||
Statement of operations
| Nine Months Ended September 30, | ||||||||
| 2019 | 2018 | |||||||
| (Unaudited) | ||||||||
| Net sales | $ | - | $ | - | ||||
| Gross Profit | - | - | ||||||
| Net loss | (59,717 | ) | (191,534 | ) | ||||
| Share of loss from investments accounted for using the equity method | - | N/A | ||||||
| (4) | Disposition of long-term investment |
During the year ended December 31, 2018, the Company sold 552,000 shares of common stock of BioHopeKing Corporation (the “BHK”) at prices ranging from NT$25, equivalent $0.82, to NT$32, equivalent $1.05, to two directors of BHK and 25 individuals. As a result of the transactions, the Company recognized investment loss of $395,476 for the same period.
On October 15, 2018 and November 2, 2018, the Company subsequently purchased an aggregate of 200,000 and 366,200 shares of common stock of BHK at NT$10, equivalent to $0.33, and NT$50, equivalent $1.64, from one of directors of BHK and eleven shareholders of BHK, respectively. The percentage of ownership accordingly increased to 7.13% as of September 30, 2019 and December 31, 2018.
| (5) | Losses on Equity Investments |
The components of losses on equity investments for each period were as follows:
| Nine Months Ended September 30, | ||||||||
| 2019 | 2018 | |||||||
| (Unaudited) | ||||||||
| Share of equity method investee losses | $ | (182,113 | ) | $ | (164,649 | ) | ||
| Impairments | - | - | ||||||
| Total losses on equity investments | $ | (182,113 | ) | $ | (164,649 | ) | ||
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8. CONVERTIBLE NOTES PAYABLE
On May 9, 2018, the Company issued an eighteen-month term unsecured convertible promissory note (the “Yu and Wei Note”) in an aggregate principal amount of $300,000 to Guoliang Yu and Yingfei Wei Family Trust (the “Yu and Wei”), pursuant to which the Company received $300,000. The Yu and Wei Note bears interest at 8% per annum. The Company shall pay to the Yu and Wei an amount in cash representing all outstanding principal and accrued and unpaid interest on the Eighteenth (18) month anniversary of the issuance date of the Yu and Wei Note, which is on November 8, 2019. In the event that the Company raises gross proceeds from the sale of its common stock of at least $5,000,000 (an “Equity Offering”) then within five days of the closing for such offering, the Company must repay the outstanding amount of this Yu and Wei Note. At any time from the date hereof until this Yu and Wei Note has been satisfied, the Yu and Wei may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company’s common stock at a conversion price (the “Conversion Price”) equal to the lower of (i) $2.00 per share (the “Fixed Conversion Price”), subject to adjustment or (ii) 80% of the per share offering price (the “Alternative Conversion Price”) of any completed equity offering of the Company in an amount exceeding $500,000 that occurs when any part of the Yu and Wei Note is outstanding, subject to adjustments set forth in the Yu and Wei Note. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the Yu and Wei Note as of September 30, 2019 and December 31, 2018.
On June 27, 2018, the Company issued an eighteen-month term unsecured convertible promissory note (the “Keypoint Note”) in the aggregate principal amount of $250,000 to Keypoint Technology Ltd. (“Keypoint”), a related party, pursuant to which the Company received $250,000. The Keypoint Note bears interest at 8% per annum. The Company shall pay to the Keypoint an amount in cash representing all outstanding principal and accrued and unpaid interest on the Eighteenth (18) month anniversary of the issuance date of the Keypoint Note, which is on December 26, 2019. In the event that the Company raises gross proceeds from the sale of its common stock of at least $5,000,000 (an “Equity Offering”) then within five days of the closing for such offering, the Company must repay the outstanding amount of this Keypoint Note. At any time from the date hereof until this Keypoint Note has been satisfied, Keypoint may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company’s common stock at a conversion price (the “Conversion Price”) equal to the lower of (i) $2.00 per share (the “Fixed Conversion Price”), subject to adjustment or (ii) 80% of the per share offering price (the “Alternative Conversion Price”) of any completed equity offering of the Company in an amount exceeding $500,000 that occurs when any part of the Keypoint Note is outstanding, subject to adjustments set forth in the Keypoint Note. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the Keypoint Note as of September 30, 2019 and December 31, 2018.
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On August 25, 2018, the Company issued an eighteen-month term unsecured convertible promissory note (the “Odaira Note”) in the aggregate principal amount of $250,000 to the Company’s director, Yoshinobu Odaira. (“Odaira), pursuant to which the Company received $250,000 on November 29, 2018. The Odaira Note bears interest at 8% per annum. The Company shall pay to the Odaira an amount in cash representing all outstanding principal and accrued and unpaid interest on the Eighteenth (18) month anniversary of the issuance date of the Odaira Note, which is on February 24, 2020. In the event that the Company raises gross proceeds from the sale of its common stock of at least $5,000,000 (an “Equity Offering”) then within five days of the closing for such offering, the Company must repay the outstanding amount of this Odaira Note. At any time from the date hereof until this Odaira Note has been satisfied, Odaira may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company’s common stock at a conversion price (the “Conversion Price”) equal to the lower of (i) $2.00 per share (the “Fixed Conversion Price”), subject to adjustment or (ii) 80% of the per share offering price (the “Alternative Conversion Price”) of any completed equity offering of the Company in an amount exceeding $500,000 that occurs when any part of the Odaira Note is outstanding, subject to adjustments set forth in the Odaira Note. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the Odaira Note as of September 30, 2019 and December 31, 2018.
On May 30, 2019 and July 11, 2019, the Company issued 2 twelve-month term unsecured convertible promissory notes (the “Kuo Note”) in an aggregate principal amount of $250,000 to Kuo Sheng Lung (the “Kuo”), pursuant to which the Company received $160,000 on May 30, 2019 and $90,000 on July 11, 2019. The Kuo Note bears interest at 20% per annum. The Company shall pay to the Kuo an amount in cash representing all outstanding principal and accrued and unpaid interest on the Twelve (12) month anniversary of the issuance date of the Kuo Note, which is on May 29, 2020 and July 10, 2020. At any time from the date hereof until this Kuo Note has been satisfied, the kuo may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company’s common stock at a conversion price (the “Conversion Price”) equal to the lower of (i) $.50 per share (the “Fixed Conversion Price”), subject to adjustment, or (ii) 70% of the per share offering price (the “Alternative Conversion Price”) of the completed public equity offering of the Company in an amount exceeding $10,000,000 as stated on the registration statement on a Form S-1 filed with the Securities and Exchange Commission on November 14, 2018 (the “Public Offering”), as amended from time to time. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the Kuo Note as of September 30, 2019.
On July 10, 2019, the Company issued a twelve-month term unsecured convertible promissory note (the “NEA Note”) in an aggregate principal amount of $250,000 to New Eastern Asia (the “NEA”), pursuant to which the Company received $250,000 on July 10, 2019. The NEA Note bears interest at 20% per annum. The Company shall pay to the NEA an amount in cash representing all outstanding principal and accrued and unpaid interest on the Twelve (12) month anniversary of the issuance date of the NEA Note, which is on July 9, 2020. At any time from the date hereof until this NEA Note has been satisfied, the NEA may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company’s common stock at a conversion price (the “Conversion Price”) equal to the lower of (i) $.50 per share (the “Fixed Conversion Price”), subject to adjustment, or (ii) 70% of the per share offering price (the “Alternative Conversion Price”) of the completed public equity offering of the Company in an amount exceeding $10,000,000 as stated on the registration statement on a Form S-1 filed with the Securities and Exchange Commission on November 14, 2018 (the “Public Offering”), as amended from time to time. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the NEA Note as of September 30, 2019.
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On August 28, 2019, the Company issued a twelve-month term unsecured convertible promissory note (the “KLS Note”) in an aggregate principal amount of $200,000 to Kuo Li Shen (the “KLS”), pursuant to which the Company received $200,000 on August 28, 2019. The KLS Note bears interest at 20% per annum. The Company shall pay to the KLS an amount in cash representing all outstanding principal and accrued and unpaid interest on the Twelve (12) month anniversary of the issuance date of the KLS Note, which is on August 27, 2020. At any time from the date hereof until this KLS Note has been satisfied, the KLS may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company’s common stock at a conversion price (the “Conversion Price”) equal to the lower of (i) $.50 per share (the “Fixed Conversion Price”), subject to adjustment, or (ii) 70% of the per share offering price (the “Alternative Conversion Price”) of the completed public equity offering of the Company in an amount exceeding $10,000,000 as stated on the registration statement on a Form S-1 filed with the Securities and Exchange Commission on November 14, 2018 (the “Public Offering”), as amended from time to time. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the KLS Note as of September 30, 2019.
On September 4, 2019, the Company issued 3 twelve-month term unsecured convertible promissory note (the “C.L.L. Note”) in an aggregate principal amount of $257,500 to Chang Ping Shan, Lin Shan Tyan, and Liu Ching Hsuan (the “C.L.L.”), pursuant to which the Company received $257,500 on Sept 4, 2019. The C.L.L. Note bears interest at 20% per annum. The Company shall pay to the C.L.L. an amount in cash representing all outstanding principal and accrued and unpaid interest on the Twelve (12) month anniversary of the issuance date of the C.L.L. Note, which is on Sept 3, 2020. At any time from the date hereof until this C.L.L. Note has been satisfied, the C.L.L. may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company’s common stock at a conversion price (the “Conversion Price”) equal to the lower of (i) $.50 per share (the “Fixed Conversion Price”), subject to adjustment, or (ii) 70% of the per share offering price (the “Alternative Conversion Price”) of the completed public equity offering of the Company in an amount exceeding $10,000,000 as stated on the registration statement on a Form S-1 filed with the Securities and Exchange Commission on November 14, 2018 (the “Public Offering”), as amended from time to time. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the C.L.L. Note as of September 30, 2019.
As of September 30, 2019 and December 31, 2018, the aggregate carrying values of the convertible debentures were $1,757,500 and $800,000, respectively; and accrued convertible interest was $109,106 and $27,467, respectively.
Total interest expenses in connection with the above convertible notes payable were $18,755 and $3,567 for the three months ended September 30, 2019 and 2018, respectively. Total interest expenses in connection with the above convertible notes payable were $53,510 and $7,134 for the nine months ended September 30, 2019 and 2018, respectively.
9. BANK LOANS
| (1) | Short-term bank loan consists of the following: |
| September 30, | December 31, | |||||||
| 2019 | 2018 | |||||||
| Cathay United Bank | $ | 241,500 | $ | 245,250 | ||||
| CTBC Bank | 644,000 | 654,000 | ||||||
| Cathay Bank | 1,000,000 | - | ||||||
| Total | $ | 1,885,500 | $ | 899,250 | ||||
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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 an amount of NT$7,500,000, equivalent to $241,500. The term started June 28, 2016 with maturity date at June 28, 2017. The loan balance bears interest at a floating rate of prime rate plus 1.15%. The prime rate is based on term deposit saving interest rate of Cathay United Bank. On September 6, 2017, BioLite Taiwan extended the Cathay United Loan Agreement for one year, which was due on September 6, 2018, with the principal amount of NT$7,500,000, equivalent to $241,500. On October 1, 2018, BioLite Taiwan extended the Cathay United Loan Agreement with the same principal amount of NT$7,500,000, equivalent to $241,857 for one year, which is due on September 6, 2019. As of September 30, 2019 and December 31, 2018, the effective interest rates per annum were 2.22%. 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 $1,351 and $1,402 for the three months ended September 30, 2019 and 2018, respectively. Interest expenses were $4,025 and $4,175 for the nine months ended September 30, 2019 and 2018, respectively.
CTBC Bank
On June 12, 2017 and July 19, 2017, BioLite Taiwan and CTBC Bank entered into short-term saving secured bank loan agreements (the “CTBC Loan Agreements”) in an amount of NT$10,000,000, equivalent to $322,000, and NT$10,000,000, equivalent to $322,000, respectively. Both two loans with the same maturity date at January 19, 2018. In February 2018, BioLite Taiwan combined two loans and extended the loan contract with CTBC for one year. On January 18, 2019, BioLite Taiwan and CTBC Bank agreed to extend the loan with a new maturity date, which is July 18, 2019. The loan balances bear interest at a fixed rate of 1.63% per annum. The loan is secured by the money deposited in a savings account with the CTBC Bank. This loan is also personal guaranteed by the Company’s chairman and BioFirst.
Interest expenses were $2,646 and $2,297 for the three months ended September 30, 2019 and 2018, respectively.
Interest expenses were $7,879 and $8,270 for the nine months ended September 30, 2019 and 2018, respectively.
Cathay Bank
On January 21, 2019, the Company received a loan in the amount of $500,000 from Cathay Bank (the “Bank”) pursuant to a business loan agreement (the “Loan Agreement”) entered by and between the Company and Bank on January 8, 2019 and a promissory note (the “Note”) executed by the Company on the same day. The Loan Agreement provides for a revolving line of credit in the principal amount of $1,000,000 with a maturity date (the “Maturity Date”) of January 1, 2020. The Note executed in connection with the Loan Agreement bears an interest rate (the “Regular Interest Rate”) equal to the sum of one percent (1%) and the prime rate as published in the Wall Street Journal (the “Index”) and the accrued interest shall become payable each month from February 1, 2019. Pursuant to the Note, the Company shall pay the entire outstanding principal plus accrued unpaid interest on the Maturity Date and may prepay portion or all of the Note before the Maturity Date without penalty. If the Company defaults on the Note, the default interest rate shall become five percent (5%) plus the Regular Interest Rate. After the completion of Merger, the Company had updated relevant documents with the state of California and is working with the Bank to revise its internal records and reviewing the Company’s request for loan extension.
In connection with the Note and Loan Agreement, on January 8, 2019, each of Dr. Tsung Shann Jiang and Dr. George Lee, executed a commercial guaranty (the “Guaranty”) to guaranty the loans for the Company pursuant to the Loan Agreement and Note, severally and individually, in the amount not exceeding $500,000 each until the entire Note plus interest are fully paid and satisfied. Dr. Tsung Shann Jiang is the Chairman and Chief Executive Officer of BioLite Holding, Inc. and Dr. George Lee serves as the Chairman of the board of directors of BioKey, Inc, which became a wholly-owned subsidiaries of the Company effective by operation of law on or about February 5, 2019.
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In addition, on January 8, 2019, each of the Company and BriVision, a wholly-owned subsidiary of the Company, signed a commercial security agreement (the “Security Agreement”) to secure the loans under the Loan Agreement and the Note. Pursuant to the Security Agreements, each of the Company and BriVision (each, a “Grantor”, and collectively, the “Grantors”) granted security interest in the collaterals as defined therein, comprised of almost all of the assets of each Grantor, to secure such loans for the benefit of the Bank.
Interest expenses were $16,899 and $0 for the three months ended September 30, 2019 and 2018, respectively.
Interest expenses were $42,632 and $0 for the nine months ended September 30, 2019 and 2018, respectively.
| (2) | Long-term bank loan consists of the following: |
| September 30, | December 31, | |||||||
| 2019 | 2018 | |||||||
| Cathay United Bank | $ | 22,547 | $ | 55,092 | ||||
| Less: current portion of long-term bank loan | (22,547 | ) | (39,835 | ) | ||||
| Total | $ | - | $ | 15,257 | ||||
On April 30, 2010, BioLite Taiwan entered a seven-year bank loan of NT$8,900,000, equivalent to $288,360, with Cathay United Bank. The term started April 30, 2010 with maturity date at April 30, 2017. On April 30, 2017, BioLite Taiwan extended the original loan agreement for additional three years with the new maturity date at April 30, 2020. The loan balance bears interest at a floating rate of prime rate plus variable rates from 0.77% to 1.17%. The prime rate is based on term deposit saving interest rate of Cathay United Bank. As of June 30, 2019 and 2018, the actual interest rates per annum were 2.24%. 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 $163 and $409 for the three months ended September 30, 2019 and 2018, respectively.
Interest expenses were $745 and $1,375 for the nine months ended September 30, 2019 and 2018, respectively.
NOTE 10. NOTES PAYABLE
On November 27, 2017, BioLite Taiwan and Cheng-Chi International Co., Ltd., a Taiwan company, entered into a promissory note for borrowing an aggregate amount of NT$6,000,000, equivalent to $196,200, for the period from November 27, 2017 to January 11, 2018. The principal of promissory note bore interest at 12% per annum. This promissory note was secured by 700,000 Common Stock shares of ABVC and was also personal guaranteed by the Chairman of BioLite Taiwan. On January 11, 2018, the principal and accrued interest totaling NT$6,090,000, equivalent to $199,143, had been paid in full.
On March 27, 2018, BioLite Taiwan and two individuals entered into a promissory note, (the “Hsu and Chow Promissory Note”), for borrowing an aggregate amount of NT$4,660,000, equivalent to $150,052, for the period from March 27, 2018 to June 26, 2018. On September 26, 2018, BioLite Taiwan extended the original loan agreement through December 26, 2018. On Sept 26, 2019, BioLite Taiwan renewed and amended the contract with the “Hsu” only and extend the maturity date to Dec 26, 2019. The principal of the Hsu new Promissory Note bears interest at 13.6224% per annum. This Note was secured by common stock shares of ABVC and was also personal guaranteed by the Chairman of BioLite Taiwan. Interest expense was $5,112 and $2,911 for the three months ended September 30, 2019 and 2018, respectively. Interest expense was $15,364 and $7,629 for the nine months ended September 30, 2019 and 2018, respectively.
As of September 30, 2019, BioLite Taiwan also entered an unsecured loan agreement bearing interest at fixed rates at 12% per annum of NT$3,000,000, equivalent to $96,600, for working capital purpose. As of the date of this report, BioLite Taiwan is still in discussion with the individual with respect to the terms of the unsecured loans. Interest expense was $2,899 and $3,006 for the three months ended September 30, 2019 and 2018, respectively. Interest expense was $8,696 and $7,014 for the nine months ended September 30, 2019 and 2018, respectively.
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11. 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 | |
| Yuangene Corporation (the “Yuangene”) | Controlling beneficiary shareholder of the Company | |
| AsiaGene Corporation (the “AsiaGene”) | Shareholder; entity controlled by controlling beneficiary shareholder of Yuangene | |
| Eugene Jiang | Former President and Chairman | |
| Keypoint Technology Ltd. (the “Keypoint’) | The Chairman of Keypoint is Eugene Jiang’s mother. | |
| Lion Arts Promotion Inc. (the “Lion Arts”) | Shareholder of the Company | |
| Yoshinobu Odaira (the “Odaira”) | Director of the Company | |
| GenePharm Inc. (the “GenePharm”) | Mr. George Lee, the Director and Chairman of Biokey, is the Chairman of GenePharm. | |
| Euro-Asia Investment & Finance Corp Ltd. (the “Euro-Asia”) | Shareholder of the Company | |
| LBG USA, Inc. (the “LBG USA”) | 100% owned by BioFirst; Entity controlled by controlling beneficiary shareholder of YuanGene | |
| LionGene Corporation (the “LionGene”) | Shareholder of the Company; Entity controlled by controlling beneficiary shareholder of YuanGene | |
| Kimho Consultants Co., Ltd. (the “Kimho”) | Shareholder of the Company | |
| Mr. Tsung-Shann Jiang, Ms. Shu-Ling Jiang, Mr. Chang-Jen Jiang, Ms. Mei-Ling Jiang, and Mr. Eugene Jiang (collectively the “Jiangs”) |
Mr. Tsung-Shann Jiang, the controlling beneficiary shareholder of the Company and 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, is the Chairman of Keypoint, LION, and BioFirst; 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. |
Accounts receivable – related parties
Accounts receivable due from related parties consisted of the following as of the periods indicated:
| September 30, | December 31, | |||||||
| 2019 | 2018 | |||||||
| GenePharm Inc. | $ | 142,215 | $ | - | ||||
| Total | $ | 142,215 | $ | - | ||||
Due from related parties
Amount due from related parties consisted of the following as of the periods indicated:
| September 30, | December 31, | |||||||
| 2019 | 2018 | |||||||
| Rgene | $ | 34,220 | $ | 19,477 | ||||
| AsiaGene | 3,353 | - | ||||||
| BioFirst | 132,650 | - | ||||||
| BioFirst (Australia) | 40,000 | 40,000 | ||||||
| BioHopeKing Corporation | 111,780 | - | ||||||
| LBG USA | 675 | - | ||||||
| Total | $ | 322,678 | $ | 59,477 | ||||
| (1) | As of September 30, 2019 and December 31, 2018, the Company has advanced an aggregate amount of $34,220 and $19,477 to Rgene for working capital purpose. Under the terms of the loan agreement, the loan bears interest at 1% per month (or equivalent to 12% per annum) and the loan will be matured on December 31, 2019. As of September 30, 2019 and December 31, 2018, the accrued interest was $3,203 and $0, respectively. |
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| (2) | On May 27, 2019, the Company entered into loan agreements with AsiaGene for NT $100,000, respectively, to meet its working capital needs. The aggregated loan amount is NT100,000, equivalent to $3,353, Under the terms of the loan agreement, the loan bears interest at 1% per month (or equivalent to 12% per annum) and the loan will be matured on December 31, 2019. As of September 30, 2019, the accrued interest was $37. |
| (3) | On July 12, 2019, the Company entered into a loan agreement with BioFirst for a total amount of $150,000 to meet its working capital needs. As of September 30, 2019 and December 31, 2018, the loan balances of $132,650 and $0, respectively. This loan bears interest bears at 12% per annum, and is matured on December 31, 2019. Accrued interest in connection with this loan was $3,968 as of September 30, 2019. |
| (4) | On May 11, 2018, the Company and BioFirst (Australia) entered into a loan agreement for a total amount of $40,000 to meet its working capital needs. The advances bear 0% interest rate and are due on demand. As of September 30, 2019 and December 31, 2018, the outstanding loan balance were both $40,000. |
| (5) | 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. Under the term of the agreement, BioLite issued relevant development cost to BHK. As of September 30, 2019 and December 31, 2018, the other receivable from related parties was $111,780 and $0, respectively. |
| (6) | On February 27, 2019, the Company has advanced funds to LBG USA for working capital purpose. The advances bear 0% interest rate and are due on demand. As of September 30, 2019 and December 31, 2018, the outstanding advance balance was $675 and $0, respectively. |
Due to related parties
Amount due to related parties consisted of the following as of the periods indicated:
| September 30, | December 31, | |||||||
| 2019 | 2018 | |||||||
| Lion Arts Promotion Inc | $ | - | $ | 65,495 | ||||
| LionGene Corporation | - | 458,348 | ||||||
| BioFirst Corporation | 142,688 | 6,428,643 | ||||||
| AsiaGene | 24,017 | 160,000 | ||||||
| YuanGene | 9,205 | 92,690 | ||||||
| The Jiangs | 4,735 | 539,920 | ||||||
| Kimho | 7,500 | - | ||||||
| Due to shareholders | 188,315 | - | ||||||
| Total | $ | 376,460 | $ | 7,745,096 | ||||
| (1) | In September, 2018, BioLite Taiwan has borrowed an aggregate amount of NT$2,950,000, equivalent to $94,990, from Lion Arts for working capital purpose. These loans bear interest at fixed rates at 12% per annum with various maturity dates through April 14, 2020. On August 1, 2019, the Company entered into a Conversion Agreements to convert all of the remaining balance of $97,864 to 13,981 shares of the Company’s common stock at a conversion price of $7.00 per share. |
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| (2) | In November 2018, BioLite Taiwan has borrowed an aggregate amount of NT$13,295,000, equivalent to $430,817 from LionGene for working capital purpose. The advances bear 0% interest rate and are due on demand. On August 1, 2019, the Company entered into a Conversion Agreements to convert the all of remaining balance of $428,099, to 61,157 shares of the Company’s common stock at a conversion price of $7.00 per share. |
| (3) | On January 26, 2017, BriVision and BioFirst entered into a loan agreement for a total commitment (non-secured indebtedness) of $950,000 to meet its working capital needs. On February 2, 2019, BriVision and BioFirst agreed to extend the remaining loan balance of $693,000 for one year matured on February 1, 2020. Under the terms of the loan agreement, the loan bears interest at 12% per annum. On August 1, 2019, the Company entered into a Conversion Agreements to convert the remaining balance of $693,000 to 99,000 shares of the Company’s common stock at a conversion price of $7.00 per share. |
| Since 2017, BioLite Taiwan and BioFirst entered into several loan agreements for an aggregate amount of NT$19,430,000, equivalent to $625,646, to meet its working capital needs. Under the terms of the loan agreements, the loans bear interest at 12% per annum. The term of the loans has various maturity dates through May 27, 2020. On August 1, 2019, the Company entered into a Conversion Agreements to convert the remaining balance of $625,646 to 89,378 shares of the Company’s common stock at a conversion price of $7.00 per share. |
| Since 2017, BioFirst has also advanced funds to the Company for working capital purpose. The advances bear 0% interest rate and are due on demand. On August 1, 2019, the Company entered into a Conversion Agreements to convert the remaining balance of $597,128 to 85,304 shares of the Company’s common stock at a conversion price of $7.00 per share. |
On April 12, 2017, BioLite BVI and BioFirst entered into a loan agreement for NT$30,000,000, equivalent to $987,134 to meet its working capital needs. Under the terms of the loan agreement, the loan bears interest at 1% per month (or equivalent to 12% per annum). BioLite BVI and BioFirst extended the loan with the same interest rate and amount for one year. The loan will be matured on May 11, 2019. On May 12, 2019, the two parties extended the loan with the same interest rate and amount for one year. The loan will be matured on May 11, 2020. On August 1, 2019, the Company entered into a Conversion Agreements to convert the remaining balance of $987,134 to 141,020 shares of the Company’s common stock at a conversion price of $7.00 per share.
