ABVC BIOPHARMA, INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS. ABVC BIOPHARMA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, 2024 December 31, 2023 (Unaudited) ASSETS Current Assets Cash and cash equivalents $ 124,296 $ 60,155 Restricted cash 618,473 656,625 Accounts receivable, net 1,530 1,530 Accounts receivable - related parties, net 10,463 10,463 Due from related parties - current 1,258,312 747,573 Short-term investments 75,683 79,312 Prepaid expense and other current assets 100,810 101,051 Total Current Assets 2,189,567 1,656,709 Property and equipment, net 7,929,121 7,969,278 Operating lease right-of-use assets 607,001 809,283 Long-term investments 2,377,549 2,527,740 Deferred tax assets, net - - Prepaid expenses - non-current 74,210 78,789 Security deposits 60,017 62,442 Prepayment for long-term investments 1,274,842 1,274,842 Due from related parties - non-current, net 121,392 113,516 Total Assets $ 14,633,699 $ 14,492,599 LIABILITIES AND EQUITY Current Liabilities Short-term bank loans $ 847,000 $ 899,250 Accrued expenses and other current liabilities 3,961,050 3,696,380 Contract liabilities 79,500 79,500 Taxes payables - 112,946 Operating lease liabilities - current portion 378,199 401,826 Due to related parties 326,298 173,132 Convertible notes payable - third parties, net 956,880 569,456 Total Current Liabilities 6,548,927 5,932,490 Tenant security deposit 27,680 21,680 Operating lease liability - non-current portion 228,802 407,457 Total Liabilities 6,805,409 6,361,627 COMMITMENTS AND CONTINGENCIES Equity Preferred stock, $ 0.001 par value, 20,000,000 authorized, nil shares issued and outstanding - - Common stock, $ 0.001 par value, 100,000,000 authorized, 12,051,823 and 7,940,298 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively (1) 12,052 7,940 Additional paid-in capital 87,082,558 82,636,966 Stock subscription receivable - ( 451,480 ) Stock to be issued 31,040 - Accumulated deficit ( 70,365,716 ) ( 65,420,095 ) Accumulated other comprehensive income 435,892 516,387 Treasury stock ( 8,902,371 ) ( 8,901,668 ) Total Stockholders’ equity 8,293,455 8,388,050 Noncontrolling interest ( 465,165 ) ( 257,078 ) Total Equity 7,828,290 8,130,972 Total Liabilities and Equity $ 14,633,699 $ 14,492,599 (1) Prior period results have been adjusted to reflect the 1-for-10 reverse stock split effected on July 25, 2023. The accompanying notes are an integral part of these unaudited consolidated financial statements. 1 ABVC BIOPHARMA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) Three months Ended June 30, Six months Ended June 30, 2024 2023 2024 2023 Revenues $ 117,142 $ 6,109 $ 118,347 $ 134,381 Cost of revenues 190 72,981 467 133,217 Gross (loss) profit 116,952 ( 66,872 ) 117,880 1,164 Operating expenses Selling, general and administrative expenses 640,451 1,386,788 1,471,708 2,659,540 Research and development expenses 40,401 514,442 109,467 849,421 Stock-based compensation 412,741 225,740 2,957,736 592,229 Total operating expenses 1,093,593 2,126,970 4,538,911 4,101,190 Loss from operations ( 976,641 ) ( 2,193,842 ) ( 4,421,031 ) ( 4,100,026 ) Other income (expense) Interest income 27,141 55,041 31,190 107,752 Interest expense ( 260,032 ) ( 114,752 ) ( 944,715 ) ( 171,415 ) Operating sublease income 478 34,800 478 56,900 (Loss) on foreign exchange changes ( 117,665 ) ( 18,305 ) ( 4,145 ) ( 30,566 ) (Loss) on equity method investment ( 79,057 ) - ( 79,057 ) - Other (expense) income 22,193 3,528 52,678 6,595 Total other income (expense) ( 406,942 ) ( 39,688 ) ( 943,571 ) ( 30,734 ) Loss before income tax ( 1,383,583 ) ( 2,233,530 ) ( 5,364,602 ) ( 4,130,760 ) Provision for (benefit from) income tax ( 110,894 ) 81,695 ( 110,894 ) 81,695 Net loss ( 1,272,689 ) ( 2,315,225 ) ( 5,253,708 ) ( 4,212,455 ) Net loss attributable to noncontrolling interests ( 260,044 ) ( 51,714 ) ( 308,087 ) ( 125,249 ) Net loss attributed to ABVC and subsidiaries ( 1,012,645 ) ( 2,263,511 ) ( 4,945,621 ) ( 4,087,206 ) Foreign currency translation adjustment 202,569 ( 12,032 ) ( 80,495 ) 17,077 Comprehensive loss $ ( 810,076 ) $ ( 2,275,543 ) $ ( 5,026,116 ) $ ( 4,070,129 ) Net loss per share: Basic and diluted ( 0.09 ) ( 0.68 ) $ ( 0.47 ) $ ( 1.24 ) Weighted average shares used in computing net loss per share of common stock (1) : Basic and diluted 11,321,277 3,308,740 10,529,651 3,307,826 (1) Prior period results have been adjusted to reflect the 1-for-10 reverse stock split effected on July 25, 2023. The accompanying notes are an integral part of these unaudited consolidated financial statements. 