Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under
the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we
have evaluated the effectiveness of the design and operation of our “disclosure controls and procedures,” as such term
is defined in Rule 13a-15(e) or Rule 15d-15(e) promulgated under the Exchange Act as of the end of the period covered by this
report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure
controls and procedures were not effective as of the end of the period covered by this report to provide reasonable assurance that
material information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms due to the material weakness described below.
64
Management’s Report on Internal Control
over Financial Reporting
Our Chief Executive Officer, as the principal
executive officer (chief executive officer) and principal financial officer (chief financial officer), is responsible for establishing
and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) or 15d-15(f).
Internal control over financial reporting is a process designed 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.
Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our
assets that could have a material effect on the financial statements.
Because of its inherent limitations, our internal
controls and procedures may not prevent or detect misstatements. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have
been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Our management assessed the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2022. The framework used by management in making that assessment
was the criteria set forth in the document entitled “ Internal Control – Integrated Framework” (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our management has determined that as of December
31, 2022, the Company’s internal control over financial reporting was not effective for the purposes for which it is intended based
on the following material weakness:
– The
Company does not have sufficient and skilled accounting personnel with appropriate level of technical accounting knowledge and experience
in the application of accounting principles generally accepted in the United States commensurate with the Company’s financial reporting
requirements .
We are developing a plan to ensure that all information will be recorded,
processed, summarized and reported accurately, and as of the date of this report, we are working to hire personnel with the requisite
technical accounting knowledge to remediate the material weakness as soon as possible.
This annual report does not include an attestation
report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report
was not subject to attestation by our independent registered public accounting firm pursuant to rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial
Reporting
No change in our system of internal control over
financial reporting occurred during the fourth quarter of the fiscal year ended December 31, 2022 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS.
Not applicable.
65
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE.
The following table sets forth as of the date
of this annual report, the name, age, and position of each executive officer and director and the term of office of each such person.
Set forth below is certain biographical information
regarding each of our directors and officers as of the date of this annual report.
Name
Age
Title
Eugene Jiang
35
Chairman of the Board and Chief Business Officer (“CBO”)
Dr. Howard Doong
64
Chief Executive Officer (“CEO”)
Leeds Chow
34
Chief Financial Officer (“CFO”)
Dr. Tsung-Shann (T.S.) Jiang
68
Chief Strategy Officer (“CSTRO”) and Director
Dr. Tsang Ming Jiang
61
Director
Dr. Chang-Jen Jiang
66
Director
Norimi Sakamoto
51
Independent Director
Yen-Hsin Chou
33
Independent Director
Hsin-Hui Miao
57
Independent Director
Yoshinobu Odaira
73
Independent Director
Che-Wei Hsu
42
Independent Director
Shuling Jiang
67
Director
Yu-Min (Francis) Chung
58
Independent Director
Dr. Chi-Hsin (Richard) King
72
Chief Scientific Officer (“CSO”)
Eugene Jiang has served as our CEO and
President since the Company’s inception in July 2015 until he resigned on September 15, 2017. He remains the Chairman of the Board.
He also serves as our CBO since September 2019 and serves as the CBO of BioKey, Inc. since 2019. Mr. Jiang also serves as Director for BioLite Incorporation
since June 2015 and as Director for BioFirst Corp. since 2012. He also serves as CEO for Genepro Investment Company since
March 2010. Mr. Jiang obtained a PMBA degree from National Taiwan University in 2017 and an EMBA degree from the University
of Texas in Arrington in 2010. And in 2009, Mr. Jiang received a bachelor’s degree in Physical Education from Fu-Jen Catholic
University.
66
Dr. Howard Doong , was appointed as the
Company’s new CEO on September 15, 2017. In addition to the position at the Company, Dr. Doong also serves as director of United
BioPharma (K.Y.) since December 2022 and as the Chairman and the CEO of LifeCode Biotechnology Company (“LifeCode”),
a Taiwan company in the biotechnology business, since March 2017. Dr. Doong serves as the Chairman of Biokey since December 2020. Dr.
Doong served as the CEO and CSO of Wuhan Frasergen Genomic Medicine Company (“Wuhan Frasergen Genomic”), a Chinese company
in the biotechnology business, from 2016 to 2020. He served as the CSO of Cold Spring Biotech Corporation, a Taiwan corporation in the
biotechnology business from 2014 to 2016. He served as the CEO of iKnowledge-Care Bioscience Corp, a Taiwan company in the biotechnology
business from 2014 to 2015. He served as the director of Taipei Veteran General Hospital-LihPao Laboratory of Cancer Genomic Medicine
from 2012 to 2013. He served as the Vice President and director of Quality Assurance, TrimGen Corporation, a Maryland corporation in the
biotechnology business from 2006 to 2011. Before 2006, Dr. Doong was a professor at the University of Maryland School of Medicine and
Biotechnology Institute, and a researcher at National Cancer Institute (NCI) of the National Institutes of Health (NIH). Dr. Doong received
his Ph.D. degree from University of Chicago, the Department of Organismal Biology and Anatomy. He received his M.D and Ph.D. degree from
Harvard-MIT Division of Health Sciences and Technology. He received his M.S. degree from the University of New Hampshire, Genetics Program
and B.S. degree from Fu-Jen Catholic University, Taiwan, Department of Biology.
Leeds Chow , was appointed as the Company’s
Chief Financial Officer and Principal Accounting Officer on September 4, 2022. He has served as a Financial Controller of the Company
from March 2021 to August 2022. Mr. Chow has over 12 years of experience in Audit and Financing Industry. He has served as the finance
manager in a family office, in charge of managing investment portfolios, handling financial and operating aspects. He has also worked
in a local investment company in Hong Kong, serving as a financial advisor during the Hong Kong Initial Public Offering process, as well
as preparing opinion letters as an independent financial advisor for transactions for Hong Kong listed companies. Mr. Chow graduated
in University of California, Santa Barbara, with a Bachelor of Arts degree, majoring in Business Economics with Accounting Emphasis.
Dr. T.S. Jiang , has served as the Company’s Chief Strategy Officer
since September 2019. Dr. Jiang serves as the CEO of Biokey, Inc. since December 2021, as a director of BioFirst Corp. since 2013, and
has been the CEO and chairman of BioLite, Inc., a subsidiary of BioLite BVI, Inc., since January 2010. Prior to BioLite,
Dr. Jiang served as the president and/or chairman of multiple biotech companies in Taiwan, including PhytoHealth Corporation from 1998
to 2009 and AmCad BioMed Corporation from 2008 to 2009. In addition, Dr. Jiang is a director on various biotech associations, such as
the Taiwan Bio Industry Organization (Taiwan) from 2006 to 2008 and the Chinese Herbs and Biotech Development Association in Taiwan from
2003 to 2006. Dr. Jiang was an assistant professor at University of Illinois from 1981 to 1987 and an associate professor at Rutgers,
the State University of New Jersey from 1987 to 1990 and served as a professor at a few Taiwanese universities during a period from 1990
to 1993, such as National Taiwan University, National Cheng Kung University and Tunghai University. Dr. Jiang obtained his bachelor degree
in Engineering and Chemical Engineering from National Taiwan University in Taiwan in 1976, masters and Ph.D. from Northwestern University
in the U.S. in 1981 and Executive Master of Business Administration (“EMBA”) from National Taiwan University in Taiwan in
2007. As a successful entrepreneur, Dr. Jiang has developed and commercialized PG2 Lyo Injection, a new drug to treat cancer related fatigue.
From 1998 to 2009, Dr. T. S. Jiang served as President of Phyto Health Corporation where he led a project team to develop PG2 Injectable.