On July 24, 2017, BriVision entered into a collaborative agreement (the “BioFirst Collaborative Agreement”) with BioFirst (See Note 4). On September 25, 2017, BioFirst has delivered all research, technical, data and development data to BriVision, and the Company has recorded the full amount of $3,000,000 due to BioFirst. On June 30, 2019, the Company entered into a Stock Purchase Agreement with BioFirst, pursuant to which the Company agreed to issue 428,571 shares of the Company’s common stock to BioFirst in consideration for $3,000,000 owed by the Company to BioFirst.
| (4) | In September 2017, AsiaGene entered an investment and equity transfer agreement (the “Investment and Equity Transfer Agreement”) with Everfront Biotech Inc. (the “Everfront”), a third party. Pursuant to the Investment and Equity Transfer Agreement, Everfront agreed to purchase 2,000,000 common shares of the Company owned by AsiaGene at $1.60 per share in a total amount of $3,200,000, of which $160,000 is due before September 15, 2017 and the remaining amount of $3,040,000 is due before December 15, 2017. AsiaGene also agreed to loan the proceeds to the Company for working capital purpose. The non-secured loan bears 0% interest rate and is due on demand. On August 1, 2019, the Company entered into a Conversion Agreements to convert the remaining balance of $160,000 to 22,858 shares of the Company’s common stock at a conversion price of $7.00 per share. | |
| As of September 30, 2019, the Company also had balance due to AsiaGene of $24,017. Such advances bear no interest rate and are due on demand. |
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| (5) | On January 18, 2018, the Company and YuanGene entered into a loan agreement for a total of $50,000 to meet its working capital needs. Under the terms of the loan agreement, the loan bears interest at 1% per month (or equivalent to 12% per annum) and the Company is required to pay interest monthly to the lender. The maturity date of this loan is January 19, 2019. On January 20, 2019, the two parties extended the loan with the same interest rate and amount for one year. The loan will be matured on January 19, 2020. On August 1, 2019, the Company entered into a Conversion Agreements to convert the remaining balance of $50,000 to 7,143 shares of the Company’s common stock at a conversion price of $7.00 per share. |
| In January 2018, YuanGene Corporation has advanced an aggregate amount of $42,690 to the Company for working capital purpose. The advances bear 0% interest rate and are due on demand. On August 1, 2019, the Company entered into a Conversion Agreements to convert the remaining balance of $42,690 to 6,099 shares of the Company’s common stock at a conversion price of $7.00 per share. |
| As of September 30, 2019, the Company also had balance due to YuanGene of $9,205. Such advances bear no interest rate and are due on demand. |
| (6) | On June 27, 2018, the Company issued an eighteen-month term unsecured convertible promissory note (the “Keypoint Note”) in an aggregate principal amount of $250,000 to Keypoint Technology Ltd. (“Keypoint”) (See Note 8). The Company received $250,000 which bears interest at 8% per annum. Interest expenses in connection with this Keypoint Note were $15,000 and $0 for the nine months ended September 30, 2019 and 2018, respectively. |
| (7) | On August 25, 2018, the Company issued an eighteen-month term unsecured convertible promissory note (the “Odaira Note”) in an aggregate principal amount of $250,000 to Yoshinobu Odaira (“Odaira”) (See Note 8). The Company received $250,000 on November 29, 2018 which bears interest at 8% per annum. Interest expense in connection with this Odaira Note was $15,000 and $0 for the nine months ended September 30, 2019 and 2018, respectively. |
| (8) | Since 2018, Mr. Tsung-Shann Jiang, Mr. Chang-Jen Jiang, Ms. Shu-Ling Jiang, and Ms. Mei-Ling Jiang have entered into various loans with the Company for working capital purpose in an aggregate amount of $795,340. These loans bear interest at 12% per annum and are due on demand. On August 1, 2019, the Company entered into a Conversion Agreements to convert the remaining balance of $817,354 to 116,765 shares of the Company’s common stock at a conversion price of $7.00 per share. |
| Since 2018, the Jiangs have also advanced funds to the Company for working capital purpose in an aggregate amount of $381,375. The advances bear 0% interest rate and are due on demand. On August 4, 2019, the Company entered into a Conversion Agreements to convert the remaining balance of $381,375 to 54,482 shares of the Company’s common stock at a conversion price of $7.00 per share. | ||
| During the nine months ended September 30, 2019, the Jiangs incurred additional advances to the Company for working capital purpose. Such balance was $4,735 as of September 30, 2019. The advances bear 0% interest rate and are due on demand. |
| (9) | During the nine months ended September 30, 2019, BioFirst has also advanced funds to the Company for working capital purpose. The advances bear interest 1% per month (or equivalent to 12% per annum). As of September 30, 2019, the aggregate amount of outstanding balance and accrued interest is $142,688. Interest expenses in connection with this loan were $22,359 during the nine months ended September 30, 2019. The balance as of December 31, 2018 has been converted to the Company’s common stock pursuant to the Conversion Agreements entered on August 1, 2019. |
| (10) | On July 2, 2019, the Company entered into an agreement with Kimho, starting from September 2019 with a fixed monthly retainer of $7,500. As of September 30, 2019 and December 31, 2018, the outstanding services charge was $7,500 and $0, respectively. |
| (11) | During the 3rd Quarter of 2019, for working capital purpose, the Company entered into several agreements with our shareholders. The advances bear interest from 12% to 13.6224% per annum. As of September 30, 2019 and December 31, 2018, the aggregate amount of outstanding advance balance and accrued interest was $188,315 and $0, respectively. |
12. EQUITY
During October 2015, $350,000 of subscription receivable was fully collected from the shareholders.
On February 8, 2016, a Share Exchange Agreement (“Share Exchange Agreement”) was entered into by and among American BriVision (Holding) Corporation (the “Company”), American BriVision Corporation (“BriVision”), Euro-Asia Investment & Finance Corp. Limited, a company incorporated under the laws of Hong Kong Special Administrative Region of People’s Republic of China (“Euro-Asia”), being the owners of record of 164,387,376 (52,336,000 pre-stock split) shares of Common Stock of the Company, and the owners of record of all of the issued share capital of BriVision (the “BriVision Stock”). Pursuant to the Share Exchange Agreement, upon surrender by the BriVision Shareholders and the cancellation by BriVision of the certificates evidencing the BriVision Stock as registered in the name of each BriVision Shareholder, and pursuant to the registration of the Company in the register of members maintained by BriVision as the new holder of the BriVision Stock and the issuance of the certificates evidencing the aforementioned registration of the BriVision Stock in the name of the Company, the Company should issue 166,273,921(52,936,583 pre-stock split) shares (the “Acquisition Stock”) (subject to adjustment for fractionalized shares as set forth below) of the Company’s Common Stock to the BriVision Shareholders (or their designees), and 163,159,952 (51,945,225 pre-stock split) shares of the Company’s Common Stock owned by Euro-Asia should be cancelled and retired to treasury. The Acquisition Stock collectively should represent 79.70% of the issued and outstanding Common Stock of the Company immediately after the Closing, in exchange for the BriVision Stock, representing 100% of the issued share capital of BriVision in a reverse merger, or the Merger. Pursuant to the Merger, all of the issued and outstanding shares of BriVision’s Common Stock were converted, at an exchange ratio of 0.2536-for-1, into an aggregate of 166,273,921(52,936,583 pre-stock split) shares of Company’s Common Stock and BriVision became a wholly owned subsidiary, of the Company. The holders of Company’s Common Stock as of immediately prior to the Merger held an aggregate of 205,519,223 (65,431,144 pre-stock split) shares of Company’s Common Stock, Because of the exchange of the BriVision Stock for the Acquisition Stock (the “Share Exchange”), BriVision became a wholly owned subsidiary (the “Subsidiary”) of the Company and there was a change of control of the Company following the closing. There were no warrants, options or other equity instruments issued in connection with the share exchange agreement.
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On February 17, 2016, pursuant to the 2016 Equity Incentive Plan (the “2016 Plan”), 157,050 (50,000 pre-stock split) shares were granted to the employees.
On March 21, 2016, the Board of Directors of the Company approved an amendment to Articles of Incorporation to effect a forward split at a ratio of 1 to 3:141 (the “Forward Stock Split”) and increase the number of our authorized shares of Common Stock, par value $0.001 per share, to 360,000,000, which was effective on April 8, 2016.
On May 6, 2016, the Company and BioLite Taiwan agreed to amend the BioLite Collaborative Agreement, through entry into the Milestone Payment Agreement, whereby the Company has agreed to issue shares of Common Stock of the Company, at the price of $1.60 per share, for an aggregate number of 562,500 shares, as part of the Company’s first installation of payment pursuant to the Milestone Payment. The shares issuance was completed in June 2016. On August 26, 2016, the Company issued 1,468,750 shares (“Shares”) of the Company’s Common Stock, par value $0.001 (the “Offering”) to BioLite Taiwan pursuant to a certain Stock Purchase Agreement dated August 26, 2016 (the “SPA”). The Shares are exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Regulation S of the Securities Act promulgated thereunder. The purchase price per share of the Offering is $1.60. The net proceeds to the Company from the Offering are approximately $2,350,000. Pursuant to the BioLite Collaborative Agreement, BriVision should pay a total of $100,000,000 in cash or stock of the Company with equivalent value according to the milestone achieved. The agreement requires that 6.5% of total payment, $6,500,000 shall be made upon the first IND submission which was submitted in March 2016. In February 2017, the Company remitted this amount to BioLite with $650,000 in cash and $5,850,000 in the form of newly issued shares of the Company’s Common Stock, at the price of $2.0 per share, for an aggregate number of 2,925,000 shares. Upon the consummation of the restructuring transaction between the Company and BioLite on February 8, 2019, the Company’s Common Stock held by BioLite Taiwan was accounted for treasury stocks in the statement of equity (deficit).
On May 3, 2019, the Company filed a Certificate of Amendment with the Secretary of State of Nevada, which was effective May 8, 2019 upon its receipt of the written notice from Financial Industry Regulatory Authority (“FINRA”). Pursuant to the Certificate of Amendment, the Company effectuated a 1-for-18 reverse stock split of its issued and outstanding shares of common stock, $0.001 par value, whereby 318,485,252 outstanding shares of the Company’s common stock were exchanged for 17,693,625 shares of the Company’s Common Stock. All shares and related financial information in this Form 10-Q reflect this 1-for-18 reverse stock split.
On October 1, 2016, the Company entered into a consulting agreement with Kazunori Kameyama (“Kameyama”) for the provision of services related to the clinical trials and other administrative work, public relation work, capital raising, trip coordination, In consideration for providing such services, the Company agreed to indemnify the consultant in an amount of $150 per hour in cash up to $3,000 per month, and issue to Kameyama the Company’s Common Stock at $1.00 per share for any amount exceeding $3,000. The Company’s stocks shall be calculated and issued in December every year. On October 1, 2017, the Company and Kameyama agreed to extend the service period for one more year expiring on September 30, 2018. As a result, the non-employee stock-based compensation related to this consulting agreement was $28,800 and $5,400 for the years ended December 31, 2018 and 2017, respectively. On March 28, 2018, the Company issued 4,828 shares of the Company’s common stock at $1.60 per share in a total of $7,725 to Kameyama in connection with this consulting agreement.
On January 1, 2017, Euro-Asia Investment & Finance Corp Ltd. And the Company entered into a service agreement (the “Euro-Asia Agreement”) for the maintenance of the listing in the U.S. stock exchange market. During the years ended December 31, 2018 and 2017, the Company recognized non-employee stock based compensation expenses of $0 and $60,000 in connection with the terms in the Euro-Asia Agreement, respectively. On March 28, 2018, the Company issued 50,000 shares of the Company’s common stock at $1.60 per share in a total of $80,000 to Euro-Asia in connection with the Euro-Asia Agreement.
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On January 1, 2017, Kimho Consultants Co., Ltd. And the Company entered into a service agreement (the “Kimho Agreement”) for the maintenance of the listing in the U.S. stock exchange market. During the years ended December 31, 2018 and 2017, the Company recognized non-employee stock based compensation expenses of $0 and $90,000 in connection with the terms in the Kimho Agreement, respectively. On March 28, 2018, the Company issued 75,000 shares of the Company’s common stock at $1.60 per share in a total of $120,000 to Kimho in connection with the Kimho Agreement.
Pursuant to ASC 505-50-30, the transactions with the non-employees were measured based on the fair value of the equity instruments issued as the Company determined that the fair value of the equity instruments issued in a stock-based payment transaction with nonemployees was more reliably measurable than the fair value of the consideration received. The Company measured the fair value of the equity instruments in these transactions using the stock price on the date at which the commitments Kameyama, Euro-Asia, and Kimho for performance were rendered.
On March 28, 2018, the Company also issued an aggregate of 50,000 shares of the Company’s common stock at $1.60 per share for salaries in a total of $80,000 to three officers.
On February 8, 2019, after the Merger, the Company issued 74,997,546 shares to the shareholders of BioLite and 29,561,231 shares to the shareholders of BioKey.
As stated in Note 11, in August 2019, the Company entered into several Conversion Agreements to all creditors that are listed under below table of “due to related parties” in consideration for a total of $4,872,340 owed by the Company to various creditors based on outstanding loan agreements. Under the Conversion Agreements, creditor agrees to convert the amount of debt into the Company’s common stock at a price of $7.00 per share.
Amount
of Debt | Number
of Shares | |||||||
| Lion Arts Promotion Inc | 97,864 | 13,981 | ||||||
| LionGene Corporation | 428,099 | 61,157 | ||||||
| BioFirst Corporation | 2,902,911 | 414,702 | ||||||
| AsiaGene Corporationoo | 160,000 | 22,858 | ||||||
| YuanGene Corporation | 92,690 | 13,242 | ||||||
| The Jiangs | 1,190,776 | 170,111 | ||||||
| Total | $ | 4,872,340 | $ | 696,051 | ||||
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13. LOSS PER SHARE
Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the year. Diluted loss per share is computed by dividing net loss by the weighted-average number of common shares and dilutive potential common shares outstanding during nine months ended September 30, 2019 and 2018.
| For the Nine Months Ended | ||||||||
| September 30, 2019 | September 30, | |||||||
| Numerator: | ||||||||
| Net loss | $ | (2,817,454 | ) | $ | (2,136,962 | ) | ||
| Denominator: | ||||||||
| Weighted-average shares outstanding: | ||||||||
| Weighted-average shares outstanding - Basic | 17,333,902 | 11,881,657 | ||||||
| Stock options | - | |||||||
| Weighted-average shares outstanding - Diluted | 17,333,902 | 11,881,657 | ||||||
| Loss per share | ||||||||
| -Basic | $ | (0.16 | ) | $ | (0.18 | ) | ||
| -Diluted | $ | (0.16 | ) | $ | (0.18 | ) | ||
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.
14. 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. As such, the disclosures required under ASC 842 are not presented for periods before the date of adoption. For the comparative periods prior to adoption, the Company presented the disclosures which were required under ASC 840.
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. |
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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 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 as of January 1, 2019. 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.
The adoption of ASC 842 had a substantial impact on the Company’s consolidated balance sheets. The most significant impact was the recognition of the operating lease right-of-use assets and the liability for operating leases. Accordingly, adoption of this standard resulted in the recognition of operating lease right-of-use assets of $577,830 and operating lease liabilities of $598,937 comprised of $301,105 of current operating lease liabilities and $297,832 of non-current operating lease liabilities on the condensed consolidated balance sheet as of January 1, 2019. The adoption of ASC 842 also resulted in a cumulative-effect adjustment of $(21,107) to the opening balance of accumulated deficit.
In addition, the adoption of the standard did not have a material impact on the Company’s results of operations or cash flows. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in Selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur.
The Company has no finance leases. The Company’s leases primarily include various office and laboratory spaces, copy machine, and vehicles under various operating lease arrangements. The Company’s operating leases have remaining lease terms of up to approximately two years.
| ASSETS | September 30, 2019 | |||
| Operating lease right-of-use assets | $ | 357,932 | ||
| LIABILITIES | ||||
| Operating lease liabilities (current) | $ | 268,618 | ||
| Operating lease liabilities (noncurrent) | $ | 106,398 | ||
Supplemental Information
The table below presents supplemental information related to operating leases during the nine months ended September 30, 2019
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | 73,802 | ||
| Weighted average remaining lease term | 1.86 years | |||
| Weighted average discount rate | 0.55 | % |
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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 | ||||
| 2019 (excluding the nine months ended September 30, 2019) | $ | 150,605 | ||
| 2020 | 259,167 | |||
| 2021 | 42,319 | |||
| Total future minimum lease payments, undiscounted | 452,091 | |||
| Less: Imputed interest | 1,718 | |||
| Present value of future minimum lease payments | $ | 450,373 | ||
Business Combination
On February 8, 2019, the Company, BioLite Holding, Inc. (“BioLite”), BioKey, Inc. (“BioKey”), BioLite Acquisition Corp., a direct wholly-owned subsidiary of Parent (“Merger Sub 1”), and BioKey Acquisition Corp., a direct wholly-owned subsidiary of Parent (“Merger Sub 2”) (collectively referred to as the “Parties”) completed the business combination pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) dated as of January 31, 2018 where ABVC acquired BioLite and BioKey via issuing additional Common Stock of ABVC to the shareholders of BioLite and BioKey.
Pursuant to the terms of the Merger Agreement, BioLite and BioKey became two wholly-owned subsidiaries of the Company on February 8, 2019. ABVC issued an aggregate of 104,558,777 shares (prior to the reverse stock split in 2019) 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.
15. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date which the financial statements were available to be issued. All subsequent events requiring recognition as of September 30, 2019 have been incorporated into these financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”
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| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION |
The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our unaudited consolidated financial statements for the nine months ended September 30, 2019 and 2018, and notes thereto contained elsewhere in this Report, our annual report on Form 10-K for the twelve months ended December 31, 2018 and 2017, including the consolidated financial statements and notes thereto and our transition annual report on Form 10-KT for the transition period from October 1, 2017 to December 31, 2017, including the audited financial statements for the three months ended December 31, 2017 and for the twelve months ended September 30, 2017 and notes thereto. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. See “Cautionary Note Concerning Forward-Looking Statements.”
Introduction
We are a clinical stage biopharmaceutical company focused on development of new drugs and medical devices in the fields of oncology, ophthalmology and central nervous system. We operate our business through our wholly owned subsidiaries, American BriVision Corporation (“BriVision”), a Delaware corporation, with a focus on medical device development, BioLite Holding Inc. (“BioLite”), a Nevada corporation, with the key business of new drug development, and BioKey Inc. (BioKey”), a California company, a contract service organization.
The Company currently concentrates on, among other things, clinical research and development of six new drug candidates and one Class III medical device, which collectively constitute its primary business operations and research projects. BriVision was incorporated in 2015 in the State of Delaware. It currently focuses on the development of ABV-1701 Vitreous Substitute for Vitrectomy. BioLite was formed in July 2016 under the laws of Nevada. Through BioLite, we conduct clinical research and trials of six new drug candidates which were licensed from BioLite, Inc. (“BioLite Taiwan”), a company formed in Taiwan that is a subsidiary of BioLite. The six new drug candidates under our development are named as follows: ABV-1504 for the treatment of Major Depressive Disorder, ABV-1505 to treat Attention-Deficit Hyperactivity Disease, ABV-1501 for the treatment of Triple Negative Breast Cancer, ABV-1703 for the treatment of Pancreatic Cancer, ABV-1702 to treat Myelodysplastic syndromes and ABV-1601 Depression in Cancer Patients. BioKey was formed under the laws of California in November 2000. 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 I through phase III) and commercial manufacturing. It also licenses out its technologies and initiates joint research and development processes to other biotechnology, pharmaceutical, and nutraceutical companies.
As a clinical stage biopharmaceutical company, we utilize our licensed technology to (i) further the development of pharmaceutical products with focuses on oncology, ophthalmology and central nervous system indications, (ii) target patients that may potentially respond to such pharmaceutical products and (iii) obtain regulatory approvals for and commercialize such pharmaceutical products in various markets. The business model of the Company includes the following steps and stages: 1) engaging medical research institutions, such as Memorial Sloan Kettering Cancer Center (“MSKCC”) and MD Anderson Cancer Center, to coordinate clinical trials of translational medicine for Proof of Concept (“POC”) on behalf of the Company; 2) retaining ownership of the research results developed by the Company, and 3) out-licensing the research results and data to pharmaceutical companies which will further develop and commercialize the products.
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From its inception, the Company has not generated substantial revenue from its medical device and new drug development. For the nine months ended September 30, 2019, the Company generated $601,757 in revenue, mainly from the CDMO business unit.
Closing of the Merger
On January 31, 2018, the Company, BioLite, BioKey, BioLite Acquisition Corp., a Nevada company and direct wholly-owned subsidiary of Parent (“Merger Sub 1”), and BioKey Acquisition Corp., a California company and direct wholly-owned subsidiary of Parent (“Merger Sub 2”) entered into a definitive Agreement and Plan of Merger, providing for the acquisition of BioLite and BioKey by ABVC, which we refer to as the “Merger Agreement.”
On February 8, 2019 (the “Closing Date”), the Company closed the transactions contemplated under the Merger Agreement (the “Closing”), pursuant to which BioLite merged with Merger Sub 1 with BioLite as the surviving corporation, which we refer to as the “BioLite Merger,” and BioKey merged with Merger Sub 2 with BioKey as the surviving corporation, which is referred as the “BioKey Merger.” On the Closing Date, BioLite filed the Article of Merger of the BioLite Merger with the State of Nevada, pursuant to which BioLite became a wholly-owned subsidiary of the Company. On the same day, BioKey filed the Agreement of Merger of the BioKey Merger with the State of California, pursuant to which BioKey became a wholly-owned subsidiary of the Company. In addition, in accordance with the terms of the Merger Agreement and as consideration for the acquisition of BioLite and BioKey, the Company issued 1.82 shares of its common stock, par value $0.001 per share, for each share of BioLite’s common stock to each BioLite shareholder and one share of ABVC’s common stock for each share of BioKey’s capital stock to each BioKey equity holder. The Company issued an aggregate of approximately 104,558,777 shares to both BioLite shareholders and BioKey shareholders 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.
