UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

Amendment No. 2

 

☒       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2016

 

☐      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		IRS Employer
incorporation or organization		Identification Number

 

11 Sawyers Peak Drive, Goshen, NY 10924

Tel: 845-291-1291

(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 and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒   No ☐

 

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	☐    (Do not check if a smaller reporting company)	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 February 14, 2017, there were 210,821,647 shares of common stock, par value per share $0.001, outstanding.

 

 

 

Explanatory Note

 

American BriVision (Holding) Corporation (together with its subsidiary, the “Company” sometimes referred to as “we”, “us” or “our”) is filing this Amendment No. 2 (this “Amendment No.2” or “Form 10-Q/A”) to its Quarterly Report on Form 10-Q Amendment No. 1 for the period ended December 31, 2016, originally filed on May 22, 2017, (the “Amendment No.1”) to reflect the restatement of its consolidated financial statements for the period ended December 31, 2016, and related disclosures described below. The restatement of the Amendment No.1 reflected in this Amendment No.2 corrects revenue, gross profit, net loss from operations, loss from continuing operations before income taxes, and net loss for the three months ended December 31, 2016, additional paid-in capital and accumulated deficit as of December 31, 2016, and the disclosures of related party transaction (see Note 6) and earnings per share (see Note 9) for the three months ended December 31, 2016. There is no impact or changes to the total assets, total liability and total stockholders’ equity as of December 31, 2016. For details of the changes, please refer to Note 2 of the consolidated financial statements.

 

No other sections were affected, but for the convenience of the reader, this report on Form 10-Q/A Amendment No. 2 restates in its entirety, as amended, our Original Form 10-Q and the Amendment No. 1.

 

This report on Form 10- Q/A Amendment No.2 is presented as of the filing date of the Original Form 10-Q and the Amendment No. 1 and does not reflect events occurring subsequent to the date of filing of the Original Form 10-Q and the Amendment No. 1.

 

Background of Restatements in Amendment No. 2

 

The additional paid-in capital and accumulated deficit as of December 31, 2016 was erroneously stated as $4,733,461 and $(11,463,738), respectively, on the Amendment No. 1. The Company restated the additional paid-in capital and accumulated deficit as of December 31, 2016 as $4,803,461 and $(11,533,738), respectively. The error as a result of related party under common control transactions caused $70,000 difference in both accounts. There is no impact on the ending balance of the total stockholders’ equity as of December 31, 2016. The Company also restated revenue, gross profit, net loss from operations, loss from continuing operations before income taxes, and net loss in its statements of operation for the three months ended December 31, 2016 for the same reason.

 

On the Notes 6 to Consolidated Financial Statements of the Amendment No. 1, the Company recorded revenues of $70,000 because of a consulting service provided to a Company’s shareholder, LionGene Corporation. The Company determined that the total amount of $70,000 should be recorded as additional paid-in capital since the Company and LionGene Corporation are related parties and under common control by a controlling beneficiary shareholder of YuanGene Corporation, and should be treated as the correction of error as of December 31, 2016.

 

On the Notes 9 to Consolidated Financial Statements of the Amendment No. 1, the net loss in the disclosure of the earning per share for the three months ended December 31, 2016 was erroneously reflected as $(140,337). The earning-per-share on the Amendment No. 1 for the three-months ended December 31, 2016 was $(0.00066567), which was shown as $(0.00). The Company corrected the net loss in the disclosure of the earning per share for the three-months ended December 31, 2016 to $(210,337) in order to align with the net loss and weight-average shares outstanding basic and diluted as reflected on the accompanying unaudited Condensed Consolidated Statements of Operations for the three months ended December 31, 2016. The corrected earning per share was $(0.000997701), which is shown as $(0.00) in the restated financial statements for the three months ended December 31, 2016. The overall impact in the earning-per-share for the three months ended December 31, 2016 is $0.00.

 

Items Amended by the Amendment No.2

 

This Amendment reflects the results of the work described above and includes the restatement of our consolidated financial statements for the period ended December 31, 2016. For the convenience of the reader, this Amendment sets forth Original Form 10-Q and the Amendment No. 1, as modified and superseded where necessary to reflect the restatement and other related adjustments, internal control matters, and as otherwise specifically indicated. Specifically, the following items included in the Original Form 10-Q and Amendment No. 1 are amended by this Amendment:

 

- Part I, Item 1, Financial Statements

 

- Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operation

 

 

TABLE OF CONTENTS

 

PART I	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of December 31, 2016 (Unaudited) and September 30, 2016	1
	Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 2016 and 2015 (Unaudited)	2
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2016 and 2015 (Unaudited)	3
	Notes to Unaudited Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18
PART II	OTHER INFORMATION	19
Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults Upon Senior Securities	19
Item 4.	Mine Safety Disclosures	19
Item 5.	Other Information	19
Item 6.	Exhibits	19
Signatures		20

 

 

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.

