ABVC BioPharma(ABVC) - 2020 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for American BriVision (Holding) Corporation as of September 30, 2020, and for the three and nine-month periods then ended, accompanied by detailed notes Consolidated Balance Sheets The Consolidated Balance Sheet as of September 30, 2020, shows a decrease in total assets to $6.53 million from $6.93 million at year-end 2019, with total liabilities increasing to $7.72 million from $7.05 million, leading to a significant increase in total equity deficit from $(0.12) million to $(1.19) million Consolidated Balance Sheet Summary (in USD) | Metric | September 30, 2020 (Unaudited) | December 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $1,177,789 | $878,238 | | Total Assets | $6,529,385 | $6,927,811 | | Total Current Liabilities | $6,045,547 | $6,814,193 | | Total Liabilities | $7,721,225 | $7,052,628 | | Total Equity (Deficit) | $(1,191,840) | $(124,817) | Consolidated Statements of Operations and Comprehensive Loss For the nine months ended September 30, 2020, revenues decreased to $420,852 from $601,757 in the prior year period, and the net loss attributable to the company widened significantly to $4.94 million from $2.56 million, resulting in a net loss per share of $(0.25) compared to $(0.15) in 2019 Statement of Operations Summary (in USD) | Metric | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Revenues | $420,852 | $601,757 | | Gross Profit | $404,038 | $584,109 | | Loss from Operations | $(3,655,157) | $(2,334,995) | | Net Loss | $(5,624,450) | $(2,817,454) | | Net Loss Attributed to ABVC | $(4,942,881) | $(2,564,105) | | Net Loss Per Share (Basic & Diluted) | $(0.25) | $(0.15) | Consolidated Statements of Cash Flows For the nine months ended September 30, 2020, net cash used in operating activities was $2.38 million, net cash used in investing activities was $0.33 million, and net cash provided by financing activities was $2.70 million, primarily from common stock issuance, resulting in a net decrease in cash and cash equivalents of $8,590 Cash Flow Summary (in USD) | Metric | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,375,873) | $(1,638,709) | | Net cash used in investing activities | $(332,539) | $(35,079) | | Net cash provided by financing activities | $2,698,793 | $2,483,244 | | Net increase (decrease) in cash | $(8,590) | $809,019 | Notes to Unaudited Consolidated Financial Statements These notes provide detailed information on the company's business, significant accounting policies, and key corporate events impacting its financial position - The company is a clinical-stage biopharmaceutical firm focused on developing new drugs and medical devices derived from plants, licensing promising candidates from research institutions for further clinical trials[20] - On February 8, 2019, the company completed a business combination with BioLite Holding, Inc. and BioKey, Inc., making them wholly-owned subsidiaries[28][29] - A 1-for-18 reverse stock split was effected on May 8, 2019, with all share and per-share data in the report reflecting this split[42] - In November 2020, the company raised $5 million through the sale of common stock and warrants to two non-U.S. investors, and also received $2.5 million from issuing a convertible promissory note[242][244] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's business overview, strategic objectives, financial performance, and liquidity, highlighting the impact of COVID-19 and increased operating expenses Business Overview and Strategy The company is a clinical-stage biopharmaceutical firm focused on developing plant-derived drugs and medical devices through a licensing and out-partnering strategy, with a focus on advancing its clinical pipeline - The company's business model is to license new drugs and medical devices from research institutions, conduct Phase II clinical trials, and then out-license to larger pharmaceutical companies for Phase III and commercialization[258][259] - Key strategic elements include advancing Vitargus® to pivotal trials, licensing out ABV-1504 for major depressive disorder, and completing Phase II trials for ABV-1505 for ADHD[296] - Recent clinical study reports were issued for Vitargus® (Phase I), ABV-1505 for ADHD (Phase II Part I), and ABV-1504 for MDD (Phase II), with all showing positive results supporting further development[285][288][290] Results of Operations For the nine months ended September 30, 2020, revenues fell 30% to $420,852 due to COVID-19's impact on the CDMO business, operating expenses rose 39% to $4.06 million, and other expenses surged to $2.1 million, primarily due to impairment and investment losses, consequently nearly doubling the net loss to $5.62 million Three-Month Performance Comparison (in USD) | Metric | Q3 2020 | Q3 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $115,553 | $197,733 | -41.5% | | Operating Expenses | $1,396,700 | $1,310,558 | +6.6% | | Net Loss | $(2,131,131) | $(1,329,685) | +60.3% | Nine-Month Performance Comparison (in USD) | Metric | Nine Months 2020 | Nine Months 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $420,852 | $601,757 | -30.1% | | Operating Expenses | $4,059,195 | $2,919,104 | +39.0% | | Net Loss | $(5,624,450) | $(2,817,454) | +99.6% | - The decrease in revenue for both the three and nine-month periods was mainly attributed to the impact of COVID-19 on the company's CDMO business, as clients postponed projects[388][396] - The significant increase in net loss was driven by higher SG&A expenses related to marketing and up-listing, a $952,711 impairment loss, and a $1,067,298 loss on investment in equity securities for the nine-month period[398][399][400][402] Liquidity and Capital Resources As of September 30, 2020, the company had a working capital deficit of $4.87 million, an improvement from a deficit of $5.94 million at the end of 2019, with net cash used in operations at $2.38 million and $2.70 million generated from financing activities Working Capital (in USD) | Metric | September 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Current Assets | $1,177,789 | $878,238 | | Current Liabilities | $6,045,547 | $6,814,193 | | Working Capital (Deficit) | $(4,867,758) | $(5,935,955) | - Net cash used in operating activities increased to $2.38 million for the nine months ended Sep 30, 2020, from $1.64 million in the prior-year period, mainly due to a higher net loss[405] - Net cash from financing activities was $2.70 million for the first nine months of 2020, an increase from $2.48 million in 2019, driven by successful fundraising through private placements[407] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and is therefore not required to provide the information for this item - As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk[410] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of September 30, 2020, and plans to remediate material weaknesses through additional staff training and expanded use of external consultants - Management concluded that the company's disclosure controls and procedures were not effective as of September 30, 2020[412] - Planned remediation measures include continued training for financial staff on U.S. GAAP and expanding the involvement of qualified external consultants to review the financial reporting process[415] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings during the period - There were no legal proceedings to report[416] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's annual report on Form 10-K filed on May 15, 2020, and the Form 10-Q filed on August 14, 2020 - No material changes to risk factors were reported since the last Form 10-K and Form 10-Q filings[417] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued common stock and warrants in unregistered sales to settle convertible notes and compensate consultants, relying on Regulation D or S exemptions - On September 30, 2020, the company issued 795,735 shares of common stock and warrants to six noteholders to settle outstanding convertible debt[419][420] - The company issued 60,000 shares and 60,000 warrants to ViewTrade Securities, Inc. as compensation for capital markets advisory services[426] - An additional 420,000 shares were issued to three other consulting firms for investor relations and business development services[428] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There were no defaults upon senior securities[429][430] Item 5. Other Information The company reported no other information for this item - No other information was disclosed[430] Item 6. Exhibits This section lists the exhibits filed with the quarterly report, including certifications pursuant to the Sarbanes-Oxley Act (Sections 302 and 906) and XBRL data files - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, as well as XBRL instance and taxonomy documents[431]