This product was extracted, isolated and purified from a type of Traditional Chinese Medicine. PG2 Injection was intended for cancer patients
who had trouble recovering from severe fatigue. Dr. Jiang oversaw and managed the R&D department, daily corporate operations and business
of Phyto Health Corporation when he was the President. PG2 Lyo Injection received approval on its NDA from Taiwan Food and Drug Administration
in 2010 and later was launched into the Taiwan market in 2012. We believe that Dr. Jiang provides leadership and technological guidance
on our strategic development and operations.
Dr. Tsang Ming Jiang , has served as a
director of BioFirst Corp. since 2017 and as a technical director at Supermicro Computer, Inc. since August 2022. Dr. Jiang served as
a technical director at the Industrial Technology Research Institute in Taiwan from February 2017 to July 2021. Prior to joining the
Industrial Technology Research Institute as a technical director, Dr. Jiang worked at the Company as chief information officer from November
2016 to January 2017, Ericsson as engineering manager from 2013 to 2016 and the Industrial Technology Research Institute as deputy director
from October 2011 to February 2013. In addition, Dr. Jiang worked at several other research institutes, including University of Alaska
Fairbanks, National Taiwan University and Chung Cheng University, with his research interest in cloud computing and Internet security,
especially in the areas of virtualization, software-defined data centers, SDN enabled networks and big data analytics. Dr. Jiang received
his Bachelor of Science in electrical engineering in 1983 and Master of Science in electrical engineering in 1984, both from National
Taiwan University, and his Ph.D. in electrical engineering and computer science from University of Illinois at Chicago in 1988. Dr. Tsang
Ming Jiang is a brother of Dr. Tsung-Shann Jiang, who together with his wife collectively owns 80% of Lion Arts Promotion, Inc. which
has approximately 69.3% of ownership interest in the Company through YuanGene Corporation, a wholly-owned subsidiary of Lion Arts Promotion,
Inc.
67
Dr. Chang-Jen Jiang , has served as a director
of BioLite Inc. since 2013 and as a director of BioFirst Corp. since 2015. Dr. Jiang has been a pediatrician at the department of pediatrics
of Eugene Women and Children Clinic since 2016. Previously, Dr. Chang-Jen worked as an attending doctor at the department of pediatrics
of Keelung Hospital, the Ministry of Health and Welfare in Taiwan from 1994 to 2009. Before his position at Keelung Hospital, he was a
chief doctor at the department of pediatrics, hematology and oncology of Mackay Memorial Hospital in Taiwan for three years until 1994.
Dr. Chang-Jen Jiang obtained his doctor of medicine degree (the Taiwanese equivalent degree of MD) from Taipei Medical University in Taiwan
in 1982 and started his career in Mackay Memorial Hospital. We believe that the Company will benefit from Dr. Jiang’s knowledge
in biology and experiences in medical practice.
Norimi Sakamoto , currently serves a director
at Shogun Maitake Canada Co., Ltd. from June 2016. Ms. Sakamoto served as the chief executive officer of MyLife Co., Ltd. from June 2013
to March 2020. Ms. Sakamoto started her career in 1997 from Sumitomo Corporation Hokkaido Co., Ltd. in Japan. Ms. Sakamoto received her
Bachelor Degree of Arts in travel and tourism from Davis and Elkins College in 1993 and Master of Science in urban studies from the University
of New Orleans in 1995.
Yen-Hsin Chou , has served as a financial
specialist at Mega Bank since 2011. Ms. Chou’s responsibilities primarily include customer services and financial consultations.
Ms. Chou received a Bachelor Degree in finance and economics from Yuan Ze University School of Economics in 2010.
Hsin-Hui Miao , served as counter manager
at Yueh Shan Chi Cram School from August 2021 to May 2022. From August 1988 to July 2021, Ms. Miao was a kindergarten teacher and also
severed as the leader of general affairs team at the affiliated high school of Tunghai University, Kindergarten Division. Ms. Miao received
her Bachelor Degree of Education from Taichung University of Education in 1998.
Yoshinobu Odaira , is an entrepreneur and
has founded a number of Japanese agricultural companies, including Yukiguni Maitake, our licensing partner. In 1983, Mr. Odaira established
Yukiguni Maitake, which became a public company in Japan in 1994. In 2015, Bain Capital Private Equity purchased Yukiguni Maitake through
a tender offer. In addition to his success with Yukiguni Maitake, Mr. Odaira served as the CEO of Yukiguni Shoji Co., Ltd. since 1988,
as the CEO of Odaira Shoji Co., Ltd. from 1989 and as a director of Shogun Maitake Japan Co., Ltd. since June 1989. In 2015, Mr.
Odaira founded two new companies, Shogun Maitake Canada Co., Ltd. in Canada and Odaira Kinoko Research Co., Ltd. in Japan. Mr. Odaira
has served as the CEO and director of Shogun Maitake Canada Co., Ltd. since June 2016. Mr. Odaira served as a director of BioLite Inc.
from February 2019 to April 2019. Yoshinobu Odaira graduated from the Ikazawa Junior High School in 1963. We believe that we will benefit
from Mr. Odaira’s successful business experience.
Che-Wei Hsu , is currently employed as a
clerk by Chunghwa Post Co., Ltd. since August 2016; previously she was a teacher in a Junior High School. Ms. Hsu received a Bachelor
Degree from Tunghai University School of Chinese Literature in 2004.
Shuling Jiang , has served as a director
for various companies, including BioLite, Inc. and BioFirst Corp, , since 2017 and started to serve as Managing Director for Biokey, Inc.
in 2022. Ms. Jiang received a Bachelor Degree from National Taiwan Normal University School of Music in 1978 and a Master Degree from
Northwestern University School of Music in 1983.
Yu-Min (Francis) Chung , was a Partner
at Maxpro Ventures, an investment firm in Taiwan focused on breakthrough biomedical technology companies, from July 2018 to May 2022.
Prior to that, he served as Vice President at TaiAn Technology, which is a biotechnology service company and a management company for
biotechnology venture capital funds in Taiwan, from June 2016 to June 2018. Mr. Chung received his Bachelor’s Degree of Science
in Chemistry from National Taiwan University in 1987, Master’s Degree in Business Administration from National Taiwan University
in 2006, and Ph.D. in Pharmacy from University of Iowa in 1995.
Significant Employees
The following are employees who are not executive
officers, but who are expected to make significant contributions to our business:
Dr. Chi-Hsin Richard King—Chief Scientific
Officer
Effective September 15, 2017, the Board appointed
Dr. Chi-Hsin Richard King as the CSO of the Company. Dr. Chi-Hsin Richard King, 71, retired since July 2017. He served as the consultant
at TaiGen Biotechnology Co. Ltd (“TaiGen”), a Taiwan company in the biotechnology business, from August 2016 to July 2017,
the Senior Vice President at TaiGen from July 2008 to August 2016 and as the Vice President at Research and Development of TaiGen from
June 2005 to July 2008. Dr. King served as the Director at Albany Molecular Research Inc. (“AMRI”), a New York corporation,
from January 2003 to June 2005, the Assistant Director at Medicinal Chemistry Department of AMRI from January 2000 to December 2002 and
the Assistant Director at Chemical Development Department of AMRI from August 1997 to January 2000. Dr. King received the Ph.D. degree
of bio-organic chemistry from University of Utah in 1980, and B.S. degree of chemistry from National Taiwan Normal University in 1972.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires that
the members of the Board, our executive officers and persons who own more than 10 percent of a registered class of our equity securities
file initial reports of ownership and reports of changes in ownership of our common units and other equity securities with the SEC and
any exchange or other system on which such securities are traded or quoted.