2 ABVC BIOPHARMA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six months Ended June 30, 2024 2023 Cash flows from operating activities Net loss $ ( 5,253,708 ) $ ( 4,212,455 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 14,591 13,490 Stock-based compensation 2,957,736 592,229 Provision for doubtful accounts - 38,500 Loss on equity method investment 79,057 - Other non-cash expenses 915,546 122,784 Deferred tax expense - 81,695 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable - 181,565 Decrease (increase) in prepaid expenses and security deposits 7,245 720 Decrease (increase) in due from related parties ( 518,615 ) ( 156,823 ) Decrease (increase) in tenant security deposit 6,000 ( 2,300 ) Increase (decrease) in accrued expenses and other current liabilities 264,670 531,778 Increase (decrease) in contract liabilities - 68,516 Increase (decrease) in taxes payables ( 112,946 ) - Increase (decrease) in due to related parties 153,166 342,841 Net cash used in operating activities ( 1,487,258 ) ( 2,397,460 ) Cash flows from investing activities Increase in prepayment for long-term investments - ( 440,575 ) Net cash provided by financing activities - ( 440,575 ) Cash flows from financing activities Proceeds from issuance of warrant 394,071 - Proceeds from exercise of warrant 737,500 - Repayment of short-term bank loans - ( 1,000,000 ) Proceeds from convertible notes payable - third parties 282,095 3,175,000 Proceeds from common stock subscription 131,040 - Net cash provided by financing activities 1,544,706 2,175,000 Effect of exchange rate changes on cash and cash equivalents and restricted cash ( 31,459 ) 13,496 Net increase (decrease) in cash and cash equivalents and restricted cash 25,989 ( 649,539 ) Cash and cash equivalents and restricted cash Beginning 716,780 1,391,728 Ending $ 742,769 $ 742,189 Supplemental disclosure of cash flows Cash paid during the year for: Interest expense paid $ 13,559 $ 21,532 Income tax paid $ 25,946 $ - Non-cash financing and investing activities Issuance of common stock for conversion of debt $ 811,174 $ - Supplemental disclosure of cash flows The accompanying notes are an integral part of these unaudited consolidated financial statements. 3 ABVC BIOPHARMA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023 (UNAUDITED) Common Stock Stock Additional Accumulated Other Treasury Stock Non Total Number of shares (1) Amounts (1) Subscription Receivable Paid-in Capital (1) Accumulated Deficit Comprehensive Income Number of Shares (1) Amount controlling Interest Equity (Deficit) Balance at December 31, 2022 3,285,733 $ 3,286 $ ( 1,354,440 ) $ 67,937,050 $ ( 54,904,439 ) $ 517,128 ( 27,535 ) $ ( 9,100,000 ) $ 137,554 $ 3,236,139 Issuance of common stock for consulting service 22,341 22 - 140,727 - - - - - 140,749 Stock-based compensation - - 451,480 - - - - - - 451,480 Net loss for the period - - - - ( 4,087,206 ) - - - ( 125,249 ) ( 4,212,455 ) Cumulative transaction adjustments - - - - - 17,077 - - - 17,077 Balance at June 30, 2023 3,308,074 $ 3,308 $ ( 902,960 ) $ 68,077,777 $ ( 58,991,645 ) $ 534,205 ( 27,535 ) $ ( 9,100,000 ) $ 12,305 $ ( 367,010 ) Common Stock Stock Additional Non Stockholders’ Number of shares Amounts Stock to be issued Subscription Receivable Paid-in Capital Accumulated Deficit Comprehensive Income Treasury Stock controlling Interest Equity (Deficit) Balance at December 31, 2023 7,940,298 $ 7,940 $ - $ ( 451,480 ) $ 82,636,966 $ ( 65,420,095 ) $ 516,387 $ ( 8,901,668 ) $ ( 257,078 ) $ 8,130,972 Issuance of common shares upon exercise of convertible notes 905,303 905 - - 810,269 - - - - 811,174 Issuance of subsidiaries’ common shares for consulting service - - - - 383,500 - - - - 383,500 Issuance of pre-funded warrant - - - - 394,071 - - - - 394,071 Repurchase of common stock 703,496 703 - - - - - ( 703 ) - - Stock based compensation 1,502,726 1,504 - 451,480 2,121,252 - - - - 2,574,236 Exercise of common stock warrants 1,000,000 1,000 - - 736,500 - - - - 737,500 Stock to be issued - - 31,040 - - - - - 100,000 131,040 Net loss for the period - - - - - ( 4,945,621 ) - - ( 308,087 ) ( 5,253,708 ) Cumulative transaction adjustments - - - - - - ( 80,495 ) - - ( 80,495 ) Balance at June 30, 2024 12,051,823 $ 12,052 $ 31,040 $ - $ 87,082,558 $ ( 70,365,716 ) $ 435,892 $ ( 8,902,371 ) $ ( 465,165 ) $ 7,828,290 (1) Prior period results have been adjusted to reflect the 1-for-10 reverse stock split effected on July 25, 2023. The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 ABVC BIOPHARMA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION AND DESCRIPTION OF BUSINESS ABVC