Following the Closing, the Company operates as a single entity with three relatively separate but integrated special business units (“SBU”s), which are 1) New Drug Development SBU, including the new drug pipeline products from BioLite and the patented controlled release drug delivery technology from BioKey, 2) Innovative Medical Devices SBU, currently focusing on the development of Vitargus, a new invention of a biocompatible vitreous substitute for the treatment of retinal detachment and vitreous hemorrhage, and 3) CDMO SBU, providing contract services for pharmaceutical companies in the U. S. and as abroad to develop and manufacture new drug products in BioKey’s good manufacturing practice (“GMP”) facility and prepare studies to obtain ANDAs to launch certain new pharmaceutical products in the U.S. While each of these SBUs is operated independently of one another, they report to the same management team and supervised by the board of directors (the “Board”) of the Company and share common resources and functions, including, but not limited to, administration, accounting, human resources, research and development, business development, legal, manufacturing facilities, and office and laboratory spaces. The Board has representatives from each board of directors of BioLite, BioKey and ABVC. The Board consists of the following members: Eugene Jiang, Dr. Tsang Ming Jiang, Dr. Ming-Fong Wu, Norimi Sakamoto, Yen-Hsin Chou, Dr. Tsung-Shann (T.S.) Jiang, Dr. Chang-Jen Jiang, Dr. Shin-Yu Miao, Yoshinobu Odaira, Shih-Chen Tzeng, and Dr. Hwalin Lee.
For more information about the forgoing Mergers, please refer to the current report on Form 8-K we filed on February 14, 2019.
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Common Stock Reverse Split
On March 12, 2019, the Board by unanimous written consent in lieu of a meeting approved to i) effect a stock reverse split at the ratio of 1-for-18 (the “Reverse Split”) of both the authorized common stock of the Company and the issued and outstanding common stock and ii) to amend the articles of incorporation of the Company to reflect the Reverse Split. The Board approved and authorized the Reverse Split without obtaining approval of the Company’s shareholders pursuant to Section 78.207 of Nevada Revised Statutes.
On May 3, 2019, the Company filed a certificate of amendment to the Company’s articles of incorporation (the “Amendment”) to effect the Reverse Split with the Secretary of State of the State of Nevada. The Reverse Split took effect on May 8, 2019.
Series A Convertible Preferred Stock
On June 28, 2019, the Company filed a certificate of designation (the “Series A COD”) of Series A Convertible Preferred Stock (the “Series A Stock”) with the Secretary of the State of Nevada. Pursuant to the Series A COD, the Company designated 3,500,000 shares of preferred stock as Series A Stock, par value of $0.001 per share. Subject to the laws of Nevada, the Company will pay cumulative dividends on the Series A Stock on each anniversary from the date of original issue for a period of four calendar years. The Series A Stock will rank senior to the outstanding common stock of the Company, par value $0.001 (the “Common Stock”) with respect to dividend rights, rights upon liquidation, dissolution or winding up in the amount of accrued but unpaid dividend. Holders of the Series A Stock will have the same voting rights as the Company’s Common Stock holders. Each share of Series A Stock is initially convertible at any time at the option of the holder into one share of Common Stock and automatically converts into one share of Common Stock on the four-year anniversary of its issuance.
Collaborative Agreements
Collaborative agreements with BHK
(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 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.
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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, 2019 and December 31, 2018, 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 $1.6 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 $1.60 million, BioLite Taiwan is entitled to receive 50% of the future net licensing income or net sales profit. As of September 30, 2019 and 2018, the Company has not earned the royalty under the BHK Collaborative Agreements.
On November 14, 2019, the Company issued a full clinical study report, under the U.S. Food and Drug Administration (“FDA”) and Taiwan FDA (“TFDA”) clinical protocol code of BLI-1005-002 for ABV-1504 Major Depressive Disorder Phase II study. The study was conducted by Stanford University and five major medical centers in Taiwan. PDC-1421 is the active pharmaceutical ingredient of ABV-1504. The clinical study consisted of two parts: 1) an open label, dose escalation study conducted in 12 adult patients, and 2) a double-blinded and placebo-controlled trial conducted in parallel groups across 60 adult patients. The clinical study stated that both the low and high doses of PDC-1421 were safe and well tolerated with no serious adverse events; and a greater reduction in net change in HAM-D-17 (Hamilton Depression Rating Scale-17) at week 6 was observed in the high-dose group (-10.95) compared to placebo group (-8.70). The Company is planning for the end-of-Phase II meetings with regulatory authorities to discuss path forward for Phase III pivotal trials of ABV-1504.
Co-Development agreement with Rgene Corporation, a related party
On May 26, 2017, American BriVision Corporation 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. Pursuant to Co-Dev Agreement, BriVision and Rgene agreed to co-develop and commercialize certain products that are included in the Sixth Product as defined in the Addendum. Under the terms of the Co-Dev Agreement, Rgene should 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. Besides of $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 cost 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 September 30, 2017. During the year ended December 31, 2017, the Company has 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 $1.60 per share), for an aggregate number of 1,530,000 shares, which accounted for equity method long-term investment as of December 31, 2018. During the year ended December 31, 2018, the Company has recognized investment loss of $549. On December 31, 2018, the Company has 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. However, all projects that have been initiated and scheduled will be continuously managed and supported by the Company and Rgene.
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Collaborative agreement with BioFirst Corporation, a related party
On July 24, 2017, American BriVision Corporation 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.
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. On June 30, 2019, we entered into a stock purchase agreement with BioFirst, pursuant to which BioFirst shall convert its right to receive $3,000,000 in connection with the BioFirst Collaborative Agreement to the right to receive 428,571 shares of the Company’s common stock. 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 September 30, 2017.
On June 30, 2019, BriVision entered into a Stock Purchase Agreement (the “Purchase Agreement”) with BioFirst Corporation (“BioFirst”). Pursuant to the Purchase Agreement, the Company issued 428,571 shares of the Company’s common stock (the “Shares”) 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 Aug 5, 2019, BriVision entered into a Stock Purchase Agreement (the “Purchase Agreement”) with BioFirst Corporation (“BioFirst”). Pursuant to the Purchase Agreement, the Company issued 414,702 shares of the Company’s common stock (the “Shares”) to BioFirst in consideration for $2,902,911 owed by the Company to BioFirst (the “Total Payment”) in connection with sunk payments that were due to related party prior to the conversion.
On October 15, 2019, the Company announced encouraging results from the first-in-human clinical trial (“feasibility study” or “study”) for Vitargus®. These results were first reported by Dr. Andrew Chang, the principal investigator of the feasibility study of Vitargus®, on October 11, 2019, at the Retina Subspecialty Day program of the American Academy of Ophthalmology (AAO) 2019 Annual Meeting.
Loan Agreement
On January 21, 2019, we received a loan in the amount of $500,000 from Cathay Bank (the “Bank”) pursuant to a business loan agreement (the “Loan Agreement”) entered by and between the Company and Bank on January 8, 2019 and a promissory note (the “Note”) executed by the Company on the same day. The Loan Agreement provided for a revolving line of credit in the principal amount of $1,000,000 with a maturity date (the “Maturity Date”) of January 1, 2020. The Note executed in connection with the Loan Agreement bears an interest rate (the “Regular Interest Rate”) equal to the sum of one percent (1%) and the prime rate as published in the Wall Street Journal (the “Index”). Pursuant to the Note, the Company shall pay the entire outstanding principal plus accrued unpaid interest on the Maturity Date and may prepay portion or all of the Note before the Maturity Date without penalty. If the Company defaults on the Note, the default interest rate shall become five percent (5%) plus the Regular Interest Rate.
In connection with the Note and Loan Agreement, on January 8, 2019, each of Dr. Tsung Shann Jiang and Dr. George Lee executed a commercial guaranty (the “Guaranty”) to guaranty the loans for the Company pursuant to the Loan Agreement and Note, severally and individually, in the amount not exceeding $500,000 each until the entire Note plus interest are fully paid and satisfied. Dr. Tsung Shann Jiang is a director and Chief Strategy Officer of the Company, the Chairman and Chief Executive Officer of BioLite, a subsidiary of the Company Dr. George Lee serves as the Chairman of the board of directors of BioKey, another subsidiary of the Company.
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In addition, on January 8, 2019, each of the Company and BriVision signed a commercial security agreement (the “Security Agreement”) to secure the loans under the Loan Agreement and the Note. Pursuant to the Security Agreements, each of the Company and BriVision (each, a “Grantor”, and collectively, the “Grantors”) granted security interest in the collaterals as defined therein, comprised of almost all of the assets of each Grantor, to secure such loans for the benefit of the Bank.
For more information about the forgoing description of the Loan Agreement, Note and Security Agreement, please refer to the current report on Form 8-K we filed on February 1, 2019.
Conversion of Related Party Debts
On August 1, 2019, the Company entered into conversion agreements (the “Conversion Agreement”) with each of the nine (9) related parties (the “Related Creditors”) of the Company to convert the debts owed to all of the Related Creditors in an aggregate amount of $4,246,749 to 606,681 shares (the “Conversion Shares”) of the Company’s common stock at a conversion price of $7.00 per share. Pursuant to the Conversion Agreement, each Investor shall release the Company from any debts, liabilities or obligations incurred under the respective original agreement, which is attached in each Conversion Agreement, upon receiving its respective number of Conversion Shares as set forth in the Conversion Agreement. For more information about the foregoing description of the Conversion Agreements, please refer to the current report on Form 8-K filed on August 6, 2019.
On August 4, 2019, the Company entered into a conversion agreement (the “Conversion Agreement”) with each of the four (4) related parties (the “Investors”) of the Company to convert the debts owed to all of the Investors in an aggregate amount of $625,591 to 89,370 shares (the “Conversion Shares”) of the Company’s common stock at a conversion price of $7.00 per share, which is below the closing price of its common stock at August 2, 2019, the trading day immediately before August 4, 2019. Pursuant to the Conversion Agreement, each Investor shall release the Company from any debts, liabilities, or obligations incurred under the respective original agreement, which is attached in each Conversion Agreement, upon receiving its respective number of Conversion Shares as set forth in the Conversion Agreement. For more information about the foregoing description of the Conversion Agreement, please refer to the current report on Form 8-K filed on August 4, 2019.
Securities Purchase Agreement
On August 21, 2019, the Company entered into a Securities Purchase Agreement (the “SPA”) with one accredited investor (the “Investor”). Pursuant to the SPA, on August 28, 2019, the Company sold and issued one convertible promissory note (the “Note”) in the principal amount (the “Principal Amount”) of $200,000 to the Investor and received gross proceeds of $200,000 from the Investor.
The Principal Amount and accrued and unpaid interest of the Note shall become due on August 27, 2020, the one-year anniversary from the issuance date of the Note (the “Issuance Date”). The Note bears an interest rate of twenty percent (20%) per annum and may be convertible into shares of the Company’s common stock at a conversion price, which equals to the lower of (i) $0.50 per share (subject to adjustment as provided in the Note), or (ii) 70% of the per share offering price of the completed public equity offering of the Company in an amount exceeding $10,000,000. The holder of the Note may elect to convert part or all of the outstanding balance of the Note into shares of the Company’s common stock from the Issuance Date until the maturity date of the Note. The holder of the Note shall not have the right to convert any portion of the Note to the extent that after giving effect to the conversion, the holder together with his affiliates and any person acting as a group would beneficially own in excess of 4.99% of the number of shares of common stock of the Company, issued and outstanding. For more information about the foregoing description of the SPA, please refer to the current report on Form 8-K filed on September 5, 2019.
On September 11, 2019, the Company entered into a Securities Purchase Agreement (the “SPA”) with one accredited investor (the “Investor”). Pursuant to the SPA, the Company sold one convertible promissory note (the “Note”) in the principal amount (the “Principal Amount”) of $70,000 to the Investor and received the Principal Amount from the Investor on September 11, 2019. On September 16, 2019, the Company entered into two additional SPAs with two additional accredited investors. Pursuant to the SPAs, the Company sold two Notes in the aggregate Principal Amount of $187,500 and received such Principal Amount from the two Investors. The Company intends to issue the three Notes as soon as practicable.
The Principal Amount and accrued and unpaid interest of each Note shall become due on the date that is one year from the issuance date of the Note (the “Issuance Date”). The Note bears an interest rate of twenty percent (20%) per annum and may be convertible into shares of the Company’s common stock at a conversion price, which equals to the lower of (i) $0.50 per share (subject to adjustment as provided in the Note), or (ii) 70% of the per share offering price of the completed public equity offering of the Company in an amount exceeding $10,000,000. The holder of the Note may elect to convert part or all of the outstanding balance of the Note into shares of the Company’s common stock from the Issuance Date until the maturity date of the Note. The holder of the Note shall not have the right to convert any portion of the Note to the extent that after giving effect to the conversion, the holder together with his affiliates and any person acting as a group would beneficially own in excess of 4.99% of the number of shares of common stock of the Company, issued and outstanding. For more information about the foregoing description of the SPA, please refer to the current report on Form 8-K filed on September 17, 2019.
On October 29, 2019, the Company entered into a Securities Purchase Agreement (the “SPA”) with one accredited investor (the “Investor”). Pursuant to the SPA, the Company sold one convertible promissory note (the “Note”) in the principal amount (the “Principal Amount”) of $250,000 to the Investor and received $250,000 from the Investor on October 29, 2019.
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The Principal Amount and accrued and unpaid interest of each Note shall become due on October 29, 2019. The Note bears an interest rate of twenty percent (20%) per annum and may be convertible into shares of the Company’s common stock at a conversion price, which equals to the lower of (i) $0.50 per share (subject to adjustment as provided in the Note), or (ii) 70% of the per share offering price of the completed public equity offering of the Company in an amount exceeding $10,000,000. The holder of the Note may elect to convert part or all of the outstanding balance of the Note into shares of the Company’s common stock until the maturity date of the Note. The holder of the Note shall not have the right to convert any portion of the Note to the extent that after giving effect to the conversion, the holder together with his affiliates and any person acting as a group would beneficially own in excess of 4.99% of the number of shares of common stock of the Company, issued and outstanding.
Upon the occurrence of an event of default (as defined in the Note), the entire unpaid and outstanding principal plus any accrued and unpaid interest shall be immediately due and payable. For more information about the foregoing description of the SPA, please refer to the current report on Form 8-K filed on November 1, 2019.
Operations
Our business model includes the following steps and stages: 1) engaging medical research institutions, such as Memorial Sloan Kettering Cancer Center (“MSKCC”) and MD Anderson Cancer Center, to coordinate clinical trials of translational medicine for Proof of Concept (“POC”) on behalf of the Company; 2) retaining ownership of the research results developed by the Company, and 3) out-licensing the research results and data to pharmaceutical companies who will further develop the products.
Revenue Generation
Most of our licensed products are still under development and trial stage. During the nine months ended September 30, 2019 and 2018, we generated $601,757 and $3,976 in revenues, primarily from the CDMO business unit.
Research and Development
During the nine months ended September 30, 2019 and 2018, we spent approximately $778,964 and $359,322 on research and development, respectively, which consisted primarily of research and development and payroll expenses. Such payroll expenses were settled in both cash and common stock issued by the Company.
Critical Accounting Policies and Estimates
Basis of Presentation
The accompanying consolidated 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 financial statements are expressed in U.S. dollars.
Fiscal Year
The Company changed its fiscal year from the period beginning on October 1st and ending on September 30th to the period beginning on January 1st and ending on December 31st, beginning January 1, 2018. All references herein to a fiscal year prior to December 31, 2017 refer to the twelve months ended September 30th of such year.
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 consolidated financial statements and the amount of revenues and expenses during the reporting periods. Actual results could differ materially from those results.
Inventory
Inventory consists of raw materials, work-in-process, finished goods, and merchandise. Inventories are stated at the lower of cost or market and valued on a moving weighted average cost basis. Market is determined based on net realizable value. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and incurs a charge to operations for known and anticipated inventory obsolescence.
Reclassifications
Certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.
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Forward Stock Split
On March 21, 2016, the Board of Directors of the Company approved an amendment to Articles of Incorporation to effect a forward split at a ratio of 1 to 3.141 and increase the number of our authorized shares of Common Stock, par value $0.001 per share, to 360,000,000, which was effective on April 8, 2016.
Stock Reverse Split
On March 12, 2019, the Board of Directors of the Company by unanimous written consent in lieu of a meeting approved to i) effect a stock reverse split at the ratio of 1-for-18 (the “Reverse Split”) of both the authorized common stock of the Company (the “Common Stock”) and the issued and outstanding Common Stock and ii) to amend the articles of incorporation of the Company to reflect the Reverse Split. The Board approved and authorized the Reverse Split without obtaining approval of the Company’s shareholders pursuant to Section 78.207 of Nevada Revised Statutes. On May 3, 2019, the Company filed a certificate of amendment to the Company’s articles of incorporation (the “Amendment”) to effectuate the Reverse Split with the Secretary of State of Nevada. The Financial Industry Regulatory Authority (“FINRA”) informed the Company that the Reverse Split was effective on May 8, 2019. All shares and related financial information in this Form 10-Q has reflected this 1-for-18 stock reverse split.
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 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 assets or liabilities. |
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, inventory, 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, 2019 and December 31, 2018, the Company’s cash and cash equivalents amounted $1,035,678 and $226,688, 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 Equivalents
Restricted cash equivalents primarily consist of cash held in a reserve bank account in Taiwan. As of September 30, 2019 and December 31, 2018, the Company’s restricted cash equivalents amounted $16,122 and $16,093, respectively.
Concentration of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments in high quality credit institutions, but these investments may be in excess of Taiwan Central Deposit Insurance Corporation and the U.S. Federal Deposit Insurance Corporation’s insurance limits. The Company does not enter into financial instruments for hedging, trading or speculative purposes.
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Revenue Recognition
During the fiscal year 2018, the Company adopted Accounting Standards Codification (“ASC”), Topic 606 (ASC 606), Revenue from Contracts with Customers, using the modified retrospective method to all contracts that were not completed as of January 1, 2018, and applying the new revenue standard as an adjustment to the opening balance of accumulated deficit at the beginning of 2018 for the cumulative effect. The results for the Company’s reporting periods beginning on and after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. Based on the Company’s review of existing collaborative agreements as of January 1, 2018, the Company concluded that the adoption of the new guidance did not have a significant change on the Company’s revenue during all periods presented.
Pursuant to ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines is within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration the Company is entitled to in exchange for the goods or services the Company transfers to the customers. At inception of the contract, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
The following are examples of when the Company recognizes revenue based on the types of payments the Company receives.
Merchandise Sales — The Company recognizes net revenues from dietary supplements product sales when customers obtain control of the Company’s products, which typically occurs upon delivery to customer. Product revenues are recorded at the net sales price, or “transaction price,” which includes applicable reserves for variable consideration, including discounts, allowances, and returns.
Trade discount and allowances: The Company generally provides invoice discounts on product sales to its customers for prompt payment. The Company estimates that, based on its experience, its customers will earn these discounts and fees, and deducts the full amount of these discounts and fees from its gross product revenues and accounts receivable at the time such revenues are recognized.
Product returns: The Company estimates the amount of each product that will be returned and deducts these estimated amounts from its gross revenues at the time the revenues are recognized. The Company’s customers have the right to return unopened packages, subject to contractual limitations.
To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal.
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: nonrefundable 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, 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 collaboration partners.
As part of the accounting for these arrangements, the Company applies judgment to determine whether the performance obligations are distinct, and develop assumptions in determining the stand-alone selling price for each distinct performance obligation identified in the collaboration agreements. To determine the stand-alone selling price, the Company relies on assumptions which may include forecasted revenues, development timelines, reimbursement rates for R&D personnel costs, discount rates and probabilities of technical and regulatory success.
The Company had multiple deliverables under the collaborative agreements, including deliverables relating to grants of technology licenses, regulatory and clinical development, and marketing activities. Estimation of the performance periods of the Company’s deliverables requires the use of management’s judgment. Significant factors considered in management’s evaluation of the estimated performance periods include, but are not limited to, the Company’s experience in conducting clinical development, regulatory and manufacturing activities. The Company reviews the estimated duration of its performance periods under its collaborative agreements on an annually basis, and makes any appropriate adjustments on a prospective basis. Future changes in estimates of the performance period under its collaborative agreements could impact the timing of future revenue recognition.
(i) 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 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.
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(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.
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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 advance from customers upon receipt or when due, and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the right of the Company to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customers and the transfer of the promised goods or services to the customers will be one year or less.
Property and Equipment
Property and equipment is carried at cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Expenditures that improve the functionality of the related asset or extend the useful life are capitalized. When property and equipment is retired or otherwise disposed of, the related gain or loss is included in operating income. Leasehold improvements are depreciated on the straight-line method over the shorter of the remaining lease term or estimated useful life of the asset. Depreciation is calculated on the straight-line method, including property and equipment under capital leases, generally based on the following useful lives:
| Estimated Life in Years | ||
| Buildings and leasehold improvements | 5 ~ 50 | |
| Machinery and equipment | 5 ~ 10 | |
| Office equipment | 3 ~ 6 |
Impairment of Long-Lived Assets
The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed to be reported at the lower of the carrying amount or the fair value less costs to sell.
Long-term Equity Investment
The Company acquires the equity investments to promote business and strategic objectives. The Company accounts for non-marketable equity and other equity investments for which the Company does not have control over the investees as:
| ● | Equity method investments when the Company has the ability to exercise significant influence, but not control, over the investee. Its proportionate share of the income or loss is recognized monthly and is recorded in gains (losses) on equity investments. |
| ● | Non-marketable cost method investments when the equity method does not apply. |
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Significant judgment is required to identify whether an impairment exists in the valuation of the Company’s non-marketable equity investments, and therefore the Company considers this a critical accounting estimate. Its yearly analysis considers both qualitative and quantitative factors that may have a significant impact on the investee’s fair value. Qualitative analysis of its investments involves understanding the financial performance and near-term prospects of the investee, changes in general market conditions in the investee’s industry or geographic area, and the management and governance structure of the investee. Quantitative assessments of the fair value of its investments are developed using the market and income approaches. The market approach includes the use of comparable financial metrics of private and public companies and recent financing rounds. The income approach includes the use of a discounted cash flow model, which requires significant estimates regarding the investees’ revenue, costs, and discount rates. The Company’s assessment of these factors in determining whether an impairment exists could change in the future due to new developments or changes in applied assumptions.
Other-Than-Temporary Impairment
The Company’s long-term equity investments are subject to a periodic impairment review. Impairments affect earnings as follows:
| ● | Marketable equity securities include the consideration of general market conditions, the duration and extent to which the fair value is below cost, and our ability and intent to hold the investment for a sufficient period of time to allow for recovery of value in the foreseeable future. The Company also considers specific adverse conditions related to the financial health of, and the business outlook for, the investee, which may include industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in the investee’s credit rating. The Company records other-than-temporary impairments on marketable equity securities and marketable equity method investments in gains (losses) on equity investments. |
| ● | Non-marketable equity investments 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 or management of the investee; additional funding requirements; and the investee’s ability to remain in business. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred that is other than temporary and that shall be recognized even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method. A loss in value of an investment that is other than a temporary decline shall be recognized. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. The Company records other-than-temporary impairments for non-marketable cost method investments and equity method investments in gains (losses) on equity investments. Other-than-temporary impairments of equity investments were $0 for the three and nine months ended September 30, 2019 and 2018, respectively. |
Goodwill
The Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. In testing goodwill for impairment, the Company may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that goodwill impairment is more likely than not, the Company performs a two-step impairment test. The Company tests goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting units. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. The Company estimates the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions.