This was the first year that our officers, directors
and greater than 10% shareholders were subject to these rules. Based solely upon our review of the Section 16(a) filings that have been
furnished to us and representations by our directors and executive officers (where applicable), we believe that all filings required
to be made under Section 16(a) during the fiscal year ended December 31, 2022 were timely made, except that during the fiscal year ended
December 31, 2022, Ms. Shuling Jiang, failed to timely report her initial ownership of our common stock on Form 3.
68
Director Independence
The NASDAQ Rules require that a majority of the
Board be independent. The Board consists of 11 directors, of which nine are non-management directors. Each year the Board reviews the
materiality of any relationship that each of our directors has with the Company, either directly or indirectly. No member of the Board
has any relationship or arrangement that would require disclosure under Item 404 of Regulation S-K. For additional information
see “Certain Relationships and Related-Party Transactions” in this report. Based on this review, the Board has determined
that the following current directors are “independent directors” as defined by the NASDAQ Rules: Messrs. Odaira and Chung
and Mses. Sakamoto, Chou and Miao.
Each director who is a member of the Audit and Finance Committee,
Compensation Committee and Nominating and Corporate Governance Committee is an independent director.
Family Relationships
There
are no family relationships among the executive officers and directors of the Company, except that Dr. Tsang Ming Jiang, Dr. Tsung-Shann
Jiang and Dr. Chang-Jen Jiang are brothers, Mr. Eugene Jiang is Dr. Tsung-Shann Jiang’s son, and the marital relationship between
Yoshinobu Odaira and Norimi Sakamoto and between Shuling Jiang and Dr. Jiang.
Board Committees
Audit Committee . The Audit Committee of
the Board of Directors currently consists of Ms. Chou, Yen-Hsin (Chair), Ms. Miao, Hsin-Hui, and Ms. Hsu, Che-Wei. The functions of the
Audit Committee include the retention of our independent registered public accounting firm, reviewing and approving the planned scope,
proposed fee arrangements and results of the Company’s annual audit, reviewing the adequacy of the Company’s accounting and
financial controls and reviewing the independence of the Company’s independent registered public accounting firm. The Board has
determined that Ms. Chou, Ms. Miao and Ms. Hsu are each an “independent director” under the listing standards of The NASDAQ
Stock Market. The Board of Directors has also determined Ms. Chou is an “audit committee financial expert” within the applicable
definition of the SEC. The Audit Committee is governed by a written charter approved by the Board of Directors, a copy of which is available
on our website at www.abvcpharma.com. Information contained on our website are not incorporated by reference into and do not form any
part of this reports. We have included the website address as a factual reference and do not intend it to be an active link to the website.
Compensation Committee . The Compensation
Committee of the Board of Directors currently consists of Ms. Norimi Sakamoto (Chair), Ms. Miao, Hsin-Hui, and Ms. Hsu, Che-Wei. The functions
of the Compensation Committee include the approval of the compensation offered to our executive officers and recommending to the full
Board of Directors the compensation to be offered to our directors, including our Chairman. The Board has determined that Ms. Sakamoto,
Ms. Miao and Ms. Hsu are each an “independent director” under the listing standards of The NASDAQ Stock Market LLC. In addition,
the members of the Compensation Committee qualify as “non-employee directors” for purposes of Rule 16b-3 under the Exchange
Act and as “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended. The Compensation
Committee is governed by a written charter approved by the Board of Directors, a copy of which is available on our website at www.abvcpharma.com.
Information contained on our website are not incorporated by reference into and do not form any part of this report. We have included
the website address as a factual reference and do not intend it to be an active link to the website.
Corporate Governance and Nominating Committee .
The Corporate Governance and Nominating Committee of the Board of Directors consists of Mr. Yoshinobu Odaira (Chair), Ms. Miao, Hsin-Hui,
and Ms. Hsu, Che-Wei, each of whom is an independent director under Nasdaq’s listing standards. The corporate governance and
nominating committee is responsible for overseeing the selection of persons to be nominated to serve on our board of directors. The corporate
governance and nominating committee considers persons identified by its members, management, shareholders, investment bankers and others.
Board Diversity
Under Nasdaq Rule 5605(f) Nasdaq-listed companies
are required, subject to certain exceptions, (1) to have at least one director who self-identifies as a female, and (2) to have at least
one director who self-identifies as Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian
or Pacific Islander, two or more races or ethnicities, or as LGBTQ+, or (3) to explain why the reporting company does not have at least
two directors on its board who self-identify in the categories listed above. Under Nasdaq Rule 5605(f)(2)(D), boards of directors composed
of five or fewer members must have one director who is Diverse as defined by the Rule and are not subject to the requirements of subparagraphs
(A), (B), and (C) of Rule 5605(f)(2) until and unless they expand the board beyond five members.
In addition, Nasdaq Rule 5606 (Board Diversity
Disclosure) requires each Nasdaq-listed company, again subject to certain exceptions, to provide statistical information about such company’s
Board of Directors, in a specified format, related to each director’s self-identified gender, race, and self-identification as
LGBTQ+. This matrix is presented below. The Company believes it is in compliance with the diversity requirements imposed by the Nasdaq
listing rules.
69
Board Diversity Matrix (as
of December 31, 2022)
Total number of directors
Female
Male
Non-Binary
Did Not Disclose Gender
Part I: Gender Identity
5
6
Directors
Part II: Demographic Background
African American or Black
Alaskan Native or Native American
Asian
4
6
Hispanic or Latinx
Native Hawaiian or Pacific Islander
White
Two or more races or ethnicities
LGBTQ+
Did not disclose demographic background
1
Guidelines for Selecting Director Nominees
The guidelines for selecting nominees, which
are specified in the Corporate Governance and Nominating Committee Charter, generally provide that persons to be nominated:
●
should have demonstrated
notable or significant achievements in business, education or public service;
●
should possess the requisite
intelligence, education and experience to make a significant contribution to the board of directors and bring a range of skills,
diverse perspectives and backgrounds to its deliberations; and
●
should have the highest
ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the shareholders.
The corporate governance and nominating committee
will consider a number of qualifications relating to management and leadership experience, background and integrity and professionalism
in evaluating a person’s candidacy for membership on the board of directors. The nominating committee may require certain skills
or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider
the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The board of directors will also
consider director candidates recommended for nomination by our shareholders during such times as they are seeking proposed nominees to
stand for election at the next annual meeting of shareholders (or, if applicable, a special meeting of shareholders). Our shareholders
that wish to nominate a director for election to the Board should follow the procedures set forth in our bylaws. The nominating committee
does not distinguish among nominees recommended by shareholders and other persons.
70
Board Leadership Structure and Role in Risk
Oversight
We have two separate individuals serving as our
CEO and Chairman. Our Board of Directors, or the Board, is primarily responsible for overseeing our risk management processes on behalf
of our company. The Board receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate
regarding our company’s assessment of risks. In addition, the Board focuses on the most significant risks facing our company and
our company’s general risk management strategy, and also ensures that risks undertaken by our company are consistent with the board’s
appetite for risk. While the Board oversees our company’s risk management, management is responsible for day-to-day risk management
processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and
that our board leadership structure supports this approach.
Code of Ethics
We adopted a code of ethics, a copy of which
is attached herein as Exhibit 14.1. The Code of Ethics applies to all of our employees, officers and directors. This Code constitutes
a “code of ethics” as defined by the rules of the SEC. Copies of the code may be obtained free of charge from our website,
www.abvcpharma.com. Any amendments to, or waivers from, a provision of our code of ethics that applies to any of our executive officers
will be posted on our website in accordance with the rules of the SEC.
Indemnification
Neither our Articles of Incorporation nor Bylaws
prevent us from indemnifying our officers, directors and agents to the extent permitted under the Nevada Revised Statute (“NRS”).