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS

 

American BriVision (Holding) Corporation.

(formerly METU BRANDS, INC.)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

		December 31, 2016				September 30, 2016
		(Restated)				(Audited) (Restated)
Assets
Current assets
Cash		$	18,645			$	173,537
Total Current Assets			18,645				173,537
Deposit			-				3,815
Total Assets		$	18,645			$	177,352
Liabilities and Equity
Accounts Payable			-				18,370
Accrued expense			38,100				38,100
Due to related party			6,500,000				6,500,000
Total Liabilities			6,538,100				6,556,470
Commitments and Contingencies
Stockholders’ equity
Common Stock 360,000,000 authorized at $0.001 par value; shares issued and outstanding 210,821,647 at December 31, 2016 and September 30, 2016			210,822				210,822
Additional paid-in capital			4,803,461				4,733,461
Subscription receivable			-				-
Accumulated deficit			(11,533,738	)			(11,323,401	)
Total equity			(6,519,455	)			(6,379,118	)
Total liabilities and equity		$	18,645			$	177,352

 

“The accompanying notes are an integral part of these condensed consolidated financial statements.”

 

 

American BriVision (Holding) Corporation.

(formerly METU BRANDS, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the three months ended December 31, 2016				For the three months ended December 31, 2015
		(Restated)
Revenues		$	-			$	-
Cost of sales			-				-
Gross profit			-				-
Operating expenses
Selling, general and administrative expenses			185,188				1,605
Research and Development			25,198				3,500,000
Total Operating Expenses			210,386				3,501,605
Net loss from operations			(210,386	)			(3,501,605	)
Other income (expense)
Bank Interest Income			49				103
Gain on exchange differences			-				89
Total Other Income			49				192
Loss from continuing operations before income taxes			(210,337	)			(3,501,413	)
Income taxes			-				-
Net loss		$	(210,337	)		$	(3,501,413	)
Basic and Diluted loss per share
Basic and diluted loss per share			(0.00	)			(0.02	)
Weighted average number of shares outstanding basic and diluted			210,821,647				163,881,199

 

“The accompanying notes are an integral part of these condensed consolidated financial statements.”

 

 

American BriVision (Holding) Corporation.

(formerly METU BRANDS, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

 

		For the three months ended December 31, 2016				For the three months ended December 31, 2015
		(Restated)
Cash flows from operating activities
Net loss from continuing operations		$	(210,337	)		$	(3,501,413	)
Adjustments to reconcile net loss to net cash used by operating activities:
Increase (decrease) in deposit			3,815				-
Increase (decrease) in accounts receivable			-				(550,349	)
(Increase) decrease in accounts payable			-				(300,000	)
Increase (decrease) in due to related party			-				3,477,483
Increase (decrease) in accounts payable			(18,370	)			-
Net cash used in operating activities			(224,892	)			(874,279	)
Cash flows from investing activities
Net cash provided (used) by investing activities			-				-
Cash flows from financing activities
Capital contribution from related parties under common control			70,000				-
(Decrease) increase in due to shareholder			-				350,000
(Decrease) increase in due to shareholder			-				(46,586	)
Net cash provided by financing activities			70,000				303,414
Net decrease in cash			(154,892	)			(570,865	)
Cash, beginning of period			173,537				994,830
Cash, end of period		$	18,645			$	423,965
Supplemental disclosure of cash flow information
Interest paid		$	-			$	-
Income taxes paid		$	-			$	-

 

“The accompanying notes are an integral part of these condensed consolidated financial statements.”

 

 

American BriVision (Holding) Corporation.

(formerly METU BRANDS, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

 

American BriVision (Holding) Corporation (the “Company” or “Holding entity”), a Nevada corporation, thru the Company’s operating entity, American BriVision Corporation (“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.