BioPharma, Inc. (the “Company”), formerly known as American BriVision (Holding) Corporation, a Nevada corporation, through the Company’s operating entity, American BriVision Corporation (“BriVision”), which was incorporated in July 2015 in the State of Delaware, engages in biotechnology to fulfill unmet medical needs and focuses on the development of new drugs and medical devices derived from plants. BriVision develops its pipeline by carefully tracking new medical discoveries or medical device technologies in research institutions in the Asia-Pacific region. Pre-clinical, disease animal model and Phase I safety studies are examined closely by the Company to identify drugs that BriVision believes demonstrate efficacy and safety. Once a drug appears to be a good candidate for development and ultimately commercialization, BriVision licenses the drug or medical device from the original researchers and begins to introduce the drugs clinical plan to highly respected principal investigators in the United States, Australia and Taiwan to conduct a Phase II clinical trial. At present, clinical trials for the Company’s drugs and medical devices are being conducted at such world-famous institutions as including Stanford University, University of California San Fransisco (UCSF) and Cedar Sinai Medical Centre (CSMC). BriVision had no predecessor operations prior to its formation on July 21, 2015. The Company has three wholly-owned subsidiaries, BriVision, BioLite Holding Inc. (“BioLite Holding”), and BioKey Inc. (“BioKey”), and a partially-owned subsidiary, AiBtl BioPharma Inc. (“AIBL”). BioLite Holding was incorporated in the State of Nevada with wholly owned subsidiary BioLite BVI, Inc. (“BioLite BVI”) that was incorporated in the British Virgin Islands. BioLite BVI holds 73 % ownership of BioLite Inc. (“BioLite Taiwan”), a Taiwanese corporation that was founded in February 2006. BioLite Taiwan has been in the business of developing new drugs for over twelve years . Incorporated in California on November 20, 2000, BioKey has chosen to initially focus on developing generic drugs to ride the opportunity of the booming industry. On November 12, 2023, the Company and BioLite Taiwan each entered into a multi-year, global licensing agreement with AIBL for the Company and BioLite Taiwan’s CNS drugs with the indications of MDD (Major Depressive Disorder) and ADHD (Attention Deficit Hyperactivity Disorder) (collectively, the “Licensed Products”). The potential license will cover the Licensed Products’ clinical trial, registration, manufacturing, supply, and distribution rights. The parties are determined to collaborate on the global development of the Licensed Products. The parties are also working to strengthen new drug development and business collaboration, including technology, interoperability, and standards development. As per each of the respective agreements, each of ABVC and BioLite Taiwan received 23 million shares of AIBL stock and as a result, the Company has a controlling interest over AIBL. If certain milestones are met, the Company and BioLite Taiwan are each eligible to receive $3,500,000 and royalties equaling 5% of net sales, up to $100 million. 2. LIQUIDITY AND GOING CONCERN The accompanying unaudited interim consolidated financial statements have been prepared in conformity with U.S. GAAP which contemplates continuation of the Company on a going concern basis. The going concern basis assumes that assets are realized, and liabilities are settled in the ordinary course of business at amounts disclosed in the unaudited interim consolidated financial statements. The Company’s ability to continue as a going concern depends upon its ability to market and sell its products to generate positive operating cash flows. For the six months ended June 30, 2024, the Company reported net loss of $ 5,253,708 . As of June 30, 2024, the Company’s working capital deficit was $ 4,359,360 . In addition, the Company had net cash outflows of $ 1,487,258 from operating activities for the six months ended June 30, 2024. These conditions give rise to substantial doubt as to whether the Company will be able to continue as a going concern. Management’s plan is to continue to improve operations to generate positive cash flows and raise additional capital through private of public offerings. If the Company is not able to generate positive operating cash flows, and raise additional capital, there is the risk that the Company may not be able to meet its short-term obligations. Management is committed to enhancing operations to generate positive cash flows and plans to secure additional capital through private or public offerings. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The unaudited interim consolidated financial statements do not include all the information and footnotes required by the U.S. GAAP for complete financial statements. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with the U.S. GAAP have been condensed or omitted consistent with Article 8 of Regulation S-X. In the opinion of the Company’s management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, in normal recurring nature, as necessary for the fair statement of the Company’s financial position as of June 30, 2024, and results of operations and cash flows for the six months ended June 30, 2024 and 2023. The unaudited interim consolidated balance sheet as of June 30, 2024 has been derived from the audited financial statements at December 31, 2023 but does not include all the information and footnotes required by the U.S. GAAP. Interim results of operations are not necessarily indicative of the results expected for the full fiscal year or for any future period. These financial statements should be read in conjunction with the audited consolidated financial statements as of and for the years ended December 31, 2023 and 2022, and related notes included in the Company’s audited consolidated financial statements. 5 The accompanying unaudited consolidated interim financial statements have been prepared in accordance with the generally accepted accounting principles in the United States of America (the “U.S. GAAP”). All significant intercompany transactions and account balances have been eliminated. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred. The Company’s unaudited financial statements are expressed in U.S. dollars. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the amount of revenues and expenses during the reporting periods. Actual results could differ materially from those results. On July 25, 2023, the Company filed a Certificate of Amendment to its Articles of Incorporation authorizing a 1-for-10 reverse stock split of the issued and outstanding shares of its common stock. The Company’s stockholders previously approved the Reverse Stock Split at the Company’s Special Shareholder Meeting held on July 7, 2023. The Reverse Stock Split was effected to reduce the number of issued and outstanding shares and to increase the per share trading value of the Company’s common stock, although that outcome is not guaranteed. In turn, the Company believes that the Reverse Stock Split will enable the Company to restore compliance with certain continued listing standards of NASDAQ Capital Market. All shares and related financial information in this Form 10-Q reflect this 1-for-10 reverse stock split. Fair Value Measurements FASB ASC 820, “Fair Value Measurements” defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. It requires that an entity measure its financial instruments to base fair value on exit price, maximize the use of observable units and minimize the use of unobservable inputs to determine the exit price. It establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows: ● Level 1 Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available. ● Level 2 Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. 6 ● Level 3 Valuations based on inputs that are unobservable and not corroborated by market data. The fair value for such assets and liabilities is generally determined using pricing models, discounted cash flow methodologies, or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability. The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents, restricted cash, accounts receivable, due from related parties, prepaid expenses and other current assets, accounts payable, accrued liabilities, and due to related parties approximate fair value due to their relatively short maturities. The carrying value of the Company’s short-term bank loan, convertible notes payable, and accrued interest approximates their fair value as the terms of the borrowing are consistent with current market rates and the duration to maturity is short. The carrying value of the Company’s long-term bank loan approximates fair value because the interest rates approximate market rates that the Company could obtain for debt with similar terms and maturities. Cash and Cash Equivalents The Company considers highly liquid investments with maturities of three months or less, when purchased, to be cash equivalents. As of June 30, 2024 and December 31, 2023, the Company’s cash and cash equivalents amounted $ 124,296 