NRS Section 78.7502 provides that a corporation shall indemnify any director, officer, employee or agent of a corporation against expenses,
including attorneys’ fees, actually and reasonably incurred by him in connection with any the defense to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding
referred to Section 78.7502(1) or 78.7502(2), or in defense of any claim, issue or matter therein.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to Nevada law, we
are informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
71
ITEM 11. EXECUTIVE COMPENSATION
The following tables set forth, for each of the
last two completed fiscal years of us, the total compensation awarded to, earned by or paid to any person who was a principal executive
officer during the preceding fiscal year and every other highest compensated executive officers earning more than $100,000 during the
last fiscal year (together, the “Named Executive Officers”). The tables set forth below reflect the compensation of the Named
Executive Officers.
Summary
Compensation Table
Name and Principal Position
Year
Salary
($)
Bonus
($)
Stock Awards
($)
Option Awards
($) (7)
Non-Equity Incentive Plan Compensation
($)
Change in Pension
Value and
Nonqualified Deferred Compensation Earnings
($)
All Other Compensation
($)
Total
($)
Howard Doong (1)
2022
200,000
248,386
448,386
2021
200,000
836,002
1,036,002
Leeds Chow (2)
2022
130,000
-
130,000
2021
120,000
-
120,000
Tsung-Shann Jiang (3)
2022
200,000
248,386
448,386
2021
200,000
62,700
262,700
Richard Chi-Hsin King (4)
2022
200,000
248,386
448,386
2021
200,000
661,834
861,834
Eugene Jiang (5)
2022
200,000
248,386
448,386
2021
200,000
62,700
262,700
Chihliang An (6)
2022
133,333
248,386
381,719
2021
200,000
487,668
687,668
(1) Dr.
Doong was appointed as the CEO on September 15, 2017.
(2)
Mr. Chow was appointed
as the CFO on September 4, 2022.
(3)
Dr. Jiang was appointed
as the CSTRO on September 1, 2019.
(4)
Dr. King was appointed
as the CSO on September 15, 2017 .
(5)
Eugene Jiang was appointed
as CBO on September 1, 2019 .
(6)
Mr. An resigned from his
positions as the Company’s CFO on September 4, 2022.
(7)
The weighted average grant
date fair value of options granted during 2022 was $1.63, using the Black-Scholes option-pricing model. Accordingly, the Company
recognized stock-based compensation expense of $1,241,930 for the years ended December 31, 2022.
Narrative Disclosure to Summary Compensation Table
Other
than set out below, there are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive
officers. Our directors and executive officers may receive share options at the discretion of our board of directors in the future. We
do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors
or executive officers, except that share options may be granted at the discretion of our board of directors.
Stock Option Plan
Our board approved and adopted the Amended and
Restated 2016 Equity Incentive Plan on September 12, 2020 (the “Plan”), a copy of which is attached hereto as exhibit 10.17.
72
Grants of Plan-Based Awards
On November 21, 2020, the Company issued an aggregate
of 545,182 options to purchase shares of Common Stock in lieu of unpaid salaries of certain employees (other than Officers and Directors)
and unpaid consulting fees under the Plan, as amended; the total converted salaries was $1,090,361. The options are exercisable at $2.00
per share.
On October 15, 2021, the Company’s Board
of Directors approved and issued the following option awards pursuant to the Plan:
● 30,000
options to each director, including the Chairman; such options are exercisable at $3.00 per share.
● Options
for 400,001 shares, 233,334 shares, and 316,667 shares to the CEO, CFO and CSO, respectively; the options are exercisable at $3.00 per
share.
On April 16, 2022, the Company entered into stock
option agreements with 5 directors, pursuant to which the Company granted options to purchase an aggregate of 761,920 shares of common
stock under the Plan, as amended, at an exercise price of $3 per share. The options were vested at the grant date and become exercisable
for 10 years from the grant date.
As
of the date of this report, we have granted options under the Plan that can be exercised for an aggregate of 2,587,104 shares of Common
Stock.
Outstanding Equity Awards at Fiscal Year End
The following table summarizes outstanding unexercised
options, unvested stocks and equity incentive plan awards held by each of our named executive officers, as of December 31, 2022:
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
OPTION AWARDS
STOCK AWARDS
Name
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned Options
(#)
Options
Exercise
Prices
($)
Option
Expiration
Date
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Been Issued
(#)
Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Been
Issued
($)
Howard Doong
85,715
10,715
-
2.00
Nov 20, 2031
-
-
-
-
400,001
-
-
3.00
Oct 15, 2032
152,384
-
-
3.00
Apr 16, 2033
Chihliang An
54,762
9,524
-
2.00
Nov 20, 2031
233,334
-
-
3.00
Oct 15, 2032
152,384
-
-
3.00
Apr 16, 2033
Tsung-Shann Jiang
34,105
-
-
2.00
Nov 20, 2031
30,000
-
-
3.00
Oct 15, 2032
152,384
-
-
3.00
Apr 16, 2033
Richard Chi-Hsin King
82,144
14,286
-
2.00
Nov 20, 2031
316,667
-
-
3.00
Oct 15, 2032
152,384
-
-
3.00
Apr 16, 2033
Eugene Jiang
72,418
12,193
-
2.00
Nov 20, 2031
30,000
-
-
3.00
Oct 15, 2032
152,384
-
-
3.00
Apr 16, 2033
73
Compensation of Directors
We did not
pay stock options to directors in fiscal year 2022.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we
provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans
pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may
be granted at the discretion of the board of directors or a committee thereof.
Employment Contracts
Dr. Howard Doong has entered into an employment agreement (“Doong
Employment Agreement”) with the Company, pursuant to which he shall receive an annual base salary of $100,000. As of December 31,
2017, we paid Dr. Doong 20,833 shares of the Company’s common stock at a per share price of $1.60 as opposed to cash compensation.
Under Doong Employment Agreement, Dr. Doong is employed as our CEO and President of the Company. We may terminate the employment for cause,
at any time, without notice or remuneration, for certain acts of the executive officer, such as conviction or plea of guilty to a felony
or grossly negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties. In such case, the executive
officer will not be entitled to receive payment of any severance benefits or other amounts by reason of the termination, and the executive
officer’s right to all other benefits will terminate, except as required by any applicable law. We may also terminate an executive
officer’s employment without cause upon one-month advance written notice. In such case of termination by us, we are required to
provide compensation to the executive officer, including severance pay equal to 12 months of base salary. The executive officer may terminate
the employment at any time with a one-month advance written notice if there is any significant change in the executive officer’s
duties and responsibilities or a material reduction in the executive officer’s annual salary. In such case, the executive officer
will be entitled to receive compensation equivalent to 12 months of the executive officer’s base salary. On August 21, 2019, all
of the Board members present at the Meeting, unanimously reelected Dr. Howard Doong as the Chief Executive Officer (“CEO”),
which became effective on September 1, 2019 for a term of three years.
On
September 4, 2022, the Board appointed Mr. Leeds Chow as the Company’s Chief Financial Officer (“CFO”) and Principal
Accounting Officer effective from September 4, 2022 for a term of 3 years.
Dr. Chi-Hsin Richard King has entered into an employment agreements
(“King Employment Agreement”) with the Company, pursuant to which he shall receive an annual base salary of $50,000. As of
December 31, 2017, we paid Mr. King 10,416 shares of the Company’s common stock at a per share price of $1.60 as opposed to cash
compensation. Under King Employment Agreement, Dr. King is employed as the CSO of the Company. We may terminate the employment for cause,
at any time, without notice or remuneration, for certain acts of the executive officer, such as conviction or plea of guilty to a felony
or grossly negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties. In such case, the executive
officer will not be entitled to receive payment of any severance benefits or other amounts by reason of the termination, and the executive
officer’s right to all other benefits will terminate, except as required by any applicable law. We may also terminate an executive
officer’s employment without cause upon one-month advance written notice. In such case of termination by us, we are required to
provide compensation to the executive officer, including severance pay equal to 12 months of base salary. The executive officer may terminate
the employment at any time with a one-month advance written notice if there is any significant change in the executive officer’s
duties and responsibilities or a material reduction in the executive officer’s annual salary. In such case, the executive officer
will be entitled to receive compensation equivalent to 12 months of the executive officer’s base salary. On August 21, 2019, all
of the Board members present at the Meeting, unanimously reelected Dr. Richard King as the Chief Scientific Officer (“CSO”),
which became effective on September 1, 2019 for a term of three years.