 

REVERSE MERGER

 

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 Republic of China (“Euro-Asia”), being the owners of record of 52,336,000 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 52,936,583 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 51,945,225 shares of the Company’s common stock owned by Euro-Asia should be cancelled and retired to treasury. The Acquisition Stock collectively should represent 79.70% of the issued and outstanding common stock of the Company immediately after the Closing, in exchange for the BriVision Stock, representing 100% of the issued share capital of BriVision. Because of the exchange of the BriVision Stock for the Acquisition Stock (the “Share Exchange”), BriVision became a wholly owned subsidiary (the “Subsidiary”) of the Company and 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.

 

Because of the consummation of the Share Exchange, BriVision is now our wholly owned subsidiary and its shareholders own approximately 79.70% of our issued and outstanding common stock.

 

Following the Share Exchange, we have abandoned our prior business plan and we are now pursuing BriVision’s historical businesses and proposed businesses, which focus on the development of new drugs and innovative medical devices to fulfill unmet medical needs. The business model of the Company is to integrate research achievements from world-famous institutions, conduct clinical trials of translational medicine for Proof of Concept (“POC”), out-license to international pharmaceutical companies, and exploit global markets.

 

Accounting Treatment of the Reverse Merger

 

For financial reporting purposes, the Share Exchange represents a “reverse merger” rather than a business combination and BriVision is deemed the accounting acquirer in the transaction. The Share Exchange is being accounted for as a reverse-merger and recapitalization. BriVision is the acquirer for financial reporting purposes and the Company is the acquired company. Consequently, the assets and liabilities and the operations reflected in the historical financial statements prior to the Share Exchange will be those of BriVision and recorded at the historical cost basis of BriVision. 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.

 

 

2. CORRECTIONS TO PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

 

The Company determined that the total amount of $70,000 as a result of a consulting service provided to a Company’s shareholder, LionGene Corporation (see Note 6) should be recorded as additional paid-in capital as of December 31, 2016 since the Company and LionGene Corporation are related parties and under common control by a controlling beneficiary shareholder of YuanGene Corporation, and should be treated as the correction of error as of December 31, 2016.

 

The Company restated the consolidated financial statements as of December 31, 2016 and for the three-month period then ended. The item Additional paid-in-capital adjusted up with $70,000 while the Accumulated deficit adjusted down with ($70,000). Revenues, gross profit, net loss from operations, loss from continuing operations before income taxes, and net loss were also adjusted on the Statement of Operations accordingly. Net loss from continuing operations, net cash used in operating activities, capital contribution form related parties under common control, and net cash provided by financing activities were also adjusted on the statements of cash flows accordingly.

 

The following tables present the effect of the corrections discussed above and other adjustments on selected line items of our previously reported consolidated financial statements as of and for the three months ended December 31, 2016,

 

ITEMS

 

		As of and for the Period Ended December 31, 2016
		Previously  Reported				Adjustments				Restated
Consolidated Balance Sheets
Additional paid-in-capital			4,733,461				70,000				4,803,461
Accumulated deficit			(11,463,738	)			(70,000	)			(11,533,738	)
Consolidated Statements of Operations
Revenues			70,000				(70,000	)			-
Gross profit			70,000				(70,000	)			-
Net loss from operations			(140,386	)			(70,000	)			(210,386	)
Loss from continuing operations before income taxes			(140,337	)			(70,000	)			(210,337	)
Net loss			(140,337	)			(70,000	)			(210,337	)
Consolidated Statements of Cash Flow
Cash flows from operating activities
Net loss from continuing operations			(140,337	)			(70,000	)			(210,337	)
Net cash used in operating activities			(154,892	)			(70,000	)			(224,892	)
Cash flows from financing activities
Capital contribution from related parties under common control			-				70,000				70,000
Net cash provided by financing activities			-				70,000				70,000

 

As a result of the restatement of the consolidated balance sheets as of December 31, 2016, additional paid-in capital was increased by $70,000 and changed from $4,733,461 to $4,803,461. Accumulated deficit was increased by $70,000 and changed from $(11,463,738) to $(11,533,738).

 

As a result of the restatement of the consolidated statements of operations for the three months ended December 31, 2016, revenues were decreased by $70,000 and changed from $70,000 to $0. Gross profit was decreased by $70,000 and changed from $70,000 to $0. Net loss from operations was increased by $70,000 and changed from $(140,386) to $(210,386). Loss from continuing operations before income taxes was increased by $70,000 and changed from $(140,337) to $(210,337). Net loss was increased by $70,000 and changed from $(140,337) to $(210,337). Basic and diluted loss per share were also increased by $(0.00) and changed from $(0.00) to $(0.00).