The Company completed the required testing of goodwill for impairment at the closing of Merger of BioKey on February 8, 2019, and determined that goodwill was impaired because of the current financial condition of the Company and the Company’s inability to generate future operating income without substantial sales volume increases, which are highly uncertain. Furthermore, the Company anticipates future cash flows indicate that the recoverability of goodwill is not reasonably assured.
Research and Development Expenses
The Company accounts for the cost of using licensing rights in research and development cost according to ASC Topic 730-10-25-1. This guidance provides that absent alternative future uses the acquisition of product rights to be used in research and development activities must be charged to research and development expenses when incurred.
For pharmaceutical contract development and manufacturing organization (the “CDMO”) business unit, the Company accounts for R&D costs in accordance with ASC Topic730, Research and Development (“ASC 730”). Research and development expenses are charged to expense as incurred unless there is an alternative future use in other research and development projects or otherwise. Research and development expenses are comprised of costs incurred in performing research and development activities, including personnel-related costs, facilities-related overhead, and outside contracted services including clinical trial costs, manufacturing and process development costs for both clinical and preclinical materials, research costs, and other consulting services. Non-refundable advance payment for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. In instances where the Company enters into agreements with third parties to provide research and development services, costs are expensed as services are performed.
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Post-retirement and post-employment benefits
The Company’s subsidiaries in Taiwan adopted the government mandated defined contribution plan pursuant to the Labor Pension Act (the “Act”) in Taiwan. Such labor regulations require that the rate of contribution made by an employer to the Labor Pension Fund per month shall not be less than 6% of the worker’s monthly salaries. Pursuant to the Act, the Company makes monthly contribution equal to 6% of employees’ salaries to the employees’ pension fund. The Company has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $3,646 and $4,806 for the nine months ended September 30, 2019 and 2018, respectively. The total amounts for such employee benefits, which were expensed as incurred, were $12,365 and $14,827 for the nine months ended September 30, 2019 and 2018, respectively. Other than the above, the Company does not provide any other post-retirement or post-employment benefits.
Stock-based Compensation
The Company measures expense associated with all employee stock-based compensation awards using a fair value method and recognizes such expense in the 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 for the three months and nine months ended Sep 30, 2019 and 2018.
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 $5,737 and $7,575 for the three months ended Sep 30, 2019 and 2018, respectively. Total non-employee stock-based compensation expenses were $22,808 and $21,075 for the nine months ended Sep 30, 2019 and 2018, respectively.
Beneficial Conversion Feature
From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of the warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.
Income Taxes
The Company accounts for income taxes using the asset and liability approach which allows the recognition and measurement of deferred tax assets to be based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will expire before the Company is able to realize their benefits, or future deductibility is uncertain.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigations based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefits recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer satisfied. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the year incurred. No significant penalty or interest relating to income taxes has been incurred for the nine months ended September 30, 2019and 2018. GAAP also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transition.
On December 22, 2017, the SEC issued Staff Accounting Bulletin (“SAB 118”), which provides guidance on accounting for tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate to be included in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provision of the tax laws that were in effect immediately before the enactment of the Tax Act. While the Company is able to make reasonable estimates of the impact of the reduction in corporate rate and the deemed repatriation transition tax, the final impact of the Tax Act may differ from these estimates, due to, among other things, changes in our interpretations and assumptions, additional guidance that may be issued by the I.R.S., and actions the Company may take. The Company is continuing to gather additional information to determine the final impact.
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Valuation of Deferred Tax Assets
A valuation allowance is recorded to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized. In assessing the need for the valuation allowance, management considers, among other things, projections of future taxable income and ongoing prudent and feasible tax planning strategies. If the Company determines that sufficient negative evidence exists, then it will consider recording a valuation allowance against a portion or all of the deferred tax assets in that jurisdiction. If, after recording a valuation allowance, the Company’s projections of future taxable income and other positive evidence considered in evaluating the need for a valuation allowance prove, with the benefit of hindsight, to be inaccurate, it could prove to be more difficult to support the realization of its deferred tax assets. As a result, an additional valuation allowance could be required, which would have an adverse impact on its effective income tax rate and results. Conversely, if, after recording a valuation allowance, the Company determines that sufficient positive evidence exists in the jurisdiction in which the valuation allowance was recorded, it may reverse a portion or all of the valuation allowance in that jurisdiction. In such situations, the adjustment made to the deferred tax asset would have a favorable impact on its effective income tax rate and results in the period such determination was made.
Loss Per Share of Common Stock
The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share”. Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive. Diluted earnings per share excludes all dilutive potential shares if their effect is anti-dilutive.
Commitments and Contingencies
The Company has adopted ASC Topic 450 “Contingencies” subtopic 20, in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available before financial statements are issued or are available to be issued indicates that it is probable that an assets had been impaired or a liability had been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.
Foreign-currency Transactions
For the Company’s subsidiaries in Taiwan, the foreign-currency transactions are recorded in New Taiwan dollars (“NTD”) at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under the Statements of Stockholders’ Equity (Deficit).
Translation Adjustment
The accounts of the Company’s subsidiaries in Taiwan were maintained, and their financial statements were expressed, in New Taiwan Dollar (“NT$”). Such financial statements were translated into U.S. Dollars (“$” or “USD”) in accordance ASC 830, “Foreign Currency Matters”, with the NT$ as the functional currency. According to the Statement, all assets and liabilities are translated at the current exchange rate, stockholder’s deficit are translated at the historical rates and income statement items are translated at an average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income (loss) as a component of stockholders’ equity (deficit).
Recent Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (“Topic 820”): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The ASU modifies the disclosure requirements in Topic 820, Fair Value Measurement, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019. The Company is currently evaluating the effect, if any, that the ASU 2018-13 will have on its consolidated financial statements.
Limited Operating History; Need for Additional Capital
We have no assurance that future financing will be available to us on acceptable terms, or at all. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.
If we are unable to raise additional capital to maintain our operations in the future, we may be unable to carry out our full business plan or we may be forced to cease operations.
The following discussion and analysis should be read in conjunction with the unaudited financial statements of the Company for the period ended September 30, 2019 and 2018 and accompanying notes that appear in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on April 15, 2019 and the financial statements included in this Report.
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Results of Operations
Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities, but we cannot guarantee that we will be able to achieve the same.
Results of Operations — Three Months Ended September, 2019 Compared to Three Months Ended September, 2018.
Revenues. We generated $197,733 and $747 in revenues for the three months ended September 30, 2019 and 2018, respectively. Such increase in revenue was primarily driven from the CDMO business unit and incurred $2,797 and $537 in cost of sales for the three months ended September 30, 2019 and 2018, respectively.
Operating Expenses. Our operating expenses were $1,310,558 in the three months ended September 30, 2019 as compared to $396,495 in the three months ended September 30, 2018. Our total operating expenses increased by $914,063, or 231% during the three-month period ended September 30, 2019 from 2018. Such increase in operating expenses was mainly attributed to the increase in selling, general and administrative expenses and research and development expenses. Our selling, general and administrative expenses increased by $701,176, or 210% mainly due to the increase in professional service fees. Our research and development expenses increased by $214,725 or approximately 394% primarily because we made progresses in our pipeline projects that led to corresponding milestone payments during the three months ended September 30, 2019.
Interest Expense. The interest expense was $111,968 in the three months ended September 30, 2019 as compared to $122,326 in the three months ended September 30, 2018. The decrease of $10,358, or approximately 8%, was primarily due to our effort to reduce outstanding loan from related parties through a series of debt to equity conversion during the three months ended September 30, 2019.
Net Loss. The net loss was $1,329,685 for the three months ended September 30, 2019 compared to $687,300 for the three months ended September 30, 2018. The Company’s net loss increased by $642,385, or 93% during the three- month period ended September 30, 2019 from 2018.
Results of Operations — Nine Months Ended Sept 30, 2019 Compared to Nine Months Ended Sept 30, 2018.
Revenues. We generated $601,757 and $3,976 in revenues for the nine months ended September 30, 2019 and 2018, respectively. Such increase in revenue was primarily driven from the CDMO business unit and incurred $17,648 and $2,856 in cost of sales for the nine months ended September 30, 2019 and 2018, respectively.
Operating Expenses. Our operating expenses were $2,919,104 in the nine months ended September 30, 2019 as compared to $1,596,036 in the nine months ended September 30, 2018. Our total operating expenses increased by $1,323,068, or 83% during the nine-month period ended September 30, 2019 from 2018. Such increase in operating expenses was mainly attributable to the increase in selling, general and administrative expenses and research and development expenses. Our selling, general and administrative expenses increased by $904,740 or approximately 75% mainly due to the increase in professional service fees. Our research and development expenses increased by $419,642 or approximately 117% primarily because we made progresses in our pipeline projects that led to corresponding milestone payments during the nine months ended September 30, 2019. In addition, we launched a research project related to Vitreous Substitute for Vitrectomy during the nine months ended September 30, 2018.
Interest Expense. The interest expense was $374,540 in the nine months ended September 30, 2019 as compared to $345,982 in the nine months ended September 30, 2018. The increase of $28,558, or 8% was primarily due to interest payments for various related-party loans and convertible promissory notes.
Net Loss. The net loss was $2,817,454 for the nine months ended September 30, 2019 compared to $2,136,962 for the nine months ended September 30, 2018. The Company’s net loss increased by $680,492 or approximately 32% during the nine-month period ended September 30, 2019 from 2018.
Liquidity and Capital Resources
Working Capital
| As of September 30, 2019 ($) | As of December 31, 2018 ($) | |||||||
| (Unaudited) | ||||||||
| Current Assets | 1,707,567 | 566,476 | ||||||
| Current Liabilities | 5,877,924 | 10,987,786 | ||||||
| Working Capital (deficit) | (4,170,357 | ) | (10,421,310 | ) | ||||
Cash Flow from Operating Activities
During the nine months ended September 30, 2019 and 2018, the net cash used in operating activities were $1,638,709 and $1,168,300, respectively. The increase in the amount of cash used of $470,409 was primarily due to the increased net loss from continuing operations and partially offset by the increase in advance from others during the nine months ended September 30, 2019.
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Cash Flow from Investing Activities
During the nine months ended September 30, 2019 and 2018, the net cash used in and provided by investing activities were $35,079 and $314,294, respectively. The decrease in the amount of cash provided of $349,373 was primarily due to there was no proceeds from sales of investment in equity securities and loss in long-term equity investment during the nine months ended September 30, 2019.
Cash Flow from Financing Activities
During the nine months ended September 30, 2019 and 2018, the net cash provided by financing activities were $2,483,244 and $667,114, respectively. The net cash provided by financing activities increased by $1,816,130 during the compared periods because we obtained $1,000,000 from short-term bank loans and $957,500 from convertible promissory notes during the nine months ended September 30, 2019.
Off-Balance Sheet Arrangements
As of September 30, 2019, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
| 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. |
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We performed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on their evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective as of September 30, 2019.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures is also based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during our last fiscal quarter to which this Quarterly Report on Form 10-Q relates that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
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| ITEM 1. | LEGAL PROCEEDINGS. |
Nil.
| ITEM 1A. | RISK FACTORS. |
Smaller reporting companies are not required to provide the information required by this item.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
N/A.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. |
Nil.
| ITEM 4. | MINE SAFETY DISCLOSURES. |
Not applicable.
| ITEM 5. | OTHER INFORMATION. |
On June 28, 2019, we filed a certificate of designation (“Series A COD”) of Series A Convertible Preferred Stock (the “Series A Stock”) with the Secretary of the State of Nevada. Pursuant to the Series A COD, we designated 3,500,000 shares of preferred stock as Series A Stock, par value of $0.001 per share. Subject to the laws of Nevada, we will pay cumulative dividends on the Series A Stock on each anniversary from the date of original issue for a period of four calendar years. The Series A Stock will rank senior to the outstanding common stock of the Company, par value $0.001 with respect to dividend rights, rights upon liquidation, dissolution, or winding up in the amount of accrued but unpaid dividend. Holders of the Series A Stock will have the same voting rights as our common stock holders. Each share of Series A Stock is initially convertible at any time at the option of the holder into one share of common stock, and automatically converts into one share of common stock.
| ITEM 6. | EXHIBITS |
The following exhibits are filed herewith:
| (1) | Incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K filed with the SEC on May 8, 2019. |
| (2) | Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 1, 2019. |
| (3) | Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 1, 2019. |
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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.
| American BriVision (Holding) Corporation | ||
| Dated: November 18, 2019 | By: | /s/ Howard Doong |
| Howard Doong | ||
| Chief Executive
Officer (Principal Executive Officer) | ||
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Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Howard Doong, Chief Executive Officer of American BriVision (Holding) Corporation. (the “Company”), certify that:
1. I have reviewed this Quarterly Report on Form 10-Q (this “Report”) of the Company;
2. Based on my knowledge, this Report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 3a-15(f) and 15d-15(f)) for the registrant and have:
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and |
| (d) | Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 18, 2019 | |
| /s/ Howard Doong | |
| Howard Doong | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Chihliang An, Chief Financial Officer of American BriVision (Holding) Corporation. (the “Company”), certify that:
1. I have reviewed this Quarterly Report on Form 10-Q (this “Report”) of the Company;
2. Based on my knowledge, this Report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and |
| (d) | Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 18, 2019 | |
| /s/ Chihliang An | |
| Chihliang An | |
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of American BioVision (Holding) Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 18, 2019
| /s/ Howard Doong | |
| Howard Doong, | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of American BioVision (Holding) Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 18, 2019
| /s/ Chihliang An | |
| Chihliang An | |
| Chief Financial Officer |
Long-Term Investments (Details Textual) |
1 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Oct. 15, 2018 |
Nov. 02, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2018 |
|
| Rgene [Member] | |||||
| Long-Term Investments (Textual) | |||||
| Percentage of common stock shares | 31.63% | 31.62% | |||
| BioFirst [Member] | |||||
| Long-Term Investments (Textual) | |||||
| Percentage of common stock shares | 21.51% | 15.84% | |||
| Sale of common stock, description | The Company subsequently purchased an aggregate of 200,000 and 366,200 shares of common stock of BHK at NT$10, equivalent to $0.33, and NT$50, equivalent $1.64, from one of directors of BHK and eleven shareholders of BHK, respectively. The percentage of ownership accordingly increased to 7.13% as of Sept 30, 2019 and 2018. | The Company subsequently purchased an aggregate of 200,000 and 366,200 shares of common stock of BHK at NT$10, equivalent to $0.33, and NT$50, equivalent $1.64, from one of directors of BHK and eleven shareholders of BHK, respectively. The percentage of ownership accordingly increased to 7.13% as of Sept 30, 2019 and 2018. | The Company sold 552,000 shares of common stock of BioHopeKing Corporation (the "BHK") at prices ranging from NT$25, equivalent $0.82, to NT$32, equivalent $1.05, to two directors of BHK and 25 individuals. As a result of the transactions, the Company recognized investment loss of $395,476 for the same period. | ||
Long-Term Investments (Details 2) - USD ($) |
Sep. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Non-marketable Cost Method Investments, net abstract | ||
| Sub total | $ 1,955,301 | $ 1,985,663 |
| Total | 3,270,410 | 3,488,169 |
| BioFirst Corporation [Member] | ||
| Non-marketable Cost Method Investments, net abstract | ||
| Total | 1,315,109 | 1,502,506 |
| Rgene Corporation [Member] | ||
| Non-marketable Cost Method Investments, net abstract | ||
| Total | ||
| Braingenesis Biotechnology Co., Ltd. [Member] | ||
| Non-marketable Cost Method Investments, net abstract | ||
| Sub total | 7,213 | 7,213 |
| Genepharm Biotech Corporation [Member] | ||
| Non-marketable Cost Method Investments, net abstract | ||
| Sub total | 22,021 | 22,021 |
| BioHopeKing Corporation [Member] | ||
| Non-marketable Cost Method Investments, net abstract | ||
| Sub total | $ 1,926,067 | $ 1,956,429 |
Lease (Details 1) |
9 Months Ended |
|---|---|
|
Sep. 30, 2019
USD ($)
| |
| Leases [Abstract] | |
| Cash paid for amounts included in the measurement of operating lease liabilities | $ 73,802 |
| Weighted average remaining lease term | 1 year 10 months 10 days |
| Weighted average discount rate | 0.55% |
Summary of Significant Accounting Policies (Tables) |
9 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2019 | |||||||||||||
| Accounting Policies [Abstract] | |||||||||||||
| Schedule of property and equipment |
|
Bank Loans (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Going Concern (Textual) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of short-term bank loan |
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| Schedule of long-term bank loan |
|
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Loss per Share |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LOSS PER SHARE | 13. LOSS PER SHARE
Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the year. Diluted loss per share is computed by dividing net loss by the weighted-average number of common shares and dilutive potential common shares outstanding during nine months ended September 30, 2019 and 2018.
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. |
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Inventory |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INVENTORY | 5. INVENTORY
Inventory consists of the following:
|
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Bank Loans |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Going Concern (Textual) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BANK LOANS | 9. BANK LOANS
Cathay United Bank
On June 28, 2016, BioLite Taiwan and Cathay United Bank entered into a one-year bank loan agreement (the “Cathay United Loan Agreement”) in an amount of NT$7,500,000, equivalent to $241,500. The term started June 28, 2016 with maturity date at June 28, 2017. The loan balance bears interest at a floating rate of prime rate plus 1.15%. The prime rate is based on term deposit saving interest rate of Cathay United Bank. On September 6, 2017, BioLite Taiwan extended the Cathay United Loan Agreement for one year, which was due on September 6, 2018, with the principal amount of NT$7,500,000, equivalent to $241,500. On October 1, 2018, BioLite Taiwan extended the Cathay United Loan Agreement with the same principal amount of NT$7,500,000, equivalent to $241,857 for one year, which is due on September 6, 2019. As of September 30, 2019 and December 31, 2018, the effective interest rates per annum were 2.22%. 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 $1,351 and $1,402 for the three months ended September 30, 2019 and 2018, respectively. Interest expenses were $4,025 and $4,175 for the nine months ended September 30, 2019 and 2018, respectively.
CTBC Bank
On June 12, 2017 and July 19, 2017, BioLite Taiwan and CTBC Bank entered into short-term saving secured bank loan agreements (the “CTBC Loan Agreements”) in an amount of NT$10,000,000, equivalent to $322,000, and NT$10,000,000, equivalent to $322,000, respectively. Both two loans with the same maturity date at January 19, 2018. In February 2018, BioLite Taiwan combined two loans and extended the loan contract with CTBC for one year. On January 18, 2019, BioLite Taiwan and CTBC Bank agreed to extend the loan with a new maturity date, which is July 18, 2019. The loan balances bear interest at a fixed rate of 1.63% per annum. The loan is secured by the money deposited in a savings account with the CTBC Bank. This loan is also personal guaranteed by the Company’s chairman and BioFirst.
Interest expenses were $2,646 and $2,297 for the three months ended September 30, 2019 and 2018, respectively.
Interest expenses were $7,879 and $8,270 for the nine months ended September 30, 2019 and 2018, respectively.
Cathay Bank
On January 21, 2019, the Company received a loan in the amount of $500,000 from Cathay Bank (the “Bank”) pursuant to a business loan agreement (the “Loan Agreement”) entered by and between the Company and Bank on January 8, 2019 and a promissory note (the “Note”) executed by the Company on the same day. The Loan Agreement provides for a revolving line of credit in the principal amount of $1,000,000 with a maturity date (the “Maturity Date”) of January 1, 2020. The Note executed in connection with the Loan Agreement bears an interest rate (the “Regular Interest Rate”) equal to the sum of one percent (1%) and the prime rate as published in the Wall Street Journal (the “Index”) and the accrued interest shall become payable each month from February 1, 2019. Pursuant to the Note, the Company shall pay the entire outstanding principal plus accrued unpaid interest on the Maturity Date and may prepay portion or all of the Note before the Maturity Date without penalty. If the Company defaults on the Note, the default interest rate shall become five percent (5%) plus the Regular Interest Rate. After the completion of Merger, the Company had updated relevant documents with the state of California and is working with the Bank to revise its internal records and reviewing the Company’s request for loan extension.
In connection with the Note and Loan Agreement, on January 8, 2019, each of Dr. Tsung Shann Jiang and Dr. George Lee, executed a commercial guaranty (the “Guaranty”) to guaranty the loans for the Company pursuant to the Loan Agreement and Note, severally and individually, in the amount not exceeding $500,000 each until the entire Note plus interest are fully paid and satisfied. Dr. Tsung Shann Jiang is the Chairman and Chief Executive Officer of BioLite Holding, Inc. and Dr. George Lee serves as the Chairman of the board of directors of BioKey, Inc, which became a wholly-owned subsidiaries of the Company effective by operation of law on or about February 5, 2019.
In addition, on January 8, 2019, each of the Company and BriVision, a wholly-owned subsidiary of the Company, signed a commercial security agreement (the “Security Agreement”) to secure the loans under the Loan Agreement and the Note. Pursuant to the Security Agreements, each of the Company and BriVision (each, a “Grantor”, and collectively, the “Grantors”) granted security interest in the collaterals as defined therein, comprised of almost all of the assets of each Grantor, to secure such loans for the benefit of the Bank.
Interest expenses were $16,899 and $0 for the three months ended September 30, 2019 and 2018, respectively.
Interest expenses were $42,632 and $0 for the nine months ended September 30, 2019 and 2018, respectively.
On April 30, 2010, BioLite Taiwan entered a seven-year bank loan of NT$8,900,000, equivalent to $288,360, with Cathay United Bank. The term started April 30, 2010 with maturity date at April 30, 2017. On April 30, 2017, BioLite Taiwan extended the original loan agreement for additional three years with the new maturity date at April 30, 2020. The loan balance bears interest at a floating rate of prime rate plus variable rates from 0.77% to 1.17%. The prime rate is based on term deposit saving interest rate of Cathay United Bank. As of June 30, 2019 and 2018, the actual interest rates per annum were 2.24%. 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 $163 and $409 for the three months ended September 30, 2019 and 2018, respectively.