On
August 21, 2019, all of the Board members present at the Meeting, except Eugene Jiang, appointed Mr. Eugene Jiang, the current Chairman
of the Board, as the Chief Business Officer, effective since September 1, 2019 for a term of three years. Mr. Eugene Jiang excused himself
from the discussion regarding his appointment as the Chief Business Officer of the Company during the Board meeting.
On
August 21, 2019, all of the Board members present at the Meeting, except Dr. Tsung-Shann Jiang, reelected Dr. Tsung-Shann Jiang as the
Chief Strategy Officer, effective since September 1, 2019 for a term of three years. Dr. Tsung-Shann Jiang excused himself from the discussion
regarding his appointment as the Chief Strategy Officer of the Company during the Board meeting.
74
ITEM 12. SECURITY OWENERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Beneficial Owners
The following table sets forth certain information
regarding beneficial ownership of our common stock as of March 31, 2023 (i) each person (or group of affiliated persons) who is known
by us to own more than five percent (5%) of the outstanding shares of our common stock, (ii) each director, executive officer and director
nominee, and (iii) all of our directors, executive officers and director nominees as a group.
Beneficial ownership is determined in accordance
with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or
group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the
right to acquire within 60 days of the date of the respective table. For purposes of computing the percentage of outstanding shares of
our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire
within 60 days of the date of the respective table is deemed to be outstanding for such person, but is not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned
does not constitute an admission of beneficial ownership.
Unless otherwise noted, the business address
of each beneficial owner listed is 44370 Old Warm Springs Blvd., Fremont, CA 94538. Except as otherwise indicated, the persons listed
below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power
may be shared with a spouse.
As of March 31, 2023, we had 33,080,740
shares of common stock issued and outstanding.
Name of Beneficial Owner
Amount and
Nature of
Beneficial
Ownership
Percent of
Class
Dr. Howard Doong
18,404
* %
Eugene Jiang (1)
702,246
2.3 %
Leeds Chow
2,728
*
Chi-Hsin (Richard) King
869
*
Yen-Hsin Chou
5,679
*
Hsin-Hui Miao
-
*
Dr. Tsang-Ming Jiang
6,067
*
Norimi Sakamoto
4,667
*
Dr. Tsung-Shann Jiang (2)(4)
11,980,752
36.2 %
Dr. Chang-Jen Jiang (3)
5,545
*
Yoshinobu Odaira
163,702
*
Che-Wei Hsu
3,346
*
Shuling Jiang
-
*
Yu-Min Chung
5,556
*
All officers and directors as a group (Fourteen (14) persons)
12,899,540
39.0 %
YuanGene Corporation (4)
8,296,968
25.1 %
* less
than 1%.
(1) Eugene
Jiang held 673,189 shares of the Company’s common stock through his ownership in AsianGene, 3,743 shares of the Company’s
common stock through his ownership in BioFirst, 121 shares of the Company’s common stock through his ownership in Rgene, and the
rest of 25,173 shares through direct ownership.
(2) Dr. Tsung-Shann
Jiang held 8,296,968 shares of common stock through his ownership in YuanGene Corporation, 2,277 shares of the Company’s common
stock through BioLite, 16,829 shares through Rgene Corporation, 96,364 shares through BioFirst, 674,724 shares through Lion Arts, 509,878
shares through LionGene, 8,850 shares through Genepro Investment, 213,120 shares through Keypoint, and the rest of 2,161,742 shares
through direct ownership.
(3) Dr.
Chang-Jen Jiang held 939 shares of common stock in the Company through his ownership in BioFirst, 5 shares of the Company’s common
stock through Rgene, and the rest of 4,600 shares through direct ownership.
(4) YuanGene
Corporation is a company wholly-owned by Lion Arts, which is owned by Shu-Ling Chiang (80%) and Dr. Tsung-Shann Jiang (20%); however,
YuanGene appointed Eugene Jiang to have sole voting control over the shares held by YuanGene, the principal office address of which is
2 nd floor, Building B, SNPF Plaza, Savalalo, Apia, Samoa.
75
Securities authorized for issuance under equity
incentive plans.
Equity Compensation Plan Information
The following
table discloses information as of December 31, 2022, with respect
to compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance,
aggregated as follows:
Plan category
Number of
securities
to be issued
upon
exercise of
outstanding
options,
warrants
and rights
Weighted-
average
exercise
price of
outstanding
options,
warrants
and rights
Shares of
common
stock
remaining
available for
future
issuance
under equity
compensation
plans
Equity compensation plans approved by security holders
2,587,104
$ 2.79
3,860,211
Equity compensation plans not approved by security holders
-
-
-
Total
2,587,104
$ 2.79
3,860,211
See, Item 11, Executive Compensation for additional
details about our option plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, DIRECTOR INDEPENDENCE
Except as disclosed herein, no director, executive
officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct
or indirect, in any transaction, or proposed transaction since January 1, 2020, in which the amount involved in the transaction exceeds
the lesser of $120,000 or one percent of the average of our total assets at the year-end for the last two completed fiscal years.
Co-Development agreement with Rgene Corporation
On November 10, 2020, the Company and Rgene signed
an amendment to the Co-Dev Agreement dated May 26, 2017, pursuant to which both parties agreed to delete AB-1507 HER2/neu Positive Breast
Cancer Combination Therapy and AB 1527 Ovary Cancer Combination Therapy and add ABV-1519 EGFR Positive Non-Small Cell Lung Cancer Combination
Therapy and ABV-1526 Large Intestine / Colon / Rectal Cancer Combination Therapy to the products to be co-developed and commercialized.
Other provisions of the Co-Dev Agreement remain in full force and effect.
Clinical Development Service Agreement
with Rgene Corporation
On June 10, 2022, the Company expanded its co-development
partnership with Rgene. BioKey, Inc. entered into a Clinical Development Service Agreement with Rgene (“Service Agreement”)
to guide certain Rgene drug products, RGC-1501 for the treatment of Non-Small Cell Lung Cancer (NSCLC), RGC-1502 for the treatment of
pancreatic cancer and RGC 1503 for the treatment of colorectal cancer patients, through completion of Phase II clinical studies under
U.S. FDA IND regulatory requirements (the “Rgene Studies”). The Service Agreement shall remain in effect until the expiration
date of the last patent and automatically renew for 5 more years unless terminated earlier by either party with six months written notice.
Under the terms of the Service Agreement, BioKey is eligible to receive payments totaling up to $3.0 million over a 3-year period with
each payment amount to be determined by certain regulatory milestones obtained during the agreement period.
Collaborative agreement with BioFirst Corporation
On
November 4, 2020, we executed an amendment to our collaboration agreement with BioFirst dated July 24, 2017, to add ABV-2001
Intraocular Irrigation Solution and ABV-2002 Corneal Storage Solution to our agreement. ABV-2002 is intended to be utilized during a
corneal transplant procedure to replace a damaged or diseased cornea while ABV-2001 has broader utilization during a variety of
ocular procedures.