 

As a result of the restatement of the consolidated statements of cash flow for the three months ended December 31, 2016, Net loss from continuing operations was increased by $70,000 and changed from $(140,337) to $(210,337). Net cash used in operating activities was increased by $70,000 and changed from $(154,892) to $(224,892). Capital contribution from related parties under common control under Cash flows from financing activities was increased by $70,000 and changed from $0 to $70,000. Net cash provided by financing activities was increased by $70,000 and changed from $0 to $70,000.

 

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying audited financial statements and related notes have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). This basis of accounting involves the application of accrual accounting. 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. The condensed financial statements include all adjustments that, in the opinion of management, are necessary in order not to make the financial statements misleading.

 

Certain information and footnote disclosure normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted. The results of operations for the periods ended December 31, 2016 are not necessarily indicative of the operating results for the full year.

 

Basis of Consolidation

 

The consolidated financial statements include the financial statements of the Company and its subsidiary, American BriVision Corporation (“BriVision”).  All intercompany transactions, balances and any unrealized profit and losses have been eliminated on consolidation.

  

Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. GAAP 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.

 

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. The majority of the shareholders of the Company approved the amendment to Articles of Incorporation.

 

Fair Value Measurements

 

The Company applies the provisions of ASC Subtopic 820-10, “Fair Value Measurements”, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

 

 

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

 

	●	Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
	●	Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
	●	Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

 

There were no assets or liabilities measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of December 31, 2016.

 

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 December 31, 2016, the Company’s cash and cash equivalents amounted $18,645. As of September 31, 2016, the Company’s cash and cash equivalents amounted $173,537. All of the Company’s cash deposits are held in a financial institution located in PRC where there is currently regulation mandated on obligatory insurance of bank accounts. The Company believes this financial institution is of high credit quality.

 

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.

 

Stock-based Compensation

 

The Company measures expense associated with all employee share-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 ASC Topic 718 “Compensation-Stock Compensation”

 

The Company accounted for stock-based compensation to non-employees in accordance with 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.

 

Stock-based compensation expenses were recorded in general and administrative expenses and research and development expenses.

 

 

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 during the period from July 21, 2015 (inception) to December 31, 2016. GAAP also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transition.

 

As of December 31, 2016 and December 31, 2015, the Company’s income tax expense amounted $0 and $0, respectively.

 

Earnings Per Share of Common Stock

 

The Company reports earnings (loss) per share in accordance with ASC Topic 260-10 “Earnings per Share.” Basic earnings (loss) per share are computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available.

 

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.

 

Recent Accounting Pronouncements

 

From time to time, new accounting standards issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption. The recent accounting standards are not expected to have a material impact on the consolidated financial statements upon adoption.

 

 

4. GOING CONCERN

 

The accompanying 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 $11,533,738 as of December 31, 2016. The Company also incurred net losses of $210,337 and negative cash flow of $154,892 during the three months ended December 31, 2016. 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 combined 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. On May 6, 2016, we and BioLite Inc. (“BioLite”) agreed to amend the Collaborative Agreement, through entry into the Milestone Payment Agreement, whereby we have agreed to pay the Milestone Payment to BioLite in the amount of $2,600,000 in cash and $900,000 in newly issued shares of our common stock, at the price of $1.60 per share, for an aggregate number of 562,500 shares. The cash payment and share issuance were completed in June 2016. Pursuant to the Collaborative Agreement, 6.5% of total payment, $6,500,000 shall be made upon the first IND submission which was submitted in March 2016. $6,500,000 was wholly recorded as due to related party as of December 31, 2016.

 

This Collaborative Agreement shall, once signed by both Parties, remain in effect for fifteen years as of the first commercial sales of the Product in the Territory and automatically renew for five more years unless either party gives the other party six month written notice of termination prior to the expiration date of the term.

 

The Company determined to fully expense the entire amount of $3,500,000 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 is fully expensed as research and development expense.