Interest expenses were $745 and $1,375 for the nine months ended September 30, 2019 and 2018, respectively. |
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Collaborative Agreements (Details) - USD ($) |
1 Months Ended | 9 Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 24, 2018 |
Sep. 30, 2017 |
Sep. 25, 2017 |
Jul. 24, 2017 |
May 26, 2017 |
Aug. 31, 2016 |
Jul. 27, 2016 |
Dec. 31, 2015 |
Sep. 30, 2019 |
Aug. 05, 2019 |
Jun. 30, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
| Collaborative Agreements (Textual) | |||||||||||||
| Outstanding balance | $ 322,678 | $ 59,477 | |||||||||||
| BHK Co-Development Agreement [Member] | |||||||||||||
| Collaborative Agreements (Textual) | |||||||||||||
| Description of payment settlement | 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 | ||||||||||||
| Upfront payments | $ 1,000,000 | $ 1,000,000 | |||||||||||
| Percentage of payments under co-development agreement | 10.00% | 10.00% | |||||||||||
| Milestone payments to BioLite in cash | $ 31,649,000 | $ 10,000,000 | |||||||||||
| Common stock newly issued, value | $ 1,000,000 | $ 10,000,000 | |||||||||||
| Milestone payments royalty percentage | 12.00% | ||||||||||||
| Collaborative Agreements, description | The Company recognized the cash receipt in a total of NT$50 million, approximately equivalent to $1.6 million, as collaboration revenue when all research, technical, and development data was delivered to BHK. | In addition to the total of NT$50 million, approximately equivalent to $1.60 million, BioLite Taiwan is entitled to receive 50% of the future net licensing income or net sales profit. As of September 30, 2019 and 2018, the Company has not earned the royalty under the BHK Collaborative Agreements. | |||||||||||
| Co-Dev Agreement [Member] | |||||||||||||
| Collaborative Agreements (Textual) | |||||||||||||
| Amount received from BriVision | $ 3,000,000 | $ 3,000,000 | $ 450,000 | ||||||||||
| Percentage of payments under co-development agreement | 50.00% | ||||||||||||
| Company cash payments | $ 3,000,000 | $ 3,000,000 | |||||||||||
| Co-Dev agreement, description | 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 $1.60 per share), for an aggregate number of 1,530,000 shares, which accounted for equity method long-term investment as of December 31, 2018. During the year ended December 31, 2018, the Company has recognized investment loss of $549. | ||||||||||||
| BioFirst Stock Purchase Agreement [Member] | |||||||||||||
| Collaborative Agreements (Textual) | |||||||||||||
| Amount received from BriVision | $ 2,902,911 | $ 3,000,000 | |||||||||||
| Shares issued | 414,702 | 428,571 | |||||||||||
| Collaborative Arrangement [Member] | |||||||||||||
| Collaborative Agreements (Textual) | |||||||||||||
| Percentage of payments under co-development agreement | 50.00% | ||||||||||||
| Common stock newly issued, value | $ 3,000,000 | ||||||||||||
| Licensing rights | $ 3,000,000 | ||||||||||||
| Company cash payments | $ 3,000,000 | ||||||||||||
| Research and development expense | $ 3,000,000 | ||||||||||||
Organization and Description of Business (Details) - shares |
May 03, 2019 |
Mar. 12, 2019 |
Mar. 21, 2016 |
Feb. 08, 2016 |
Aug. 31, 2017 |
|---|---|---|---|---|---|
| Organization and Description of Business (Textual) | |||||
| Percentage of common shares issued and outstanding | 73.00% | ||||
| Description of reverse stock split | The Company filed a certificate of amendment to the Company's articles of incorporation (the "Amendment") to effect the Reverse Split with the Secretary of State of Nevada. The Financial Industry Regulatory Authority ("FINRA") informed the Company that the Reverse Split was effective on May 8, 2019. All shares and related financial information in this Form 10-Q reflect this 1-for-18 reverse stock split. | i) effect a stock reverse split at the ratio of 1-for-18 (the "Reverse Split") of both the authorized common stock of the Company (the "Common Stock") and the issued and outstanding Common Stock and ii) to amend the articles of incorporation of the Company to reflect the Reverse Split. The Board approved and authorized the Reverse Split without obtaining approval of the Company's shareholders pursuant to Section 78.207 of Nevada Revised Statutes. | 1 to 3.141 | ||
| Share Exchange Agreement [Member] | |||||
| Organization and Description of Business (Textual) | |||||
| Common stock issued post-stock split | 164,387,376 | ||||
| Common stock issued pre-stock split | 52,336,000 | ||||
| Description of reverse stock split | ABVC issued an aggregate of 104,558,777 shares (prior to the reverse stock split in 2019) 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. | ||||
| Share Exchange Agreement One [Member] | |||||
| Organization and Description of Business (Textual) | |||||
| Common stock issued post-stock split | 164,387,376 | ||||
| Common stock issued pre-stock split | 52,336,000 | ||||
| Share Exchange Agreement Two [Member] | |||||
| Organization and Description of Business (Textual) | |||||
| Common stock issued post-stock split | 163,159,952 | ||||
| Common stock issued pre-stock split | 51,945,225 | ||||
| Percentage of common shares issued and outstanding | 79.70% | ||||
| Percentage of issued share capital | 100.00% | ||||
| Share Exchange Agreement Three [Member] | |||||
| Organization and Description of Business (Textual) | |||||
| Common stock issued post-stock split | 166,273,921 | ||||
| Common stock issued pre-stock split | 52,936,583 | ||||
| Common stock converted to exchange ratio | 0.2536-for-1 | ||||
| Share Exchange Agreement Four [Member] | |||||
| Organization and Description of Business (Textual) | |||||
| Common stock issued post-stock split | 205,519,223 | ||||
| Common stock issued pre-stock split | 65,431,144 |
Related Parties Transactions (Details 1) - USD ($) |
Sep. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Total | $ 142,215 | |
| GenePharm Inc. [Member] | ||
| Total | $ 142,215 |
Equity (Details) |
1 Months Ended |
|---|---|
|
Aug. 31, 2019
USD ($)
shares
| |
| Amount of debt converted | $ | $ 4,872,340 |
| Number of shares issued | shares | 696,051 |
| Lion Arts Promotion Inc. (the "LION") [Member] | |
| Amount of debt converted | $ | $ 97,864 |
| Number of shares issued | shares | 13,981 |
| LionGene Corporation (the "LionGene") [Member] | |
| Amount of debt converted | $ | $ 428,099 |
| Number of shares issued | shares | 61,157 |
| BioFirst Corporation [Member] | |
| Amount of debt converted | $ | $ 2,902,911 |
| Number of shares issued | shares | 414,702 |
| AsianGene Corporation [Member] | |
| Amount of debt converted | $ | $ 160,000 |
| Number of shares issued | shares | 22,858 |
| YuanGene Corporation [Member] | |
| Amount of debt converted | $ | $ 92,690 |
| Number of shares issued | shares | 13,242 |
| The Jiangs [Member] | |
| Amount of debt converted | $ | $ 1,190,776 |
| Number of shares issued | shares | 170,111 |
Consolidated Statements of Changes in Equity (Deficit) (Unaudited) - USD ($) |
Common Stock |
Stock Subscription Receivable |
Additional Paid-in Capital |
Accumulated Deficit |
Comprehensive Income |
Treasury Stock |
Noncontrolling Interest |
Total |
|---|---|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2017 | $ 11,875 | $ 14,874,924 | $ (6,634,067) | $ 743,763 | $ (9,100,000) | $ 806,761 | $ 703,256 | |
| Balance, Shares at Dec. 31, 2017 | 11,874,814 | (275,347) | ||||||
| Issuance of common shares | $ 10 | 79,990 | 80,000 | |||||
| Issuance of common shares, Shares | 9,990 | |||||||
| Stock based compensation | 5,626 | 5,626 | ||||||
| Net loss for the year | (601,387) | (112,235) | (713,622) | |||||
| Cumulative transaction adjustments | 64,994 | 64,994 | ||||||
| Balance at Mar. 31, 2018 | $ 11,885 | 14,960,540 | (7,235,454) | 808,757 | $ (9,100,000) | 694,526 | 140,254 | |
| Balance, Shares at Mar. 31, 2018 | 11,884,804 | (275,347) | ||||||
| Stock based compensation | 10,200 | 10,200 | ||||||
| Net loss for the year | (632,170) | (103,870) | (736,040) | |||||
| Cumulative transaction adjustments | (134,054) | (134,054) | ||||||
| Balance at Jun. 30, 2018 | $ 11,885 | 14,970,740 | (7,867,624) | 674,703 | $ (9,100,000) | 590,656 | (719,640) | |
| Balance, Shares at Jun. 30, 2018 | 11,884,804 | (275,347) | ||||||
| Stock based compensation | 7,577 | 7,577 | ||||||
| Net loss for the year | (570,809) | (116,491) | (687,300) | |||||
| Cumulative transaction adjustments | (12,040) | (12,040) | ||||||
| Balance at Sep. 30, 2018 | $ 11,885 | 14,978,317 | (8,438,433) | 662,663 | $ (9,100,000) | 474,165 | (1,411,403) | |
| Balance, Shares at Sep. 30, 2018 | 11,884,804 | (275,347) | ||||||
| Balance at Dec. 31, 2018 | $ 11,885 | 14,983,714 | (12,209,446) | 655,851 | $ (9,100,000) | 317,610 | (5,340,386) | |
| Balance, Shares at Dec. 31, 2018 | 11,884,804 | (275,347) | ||||||
| Issuance of common shares to BioKey | $ 1,642 | 692,577 | 694,219 | |||||
| Issuance of common shares to BioKey, Shares | 1,642,291 | |||||||
| Issuance of common shares to BioLite | $ 4,167 | (4,167) | ||||||
| Issuance of common shares to BioLite, Shares | 4,166,530 | |||||||
| Issuance common stock for consulting service | ||||||||
| Stock based compensation | 8,550 | 8,550 | ||||||
| Net loss for the year | (791,671) | (81,646) | (873,317) | |||||
| Cumulative transaction adjustments | (15,412) | (15,412) | ||||||
| Balance at Mar. 31, 2019 | $ 17,694 | 15,680,674 | (13,001,117) | 640,439 | $ (9,100,000) | 235,964 | (5,526,346) | |
| Balance, Shares at Mar. 31, 2019 | 17,693,625 | (275,347) | ||||||
| Balance at Dec. 31, 2018 | $ 11,885 | 14,983,714 | (12,209,446) | 655,851 | $ (9,100,000) | 317,610 | (5,340,386) | |
| Balance, Shares at Dec. 31, 2018 | 11,884,804 | (275,347) | ||||||
| Balance at Sep. 30, 2019 | $ 19,478 | (4,289,060) | 28,180,123 | (14,773,552) | 628,941 | $ (9,100,000) | 64,261 | 730,191 |
| Balance, Shares at Sep. 30, 2019 | 19,477,504 | (275,347) | ||||||
| Balance at Mar. 31, 2019 | $ 17,694 | 15,680,674 | (13,001,117) | 640,439 | $ (9,100,000) | 235,964 | (5,526,346) | |
| Balance, Shares at Mar. 31, 2019 | 17,693,625 | (275,347) | ||||||
| Issuance of common shares | $ 429 | 2,999,571 | 3,000,000 | |||||
| Issuance of common shares, Shares | 428,571 | |||||||
| Stock based compensation | 7,800 | 7,800 | ||||||
| Net loss for the year | (557,577) | (56,877) | (614,453) | |||||
| Cumulative transaction adjustments | (8,429) | (8,429) | ||||||
| Balance at Jun. 30, 2019 | $ 18,123 | 18,688,045 | (13,558,694) | 632,010 | $ (9,100,000) | 179,087 | (3,141,428) | |
| Balance, Shares at Jun. 30, 2019 | 18,122,196 | (275,347) | ||||||
| Issuance of common shares | $ 1,355 | (4,289,060) | 9,486,339 | 5,198,634 | ||||
| Issuance of common shares, Shares | 1,355,308 | |||||||
| Stock based compensation | 5,739 | 5,739 | ||||||
| Net loss for the year | (1,214,859) | (114,826) | (1,329,685) | |||||
| Cumulative transaction adjustments | (3,069) | (3,069) | ||||||
| Balance at Sep. 30, 2019 | $ 19,478 | $ (4,289,060) | $ 28,180,123 | $ (14,773,552) | $ 628,941 | $ (9,100,000) | $ 64,261 | $ 730,191 |
| Balance, Shares at Sep. 30, 2019 | 19,477,504 | (275,347) |
Collaborative Agreements |
9 Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2019 | ||||||||||||||||
| Collaborative Agreements [Abstract] | ||||||||||||||||
| COLLABORATIVE AGREEMENTS | 4. COLLABORATIVE AGREEMENTS
Collaborative agreements with BHK
(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:
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, 2019 and 2018, 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 $1.6 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 $1.60 million, BioLite Taiwan is entitled to receive 50% of the future net licensing income or net sales profit. As of September 30, 2019 and 2018, 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, American BriVision Corporation 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 11). Pursuant to Co-Dev Agreement, BriVision and Rgene agreed to co-develop and commercialize certain products that are included in the Sixth Product as defined in the Addendum. Under the terms of the Co-Dev Agreement, Rgene should 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. Besides of $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 cost 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 September 30, 2017. During the year ended December 31, 2017, the Company has 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 $1.60 per share), for an aggregate number of 1,530,000 shares, which accounted for equity method long-term investment as of December 31, 2018. During the year ended December 31, 2018, the Company has recognized investment loss of $549. On December 31, 2018, the Company has 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. However, all projects that have been initiated and scheduled will be continuously managed and supported by the Company and Rgene.
Collaborative agreement with BioFirst Corporation, a related party
On July 24, 2017, American BriVision Corporation 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 11).
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 September 30, 2017.
On June 30, 2019, BriVision entered into a Stock Purchase Agreement (the "Purchase Agreement") with BioFirst Corporation ("BioFirst"). Pursuant to the Purchase Agreement, the Company issued 428,571 shares of the Company's common stock (the "Shares") 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 Stock Purchase Agreement (the "Purchase Agreement") with BioFirst Corporation ("BioFirst"). Pursuant to the Purchase Agreement, the Company issued 414,702 shares of the Company's common stock (the "Shares") to BioFirst in consideration for $2,902,911 owed by the Company to BioFirst (the "Total Payment") in connection with a sunk payments that were due to related party prior to the conversion. |
Convertible Notes Payable |
9 Months Ended |
|---|---|
Sep. 30, 2019 | |
| Convertible Notes Payable [Abstract] | |
| CONVERTIBLE NOTES PAYABLE | 8. CONVERTIBLE NOTES PAYABLE
On May 9, 2018, the Company issued an eighteen-month term unsecured convertible promissory note (the “Yu and Wei Note”) in an aggregate principal amount of $300,000 to Guoliang Yu and Yingfei Wei Family Trust (the “Yu and Wei”), pursuant to which the Company received $300,000. The Yu and Wei Note bears interest at 8% per annum. The Company shall pay to the Yu and Wei an amount in cash representing all outstanding principal and accrued and unpaid interest on the Eighteenth (18) month anniversary of the issuance date of the Yu and Wei Note, which is on November 8, 2019. In the event that the Company raises gross proceeds from the sale of its common stock of at least $5,000,000 (an “Equity Offering”) then within five days of the closing for such offering, the Company must repay the outstanding amount of this Yu and Wei Note. At any time from the date hereof until this Yu and Wei Note has been satisfied, the Yu and Wei may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company’s common stock at a conversion price (the “Conversion Price”) equal to the lower of (i) $2.00 per share (the “Fixed Conversion Price”), subject to adjustment or (ii) 80% of the per share offering price (the “Alternative Conversion Price”) of any completed equity offering of the Company in an amount exceeding $500,000 that occurs when any part of the Yu and Wei Note is outstanding, subject to adjustments set forth in the Yu and Wei Note. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the Yu and Wei Note as of September 30, 2019 and December 31, 2018.
On June 27, 2018, the Company issued an eighteen-month term unsecured convertible promissory note (the “Keypoint Note”) in the aggregate principal amount of $250,000 to Keypoint Technology Ltd. (“Keypoint”), a related party, pursuant to which the Company received $250,000. The Keypoint Note bears interest at 8% per annum. The Company shall pay to the Keypoint an amount in cash representing all outstanding principal and accrued and unpaid interest on the Eighteenth (18) month anniversary of the issuance date of the Keypoint Note, which is on December 26, 2019. In the event that the Company raises gross proceeds from the sale of its common stock of at least $5,000,000 (an “Equity Offering”) then within five days of the closing for such offering, the Company must repay the outstanding amount of this Keypoint Note. At any time from the date hereof until this Keypoint Note has been satisfied, Keypoint may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company’s common stock at a conversion price (the “Conversion Price”) equal to the lower of (i) $2.00 per share (the “Fixed Conversion Price”), subject to adjustment or (ii) 80% of the per share offering price (the “Alternative Conversion Price”) of any completed equity offering of the Company in an amount exceeding $500,000 that occurs when any part of the Keypoint Note is outstanding, subject to adjustments set forth in the Keypoint Note. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the Keypoint Note as of September 30, 2019 and December 31, 2018.
On August 25, 2018, the Company issued an eighteen-month term unsecured convertible promissory note (the “Odaira Note”) in the aggregate principal amount of $250,000 to the Company’s director, Yoshinobu Odaira. (“Odaira), pursuant to which the Company received $250,000 on November 29, 2018. The Odaira Note bears interest at 8% per annum. The Company shall pay to the Odaira an amount in cash representing all outstanding principal and accrued and unpaid interest on the Eighteenth (18) month anniversary of the issuance date of the Odaira Note, which is on February 24, 2020. In the event that the Company raises gross proceeds from the sale of its common stock of at least $5,000,000 (an “Equity Offering”) then within five days of the closing for such offering, the Company must repay the outstanding amount of this Odaira Note. At any time from the date hereof until this Odaira Note has been satisfied, Odaira may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company’s common stock at a conversion price (the “Conversion Price”) equal to the lower of (i) $2.00 per share (the “Fixed Conversion Price”), subject to adjustment or (ii) 80% of the per share offering price (the “Alternative Conversion Price”) of any completed equity offering of the Company in an amount exceeding $500,000 that occurs when any part of the Odaira Note is outstanding, subject to adjustments set forth in the Odaira Note. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the Odaira Note as of September 30, 2019 and December 31, 2018.
On May 30, 2019 and July 11, 2019, the Company issued 2 twelve-month term unsecured convertible promissory notes (the “Kuo Note”) in an aggregate principal amount of $250,000 to Kuo Sheng Lung (the “Kuo”), pursuant to which the Company received $160,000 on May 30, 2019 and $90,000 on July 11, 2019. The Kuo Note bears interest at 20% per annum. The Company shall pay to the Kuo an amount in cash representing all outstanding principal and accrued and unpaid interest on the Twelve (12) month anniversary of the issuance date of the Kuo Note, which is on May 29, 2020 and July 10, 2020. At any time from the date hereof until this Kuo Note has been satisfied, the kuo may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company’s common stock at a conversion price (the “Conversion Price”) equal to the lower of (i) $.50 per share (the “Fixed Conversion Price”), subject to adjustment, or (ii) 70% of the per share offering price (the “Alternative Conversion Price”) of the completed public equity offering of the Company in an amount exceeding $10,000,000 as stated on the registration statement on a Form S-1 filed with the Securities and Exchange Commission on November 14, 2018 (the “Public Offering”), as amended from time to time. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the Kuo Note as of September 30, 2019.
On July 10, 2019, the Company issued a twelve-month term unsecured convertible promissory note (the “NEA Note”) in an aggregate principal amount of $250,000 to New Eastern Asia (the “NEA”), pursuant to which the Company received $250,000 on July 10, 2019. The NEA Note bears interest at 20% per annum. The Company shall pay to the NEA an amount in cash representing all outstanding principal and accrued and unpaid interest on the Twelve (12) month anniversary of the issuance date of the NEA Note, which is on July 9, 2020. At any time from the date hereof until this NEA Note has been satisfied, the NEA may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company’s common stock at a conversion price (the “Conversion Price”) equal to the lower of (i) $.50 per share (the “Fixed Conversion Price”), subject to adjustment, or (ii) 70% of the per share offering price (the “Alternative Conversion Price”) of the completed public equity offering of the Company in an amount exceeding $10,000,000 as stated on the registration statement on a Form S-1 filed with the Securities and Exchange Commission on November 14, 2018 (the “Public Offering”), as amended from time to time. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the NEA Note as of September 30, 2019.
On August 28, 2019, the Company issued a twelve-month term unsecured convertible promissory note (the “KLS Note”) in an aggregate principal amount of $200,000 to Kuo Li Shen (the “KLS”), pursuant to which the Company received $200,000 on August 28, 2019. The KLS Note bears interest at 20% per annum. The Company shall pay to the KLS an amount in cash representing all outstanding principal and accrued and unpaid interest on the Twelve (12) month anniversary of the issuance date of the KLS Note, which is on August 27, 2020. At any time from the date hereof until this KLS Note has been satisfied, the KLS may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company’s common stock at a conversion price (the “Conversion Price”) equal to the lower of (i) $.50 per share (the “Fixed Conversion Price”), subject to adjustment, or (ii) 70% of the per share offering price (the “Alternative Conversion Price”) of the completed public equity offering of the Company in an amount exceeding $10,000,000 as stated on the registration statement on a Form S-1 filed with the Securities and Exchange Commission on November 14, 2018 (the “Public Offering”), as amended from time to time. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the KLS Note as of September 30, 2019.
On September 4, 2019, the Company issued 3 twelve-month term unsecured convertible promissory note (the “C.L.L. Note”) in an aggregate principal amount of $257,500 to Chang Ping Shan, Lin Shan Tyan, and Liu Ching Hsuan (the “C.L.L.”), pursuant to which the Company received $257,500 on Sept 4, 2019. The C.L.L. Note bears interest at 20% per annum. The Company shall pay to the C.L.L. an amount in cash representing all outstanding principal and accrued and unpaid interest on the Twelve (12) month anniversary of the issuance date of the C.L.L. Note, which is on Sept 3, 2020. At any time from the date hereof until this C.L.L. Note has been satisfied, the C.L.L. may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company’s common stock at a conversion price (the “Conversion Price”) equal to the lower of (i) $.50 per share (the “Fixed Conversion Price”), subject to adjustment, or (ii) 70% of the per share offering price (the “Alternative Conversion Price”) of the completed public equity offering of the Company in an amount exceeding $10,000,000 as stated on the registration statement on a Form S-1 filed with the Securities and Exchange Commission on November 14, 2018 (the “Public Offering”), as amended from time to time. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the C.L.L. Note as of September 30, 2019.
As of September 30, 2019 and December 31, 2018, the aggregate carrying values of the convertible debentures were $1,757,500 and $800,000, respectively; and accrued convertible interest was $109,106 and $27,467, respectively.
Total interest expenses in connection with the above convertible notes payable were $18,755 and $3,567 for the three months ended September 30, 2019 and 2018, respectively. Total interest expenses in connection with the above convertible notes payable were $53,510 and $7,134 for the nine months ended September 30, 2019 and 2018, respectively. |
Equity |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EQUITY | 12. EQUITY
During October 2015, $350,000 of subscription receivable was fully collected from the shareholders.
On February 8, 2016, a Share Exchange Agreement (“Share Exchange Agreement”) was entered into by and among American BriVision (Holding) Corporation (the “Company”), American BriVision Corporation (“BriVision”), Euro-Asia Investment & Finance Corp. Limited, a company incorporated under the laws of Hong Kong Special Administrative Region of People’s Republic of China (“Euro-Asia”), being the owners of record of 164,387,376 (52,336,000 pre-stock split) shares of Common Stock of the Company, and the owners of record of all of the issued share capital of BriVision (the “BriVision Stock”). Pursuant to the Share Exchange Agreement, upon surrender by the BriVision Shareholders and the cancellation by BriVision of the certificates evidencing the BriVision Stock as registered in the name of each BriVision Shareholder, and pursuant to the registration of the Company in the register of members maintained by BriVision as the new holder of the BriVision Stock and the issuance of the certificates evidencing the aforementioned registration of the BriVision Stock in the name of the Company, the Company should issue 166,273,921(52,936,583 pre-stock split) shares (the “Acquisition Stock”) (subject to adjustment for fractionalized shares as set forth below) of the Company’s Common Stock to the BriVision Shareholders (or their designees), and 163,159,952 (51,945,225 pre-stock split) shares of the Company’s Common Stock owned by Euro-Asia should be cancelled and retired to treasury. The Acquisition Stock collectively should represent 79.70% of the issued and outstanding Common Stock of the Company immediately after the Closing, in exchange for the BriVision Stock, representing 100% of the issued share capital of BriVision in a reverse merger, or the Merger. Pursuant to the Merger, all of the issued and outstanding shares of BriVision’s Common Stock were converted, at an exchange ratio of 0.2536-for-1, into an aggregate of 166,273,921(52,936,583 pre-stock split) shares of Company’s Common Stock and BriVision became a wholly owned subsidiary, of the Company. The holders of Company’s Common Stock as of immediately prior to the Merger held an aggregate of 205,519,223 (65,431,144 pre-stock split) shares of Company’s Common Stock, Because of the exchange of the BriVision Stock for the Acquisition Stock (the “Share Exchange”), BriVision became a wholly owned subsidiary (the “Subsidiary”) of the Company and there was a change of control of the Company following the closing. There were no warrants, options or other equity instruments issued in connection with the share exchange agreement.
On February 17, 2016, pursuant to the 2016 Equity Incentive Plan (the “2016 Plan”), 157,050 (50,000 pre-stock split) shares were granted to the employees.
On March 21, 2016, the Board of Directors of the Company approved an amendment to Articles of Incorporation to effect a forward split at a ratio of 1 to 3:141 (the “Forward Stock Split”) and increase the number of our authorized shares of Common Stock, par value $0.001 per share, to 360,000,000, which was effective on April 8, 2016.