Initially ABVC will focus on ABV-2002, a solution utilized to store
a donor cornea prior to either penetrating keratoplasty (full thickness cornea transplant) or endothelial keratoplasty (back layer cornea
transplant). Designated ABV-2002 under ABVC’s product identification system, the solution is comprised of a specific poly amino
acid that protects ocular tissue from damage caused by external osmolarity exposure during pre-surgery storage. The specific polymer in
ABV 2002 can adjust osmolarity to maintain a range of 330 to 390 mOsM thereby permitting hydration within the corneal stroma during the
storage period. Stromal hydration results in (a) maintaining acceptable corneal transparency and (b) prevents donor cornea swelling. ABV-2002
also contains an abundant phenolic phytochemical found in plant cell walls that provides antioxidant antibacterial properties and neuroprotection.
Early testing by BioFirst indicates that ABV-2002
may be more effective for protecting the cornea and retina during long-term storage than other storage media available today and can be
manufactured at lower cost. ABV-2002 is categorized as a Class I Medical Device that has the lowest risk to patients; however, further
clinical development was put on hold due to the lack of funding.
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 prior to September 30, 2020. Afterwards, all outstanding load will bear interest rate at 12% per annum. On July 1, 2020,
the Company entered into a loan agreement with BioFirst (Australia) for $361,487 to properly record R&D cost and tax refund allocation
based on co-development contract executed on July 24, 2017. The loan was originally set to mature on September 30, 2021 with an interest
rate of 6.5% per annum, however, on September 7, 2021, the Company entered into a loan agreement with BioFirst (Australia) for $67,873
to meet its new project needs. On December 1, 2021, the Company entered into a loan agreement with BioFirst (Australia) for $250,000 to
increase the cost for upcoming projects. The loan has an interest rate of 6.5% per annum and matured on November 30, 2022. As of December
31, 2022 and 2021, the aggregate amount of outstanding loans and accrued interest was $1,028,556 and $491,816, respectively.
76
Joint Venture Agreement
On October 6, 2021 (the “ Completion
Date ”), the Company, Lucidaim Co., Ltd., a Japanese corporation (“ Lucidaim ,” together with the Company,
the “ Shareholders ”), and BioLite Japan K.K., a Japanese corporation (“ Biolite JP” ) entered into
a Joint Venture Agreement (the “ Agreement ”). Biolite JP is a private limited company (a Japanese Kabushiki
Kaisha ) incorporated on December 18, 2018 and at the date of the Agreement has 10,000 ordinary shares authorized, with 3,049 ordinary
shares issued and outstanding (the “ Ordinary Shares ”). Immediately prior to the execution of the Agreement, Lucidaim
owned 1,501 Ordinary Shares and the Company owned 1,548 Ordinary Shares. The Shareholders entered into the joint venture
to formally reduce to writing their desire to invest in and operate Biolite JP as a joint venture. The business of the joint venture
shall be the research and development of drugs, medical device and digital media, investment, fund running and consulting, distribution
and marketing of supplements carried on by Biolite JP and its subsidiaries in Japan, or any other territory or businesses as may from
time to time be agreed by an amendment to the Agreement. The closing of the transaction is conditioned upon the approval and receipt
of all necessary government approvals, which have been received.
Pursuant to the Agreement and the related share
transfer agreement, the Company shall transfer 54 of its Ordinary Shares to Lucidaim for no consideration, such that following
the transfer, Lucidaim shall own 1,555 Ordinary Shares (51%) and the Company shall own 1,494 Ordinary Shares (49%).
Also pursuant to the Agreement, there shall be 3 directors of Biolite JP, consisting of 1 director appointed by the Company and 2 appointed
by Lucidiam. The Company shall appoint Eugene Jiang, the Company’s current Chairman and Chief Business Officer and Lucidaim shall
appoint Michihito Onishi; the current director of Biolite JP, Toru Seo (who is also a director of BioLite Japan’s other shareholder),
is considered the second Lucidaim director. The Agreement further provides that the Company and Biolite JP shall assign the research
collaboration and license agreement between them to Biolite JP or prepare the same (the “ License Agreement ”). The
aforementioned transactions occurred on the Completion Date.
As per the Agreement, the Shareholders shall
supervise and manage the business and operations of Biolite JP. The directors shall not be entitled to any renumeration for their services
as a director and each Shareholder can remove and replace the director he/she/it appointed. If a Shareholder sells or disposes of all
of its Ordinary Shares, the director such Shareholder appointed must tender his/her resignation. The Agreement also sets forth certain
corporate actions that must be pre-approved by all Shareholders (the “ Reserved Matters ”). If the Shareholders are
unable to make a decision on any Reserved Matter, then either Shareholder can submit a deadlock notice to the other shareholder, 5 days
after which they must refer the matter to each Shareholder’s chairman and use good faith to resolve the dispute. If such dispute
is not resolved within 10 days thereafter, then either Shareholder can offer to buy all of the other Shareholder’s Ordinary Shares
for cash at a specified price; if there is not affirmative acceptance of the sale, the sale shall proceed as set forth in the sale offer.
Each of the Shareholders maintains a pre-emptive
right to purchase such number of additional Ordinary Shares as would allow such Shareholder to maintain its ownership percentage in Biolite
JP if Biolite JP issues any new Ordinary Shares. However, the Agreement provides that the Company shall lose its pre-emptive rights under
certain conditions. The Shareholders also maintain a right of first refusal if the other Shareholder receives an offer to buy such shareholder’s
Ordinary Shares.
The Agreement also requires Biolite JP to obtain
a bank facility in the amount of JPY 30,460,000 (approximately USD272,000), for its initial working capital purposes. Pursuant
to the Agreement, each Shareholder agrees to guarantee such bank facility if the bank requires a guarantee. Accordingly, the Company
may be liable for the bank facility in an amount up to JPY 14,925,400 (approximately USD134,000), which represents 49%
of the maximum bank facility. The Agreement further provides that Biolite JP shall issue annual dividends at the rate of at least 1.5%
of Biolite JP’s profits, if it has sufficient cash to do so.
Pursuant
to the Agreement, the Company and Biolite JP agree to use their best efforts to execute the License Agreement by the end of December
2021, but since it was not yet executed, the parties continue such efforts. The Company agreed that any negotiation on behalf of Biolite
JP regarding the terms of the License Agreement shall be handled by the directors appointed by Lucidaim. If the Company and such Lucidaim
directors do not reach agreement on the terms, Biolite JP may at its sole discretion determine not to execute the License Agreement without
any liability to the Company.
The Agreement contains non-solicitation and non-compete
clauses for a period of 2 years after a Shareholder or its subsidiaries ceases to be a Shareholder, with such restrictive covenants limited
to business within the ophthalmologic filed or central neurological field. Any rights to intellectual property that arise from Biolite
JP’s activities, shall belong to Biolite JP.
The Agreement contains standard indemnification
terms, except that no indemnifying party shall have any liability for an individual liability unless it exceeds JPY 500,000 (approximately
USD4,500) and until the aggregate amount of all liabilities exceeds JPY 2,000,000 (approximately USD18,000) and then only to
the extent such liability exceed such limit.
The Company paid $150,000 towards the setup
of the joint venture; BioLite Japan’s other shareholder also paid $150,000 after the Letter of Intent was signed.
The Agreement shall continue for 10 years, unless
earlier terminated. The Agreement also allows a Shareholder to terminate the agreement upon certain defaults committed by another Shareholder,
as set forth in the Agreement.
77
Agreement with BioLite, Inc.
We entered into a Collaborative Agreement with
BioLite, Inc., a company incorporated under the laws of Taiwan, and a subsidiary of the Company, (“BioLite”) on December
29, 2015, and then entered into two addendums to such agreement (as amended and revised, (the “Agreement”). The majority
shareholder of BioLite is one of the Company’s subsidiaries, the Company’s Chairman is a director of BioLite and Dr. Jiang,
the Company’s Chief Strategy Officer and a director, is the Chairman of BioLite.