 

 

5. COLLABORATIVE AGREEMENT

 

On December 29, 2015, American BriVision Corporation entered into a Collaborative Agreement with BioLite Inc., a related party, pursuant to which BioLite granted the Company sole licensing rights for drug and therapeutic use of five products: BLI-1005 CNS-Major Depressive Disorder; BLI-1008 CNS-Attention Deficit Hyperactivity Disorder; BLI-1401-1 Anti-Tumor Combination Therapy-Solid Tumor with Anti-PD-1; BLI-1401-2 Anti-Tumor Combination Therapy-Triple Negative Breast Cancer; and BLI-1501 Hematology-Chronic Lymphocytic Leukemia, in USA and Canada. Under the Collaborative Agreement, BriVision should pay a total of $100,000,000 in cash or stock of BriVision with equivalent value, according to the following schedule:

 

	●	upfront payment shall upon the signing of this Collaborative Agreement: 3.5% of total payment. After receiving upfront payment from BriVision, BioLite has to deliver all data to BriVision in one week.
	●	upon the first IND submission, BriVision shall pay, but no later than December 15, 2016: 6.5% of total payment. After receiving second payment from BriVision, BioLite has to deliver IND package to BriVision in one week.
	●	at the completion of first phase II clinical trial, BriVision shall pay, but no later than September 15, 2017: 15% of total payment. After receiving third payment from BriVision, BioLite has to deliver phase II clinical study report to BriVision in three months.
	●	upon the phase III IND submission, BriVision shall pay, but no later than December 15, 2018: 20% of total payment. After receiving forth payment from BriVision, BioLite has to deliver IND package to BriVision in one week.
	●	at the completion of phase III, BriVision shall pay, but no later than September 15, 2019:25% of total payment. After receiving fifth payment from BriVision, BioLite has to deliver phase III clinical study report to BriVision in three months.
	●	upon the NDA submission, BriVision shall pay, but no later than December 15, 2020, BriVision shall pay: 30% of total payment. After receiving sixth payment from BriVision, BioLite has to deliver NDA package to BriVision in one week.

 

Pursuant to the Collaborative Agreement, an upfront payment of $3,500,000 (the “Milestone Payment”), which is 3.5% of total payments due under the Collaborative Agreement, was to be paid by the Company upon signing of that agreement. On May 6, 2016, we and BioLite agreed to amend the Collaborative Agreement, through entry into the Milestone Payment Agreement, whereby we have agreed to pay the Milestone Payment to BioLite $2,600,000 in cash and $900,000 in newly issued shares of our common stock, at the price of $1.60 per share, for an aggregate number of 562,500 shares. The cash payment and shares issuance were completed in June 2016.

 

Pursuant to the Collaborative Agreement, 6.5% of total payment, $6,500,000 shall be made upon the first IND submission which was submitted in March 2016. $6,500,000 was wholly recorded as accounts payable as of December 31, 2016.

 

This Collaborative Agreement shall, once signed by both Parties, remain in effect for fifteen years as of the first commercial sales of the Product in the Territory and automatically renew for five more years unless either party gives the other party six month written notice of termination prior to the expiration date of the term.

 

The Company determined to fully expense the entire amount of $10,000,000 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 is fully expensed as research and

 

 

6. RELATED PARTIES TRANSACTIONS

 

During the three months ended December 31, 2016, the Company provided a one-time consulting service to LionGene Corporation for $70,000. Since both LionGene and the Company are related parties and under common control by a controlling beneficiary shareholder of YuanGene Corporation, the controlling beneficiary shareholder of the Company, the Company has recorded the full amount of $70,000 as additional paid-in capital as of December 31, 2016.

 

As of December 31, 2016 and September 30, 2016, the amount due to a related party, BioLite, Inc. (“Biolite”) was $6,500,000 and $6,500,000 respectively.

 

7. ACCOUNTS PAYABLE

 

As of December 31, 2016 and September 30, 2016, the amount Accounts Payable to LiteArt, Inc. was $0 and $18,370 respectively.

 

8. 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 affect 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.

 

The majority of the shareholders of the Company approved the amendment to Articles of Incorporation.

 

On May 6, 2016, we and BioLite agreed to amend the Collaborative Agreement, through entry into the Milestone Payment Agreement, whereby we have agreed to issue shares of our common stock, at the price of $1.60 per share, for an aggregate number of 562,500 shares, as part of our 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, a non-U.S. accredited investor (the “Purchaser”) 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. BioLite and the Company are related parties because they are under common control by a controlling beneficiary shareholder. Eugene Jiang, the former President and Chairman of the Company, is a director of BioLite Inc. and it is therefore considered a related party. The purchase price per share is $1.60 as set forth in the SPA. The net proceeds to the Company from such offering are approximately $2,350,000. The proceeds may be used for general corporate purposes.