On May 6, 2016, the Company and BioLite Taiwan agreed to amend the BioLite Collaborative Agreement, through entry into the Milestone Payment Agreement, whereby the Company has agreed to issue shares of Common Stock of the Company, at the price of $1.60 per share, for an aggregate number of 562,500 shares, as part of the Company’s first installation of payment pursuant to the Milestone Payment. The shares issuance was completed in June 2016. On August 26, 2016, the Company issued 1,468,750 shares (“Shares”) of the Company’s Common Stock, par value $0.001 (the “Offering”) to BioLite Taiwan pursuant to a certain Stock Purchase Agreement dated August 26, 2016 (the “SPA”). The Shares are exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Regulation S of the Securities Act promulgated thereunder. The purchase price per share of the Offering is $1.60. The net proceeds to the Company from the Offering are approximately $2,350,000. Pursuant to the BioLite Collaborative Agreement, BriVision should pay a total of $100,000,000 in cash or stock of the Company with equivalent value according to the milestone achieved. The agreement requires that 6.5% of total payment, $6,500,000 shall be made upon the first IND submission which was submitted in March 2016. In February 2017, the Company remitted this amount to BioLite with $650,000 in cash and $5,850,000 in the form of newly issued shares of the Company’s Common Stock, at the price of $2.0 per share, for an aggregate number of 2,925,000 shares. Upon the consummation of the restructuring transaction between the Company and BioLite on February 8, 2019, the Company’s Common Stock held by BioLite Taiwan was accounted for treasury stocks in the statement of equity (deficit).
On May 3, 2019, the Company filed a Certificate of Amendment with the Secretary of State of Nevada, which was effective May 8, 2019 upon its receipt of the written notice from Financial Industry Regulatory Authority (“FINRA”). Pursuant to the Certificate of Amendment, the Company effectuated a 1-for-18 reverse stock split of its issued and outstanding shares of common stock, $0.001 par value, whereby 318,485,252 outstanding shares of the Company’s common stock were exchanged for 17,693,625 shares of the Company’s Common Stock. All shares and related financial information in this Form 10-Q reflect this 1-for-18 reverse stock split.
On October 1, 2016, the Company entered into a consulting agreement with Kazunori Kameyama (“Kameyama”) for the provision of services related to the clinical trials and other administrative work, public relation work, capital raising, trip coordination, In consideration for providing such services, the Company agreed to indemnify the consultant in an amount of $150 per hour in cash up to $3,000 per month, and issue to Kameyama the Company’s Common Stock at $1.00 per share for any amount exceeding $3,000. The Company’s stocks shall be calculated and issued in December every year. On October 1, 2017, the Company and Kameyama agreed to extend the service period for one more year expiring on September 30, 2018. As a result, the non-employee stock-based compensation related to this consulting agreement was $28,800 and $5,400 for the years ended December 31, 2018 and 2017, respectively. On March 28, 2018, the Company issued 4,828 shares of the Company’s common stock at $1.60 per share in a total of $7,725 to Kameyama in connection with this consulting agreement.
On January 1, 2017, Euro-Asia Investment & Finance Corp Ltd. And the Company entered into a service agreement (the “Euro-Asia Agreement”) for the maintenance of the listing in the U.S. stock exchange market. During the years ended December 31, 2018 and 2017, the Company recognized non-employee stock based compensation expenses of $0 and $60,000 in connection with the terms in the Euro-Asia Agreement, respectively. On March 28, 2018, the Company issued 50,000 shares of the Company’s common stock at $1.60 per share in a total of $80,000 to Euro-Asia in connection with the Euro-Asia Agreement.
On January 1, 2017, Kimho Consultants Co., Ltd. And the Company entered into a service agreement (the “Kimho Agreement”) for the maintenance of the listing in the U.S. stock exchange market. During the years ended December 31, 2018 and 2017, the Company recognized non-employee stock based compensation expenses of $0 and $90,000 in connection with the terms in the Kimho Agreement, respectively. On March 28, 2018, the Company issued 75,000 shares of the Company’s common stock at $1.60 per share in a total of $120,000 to Kimho in connection with the Kimho Agreement.
Pursuant to ASC 505-50-30, the transactions with the non-employees were measured based on the fair value of the equity instruments issued as the Company determined that the fair value of the equity instruments issued in a stock-based payment transaction with nonemployees was more reliably measurable than the fair value of the consideration received. The Company measured the fair value of the equity instruments in these transactions using the stock price on the date at which the commitments Kameyama, Euro-Asia, and Kimho for performance were rendered.
On March 28, 2018, the Company also issued an aggregate of 50,000 shares of the Company’s common stock at $1.60 per share for salaries in a total of $80,000 to three officers.
On February 8, 2019, after the Merger, the Company issued 74,997,546 shares to the shareholders of BioLite and 29,561,231 shares to the shareholders of BioKey.
As stated in Note 11, in August 2019, the Company entered into several Conversion Agreements to all creditors that are listed under below table of “due to related parties” in consideration for a total of $4,872,340 owed by the Company to various creditors based on outstanding loan agreements. Under the Conversion Agreements, creditor agrees to convert the amount of debt into the Company’s common stock at a price of $7.00 per share.
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Inventory (Details) - USD ($) |
Sep. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Merchandise | $ 1,318 | |
| Finished goods | 91,341 | 100,736 |
| Work-in-process | 19,937 | 20,243 |
| Raw materials | 55,835 | 56,691 |
| Allowance for inventory valuation and obsolescence loss | (167,113) | (177,670) |
| Inventory, net | $ 1,318 |
Summary of Significant Accounting Policies (Details) |
9 Months Ended |
|---|---|
Sep. 30, 2019 | |
| Buildings and leasehold improvements [Member] | Minimum [Member] | |
| Estimated Life | 5 years |
| Buildings and leasehold improvements [Member] | Maximum [Member] | |
| Estimated Life | 50 years |
| Machinery and equipment [Member] | Minimum [Member] | |
| Estimated Life | 5 years |
| Machinery and equipment [Member] | Maximum [Member] | |
| Estimated Life | 10 years |
| Office equipment [Member] | Minimum [Member] | |
| Estimated Life | 3 years |
| Office equipment [Member] | Maximum [Member] | |
| Estimated Life | 6 years |
Related Parties Transactions (Details) |
9 Months Ended |
|---|---|
Sep. 30, 2019 | |
| BioFirst Corporation (the "BioFirst") [Member] | |
| Relationship with the Company and its subsidiaries, description | Loaned from the investee and provides research and development support service |
| BioFirst (Australia) Pty Ltd. (the "BioFirst (Australia)") [Member] | |
| Relationship with the Company and its subsidiaries, description | 100% owned by BioFirst; Entity controlled by controlling beneficiary shareholder of YuanGene |
| Rgene Corporation (the "Rgene") [Member] | |
| Relationship with the Company and its subsidiaries, description | Shareholder of the Company; entity controlled by controlling beneficiary shareholder of Yuangene |
| Yuangene Corporation (the "Yuangene") [Member] | |
| Relationship with the Company and its subsidiaries, description | Controlling beneficiary shareholder of the Company |
| AsiaGene Corporation (the "AsiaGene") [Member] | |
| Relationship with the Company and its subsidiaries, description | Shareholder; entity controlled by controlling beneficiary shareholder of Yuangene |
| Eugene Jiang [Member] | |
| Relationship with the Company and its subsidiaries, description | Former President and Chairman |
| Keypoint Technology Ltd. (the "Keypoint') [Member] | |
| Relationship with the Company and its subsidiaries, description | The Chairman of Keypoint is Eugene Jiang's mother. |
| Lion Arts Promotion Inc. (the "Lion Arts") | |
| Relationship with the Company and its subsidiaries, description | Shareholder of the Company |
| Yoshinobu Odaira (the "Odaira") [Member] | |
| Relationship with the Company and its subsidiaries, description | Director of the Company |
| GenePharm Inc. (the "GenePharm") [Member] | |
| Relationship with the Company and its subsidiaries, description | Mr. George Lee, the Director and Chairman of Biokey, is the Chairman of GenePharm. |
| Euro-Asia Investment & Finance Corp Ltd. (the "Euro-Asia") [Member] | |
| Relationship with the Company and its subsidiaries, description | Shareholder of the Company |
| Kimho Consultants Co., Ltd. (the "Kimho") [Member] | |
| Relationship with the Company and its subsidiaries, description | Shareholder of the Company |
| LBG USA, Inc. (the "LBG USA") [Member] | |
| Relationship with the Company and its subsidiaries, description | 100% owned by BioFirst; Entity controlled by controlling beneficiary shareholder of YuanGene |
| LionGene Corporation (the "LionGene") [Member] | |
| Relationship with the Company and its subsidiaries, description | Shareholder of the Company; Entity controlled by controlling beneficiary shareholder of YuanGene |
| Jiangs [Member] | |
| Relationship with the Company and its subsidiaries, description | Mr. Tsung-Shann Jiang, the controlling beneficiary shareholder of the Company and 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, is the Chairman of Keypoint, LION, and BioFirst; 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. |
Related Parties Transactions (Details Textual) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | 13 Months Ended | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 12, 2019 |
Jul. 02, 2019 |
May 12, 2019 |
Feb. 02, 2019 |
May 11, 2018 |
Apr. 12, 2017 |
Aug. 31, 2019 |
Jun. 30, 2019 |
May 27, 2019 |
Feb. 27, 2019 |
Jan. 20, 2019 |
Dec. 31, 2018 |
Nov. 30, 2018 |
Nov. 29, 2018 |
Aug. 25, 2018 |
Jun. 27, 2018 |
Jan. 31, 2018 |
Jan. 18, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2018 |
Jan. 26, 2017 |
|
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Interest expenses | $ 111,968 | $ 122,326 | $ 374,540 | $ 345,982 | ||||||||||||||||||||||
| Conversion price | $ 7.00 | |||||||||||||||||||||||||
| Convertion of debt | $ 4,872,340 | |||||||||||||||||||||||||
| Conversion of debt, shares | 696,051 | |||||||||||||||||||||||||
| Related party transactions, description | Since 2018, Mr. Tsung-Shann Jiang, Mr. Chang-Jen Jiang, Ms. Shu-Ling Jiang, and Ms. Mei-Ling Jiang have entered into various loans with the Company for working capital purpose in an aggregate amount of $795,340. These loans bear interest at 12% per annum and are due on demand. On August 1, 2019, the Company entered into a Conversion Agreements to convert the remaining balance of $817,354 to 116,765 shares of the Company’s common stock at a conversion price of $7.00 per share. | |||||||||||||||||||||||||
| Outstanding advance balance | $ 7,745,096 | 376,460 | 376,460 | $ 7,745,096 | ||||||||||||||||||||||
| Keypoint Note [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Aggregate principal amount | $ 250,000 | |||||||||||||||||||||||||
| Interest rate percentage | 8.00% | |||||||||||||||||||||||||
| Interest expenses | 15,000 | 0 | ||||||||||||||||||||||||
| Related party transactions, description | On June 27, 2018, the Company issued an eighteen-month term unsecured convertible promissory note (the “Keypoint Note”) in an aggregate principal amount of $250,000 to Keypoint Technology Ltd. (“Keypoint”) (See Note 8). | |||||||||||||||||||||||||
| Odaira Note [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Aggregate principal amount | $ 250,000 | |||||||||||||||||||||||||
| Interest rate percentage | 8.00% | |||||||||||||||||||||||||
| Interest expenses | 15,000 | 0 | ||||||||||||||||||||||||
| Related party transactions, description | On August 25, 2018, the Company issued an eighteen-month term unsecured convertible promissory note (the “Odaira Note”) in an aggregate principal amount of $250,000 to Yoshinobu Odaira (“Odaira”) (See Note 8). | |||||||||||||||||||||||||
| Rgene Corporation [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Aggregate principal amount | 19,477 | 34,220 | $ 34,220 | 19,477 | ||||||||||||||||||||||
| Loan agreement, description | The loan bears interest at 1% per month (or equivalent to 12% per annum) and the loan will be matured on December 31, 2019 | |||||||||||||||||||||||||
| Accrued interest | 0 | 3,203 | $ 3,203 | 0 | ||||||||||||||||||||||
| Asiangene Corporation [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Accrued interest | $ 37 | |||||||||||||||||||||||||
| Amount of equivalent | 3,353 | |||||||||||||||||||||||||
| Outstanding advance balance | 160,000 | 24,017 | 24,017 | 160,000 | ||||||||||||||||||||||
| Asiangene Corporation [Member] | NT [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Aggregate working capital | 100,000 | |||||||||||||||||||||||||
| Aggregate principal amount | $ 100,000 | |||||||||||||||||||||||||
| Loan agreement, description | The loan bears interest at 1% per month (or equivalent to 12% per annum) and the loan will be matured on December 31, 2019. | |||||||||||||||||||||||||
| BioFirst [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Aggregate principal amount | 0 | 132,650 | 132,650 | 0 | ||||||||||||||||||||||
| Accrued interest | 142,688 | $ 142,688 | ||||||||||||||||||||||||
| Interest rate percentage | 12.00% | |||||||||||||||||||||||||
| Loan maturity date | Dec. 31, 2019 | |||||||||||||||||||||||||
| Interest expenses | $ 22,359 | |||||||||||||||||||||||||
| Outstanding advance balance | 6,428,643 | 142,688 | 142,688 | 6,428,643 | ||||||||||||||||||||||
| BioFirst (Australia) [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Aggregate principal amount | $ 150,000 | $ 40,000 | ||||||||||||||||||||||||
| Interest rate percentage | 12.00% | 0.00% | ||||||||||||||||||||||||
| Loan maturity date | Dec. 31, 2019 | |||||||||||||||||||||||||
| Outstanding loan balance | 40,000 | 40,000 | ||||||||||||||||||||||||
| Interest expenses | $ 3,968 | |||||||||||||||||||||||||
| BioLite Taiwan [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Aggregate working capital | $ 430,817 | $ 94,990 | ||||||||||||||||||||||||
| Loan agreement, description | 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. | |||||||||||||||||||||||||
| Interest rate percentage | 0.00% | 12.00% | ||||||||||||||||||||||||
| Loan maturity date | Apr. 14, 2020 | |||||||||||||||||||||||||
| Other receivable from related parties | 0 | 111,780 | $ 111,780 | 0 | ||||||||||||||||||||||
| Conversion price | $ 7.00 | $ 7.00 | $ 7.00 | |||||||||||||||||||||||
| Convertion of debt | $ 428,099 | $ 97,864 | ||||||||||||||||||||||||
| Conversion of debt, shares | 61,157 | 13,981 | ||||||||||||||||||||||||
| BioLite Taiwan [Member] | NT [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Aggregate working capital | $ 13,295,000 | $ 2,950,000 | ||||||||||||||||||||||||
| LBG USA, Inc.[Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Loan agreement, description | The advances bear 0% interest rate and are due on demand. | |||||||||||||||||||||||||
| Outstanding advance | 675 | 0 | 0 | 675 | ||||||||||||||||||||||
| BioFirst [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Aggregate working capital | $ 625,646 | $ 950,000 | ||||||||||||||||||||||||
| Interest rate percentage | 12.00% | 12.00% | ||||||||||||||||||||||||
| Loan maturity date | Feb. 01, 2020 | May 27, 2020 | ||||||||||||||||||||||||
| Outstanding loan balance | $ 693,000 | |||||||||||||||||||||||||
| Conversion price | $ 7.00 | $ 7.00 | ||||||||||||||||||||||||
| Convertion of debt | $ 693,000 | $ 625,646 | ||||||||||||||||||||||||
| Conversion of debt, shares | 99,000 | 8,937 | ||||||||||||||||||||||||
| Stock purchase agreement, description | Pursuant to which the Company agreed to issue 428,571 shares of the Company’s common stock to BioFirst in consideration for $3,000,000 owed by the Company to BioFirst. | |||||||||||||||||||||||||
| BioFirst [Member] | Conversion Agreements One [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Interest rate percentage | 0.00% | |||||||||||||||||||||||||
| Conversion price | $ 7.00 | |||||||||||||||||||||||||
| Convertion of debt | $ 597,128 | |||||||||||||||||||||||||
| Conversion of debt, shares | 85,304 | |||||||||||||||||||||||||
| BioFirst [Member] | NT [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Aggregate working capital | $ 19,430,000 | |||||||||||||||||||||||||
| BioLite BVI [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Aggregate working capital | $ 987,134 | |||||||||||||||||||||||||
| Interest rate percentage | 12.00% | |||||||||||||||||||||||||
| Loan maturity date | May 11, 2020 | May 11, 2019 | ||||||||||||||||||||||||
| Conversion price | $ 7.00 | |||||||||||||||||||||||||
| Convertion of debt | $ 987,134 | |||||||||||||||||||||||||
| Conversion of debt, shares | 141,020 | |||||||||||||||||||||||||
| BioLite BVI [Member] | NT [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Aggregate working capital | $ 30,000,000 | |||||||||||||||||||||||||
| Everfront Biotech Inc. [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Investment and equity transfer agreement, description | Pursuant to the Investment and Equity Transfer Agreement, Everfront agreed to purchase 2,000,000 common shares of the Company owned by AsiaGene at $1.60 per share in a total amount of $3,200,000, of which $160,000 is due before September 15, 2017 and the remaining amount of $3,040,000 is due before December 15, 2017. AsiaGene also agreed to loan the proceeds to the Company for working capital purpose. The non-secured loan bears 0% interest rate and is due on demand. On August 1, 2019, the Company entered into a Conversion Agreements to convert the remaining balance of $160,000 to 22,858 shares of the Company’s common stock at a conversion price of $7.00 per share. | |||||||||||||||||||||||||
| YuanGene [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Aggregate working capital | $ 42,690 | $ 50,000 | ||||||||||||||||||||||||
| Interest rate percentage | 0.00% | 12.00% | ||||||||||||||||||||||||
| Loan maturity date | Jan. 19, 2020 | Jan. 19, 2019 | ||||||||||||||||||||||||
| Conversion price | $ 7.00 | $ 7.00 | ||||||||||||||||||||||||
| Convertion of debt | $ 50,000 | $ 42,690 | ||||||||||||||||||||||||
| Conversion of debt, shares | 7,143 | 6,099 | ||||||||||||||||||||||||
| Outstanding advance balance | 9,205 | 9,205 | ||||||||||||||||||||||||
| Jiangs [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Aggregate principal amount | $ 381,375 | 4,735 | $ 4,735 | $ 381,375 | ||||||||||||||||||||||
| Interest rate percentage | 0.00% | 0.00% | ||||||||||||||||||||||||
| Conversion price | $ 7.00 | $ 7.00 | ||||||||||||||||||||||||
| Convertion of debt | $ 381,375 | |||||||||||||||||||||||||
| Conversion of debt, shares | 54,482 | |||||||||||||||||||||||||
| Kimho [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Related party transactions, description | On July 2, 2019, the Company entered into an agreement with Kimho, starting from September 2019 with a fixed monthly retainer of $7,500. As of September 30, 2019 and December 31, 2018, the outstanding services charge was $7,500 and $0, respectively. | |||||||||||||||||||||||||
| Outstanding advance balance | 7,500 | $ 7,500 | ||||||||||||||||||||||||
| Due to shareholders [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Outstanding advance balance | $ 188,315 | 188,315 | ||||||||||||||||||||||||
| Advances bear interest, description | The advances bear interest from 12% to 13.6224% per annum. | |||||||||||||||||||||||||
| AsianGene Corporation [Member] | ||||||||||||||||||||||||||
| Related Parties Transactions (Textual) | ||||||||||||||||||||||||||
| Outstanding advance balance | $ 24,017 | $ 24,017 | ||||||||||||||||||||||||
Organization and Description of Business |
9 Months Ended |
|---|---|
Sep. 30, 2019 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| ORGANIZATION AND DESCRIPTION OF BUSINESS |
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
American BriVision (Holding) Corporation (the "Company" or "Holding entity"), a Nevada corporation, through the Company's operating entity, American BriVision Corporation (the "BriVision"), which was incorporated in July 2015 in the State of Delaware, engages in biotechnology and focuses on the development of new drugs and innovative medical devices to fulfill unmet medical needs. The business model of the Company is to integrate research achievements from world-famous institutions (such as Memorial Sloan Kettering Cancer Center ("MSKCC") and MD Anderson Cancer Center), conduct clinical trials of translational medicine for Proof of Concept ("POC"), out-license to international pharmaceutical companies, and exploit global markets. BriVision had to predecessor operations prior to its formation on July 21, 2015.
Reverse Merger
On February 8, 2016, a Share Exchange Agreement (the "Share Exchange Agreement") was entered into by and among American BriVision (Holding) Corporation, American BriVision Corporation ("BriVision"), and Euro-Asia Investment & Finance Corp. Limited, a company incorporated under the laws of Hong Kong Special Administrative Region of the People's Republic of China ("Euro-Asia"), being the owners of record of 164,387,376 (52,336,000 pre-stock split) shares of Common Stock of the Company, and the owners of record of all of the issued share capital of BriVision (the "BriVision Stock").
Pursuant to the Share Exchange Agreement, upon surrender by the BriVision Shareholders and the cancellation by BriVision of the certificates evidencing the BriVision Stock as registered in the name of each BriVision Shareholder, and pursuant to the registration of the Company in the register of members maintained by BriVision as the new holder of the BriVision Stock and the issuance of the certificates evidencing the aforementioned registration of the BriVision Stock in the name of the Company, the Company issued 166,273,921(52,936,583 pre-stock split) shares (the "Acquisition Stock") (subject to adjustment for fractionalized shares as set forth below) of the Company's Common Stock to the BriVision Shareholders (or their designees), and 163,159,952 (51,945,225 pre-stock split) shares of the Company's Common Stock owned by Euro-Asia were cancelled and retired to treasury. The Acquisition Stock collectively represented 79.70% of the issued and outstanding Common Stock of the Company immediately after the Closing, in exchange for the BriVision Stock, representing 100% of the issued share capital of BriVision in a reverse merger (the "Merger").
Pursuant to the Merger, all of the issued and outstanding common shares of BriVision were converted, at an exchange ratio of 0.2536-for-1, into an aggregate of 166,273,921(52,936,583pre-stock split) common shares of the Company and BriVision had become a wholly owned subsidiary of the Company. The holders of Company's Common Stock as of immediately prior to the Merger held an aggregate of 205,519,223(65,431,144 pre-stock split) shares of Company's Common Stock. Because of the exchange of the BriVision Stock for the Acquisition Stock (the "Share Exchange"), BriVision had become a wholly owned subsidiary (the "Subsidiary") of the Company and there was a change of control of the Company following the closing. There were no warrants, options or other equity instruments issued in connection with the share exchange agreement.
Upon the consummation of the Share Exchange, BriVision became our wholly owned subsidiary of the Company.
Following the Share Exchange, we have abandoned our prior business plan and we are now pursuing BriVision's historically proposed businesses, which focus on the development of new drugs and innovative medical devices to fulfill unmet medical needs. The business model of the Company is to integrate research achievements from world-famous institutions, conduct clinical trials of translational medicine for Proof of Concept ("POC"), out-license to international pharmaceutical companies, and explore global markets.
Accounting Treatment of the Reverse Merger
For financial reporting purposes, the Share Exchange represents a "reverse merger" rather than a business combination and BriVision is deemed the accounting acquirer in the transaction. The Share Exchange is being accounted for as a reverse-merger and recapitalization. BriVision is the acquirer for financial reporting purposes and the Company is the acquired company. Consequently, the assets and liabilities and the operations reflected in the historical financial statements prior to the Share Exchange will be those of BriVision and recorded at the historical cost basis of BriVision. In addition, the consolidated financial statements after completion of the Share Exchange will include the assets and liabilities of the Company and BriVision, and the historical operations of BriVision and operations of the Combined Company from the closing date of the Share Exchange.