Pursuant to the Agreement, the Company acquired
the sole licensing rights to develop and commercialize for therapeutic purposes six compounds from BioLite. In accordance with the terms
of the Agreement, the Company shall pay BioLite (i) milestone payments of up to $100 million in cash and equity of the Company or equity
securities owned by it at various stages on a schedule dictated by BioLite’s achievements of certain milestones, as set forth in
the Agreement (the “Milestone Payments”) and (ii) a royalty payment equal to 5% of net sales of the drug products when ABV-1501
is approved for sale in the licensed territories. If BioLite fails to reach any of the milestones in a timely manner, it may not receive
the rest of the payments from the Company. According to the Agreement, after Phase II clinical trials are completed, 15% of the Milestone
Payment becomes due and shall be paid in two stages: (i) 5% no later than December 31, 2021 (the “December 2021 Payment”)
and (ii) 10% no later than December 31, 2022. On February 12, 2022, the Company’s Board of Directors determined that the December
2021 Payment, which is equal to $5,000,000, shall be paid via the cancellation of certain outstanding debt, in the amount of $5,000,000,
that BioLite owes the Company as of December 31, 2021. On February 22, 2022, the parties entered into an amendment to the Agreement allowing
the Company to make all payments due under the Agreement via the forgiveness of debt, in equal value, owed by BioLite to the Company.
This
was a related party transaction and was conducted at arm’s length. In addition to the Company’s board of directors approving
the modification of terms of the Agreement, the Company’s audit committee approved them too. The Board believes it is in the Company’s
best interest to cancel outstanding debt and apply it to the December 2021 Payment.
Following such approval, the Company and BioLite
entered into an amendment to the Agreement reflecting the modified payment method.
Other related party transactions
Due from related parties:
(1) As of December 31, 2021, due from Rgene amounted
to $49,110. Under the terms of the loan agreement, the loan bears interest at 1% per month (or equivalent to 12% per annum) and the maturity
date was December 31, 2020. As of December 31, 2021, the outstanding loan balance was $33,520; and accrued interest was $13,701, respectively.
On January 1, 2021, BioLite Taiwan entered into a consultant services agreement with Rgene, of which the amount due from Rgene was $1,889
for the year ended December 31, 2021.
On June 16, 2022, the Company entered into a one-year convertible loan
agreement with Rgene, with a principal amount of $1,000,000 to Rgene which bears interest at 5% per annum for the use of working capital
that, if fully converted, would result in ABVC owning an additional 6.4% of Rgene. The Company may convert the Note at any time into shares
of Rgene’s common stock at either (i) a fixed conversion price equal to $1.00 per share or (ii) 20% discount of the stock price
of the then most recent offering, whichever is lower; the conversion price is subject to adjustment as set forth in the Note. The Note
includes standard events of default, as well as a cross-default provision pursuant to which a breach of the Service Agreement will trigger
an event of default under the convertible note if not cured after 5 business days of written notice regarding the breach is provided.
As of December 31, 2022, the outstanding loan balance was $ 500,000; and accrued interest was $13,819.
78
(2)
On July 1, 2020, the Company entered into a loan agreement with BioFirst (Australia) for $361,487 to properly record R&D cost and tax refund allocation based on co-development contract executed on July 24, 2017. The loan was originally set to be mature on September 30, 2021 with an interest rate of 6.5% per annum, but on September 7, 2021, the Company entered into a loan agreement with BioFirst (Australia) for $67,873 to meet its new project needs. On December 1, 2021, the Company entered into a loan agreement with BioFirst (Australia) for $250,000 to increase the cost for upcoming projects. The loan will be matured on November 30, 2022 with an interest rate of 6.5% per annum. In 2022, the Company entered into several loan agreements with BioFirst (Australia) for a total amount of $507,000 to increase the cost for upcoming projects. All the loans period was twelve months with an interest rate of 6.5% per annum. As of December 31, 2022 and 2021, the aggregate amount of outstanding loan and accrued interest was $1,028,556 and $491,816, respectively.
(3)
On February 24, 2015, BioLite Taiwan and BioHopeKing Corporation (the “BHK”) entered into a co-development agreement, (the “BHK Co-Development Agreement”, see Note 3). The development costs shall be shared 50/50 between BHK and the Company. Under the term of the agreement, BioLite issued relevant development cost to BHK. As of December 31, 2022 and 2021, due from BHK was $112,822 and $124,972, respectively.
(4)
On May 8, 2020, the Company and Lucidaim entered into a Letter of Intent (LOI) in regard to a potential joint venture of BioLite Japan. Based on the LOI, each party will advance an aggregated amount of $150,000 to meet BioLite Japan’s working capital needs, which the Company advanced an amount of $150,000 and the advance bear 0% interest rate. As of December 31, 2022 and 2021, the outstanding advance balances was $0 and $150,000, respectively. The outstanding balance was reclassified as prepayment for long-term investments due to the debt-to-equity agreement with BioLite Japan, while format document is pending to be executed.
Due to related parties:
(1)
Since 2019, BioFirst has advanced funds to the Company for working capital purpose. The advances bear interest 1% per month (or equivalent to 12% per annum). As of December 31, 2022 and 2021, the aggregate amount of outstanding balance and accrued interest is $188,753, a combination of $147,875 from loan, and $40,878 from expense-sharing, and $40,878, respectively.
(2)
As of December 31, 2022 and 2021, BioFirst (Australia) has advanced the Company an aggregate amount of $275,900 and $132,443, respectively for new project purpose.
(3)
Since 2019, the Jiangs advanced funds to the Company for working capital purpose. As of December 31, 2022 and 2021, the outstanding balance due to the Jiangs amounted to $19,789 and $18,750, respectively. These loans bear interest rate of 0% to 1% per month, and are due on demand.
(4)
Since 2018, the Company’s shareholders have advanced funds to the Company for working capital purpose. The advances bear interest rate from 12% to 13.6224% per annum. As of December 31, 2022 and 2021, the outstanding principal and accrued interest was $151,450 and $168,131, respectively. Interest expenses in connection with these loans were $22,779 and $22,779 for the years ended December 31, 2022 and 2021, respectively.
Promoters and Certain Control Persons
None of our management or other control persons
were “promoters” (within the meaning of Rule 405 under the Securities Act), and none of such persons took the initiative
in the formation of our business or received any of our debt or equity securities or any of the proceeds from the sale of such securities
in exchange for the contribution of property or services, during the last five years.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Various audit, audit related and non-audit services to us is as follows:
For the Year Ended
December 31,
2022
2021
Audit Fees
$ 271,000
$ 249,350
Audit Related Fees
39,436
78,750
Tax Fees
-
-
All Other Fees
-
-
Total Fees
$ 310,436
$ 328,100
Audit Fees. Audit Fees consists of
fees for professional services rendered by our principal accountants for the contemporaneous audit of our annual financial statements
and the review of quarterly financial statements or services that are normally provided by our principal accountants in connection with
statutory and regulatory filings or engagements.
Audit Related Fees. Audit Related
Fees consists of fees for assurance and related services by our principal accountants that are reasonably related to the performance
of the audit or review of our financial statements and are not reported under “Audit Fees.”
Tax Fees and All Other Fees. Tax
Fees and All Other Fees Consists of fees for products and services provided by our principal accountants, other than the services reported
under “Audit Fees,” “Audit-Related Fees” and “Tax Fees” above.