 

 

9. EARNINGS PER SHARE

 

Basic earnings per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the year. Diluted earnings per share is computed by dividing net loss by the weighted-average number of common shares and dilutive potential common shares outstanding during the year.

 

		For the Three Months Ended December 31, 2016				For the Three Months Ended December 31, 2015
		(Restated)
Numerator:
Net loss		$	(210,337	)			(3,501,413	)
Denominator:
Weighted-average shares outstanding:
Weighted-average shares outstanding - Basic			210,821,647				163,881,199
Stock options			-				-
Weighted-average shares outstanding - Diluted			210,821,647				163,881,199
Earnings per share
-Basic			(0.00	)			(0.02	)
-Diluted			(0.00	)			(0.02	)

 

Diluted earnings 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.

 

10. COMMITMENTS AND CONTINGENCIES

 

Operating Commitment

 

The total future minimum lease payments under the non-cancellable operating lease with respect to the office as of December 31, 2016 are payable as follows:

 

Year ending September 30, 2017			23,793
Year ending September 30, 2018			17,845
Total		$	41,638

 

Rental expenses of the company was $14,330 and nil for the three months ended December 31, 2016 and 2015. 

 

 

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 condensed consolidated financial statements for the three months ended December 31, 2016 and 2015, and notes thereto contained elsewhere in this Report, and our annual report on Form 10-K for the twelve months ended September 30, 2015 and 2014 including the consolidated financial statements 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.”

 

As used in this Report, the terms “we”, “us”, “our”, and “our Company” and “the Company” refer to American Brivision (Holding) Corporation (formerly known as Metu Brands, Inc.) and its subsidiaries, unless otherwise indicated.

 

Introduction

 

Currently, we are a holding company operating through our wholly owned subsidiary, American BriVision Corporation, a Delaware corporation (“BriVision”). BriVision was incorporated in 2015 in the State of Delaware. It is a biotechnology company focused on the development of new drugs and innovative medical devices to fulfill unmet medical needs. Following the Share Exchange (as described herein below), we have abandoned our prior business plan and we are now pursuing BriVision’s historical businesses and proposed businesses, which focus on the development of new drugs and innovative medical devices to fulfill unmet medical needs. The business model of the Company is to integrate research achievements from world-famous institutions, conduct clinical trials of translational medicine for Proof of Concept (“POC”), out-license to international pharmaceutical companies, and exploit global markets.

 

Share Exchange

 

On February 8, 2016, a Share Exchange Agreement (“Share Exchange Agreement”) was entered into by and among American BriVision (Holding) Corporation (the “Company”), BriVision, Euro-Asia Investment & Finance Corp. Limited, a company incorporated under the laws of Hong Kong Special Administrative Region of China (“Euro-Asia”), being the owners of record of 52,336,000 shares of common stock of the Company, and the persons listed in Exhibit A thereof (the “BriVision Shareholders”), being 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 52,936,583 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 51,945,225 shares of the Company’s common stock owned by Euro-Asia were cancelled and retired to treasury. The Acquisition Stock collectively represents 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. Because of the exchange of the BriVision Stock for the Acquisition Stock (the “Share Exchange”), BriVision became a wholly owned 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.

 

Because of the consummation of the Share Exchange, BriVision is now our wholly owned subsidiary and its shareholders own approximately 79.70% of our issued and outstanding common stock.

 

Accounting Treatment of the 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 that will be reflected in the historical financial statements prior to the Share Exchange will be those of BriVision and will be recorded at the historical cost basis of BriVision, and 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 entities (American Brivision (Holding) Corporation and its wholly owned subsidiary Brivision) from the closing date of the Share Exchange.

 

For more information about the Share Exchange, please refer to the current report on Form 8-K we filed on February 12, 2016.

 

 

Forward Stock Split

 

On March 21, 2016, our Board 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 went effective on April 8, 2016. The majority of the shareholders of the Company approved the amendment to Articles of Incorporation.