Merger
On February 8, 2019, the Company, BioLite Holding, Inc. ("BioLite"), BioKey, Inc. ("BioKey"), BioLite Acquisition Corp., a direct wholly-owned subsidiary of Parent ("Merger Sub 1"), and BioKey Acquisition Corp., a direct wholly-owned subsidiary of Parent ("Merger Sub 2") (collectively referred to as the "Parties") completed the business combination pursuant to the Agreement and Plan of Merger (the "Merger Agreement") dated as of January 31, 2018 where ABVC acquired BioLite and BioKey via issuing additional Common Stock of ABVC to the shareholders of BioLite and BioKey.
Pursuant to the terms of the Merger Agreement, BioLite and BioKey became two wholly-owned subsidiaries of the Company on February 8, 2019. ABVC issued an aggregate of 104,558,777 shares (prior to the reverse stock split in 2019) 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.
BioLite Holding, Inc. (the "BioLite Holding") was incorporated under the laws of the State of Nevada on July 27, 2016. BioLite BVI, Inc. (the "BioLite BVI"), a wholly owned subsidiary of BioLite Holding, was incorporated in the British Virgin Islands on September 13, 2016. BioLite Holding and BioLite BVI are holding companies and have not carried out substantive business operations of their own.
BioLite, Inc., (the "BioLite Taiwan") was incorporated on February 13, 2006 under the laws of Taiwan. BioLite is in the business of developing and commercialization of new botanical drugs with application in central nervous system, autoimmunity, inflammation, hematology, and oncology. In addition, BioLite Taiwan distributes dietary supplements made from extracts of Chinese herbs and Maitake mushroom.
In January 2017, BioLite Holding, 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 have sold their equity in BioLite Taiwan and were using the proceeds from such sales to purchase shares of Common Stock of BioLite Holding at the same price per share, resulting in their owning the same number of shares of Common Stock as they owned in the BioLite Taiwan. Upon closing of the Share Purchase/ Exchange Agreement in August 2017, BioLite Holding ultimately owns via BioLite BVI approximately 73% of BioLite Taiwan. The other shareholders who did not enter this Share Purchase/ Exchange Agreement retain their equity ownership in BioLite Taiwan.
BioKey, Inc. 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.
Accounting Treatment of the Merger
The Company adopted ASC 805, "Business Combination" to record the merger transactions of BioKey. Since the Company and BioLite Holding are the entities under Dr. Tsung-Shann Jiang's common control, the transaction is accounted for as a restructuring transaction. All the assets and liabilities of BioLite Holding, BioLite BVI, and BioLite Taiwan were transferred to the Company at their respective carrying amounts on the closing date of the Merger. The Company has recast prior period financial statements to reflect the conveyance of BioLite Holding's common shares as if the restructuring transaction had occurred as of the earliest date of the financial statements. All material intercompany accounts, transactions, and profits have been eliminated in consolidation. The nature of and effects on earnings per share (EPS) of nonrecurring intra-entity transactions involving long-term assets and liabilities is not required to be eliminated and EPS amounts have been recast to include the earnings (or losses) of the transferred net assets. |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Sep. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred shares, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
| Preferred stock, shares issued | ||
| Preferred stock, shares outstanding | ||
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 20,000,000 | 20,000,000 |
| Common stock, shares issued | 19,478,168 | 11,884,804 |
| Common stock, shares outstanding | 19,478,168 | 11,884,804 |
Convertible Notes Payable (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 04, 2018 |
Aug. 25, 2018 |
Jul. 10, 2018 |
Jun. 27, 2018 |
May 09, 2018 |
May 30, 2019 |
Aug. 28, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2018 |
|
| Unsecured convertible promissory note [Member] | ||||||||||||
| Convertible Notes Payable (Textual) | ||||||||||||
| Aggregate principal amount | $ 257,500 | $ 250,000 | $ 250,000 | $ 250,000 | $ 300,000 | $ 250,000 | ||||||
| Bears interest rate | 20.00% | 8.00% | 20.00% | 8.00% | 8.00% | 20.00% | ||||||
| Convertible promissory note received | $ 257,500 | $ 250,000 | $ 250,000 | $ 250,000 | $ 300,000 | $ 200,000 | ||||||
| Equity offering, description | The Company raises gross proceeds from the sale of its common stock of at least $5,000,000 (an "Equity Offering") then within five days of the closing for such offering, the Company must repay the outstanding amount of this Odaira Note. | The Company raises gross proceeds from the sale of its common stock of at least $5,000,000 (an "Equity Offering") then within five days of the closing for such offering, the Company must repay the outstanding amount of this Keypoint Note. | The Company raises gross proceeds from the sale of its common stock of at least $5,000,000 (an "Equity Offering") then within five days of the closing for such offering, the Company must repay the outstanding amount of this Yu and Wei Note. | |||||||||
| Conversion price, description | (i) $.50 per share (the “Fixed Conversion Price”), subject to adjustment, or (ii) 70% of the per share offering price (the “Alternative Conversion Price”) of the completed public equity offering of the Company in an amount exceeding $10,000,000 as stated on the registration statement on a Form S-1 filed with the Securities and Exchange Commission on November 14, 2018 (the “Public Offering”), as amended from time to time. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the C.L.L. Note. as of September 30, 2019. | (i) $2.00 per share (the “Fixed Conversion Price”), subject to adjustment or (ii) 80% of the per share offering price (the “Alternative Conversion Price”) of any completed equity offering of the Company in an amount exceeding $500,000 that occurs when any part of the Odaira Note is outstanding, subject to adjustments set forth in the Odaira Note. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the Odaira Note as of September 30, 2019 and December 31, 2018. | (i) $.50 per share (the “Fixed Conversion Price”), subject to adjustment, or (ii) 70% of the per share offering price (the “Alternative Conversion Price”) of the completed public equity offering of the Company in an amount exceeding $10,000,000 as stated on the registration statement on a Form S-1 filed with the Securities and Exchange Commission on November 14, 2018 (the “Public Offering”), as amended from time to time. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the NEA Note as of September 30, 2019. | (i) $2.00 per share (the “Fixed Conversion Price”), subject to adjustment or (ii) 80% of the per share offering price (the “Alternative Conversion Price”) of any completed equity offering of the Company in an amount exceeding $500,000 that occurs when any part of the Keypoint Note is outstanding, subject to adjustments set forth in the Keypoint Note. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the Keypoint Note as of September 30, 2019 and December 31, 2018. | (i) $2.00 per share (the “Fixed Conversion Price”), subject to adjustment or (ii) 80% of the per share offering price (the “Alternative Conversion Price”) of any completed equity offering of the Company in an amount exceeding $500,000 that occurs when any part of the Yu and Wei Note is outstanding, subject to adjustments set forth in the Yu and Wei Note. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the Yu and Wei Note as of September 30, 2019 and December 31, 2018. | (i) $.50 per share (the “Fixed Conversion Price”), subject to adjustment, or (ii) 70% of the per share offering price (the “Alternative Conversion Price”) of the completed public equity offering of the Company in an amount exceeding $10,000,000 as stated on the registration statement on a Form S-1 filed with the Securities and Exchange Commission on November 14, 2018 (the “Public Offering”), as amended from time to time. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the KLS Note as of September 30, 2019. | ||||||
| Convertible debenture | $ 1,757,500 | $ 1,757,500 | $ 800,000 | |||||||||
| Accrued convertible interest | 109,106 | $ 27,467 | ||||||||||
| Interest expenses in connection with convertible notes payable | $ 18,755 | $ 3,567 | $ 53,510 | $ 7,134 | ||||||||
| Kuo Note [Member] | ||||||||||||
| Convertible Notes Payable (Textual) | ||||||||||||
| Unsecured convertible promissory note, description | The Company issued 2 twelve-month term unsecured convertible promissory notes (the "Kuo Note") in an aggregate principal amount of $250,000 to Kuo Sheng Lung (the "Kuo"), pursuant to which the Company received $160,000 on May 30, 2019 and $90,000 on July 11, 2019. The Kuo Note bears interest at 20% per annum. The Company shall pay to the Kuo an amount in cash representing all outstanding principal and accrued and unpaid interest on the Twelve (12) month anniversary of the issuance date of the Kuo Note, which is on May 29, 2020 and July 10, 2020. At any time from the date hereof until this Kuo Note has been satisfied, the kuo may convert the unpaid and outstanding principal plus any accrued and unpaid interest and or default interest, if any, into shares of the Company's common stock at a conversion price (the "Conversion Price") equal to the lower of (i) $.50 per share (the "Fixed Conversion Price"), subject to adjustment, or (ii) 70% of the per share offering price (the "Alternative Conversion Price") of the completed public equity offering of the Company in an amount exceeding $10,000,000 as stated on the registration statement on a Form S-1 filed with the Securities and Exchange Commission on November 14, 2018 (the "Public Offering"), as amended from time to time. In accordance with FASB ASC 470-20, the Company recognized none of the intrinsic value of embedded beneficial conversion feature present in the Kuo Note. | |||||||||||
Long-Term Investments (Details 3) - USD ($) |
Sep. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Current Assets | $ 1,707,567 | $ 566,476 |
| Current Liabilities | 5,877,924 | 10,987,786 |
| Shareholders' Equity (Deficit) | 665,930 | (5,657,996) |
| Rgene [Member] | ||
| Current Assets | 29,869 | 98,168 |
| Noncurrent Assets | 93,031 | 14,779 |
| Current Liabilities | 324,694 | 261,685 |
| Noncurrent Liabilities | 4,565 | |
| Shareholders' Equity (Deficit) | (206,359) | (148,738) |
| BioFirst [Member] | ||
| Current Assets | 1,239,738 | 7,551,898 |
| Noncurrent Assets | 7,243,928 | 1,608,460 |
| Current Liabilities | 1,903,098 | 1,648,206 |
| Noncurrent Liabilities | 25,880 | |
| Shareholders' Equity (Deficit) | $ 6,554,688 | $ 7,512,152 |
Lease (Details) - USD ($) |
Sep. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| ASSETS | ||
| Operating lease right-of-use assets | $ 357,932 | |
| LIABILITIES | ||
| Operating lease liabilities (current) | 268,618 | |
| Operating lease liabilities (noncurrent) | $ 106,398 |
Summary of Significant Accounting Policies (Policies) |
9 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2019 | |||||||||||||
| Accounting Policies [Abstract] | |||||||||||||
| Basis of Presentation | Basis of Presentation
The accompanying consolidated 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 financial statements are expressed in U.S. dollars. |
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| Fiscal Year | Fiscal Year
The Company changed its fiscal year from the period beginning on October 1st and ending on September 30th to the period beginning on January 1st and ending on December 31st, beginning January 1, 2018. All references herein to a fiscal year prior to December 31, 2017 refer to the twelve months ended September 30th of such year. |
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| Use of Estimates | 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 consolidated financial statements and the amount of revenues and expenses during the reporting periods. Actual results could differ materially from those results. |
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| Inventory | Inventory
Inventory consists of raw materials, work-in-process, finished goods, and merchandise. Inventories are stated at the lower of cost or market and valued on a moving weighted average cost basis. Market is determined based on net realizable value. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and incurs a charge to operations for known and anticipated inventory obsolescence. |
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| Reclassifications | Reclassifications
Certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit. |
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| Forward Stock split | Forward Stock Split
On March 21, 2016, the Board of Directors of the Company approved an amendment to Articles of Incorporation to effect a forward split at a ratio of 1 to 3.141 and increase the number of our authorized shares of Common Stock, par value $0.001 per share, to 360,000,000, which was effective on April 8, 2016. |
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| Stock Reverse Split | Stock Reverse Split
On March 12, 2019, the Board of Directors of the Company by unanimous written consent in lieu of a meeting approved to i) effect a stock reverse split at the ratio of 1-for-18 (the "Reverse Split") of both the authorized common stock of the Company (the "Common Stock") and the issued and outstanding Common Stock and ii) to amend the articles of incorporation of the Company to reflect the Reverse Split. The Board approved and authorized the Reverse Split without obtaining approval of the Company's shareholders pursuant to Section 78.207 of Nevada Revised Statutes. On May 3, 2019, the Company filed a certificate of amendment to the Company's articles of incorporation (the "Amendment") to effect the Reverse Split with the Secretary of State of Nevada. The Financial Industry Regulatory Authority ("FINRA") informed the Company that the Reverse Split was effective on May 8, 2019. All shares and related financial information in this Form 10-Q reflect this 1-for-18 reverse stock split. |
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| Fair Value Measurements | 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:
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, inventory, 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. |
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| Cash and Cash Equivalents | 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, 2019 and December 31, 2018, the Company’s cash and cash equivalents amounted $1,035,678 and $226,688, 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. |
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| Restricted Cash Equivalents | Restricted Cash Equivalents
Restricted cash equivalents primarily consist of cash held in a reserve bank account in Taiwan. As of September 30, 2019 and December 31, 2018, the Company’s restricted cash equivalents amounted $16,122 and $16,093, respectively. |
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| Concentration of Credit Risk | Concentration of Credit Risk
The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments in high quality credit institutions, but these investments may be in excess of Taiwan Central Deposit Insurance Corporation and the U.S. Federal Deposit Insurance Corporation's insurance limits. The Company does not enter into financial instruments for hedging, trading or speculative purposes. |
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| Revenue Recognition | Revenue Recognition
During the fiscal year 2018, the Company adopted Accounting Standards Codification ("ASC"), Topic 606 (ASC 606), Revenue from Contracts with Customers, using the modified retrospective method to all contracts that were not completed as of January 1, 2018, and applying the new revenue standard as an adjustment to the opening balance of accumulated deficit at the beginning of 2018 for the cumulative effect. The results for the Company's reporting periods beginning on and after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. Based on the Company's review of existing collaborative agreements as of January 1, 2018, the Company concluded that the adoption of the new guidance did not have a significant change on the Company's revenue during all periods presented.
Pursuant to ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines is within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration the Company is entitled to in exchange for the goods or services the Company transfers to the customers. At inception of the contract, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
The following are examples of when the Company recognizes revenue based on the types of payments the Company receives.
Merchandise Sales — The Company recognizes net revenues from dietary supplements product sales when customers obtain control of the Company's products, which typically occurs upon delivery to customer. Product revenues are recorded at the net sales price, or "transaction price," which includes applicable reserves for variable consideration, including discounts, allowances, and returns.
Trade discount and allowances: The Company generally provides invoice discounts on product sales to its customers for prompt payment. The Company estimates that, based on its experience, its customers will earn these discounts and fees, and deducts the full amount of these discounts and fees from its gross product revenues and accounts receivable at the time such revenues are recognized.
Product returns: The Company estimates the amount of each product that will be returned and deducts these estimated amounts from its gross revenues at the time the revenues are recognized. The Company's customers have the right to return unopened packages, subject to contractual limitations.
To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal.
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: nonrefundable 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, 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 collaboration partners.
As part of the accounting for these arrangements, the Company applies judgment to determine whether the performance obligations are distinct, and develop assumptions in determining the stand-alone selling price for each distinct performance obligation identified in the collaboration agreements. To determine the stand-alone selling price, the Company relies on assumptions which may include forecasted revenues, development timelines, reimbursement rates for R&D personnel costs, discount rates and probabilities of technical and regulatory success.
The Company had multiple deliverables under the collaborative agreements, including deliverables relating to grants of technology licenses, regulatory and clinical development, and marketing activities. Estimation of the performance periods of the Company's deliverables requires the use of management's judgment. Significant factors considered in management's evaluation of the estimated performance periods include, but are not limited to, the Company's experience in conducting clinical development, regulatory and manufacturing activities. The Company reviews the estimated duration of its performance periods under its collaborative agreements on an annually basis, and makes any appropriate adjustments on a prospective basis. Future changes in estimates of the performance period under its collaborative agreements could impact the timing of future revenue recognition.
(i) 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 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 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 advance from customers 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. |
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| Property and Equipment | Property and Equipment
Property and equipment is carried at cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Expenditures that improve the functionality of the related asset or extend the useful life are capitalized. When property and equipment is retired or otherwise disposed of, the related gain or loss is included in operating income. Leasehold improvements are depreciated on the straight-line method over the shorter of the remaining lease term or estimated useful life of the asset. Depreciation is calculated on the straight-line method, including property and equipment under capital leases, generally based on the following useful lives:
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| Impairment of Long-Lived Assets | Impairment of Long-Lived Assets
The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment ("ASC 360-10"). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell. |
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| Long-term Equity Investment | Long-term Equity Investment
The Company acquires the equity investments to promote business and strategic objectives. The Company accounts for non-marketable equity and other equity investments for which the Company does not have control over the investees as:
Significant judgment is required to identify whether an impairment exists in the valuation of the Company's non-marketable equity investments, and therefore the Company considers this a critical accounting estimate. Its yearly analysis considers both qualitative and quantitative factors that may have a significant impact on the investee's fair value. Qualitative analysis of its investments involves understanding the financial performance and near-term prospects of the investee, changes in general market conditions in the investee's industry or geographic area, and the management and governance structure of the investee. Quantitative assessments of the fair value of its investments are developed using the market and income approaches. The market approach includes the use of comparable financial metrics of private and public companies and recent financing rounds. The income approach includes the use of a discounted cash flow model, which requires significant estimates regarding the investees' revenue, costs, and discount rates. The Company's assessment of these factors in determining whether an impairment exists could change in the future due to new developments or changes in applied assumptions. |
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| Other-Than-Temporary Impairment | Other-Than-Temporary Impairment
The Company’s long-term equity investments are subject to a periodic impairment review. Impairments affect earnings as follows:
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| Goodwill | Goodwill
The Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. In testing goodwill for impairment, the Company may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that goodwill impairment is more likely than not, the Company performs a two-step impairment test. The Company tests goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting units. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. The Company estimates the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions.
The Company completed the required testing of goodwill for impairment as of September 30, 2019, and determined that goodwill was impaired because of the current financial condition of the Company and the Company's inability to generate future operating income without substantial sales volume increases, which are highly uncertain. Furthermore, the Company anticipates future cash flows indicate that the recoverability of goodwill is not reasonably assured. |
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| Research and Development Expenses | Research and Development Expenses
The Company accounts for the cost of using licensing rights in research and development cost according to ASC Topic 730-10-25-1. This guidance provides that absent alternative future uses the acquisition of product rights to be used in research and development activities must be charged to research and development expenses when incurred.
For CDMO business unit, the Company accounts for R&D costs in accordance with Accounting Standards Codification ("ASC") 730, Research and Development ("ASC 730"). Research and development expenses are charged to expense as incurred unless there is an alternative future use in other research and development projects or otherwise. Research and development expenses are comprised of costs incurred in performing research and development activities, including personnel-related costs, facilities-related overhead, and outside contracted services including clinical trial costs, manufacturing and process development costs for both clinical and preclinical materials, research costs, and other consulting services. Non-refundable advance payment for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. In instances where the Company enters into agreements with third parties to provide research and development services, costs are expensed as services are performed. |
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| Post-retirement and post-employment benefits | Post-retirement and post-employment benefits
The Company’s subsidiaries in Taiwan adopted the government mandated defined contribution plan pursuant to the Labor Pension Act (the “Act”) in Taiwan. Such labor regulations require that the rate of contribution made by an employer to the Labor Pension Fund per month shall not be less than 6% of the worker’s monthly salaries. Pursuant to the Act, the Company makes monthly contribution equal to 6% of employees’ salaries to the employees’ pension fund. The Company has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $3,646 and $4,806 for the nine months ended September 30, 2019 and 2018, respectively. The total amounts for such employee benefits, which were expensed as incurred, were $12,365 and $14,827 for the nine months ended September 30, 2019 and 2018, respectively. Other than the above, the Company does not provide any other post-retirement or post-employment benefits. |
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| Stock-based Compensation | 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 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 for the three months and nine months ended September 30, 2019 and 2018.
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 $5,737 and $7,575 for the three months ended September 30, 2019 and 2018, respectively. Total non-employee stock-based compensation expenses were $22,808 and $21,075 for the nine months ended September 30, 2019 and 2018, respectively. |
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| Beneficial Conversion Feature | Beneficial Conversion Feature
From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of the warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method. |
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| Income Taxes | Income Taxes
The Company accounts for income taxes using the asset and liability approach which allows the recognition and measurement of deferred tax assets to be based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will expire before the Company is able to realize their benefits, or future deductibility is uncertain.
Under ASC 740, a tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigations based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefits recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer satisfied. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the year incurred. No significant penalty or interest relating to income taxes has been incurred for the nine months ended September 30, 2019 and 2018. GAAP also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transition.
On December 22, 2017, the SEC issued Staff Accounting Bulletin ("SAB 118"), which provides guidance on accounting for tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company's accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate to be included in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provision of the tax laws that were in effect immediately before the enactment of the Tax Act. While the Company is able to make reasonable estimates of the impact of the reduction in corporate rate and the deemed repatriation transition tax, the final impact of the Tax Act may differ from these estimates, due to, among other things, changes in our interpretations and assumptions, additional guidance that may be issued by the I.R.S., and actions the Company may take. The Company is continuing to gather additional information to determine the final impact. |
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| Valuation of Deferred Tax Assets | Valuation of Deferred Tax Assets
A valuation allowance is recorded to reduce the Company's deferred tax assets to the amount that is more likely than not to be realized. In assessing the need for the valuation allowance, management considers, among other things, projections of future taxable income and ongoing prudent and feasible tax planning strategies. If the Company determines that sufficient negative evidence exists, then it will consider recording a valuation allowance against a portion or all of the deferred tax assets in that jurisdiction. If, after recording a valuation allowance, the Company's projections of future taxable income and other positive evidence considered in evaluating the need for a valuation allowance prove, with the benefit of hindsight, to be inaccurate, it could prove to be more difficult to support the realization of its deferred tax assets. As a result, an additional valuation allowance could be required, which would have an adverse impact on its effective income tax rate and results. Conversely, if, after recording a valuation allowance, the Company determines that sufficient positive evidence exists in the jurisdiction in which the valuation allowance was recorded, it may reverse a portion or all of the valuation allowance in that jurisdiction. In such situations, the adjustment made to the deferred tax asset would have a favorable impact on its effective income tax rate and results in the period such determination was made. |
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| Loss Per Share of Common Stock | Loss Per Share of Common Stock
The Company calculates net loss per share in accordance with ASC Topic 260, "Earnings per Share". Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive. Diluted earnings per share excludes all dilutive potential shares if their effect is anti-dilutive. |
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| Commitments and Contingencies | Commitments and Contingencies
The Company has adopted ASC Topic 450 "Contingencies" subtopic 20, in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available before financial statements are issued or are available to be issued indicates that it is probable that an assets had been impaired or a liability had been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred. |
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| Foreign-currency Transactions | Foreign-currency Transactions
For the Company's subsidiaries in Taiwan, the foreign-currency transactions are recorded in New Taiwan dollars ("NTD") at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under the Statements of Stockholders' Equity (Deficit). |
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| Translation Adjustment | Translation Adjustment
The accounts of the Company's subsidiaries in Taiwan were maintained, and their financial statements were expressed, in New Taiwan Dollar ("NT$"). Such financial statements were translated into U.S. Dollars ("$" or "USD") in accordance ASC 830, "Foreign Currency Matters", with the NT$ as the functional currency. According to the Statement, all assets and liabilities are translated at the current exchange rate, stockholder's deficit are translated at the historical rates and income statement items are translated at an average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income (loss) as a component of stockholders' equity (deficit). |
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement ("Topic 820"): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). The ASU modifies the disclosure requirements in Topic 820, Fair Value Measurement, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019. The Company is currently evaluating the effect, if any, that the ASU 2018-13 will have on its consolidated financial statements. |
Long-Term Investments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of ownership percentages of investee |
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| Schedule of extent the investee relies |
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| Schedule of long-term investment |
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| Schedule of equity investments |
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| BioFirst [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of balance sheets |
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| Schedule of statements of operation |
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| Rgene [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of balance sheets |
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| Schedule of statements of operation |
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Going Concern (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2018 |
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| Going Concern (Textual) | |||||
| Accumulated deficit | $ (14,773,552) | $ (14,773,552) | $ (12,209,446) | ||
| Net loss | $ (1,329,685) | $ (687,300) | (2,817,454) | $ (2,136,962) | |
| Working capital deficiency | $ 4,170,357 | $ 10,421,310 | |||
Lease (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||
| Schedule of operating lease arrangements |
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| Schedule of supplemental information related to operating leases |
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| Schedule of minimum future annual payments under non-cancellable leases |
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Property and Equipment (Details Textual) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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| Property and Equipment (Textual) | ||||
| Depreciation expenses | $ 14,262 | $ 10,569 | $ 43,893 | $ 33,240 |
Property and Equipment |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT | 6. PROPERTY AND EQUIPMENT
Property and equipment as of September 30, 2019 and December 31, 2018 are summarized as follows:
Depreciation expenses were $14,262 and $10,569 for the three months ended September 30, 2019 and 2018, respectively. Depreciation expenses were $43,893 and $33,240 for the nine months ended September 30, 2019 and 2018, respectively. |
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Notes Payable |
9 Months Ended |
|---|---|
Sep. 30, 2019 | |
| Notes Payable [Abstract] | |
| NOTES PAYABLE | NOTE 10. NOTES PAYABLE
On November 27, 2017, BioLite Taiwan and Cheng-Chi International Co., Ltd., a Taiwan company, entered into a promissory note for borrowing an aggregate amount of NT$6,000,000, equivalent to $196,200, for the period from November 27, 2017 to January 11, 2018. The principal of promissory note bore interest at 12% per annum. This promissory note was secured by 700,000 Common Stock shares of ABVC and was also personal guaranteed by the Chairman of BioLite Taiwan. On January 11, 2018, the principal and accrued interest totaling NT$6,090,000, equivalent to $199,143, had been paid in full.