79
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) List of Financial statements included
in Part II hereof
Report of Independent Registered Public Accounting Firm (PCAOB ID 1171)
F-2
Balance Sheets as of December 31, 2022
F-3
Statements of Operations for the years ended December 31, 2022 and 2021
F-4
Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2022 and 2021
F-6
Statements of Cash Flows for the years ended December 31, 2022 and 2021
F-5
Notes to the Financial Statements
F-7
(a)(2) List of Financial Statement schedules
included in Part IV hereof: None.
(a)(3) Exhibits
The following exhibits are included herewith:
Exhibit No.
Description
2.1
Share Exchange Agreement, dated February 8, 2016 (1)
3.1
Articles of Incorporation of the Company (2)
3.2
Bylaws of the Company, as amended+
3.3
Certificate of Amendment to Articles of Incorporation filed on March 21, 2016 (4)
3.4
Certificate of Amendment to Articles of Incorporation filed on December 21, 2016 (5)
3.5
Certificate of Amendment to Articles of Incorporation filed on March 30, 2020 (6)
3.6
Certificate of Amendment to Articles of Incorporation filed on February 17, 2021 (3)
4.1
Form of Warrant (7)
4.2
Description of Securities registered under Section 12 of the Exchange Act (27)
4.3
Form of Placement Agent Warrant for Lind Offering (30)
10.1
Collaboration Agreement dated December 29, 2015 (8)
10.2
Collaborative Agreement and Milestone Payment Agreement dated June 9, 2016 (9)
10.3
Addendum to the Collaboration Agreement dated January 12, 2017 (11)
10.4
Collaboration Agreement with BioFirst dated July 24, 2017 (12)
10.5
Co-Development Agreement with Rgene dated May 26, 2017 (13)
10.6
Employment Agreement with Leeds Chow+
10.7
Promissory Note entered by American BriVision (Holding) Corporation (17)
10.8
Form of Commercial Security Agreement (18)
10.9
Form of Exchange Agreement entered into by and between the Company and non-US person (19)
10.10
Form of Exchange Agreement entered into by and between the Company and non-US person (20)
10.11
Form of Securities Purchase Agreement entered into by and between the Company and U.S. investors (21)
10.12
Form of Securities Purchase Agreement entered into by and between the Company and non-U.S. investors (22)
10.13
Amended and Restated American BriVision (Holding) Corporation 2016 Equity Incentive (28)
10.14
Joint Venture Agreement between the Company, Lucidaim Co., Ltd. And BioLite Japan K.K.(26)
10.15
Form of Securities Purchase Agreement entered into by and between the Company and certain investors dated May 11, 2022 (25)
10.16
Clinical Development Service Agreement between the Company and Rgene dated June 10, 2022 (portions of the exhibit have been omitted because they (i) are not material and (ii) is the type of information that the registrant treats as private or confidential) (10)
80
10.17
Promissory Note dated June 16, 2022 issued by Rgene Corporation to the Company (29)
10.18
Securities Purchase Agreement(30)
10.19
Form of Note(30)
10.20
Form of Warrant(30)
10.21
Security Agreement(30)
10.22
Guarantor Security Agreement(30)
10.23
Guaranty(30)
10.24
Trademark Security Agreement with Rgene Corporation(30)
10.25
Trademark Security Agreement with BioFirst Corporation(30)
10.26
Patent Security Agreement(30)
10.27
Copyright Security Agreement(30)
10.28
Stock Pledge Agreement(30)
14.1
Code of Ethics (23)
16.1
Letter from KCCW Accountancy Corp. to the U.S. Securities and Exchange Commission (24)
21.1
List of subsidiaries+
31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 +
31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 +
32.1
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ++
32.2
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ++
101.INS
Inline XBRL Instance Document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
+
Filed herewith
++
Furnished herewith
(1)
Incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February 16, 2016.
(2)
Incorporated by reference
to Exhibit 3.01 to the Company’s Form SB-2 filed on June 28, 2002
(3)
Incorporated by reference to Exhibit 3.6 to the Company’s Quarterly
Report on Form 10-Q filed on May 10, 2021.
(4)
Incorporated by reference
to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on March 28, 2016.
(5)
Incorporated by reference
to Exhibit 3.4 to the Company’s Form S-1, filed on September 13, 2016.
(6)
Incorporated by reference
to Exhibit 3.1 to the Company’s Form 8-K, filed on April 7, 2020
(7)
Incorporated by reference
to Exhibit 4.1 the Company’s Current Report on Form 8-K, filed on April 24, 2020
(8)
Incorporated by reference
to Exhibit 10.2 the Company’s Current Report on Form 8-K, filed on February 16, 2016.
(9)
Incorporated by reference
to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on June 9, 2016.
(10)
Incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on June 21, 2022.
81
(11)
Incorporated by reference
to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on February 22, 2017.
(12)
Incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on July 24, 2017.
(13)
Incorporated by reference
to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on May 30, 2017.
(14)
Incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on September 20, 2017.
(15)
Incorporated by reference
to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on September 20, 2017.
(16)
Incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February 1, 2019.
(17)
Incorporated by reference
to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on February 1, 2019.
(18)
Incorporated by reference
to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on February 1, 2019.
(19)
Incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on April 24, 2020.
(20)
Incorporated by reference
to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed April 14, 2020.
(21)
Incorporated by reference
to Exhibit 10.15 to the Company’s Annual Report on Form 10-K, filed May 15, 2020.
(22)
Incorporated by reference
to Exhibit 10.16 to the Company’s Annual Report on Form 10-K, filed May 15, 2020
(23)
Incorporated by reference
to Exhibit 14.1 to the Company’s Amendment No.1 to Form S-1, filed on November 14, 2016.
(24)
Incorporated by reference
to Exhibit 16.1 to the Company’s Current Report on Form 8-K, filed on October 21, 2022.
(25)
Incorporated by reference
to Exhibit 1.1 to the Company’s Current Report on Form 8-K, filed May 12, 2022.
(26)
Incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on October 8, 2021.
(27)
Incorporated by reference
to Exhibit 4.2 to the Company’s Annual Report on Form 10-K, filed March 16, 2021.
(28)
Incorporated by reference
to Exhibit 10.17 to the Company’s Annual Report on Form 10-K, filed March 16, 2021.
(29)
Incorporated by reference
to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on June 21, 2022.
(30)
Incorporated by reference
to the Company’s Current Report on Form 8-K, filed on February 24, 2023.
Item 16. Form 10-K Summary
Not applicable.
82
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) 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 on March 31, 2023.
ABVC BioPharma, Inc.
By:
/s/
Howard Doong
Howard Doong
Chief Executive Officer
Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated:
Signature
Title
Date
/s/ Howard Doong
Chief Executive Officer
March 31, 2023
Howard Doong
/s/ Eugene Jiang
Chairman of the Board of Directors
March 31, 2023
Eugene Jiang
/s/ Leeds Chow
Chief Financial Officer
March 31, 2023
Leeds Chow
/s/ Yen-Hsin Chou
Director
March 31, 2023
Yen-Hsin Chou
/s/ Hsin-Hui Miao
Director
March 31, 2023
Hsin-Hui Miao
/s/ Tsang-Ming Jiang
Director
March 31, 2023
Tsang-Ming Jiang
/s/ Shuling Jiang
Director
March 31, 2023
Shuling Jiang
/s/ Norimi Sakamoto
Director
March 31, 2023
Norimi Sakamoto
/s/ Tsung-Shann Jiang
Director
March 31, 2023
Tsung-Shann Jiang
/s/ Chang-Jen Jiang
Director
March 31, 2023
Chang-Jen Jiang
/s/ Yoshinobu Odaira
Director
March 31, 2023
Yoshinobu Odaira
/s/ Che-Wei Hsu
Director
March 31, 2023
Che-Wei Hsu
/s/ Yu-Min (Francis) Chung
Director
March 31, 2023
Yu-Min (Francis) Chung
83