 

Collaborative Agreement

 

On December 29, 2015, American BriVision Corporation entered into a Collaborative Agreement with BioLite Inc., a related party, pursuant to which BioLite granted the Company sole licensing rights for drug and therapeutic use of five products: BLI-1005 CNS-Major Depressive Disorder; BLI-1008 CNS-Attention Deficit Hyperactivity Disorder; BLI-1401-1 Anti-Tumor Combination Therapy-Solid Tumor with Anti-PD-1; BLI-1401-2 Anti-Tumor Combination Therapy-Triple Negative Breast Cancer; and BLI-1501 Hematology-Chronic Lymphocytic Leukemia, in USA and Canada. Under the Collaborative Agreement, BriVision should pay a total of $100,000,000 in cash or stock of BriVision with equivalent value, according to the following schedule:

 

	●	upfront payment shall upon the signing of this Collaborative Agreement: 3.5% of total payment. After receiving upfront payment from BriVision, BioLite has to deliver all data to BriVision in one week.
	●	upon the first IND submission, BriVision shall pay, but no later than December 15, 2016: 6.5% of total payment. After receiving second payment from BriVision, BioLite has to deliver IND package to BriVision in one week.
	●	at the completion of first phase II clinical trial, BriVision shall pay, but no later than September 15, 2017: 15% of total payment. After receiving third payment from BriVision, BioLite has to deliver phase II clinical study report to BriVision in three months.
	●	upon the phase III IND submission, BriVision shall pay, but no later than December 15, 2018: 20% of total payment. After receiving forth payment from BriVision, BioLite has to deliver IND package to BriVision in one week.
	●	at the completion of phase III, BriVision shall pay, but no later than September 15, 2019:25% of total payment. After receiving fifth payment from BriVision, BioLite has to deliver phase III clinical study report to BriVision in three months.
	●	upon the NDA submission, BriVision shall pay, but no later than December 15, 2020, BriVision shall pay: 30% of total payment. After receiving sixth payment from BriVision, BioLite has to deliver NDA package to BriVision in one week.

 

Pursuant to the Collaborative Agreement, an upfront payment of $3,500,000 (the “Milestone Payment”), which is 3.5% of total payments due under the Collaborative Agreement, was to be paid by the Company upon signing of that agreement. On May 6, 2016, BriVision and BioLite agreed to amend the Collaborative Agreement, through entry into the Milestone Payment Agreement, whereby we have agreed to pay the Milestone Payment to BioLite $2,600,000 in cash and $900,000 in newly issued shares of our common stock, at the price of $1.60 per share, for an aggregate number of 562,500 shares. The cash payment and shares issuance were completed in June 2016.

 

Pursuant to the Collaborative Agreement, 6.5% of total payment, $6,500,000 shall be made upon the first IND submission which was submitted in March 2016. $6,500,000 was wholly recorded as accounts payable as of December 31, 2016.

 

This Collaborative Agreement shall, once signed by both Parties, remain in effect for fifteen years as of the first commercial sales of the Product in the Territory and automatically renew for five more years unless either party gives the other party six month written notice of termination prior to the expiration date of the term.

 

The Company determined to fully expense the entire amount of $3,500,000 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 is fully expensed as research and there was no commercial sales during the period ended December 31, 2016.

 

Plan of Operations

 

BriVision will select potential drug candidates (including but not limited to botanical drugs) from different research institutes, start to develop it from pre-clinical stage (including all CMC process and animal study) to clinical study stage. When the phase II clinical trial is finished and the efficacy is approved, we will have reached the “proof of concept” stage. We plan to license our drugs to big pharmaceutical companies, coordinate with them to develop and enhance the drugs and explore the global markets.

 

Revenue Generation

 

Most of our licensed products are still under development and trial stage. We generated $0 in revenues and cost of sales for the three months ended December 31, 2016 and 2015.

 

Research and Development

 

During the first three months for the period ended December 31, 2016 and 2015, we have spent approximately $25,198 and $3,500,000, respectively on research and development.

 

 

Critical Accounting Policies and Estimates

 

We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

 

Basis of Presentation

 

The accompanying audited financial statements and related notes have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). 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.

 

Forward Stock split

 

On March 21, 2016, the Board of Directors of the Company approved an amendment to Articles of Incorporation to affect 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. The majority of the shareholders of the Company approved the amendment to Articles of Incorporation. See Note 8 for more details.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. GAAP 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.

 

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.

 

Stock-based Compensation

 

The Company measures expense associated with all employee share-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 ASC Topic 718 “Compensation-Stock Compensation”

 

The Company accounted for stock-based compensation to non-employees in accordance with 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.

 

Stock-based compensation expenses were recorded in general and administrative expenses and research and development expenses.

 

Fair Value Measurements

 

The Company applies the provisions of ASC Subtopic 820-10, “Fair Value Measurements”, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

 

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

 

	●	Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
	●	Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
	●	Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

 

There were no assets or liabilities measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of December 31, 2016. 