On March 27, 2018, BioLite Taiwan and two individuals entered into a promissory note, (the “Hsu and Chow Promissory Note”), for borrowing an aggregate amount of NT$4,660,000, equivalent to $150,052, for the period from March 27, 2018 to June 26, 2018. On September 26, 2018, BioLite Taiwan extended the original loan agreement through December 26, 2018. On Sept 26, 2019, BioLite Taiwan renewed and amended the contract with the “Hsu” only and extend the maturity date to Dec 26, 2019. The principal of the Hsu new Promissory Note bears interest at 13.6224% per annum. This Note was secured by common stock shares of ABVC and was also personal guaranteed by the Chairman of BioLite Taiwan. Interest expense was $5,112 and $2,911 for the three months ended September 30, 2019 and 2018, respectively. Interest expense was $15,364 and $7,629 for the nine months ended September 30, 2019 and 2018, respectively.
As of September 30, 2019, BioLite Taiwan also entered an unsecured loan agreement bearing interest at fixed rates at 12% per annum of NT$3,000,000, equivalent to $96,600, for working capital purpose. As of the date of this report, BioLite Taiwan is still in discussion with the individual with respect to the terms of the unsecured loans. Interest expense was $2,899 and $3,006 for the three months ended September 30, 2019 and 2018, respectively. Interest expense was $8,696 and $7,014 for the nine months ended September 30, 2019 and 2018, respectively. |
Document and Entity Information - shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2019 |
Nov. 15, 2019 |
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| Document and Entity Information [Abstract] | ||
| Entity Registrant Name | American BriVision (Holding) Corp | |
| Entity Central Index Key | 0001173313 | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --12-31 | |
| Document Type | 10-Q | |
| Document Period End Date | Sep. 30, 2019 | |
| Document Fiscal Period Focus | Q3 | |
| Document Fiscal Year Focus | 2019 | |
| Entity Filer Category | Non-accelerated Filer | |
| Entity Small Business | true | |
| Entity Shell Company | false | |
| Entity Current Reporting Status | Yes | |
| Entity Emerging Growth Company | false | |
| Entity Ex Transition Period | false | |
| Entity Filer Number | 333-91436 | |
| Entity Interactive Data Current | Yes | |
| Entity Incorporation State Country Code | NV | |
| Entity Common Stock, Shares Outstanding | 19,478,168 |
Going Concern |
9 Months Ended |
|---|---|
Sep. 30, 2019 | |
| Going Concern [Abstract] | |
| GOING CONCERN | 3. GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred losses since its inception resulting in an accumulated deficit of $14,773,552 and $12,209,446 as of September 30, 2019 and December 31, 2018, respectively, and incurred net loss of $2,817,454 and $2,136,962 for the nine months ended September 30, 2019 and 2018, respectively. The Company also had working capital deficient of $4,170,357 and $10,421,310 at September 30, 2019 and December 31, 2018, respectively. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company upon signing of that agreement.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its equity securities (2) short-term and long-term borrowings from banks and third-parties, and (3) short-term borrowings from stockholders or other related party(ies) when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations. |
Equity (Details Textual) - USD ($) |
1 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 03, 2019 |
Mar. 12, 2019 |
Feb. 08, 2019 |
May 06, 2016 |
Mar. 21, 2016 |
Feb. 08, 2016 |
Dec. 29, 2015 |
Aug. 31, 2019 |
Sep. 30, 2017 |
Jul. 24, 2017 |
May 26, 2017 |
Feb. 28, 2017 |
Oct. 02, 2016 |
Aug. 26, 2016 |
May 06, 2016 |
Mar. 31, 2016 |
Feb. 17, 2016 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Mar. 28, 2018 |
Aug. 31, 2017 |
Jun. 30, 2016 |
Oct. 30, 2015 |
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| Equity (Textual) | |||||||||||||||||||||||||
| Common stock, authorized | 360,000,000 | 20,000,000 | 20,000,000 | ||||||||||||||||||||||
| Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||||||||||||||
| Description of forward split | The Company filed a certificate of amendment to the Company's articles of incorporation (the "Amendment") to effect the Reverse Split with the Secretary of State of Nevada. The Financial Industry Regulatory Authority ("FINRA") informed the Company that the Reverse Split was effective on May 8, 2019. All shares and related financial information in this Form 10-Q reflect this 1-for-18 reverse stock split. | i) effect a stock reverse split at the ratio of 1-for-18 (the "Reverse Split") of both the authorized common stock of the Company (the "Common Stock") and the issued and outstanding Common Stock and ii) to amend the articles of incorporation of the Company to reflect the Reverse Split. The Board approved and authorized the Reverse Split without obtaining approval of the Company's shareholders pursuant to Section 78.207 of Nevada Revised Statutes. | 1 to 3.141 | ||||||||||||||||||||||
| Subscription receivable | $ 350,000 | ||||||||||||||||||||||||
| Percentage of common shares issued and outstanding | 73.00% | ||||||||||||||||||||||||
| Issuance of common shares | $ 694,219 | $ 80,000 | |||||||||||||||||||||||
| Due to related parties | $ 376,460 | $ 7,745,096 | $ 4,229,320 | ||||||||||||||||||||||
| Common stock, shares issued | 19,478,168 | 11,884,804 | 213,746,647 | ||||||||||||||||||||||
| Financial amendment, description | The Company filed a Certificate of Amendment with the Secretary of State of Nevada, which was effective May 8, 2019 upon its receipt of the written notice from Financial Industry Regulatory Authority ("FINRA"). Pursuant to the Certificate of Amendment, the Company effectuated a 1-for-18 reverse stock split of its issued and outstanding shares of common stock, $0.001 par value, whereby 318,485,252 outstanding shares of the Company's common stock were exchanged for 17,693,625 shares of the Company's Common Stock. All shares and related financial information in this Form 10-Q reflect this 1-for-18 reverse stock split. | ||||||||||||||||||||||||
| Agreement, description | The Company remitted this amount to BioLite with $650,000 in cash and $5,850,000 in the form of newly issued shares of the Company's Common Stock, at the price of $2.0 per share, for an aggregate number of 2,925,000 shares. Upon the consummation of the restructuring transaction between the Company and BioLite on February 8, 2019, the Company's Common Stock held by BioLite Taiwan was accounted for treasury stocks in the statement of equity (deficit). | The Company issued 1,468,750 shares ("Shares") of the Company's Common Stock, par value $0.001 (the "Offering") to BioLite Taiwan pursuant to a certain Stock Purchase Agreement dated August 26, 2016 (the "SPA"). The Shares are exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Regulation S of the Securities Act promulgated thereunder. The purchase price per share of the Offering is $1.60. The net proceeds to the Company from the Offering are approximately $2,350,000. Pursuant to the BioLite Collaborative Agreement, BriVision should pay a total of $100,000,000 in cash or stock of the Company with equivalent value according to the milestone achieved. The agreement requires that 6.5% of total payment, $6,500,000 shall be made upon the first IND submission which was submitted in March 2016. | The Company and BioLite Taiwan agreed to amend the BioLite Collaborative Agreement, through entry into the Milestone Payment Agreement, whereby the Company has agreed to issue shares of Common Stock of the Company, at the price of $1.60 per share, for an aggregate number of 562,500 shares, as part of the Company's first installation of payment pursuant to the Milestone Payment. The shares issuance was completed in June 2016. | ||||||||||||||||||||||
| Due to related parties consideration | $ 4,872,340 | ||||||||||||||||||||||||
| Common stock price per share | $ 7.00 | ||||||||||||||||||||||||
| Kimho Consultants Co., Ltd [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Common stock, par value | $ 1.60 | ||||||||||||||||||||||||
| Common stock, shares issued | 75,000 | ||||||||||||||||||||||||
| Common stock, shares issued total | 120,000 | ||||||||||||||||||||||||
| 2016 Equity Incentive Plan [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Common stock issued pre-stock split | 50,000 | ||||||||||||||||||||||||
| Common stock issued post-stock split | 157,050 | ||||||||||||||||||||||||
| Collaborative Arrangement [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Issuance of common shares | $ 900,000 | $ 3,000,000 | $ 3,000,000 | ||||||||||||||||||||||
| Issuance of common shares, shares | 428,571 | ||||||||||||||||||||||||
| Company cash payments | $ 3,000,000 | ||||||||||||||||||||||||
| Due to related parties | $ 100,000,000 | ||||||||||||||||||||||||
| Total payment upon first IND submission | $ 15,000,000 | ||||||||||||||||||||||||
| Percentage of payments under collaborative agreement | 3.50% | 50.00% | 15.00% | ||||||||||||||||||||||
| Consulting agreement, description | The Company agreed to indemnify the consultant in an amount of $150 per hour in cash up to $3,000 per month, and issue to Kameyama the Company's Common Stock at $1.00 per share for any amount exceeding $3,000. | ||||||||||||||||||||||||
| Share Exchange Agreement [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Description of forward split | ABVC issued an aggregate of 104,558,777 shares (prior to the reverse stock split in 2019) 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. | ||||||||||||||||||||||||
| Common stock issued pre-stock split | 52,336,000 | ||||||||||||||||||||||||
| Common stock issued post-stock split | 164,387,376 | ||||||||||||||||||||||||
| Share Exchange Agreement One [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Common stock issued pre-stock split | 52,336,000 | ||||||||||||||||||||||||
| Common stock issued post-stock split | 164,387,376 | ||||||||||||||||||||||||
| Share Exchange Agreement Two [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Common stock issued pre-stock split | 51,945,225 | ||||||||||||||||||||||||
| Common stock issued post-stock split | 163,159,952 | ||||||||||||||||||||||||
| Percentage of common shares issued and outstanding | 79.70% | ||||||||||||||||||||||||
| Percentage of issued share capital | 100.00% | ||||||||||||||||||||||||
| Share Exchange Agreement Three [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Common stock issued pre-stock split | 52,936,583 | ||||||||||||||||||||||||
| Common stock issued post-stock split | 166,273,921 | ||||||||||||||||||||||||
| Exchange ratio | 0.2536-for-1 | ||||||||||||||||||||||||
| Share Exchange Agreement Four [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Common stock issued pre-stock split | 65,431,144 | ||||||||||||||||||||||||
| Common stock issued post-stock split | 205,519,223 | ||||||||||||||||||||||||
| Co-Dev Agreement [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Company cash payments | $ 3,000,000 | $ 3,000,000 | |||||||||||||||||||||||
| Due to related parties | $ 3,000,000 | ||||||||||||||||||||||||
| Percentage of payments under collaborative agreement | 50.00% | ||||||||||||||||||||||||
| Collaborative Arrangement One [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Due to related parties | $ 100,000,000 | ||||||||||||||||||||||||
| Total payment upon first IND submission | $ 6,500,000 | ||||||||||||||||||||||||
| Percentage of payments under collaborative agreement | 6.50% | ||||||||||||||||||||||||
| Euro-Asia Investment & Finance Corp Ltd. [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Common stock, par value | $ 1.60 | ||||||||||||||||||||||||
| Common stock, shares issued | 50,000 | ||||||||||||||||||||||||
| Common stock, shares issued total | 80,000 | ||||||||||||||||||||||||
| Consulting Agreement [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Common stock, par value | $ 1.60 | ||||||||||||||||||||||||
| Non-employee stock-based compensation | $ 28,800 | $ 5,400 | |||||||||||||||||||||||
| Common stock, shares issued | 4,828 | ||||||||||||||||||||||||
| Common stock, shares issued total | 7,725 | ||||||||||||||||||||||||
| Euro-Asia Agreement [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Non-employee stock-based compensation | 0 | 60,000 | |||||||||||||||||||||||
| Kimho Agreement [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Non-employee stock-based compensation | $ 0 | $ 90,000 | |||||||||||||||||||||||
| BioKey [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Common stock issued post-stock split | 104,558,777 | ||||||||||||||||||||||||
| Issuance of common shares, shares | 29,561,231 | ||||||||||||||||||||||||
| BioLite [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Common stock issued post-stock split | 104,558,777 | ||||||||||||||||||||||||
| Issuance of common shares, shares | 74,997,546 | ||||||||||||||||||||||||
| Officer One [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Common stock, par value | $ 1.60 | ||||||||||||||||||||||||
| Common stock, shares issued | 50,000 | ||||||||||||||||||||||||
| Common stock, shares issued total | 80,000 | ||||||||||||||||||||||||
| Officer Two [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Common stock, par value | $ 1.60 | ||||||||||||||||||||||||
| Common stock, shares issued | 50,000 | ||||||||||||||||||||||||
| Common stock, shares issued total | 80,000 | ||||||||||||||||||||||||
| Officer Three [Member] | |||||||||||||||||||||||||
| Equity (Textual) | |||||||||||||||||||||||||
| Common stock, par value | $ 1.60 | ||||||||||||||||||||||||
| Common stock, shares issued | 50,000 | ||||||||||||||||||||||||
| Common stock, shares issued total | 80,000 | ||||||||||||||||||||||||
Bank Loans (Details Textual) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 08, 2019 |
Oct. 01, 2018 |
Sep. 06, 2017 |
Jun. 12, 2017 |
Jan. 21, 2019 |
Jan. 18, 2019 |
Jul. 19, 2017 |
Apr. 30, 2017 |
Jun. 28, 2016 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2018 |
|
| Bank Loans (Textual) | ||||||||||||||
| Interest expenses | $ 163 | $ 409 | ||||||||||||
| Cathay United Loan Agreement [Member] | ||||||||||||||
| Bank Loans (Textual) | ||||||||||||||
| Principal amount | $ 241,857 | $ 241,500 | $ 241,500 | |||||||||||
| Maturity date | Jun. 28, 2017 | |||||||||||||
| Debt instrument term | 1 year | 1 year | 1 year | |||||||||||
| Bears interest floating rate | 1.15% | 2.22% | 2.22% | 2.22% | ||||||||||
| Debt instrument due date | Sep. 06, 2019 | Sep. 06, 2018 | ||||||||||||
| Interest expenses | $ 1,351 | 1,402 | $ 745 | $ 1,375 | ||||||||||
| Cathay United Loan Agreement [Member] | NT [Member] | ||||||||||||||
| Bank Loans (Textual) | ||||||||||||||
| Principal amount | $ 7,500,000 | $ 7,500,000 | $ 7,500,000 | |||||||||||
| CTBC Loan Agreements [Member] | ||||||||||||||
| Bank Loans (Textual) | ||||||||||||||
| Principal amount | $ 322,000 | $ 322,000 | ||||||||||||
| Maturity date | Jan. 19, 2018 | Jul. 18, 2019 | Jan. 19, 2018 | |||||||||||
| Debt instrument term | 1 year | 1 year | ||||||||||||
| Bears interest floating rate | 1.63% | |||||||||||||
| Interest expenses | $ 2,646 | 2,297 | $ 7,879 | 8,270 | ||||||||||
| CTBC Loan Agreements [Member] | NT [Member] | ||||||||||||||
| Bank Loans (Textual) | ||||||||||||||
| Principal amount | $ 10,000,000 | $ 10,000,000 | ||||||||||||
| Loan Agreement [Member] | ||||||||||||||
| Bank Loans (Textual) | ||||||||||||||
| Maturity date | Jan. 01, 2020 | |||||||||||||
| Received loan amount | $ 500,000 | |||||||||||||
| Exceeding amount | $ 500,000 | |||||||||||||
| Regular interest rate, description | The Note executed in connection with the Loan Agreement bears an interest rate (the "Regular Interest Rate") equal to the sum of one percent (1%) and the prime rate as published in the Wall Street Journal (the "Index") and the accrued interest shall become payable each month from February 1, 2019. Pursuant to the Note, the Company shall pay the entire outstanding principal plus accrued unpaid interest on the Maturity Date and may prepay portion or all of the Note before the Maturity Date without penalty. If the Company defaults on the Note, the default interest rate shall become five percent (5%) plus the Regular Interest Rate. | |||||||||||||
| Cathay United Bank [Member] | ||||||||||||||
| Bank Loans (Textual) | ||||||||||||||
| Maturity date | Apr. 30, 2020 | |||||||||||||
| Bears interest floating rate | 2.24% | 2.24% | 2.24% | |||||||||||
| Interest expenses | $ 4,025 | 4,175 | ||||||||||||
| Cathay United Bank [Member] | Minimum [Member] | ||||||||||||||
| Bank Loans (Textual) | ||||||||||||||
| Bears interest floating rate | 0.77% | |||||||||||||
| Cathay United Bank [Member] | Maximum [Member] | ||||||||||||||
| Bank Loans (Textual) | ||||||||||||||
| Bears interest floating rate | 1.17% | |||||||||||||
| Cathay United Bank [Member] | April 30, 2010 [Member] | ||||||||||||||
| Bank Loans (Textual) | ||||||||||||||
| Principal amount | $ 288,360 | $ 288,360 | ||||||||||||
| Maturity date | Apr. 30, 2017 | |||||||||||||
| Debt instrument term | 7 years | |||||||||||||
| Cathay United Bank [Member] | NT [Member] | April 30, 2010 [Member] | ||||||||||||||
| Bank Loans (Textual) | ||||||||||||||
| Principal amount | 8,900,000 | $ 8,900,000 | ||||||||||||
| Cathay Bnak [Member] | ||||||||||||||
| Bank Loans (Textual) | ||||||||||||||
| Interest expenses | $ 16,899 | $ 0 | $ 42,632 | $ 0 | ||||||||||
Related Parties Transactions (Details 2) - USD ($) |
Sep. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Total | $ 322,678 | $ 59,477 |
| Rgene [Member] | ||
| Total | 34,220 | 19,477 |
| AsiaGene [Member] | ||
| Total | 3,353 | |
| BioFirst (Australia) [Member] | ||
| Total | 40,000 | 40,000 |
| BioHopeKing Corporation [Member] | ||
| Total | 111,780 | |
| BioFirst [Member] | ||
| Total | 132,650 | |
| LBG USA [Member] | ||
| Total | $ 675 |
Lease (Details 2) |
Sep. 30, 2019
USD ($)
|
|---|---|
| Leases [Abstract] | |
| 2019 (excluding the nine months ended September 30, 2019) | $ 150,605 |
| 2020 | 259,167 |
| 2021 | 42,319 |
| Total future minimum lease payments, undiscounted | 452,091 |
| Less: Imputed interest | 1,718 |
| Present value of future minimum lease payments | $ 450,373 |
Long-Term Investments (Details 5) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
| Long-Term Investment [Abstract] | ||||
| Share of equity method investee losses | $ (64,689) | $ (39,166) | $ (182,113) | $ (164,649) |
| Impairments | ||||
| Total losses on equity investments | $ (182,113) | $ (164,649) | ||
Long-Term Investments (Details 1) |
9 Months Ended |
|---|---|
Sep. 30, 2019 | |
| BioFirst Corporation [Member] | |
| Relationship with the Company and its subsidiaries, description | Loaned from the investee and provides research and development support service |
| Braingenesis Biotechnology Co., Ltd. [Member] | |
| Relationship with the Company and its subsidiaries, description | No specific business relationship |
| Genepharm Biotech Corporation [Member] | |
| Relationship with the Company and its subsidiaries, description | No specific business relationship |
| BioHopeKing Corporation [Member] | |
| Relationship with the Company and its subsidiaries, description | Collaborating with the Company to develop and commercialize drugs |
| Rgene Corporation [Member] | |
| Relationship with the Company and its subsidiaries, description | Collaborating with the Company to develop and commercialize drugs |
Bank Loans (Details 1) - Cathay United Loan Agreement [Member] - USD ($) |
Sep. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Cathay United Bank | $ 22,547 | $ 55,092 |
| Less: current portion of long-term bank loan | (22,547) | (39,835) |
| Total | $ 0 | $ 15,257 |
Related Parties Transactions (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of related party transactions |
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| Schedule of accounts receivable related parties |
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| Schedule of amount due from related parties |
|
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| Schedule of amount due to related party |
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Lease |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASE | 14. 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. As such, the disclosures required under ASC 842 are not presented for periods before the date of adoption. For the comparative periods prior to adoption, the Company presented the disclosures which were required under ASC 840. The Company applied the following practical expedients in the transition to the new standard and allowed under ASC 842:
The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating 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 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 as of January 1, 2019. 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.
The adoption of ASC 842 had a substantial impact on the Company’s consolidated balance sheets. The most significant impact was the recognition of the operating lease right-of-use assets and the liability for operating leases. Accordingly, adoption of this standard resulted in the recognition of operating lease right-of-use assets of $577,830 and operating lease liabilities of $598,937 comprised of $301,105 of current operating lease liabilities and $297,832 of non-current operating lease liabilities on the condensed consolidated balance sheet as of January 1, 2019. The adoption of ASC 842 also resulted in a cumulative-effect adjustment of $(21,107) to the opening balance of accumulated deficit.
In addition, the adoption of the standard did not have a material impact on the Company’s results of operations or cash flows. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in Selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur.
The Company has no finance leases. The Company’s leases primarily include various office and laboratory spaces, copy machine, and vehicles under various operating lease arrangements. The Company’s operating leases have remaining lease terms of up to approximately two years.
Supplemental Information
The table below presents supplemental information related to operating leases during the nine months ended September 30, 2019
The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:
Business Combination
On February 8, 2019, the Company, BioLite Holding, Inc. (“BioLite”), BioKey, Inc. (“BioKey”), BioLite Acquisition Corp., a direct wholly-owned subsidiary of Parent (“Merger Sub 1”), and BioKey Acquisition Corp., a direct wholly-owned subsidiary of Parent (“Merger Sub 2”) (collectively referred to as the “Parties”) completed the business combination pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) dated as of January 31, 2018 where ABVC acquired BioLite and BioKey via issuing additional Common Stock of ABVC to the shareholders of BioLite and BioKey.
Pursuant to the terms of the Merger Agreement, BioLite and BioKey became two wholly-owned subsidiaries of the Company on February 8, 2019. ABVC issued an aggregate of 104,558,777 shares (prior to the reverse stock split in 2019) 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. |
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Inventory (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of inventory |
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