 

 

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 December 31, 2016 and September 30, 2016, the Company’s cash and cash equivalents amounted $18,645 and $173,537, respectively. All of the Company’s cash deposit is held in a financial institution located in PRC where there is currently regulation mandated on obligatory insurance of bank accounts. The Company believes this financial institution is of high credit quality.

 

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 that these items will expire before the Company is able to realize their benefits, or that 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 benefit to be 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 satisfied. 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 during the period from July 21, 2015 (inception) to December 31, 2016. GAAP also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transition.

 

As of December 31, 2016 and September 30, 2016, the Company’s income tax expense amounted $0 and $0, respectively.

 

Earnings Per Share of Common Stock

 

The Company reports earnings (loss) per share in accordance with ASC Topic 260-10 “Earnings per Share.” Basic earnings (loss) per share are computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available.

 

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.

 

Recent Accounting Pronouncements

 

From time to time, new accounting standards issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption. The recent accounting standards are not expected to have a material impact on the consolidated financial statements upon adoption.

 

Off-Balance Sheet Arrangements

 

We do 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.

 

Limited Operating History; Need for Additional Capital

 

There is no historical financial information about us upon which to base an evaluation of our performance. As of the date of this filing, we have not generated any revenues from operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the launching of our games and market or wider economic downturns. We do not believe we have sufficient funds to operate our business for the next 12 months.

 

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 audited financial statements of BriVision for the period ended September 30, 2016 and accompanying notes that appear in our Annual Report on Form 10-K/A Amendment No 2, as filed with the Securities and Exchange Commission on May 22 , 2017 and the financial statements included in this Report.

 

Results of Operation

 

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 December 31, 2016 as Compared to December 31, 2015

 

Revenues. We generated no revenues and cost of sales for the three months ended December 31, 2016 and 2015.

 

Operating Expenses. Our selling, general and administrative expenses were $185,188 for the three months ended December 31, 2016 as compared to $1,605 for the three months ended December 31, 2015. The increase of $183,583 in the current period is the result of increased professional fees and salary and welfare. Our Research and Development expenses were $25,198 for the three months ended December 31, 2016 as compared to $3,500,000 for the three months ended December 31, 2015. The decrease was because we fully expensed an upfront payment of $3,500,000 under the Collaborative Agreement during the three months ended December 31, 2015.

 

Net Loss. The net loss was $210,337 for the three months ended December 31, 2016 compared to loss of $3,501,413 for the three months ended December 31, 2015. The result of decrease of net loss in current period was due to the decreased research and development fees during the three months ended December 31, 2016.

 

Liquidity and Capital Resources

 

Working Capital

 

		As of December 31, 2016 ($)				As of September 30, 2016 ($)
Current Assets			18,645				173,537
Current Liabilities			6,538,100				6,556,470
Working Capital (deficit)			(6,519,455	)			(6,382,933	)

 

Cash Flows

 

Cash Flow from Operating Activities

 

During the three months ended December 31, 2016 and 2015, the net cash used in operating activities were $224,892 and $874,279 respectively. There was a decrease in continuing operations during the three months ended December 31, 2016.

 

Cash Flow from Investing Activities

 

During the three months ended December 31, 2016 and 2015, there were no net cash used in or generated from investing activities.

 

Cash Flow from Financing Activities

 

During the three months ended December 31, 2016 and 2015, there were $70,000 and $303,414 net cash provided by financing activities.

 

Critical Accounting Policy and Estimates

 

We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

 

Off-Balance Sheet Arrangements

 

We do 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.

 

Smaller reporting companies 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 are not effective as of December 31, 2016.

 

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.

 

 

PART II. - OTHER INFORMATION

 

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.

 

Nil.

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

 

Nil.

 

ITEM 4.

MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5.

OTHER INFORMATION.

 

Nil.

 

ITEM 6.

EXHIBITS

 

The following exhibits are filed herewith:

 

Exhibit No.		Description
31.1		Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	American BriVision (Holding) Corporation
Dated: March 19, 2018	By:	/s/ Howard Doong
		Howard Doong
		Chief Executive Officer (Principal Executive Officer)
Dated: March 19, 2018	By:	/s/ Chun Mu Hung
		Chun Mu Hung
		Chief Financial Officer (Principal Financial and Accounting Officer)

 

 

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