and $ 60,155 , respectively. Some of the Company’s cash deposits are held in financial institutions located in Taiwan where there is currently regulation mandated on obligatory insurance of bank accounts. The Company believes this financial institution is of high credit quality. Restricted Cash Restricted cash primarily consist of certificate of deposits as a collateral of short-term loan held in CTBC Bank. As of June 30, 2024 and December 31, 2023, the Company’s restricted cash amounted $ 618,473 and $ 656,625 , respectively. Concentration of Credit Risk The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments in high quality credit institutions, but these investments may be in excess of Taiwan Central Deposit Insurance Corporation and the U.S. Federal Deposit Insurance Corporation’s insurance limits. The Company does not enter into financial instruments for hedging, trading or speculative purposes. The Company performs ongoing credit evaluation of our customers and requires no collateral. An allowance for doubtful accounts is provided based on a review of the collectability of accounts receivable. The Company determines the amount of allowance for doubtful accounts by examining its historical collection experience and current trends in the credit quality of its customers as well as its internal credit policies. Actual credit losses may differ from our estimates. Concentration of clients As of June 30, 2024, the most major client, specializes in developing and commercializing of dietary supplements and therapeutics in dietary supplement industry, accounted for 87.2 % of the Company’s total account receivable. As of December 31, 2023, the most major client, specializes in developing and commercializing of dietary supplements and therapeutics in dietary supplement industry, accounted for 87.2 % of the Company’s total account receivable. For the six months ended June 30, 2024, one major client, manufactures a wide range of pharmaceutical products, accounted for 98.0 % of the Company’s total revenues. For the six months ended June 30, 2023, two major clients, manufacturing drugs, dietary supplements, and medical products, accounted for 43.6 % and 34.8 % of the Company’s total revenues. 7 Accounts receivable and allowance for expected credit losses accounts Accounts receivable is recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. The Company make estimates of expected credit and collectability trends for the allowance for credit losses and allowance for unbilled receivables based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of customers, current economic conditions reasonable and supportable forecasts of future economic conditions, and other factors that may affect our ability to collect from customers. The provision is recorded against accounts receivable balances, with a corresponding charge recorded in the consolidated statements of income. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. Allowance for expected credit losses accounts was $ 616,427 and $ 616,505 as of June 30, 2024 and December 31, 2023, respectively. Revenue Recognition During the fiscal year 2018, the Company adopted Accounting Standards Codification (“ASC”), Topic 606 (ASC 606), Revenue from Contracts with Customers, using the modified retrospective method to all contracts that were not completed as of January 1, 2018, and applying the new revenue standard as an adjustment to the opening balance of accumulated deficit at the beginning of 2018 for the cumulative effect. The results for the Company’s reporting periods beginning on and after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. Based on the Company’s review of existing collaborative agreements as of January 1, 2018, the Company concluded that the adoption of the new guidance did not have a significant change on the Company’s revenue during all periods presented. Pursuant to ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines is within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration the Company is entitled to in exchange for the goods or services the Company transfers to the customers. At inception of the contract, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. The following are examples of when the Company recognizes revenue based on the types of payments the Company receives. Collaborative Revenues - The Company recognizes collaborative revenues generated through collaborative research, development and/or commercialization agreements. The terms of these agreements typically include payment to the Company related to one or more of the following: non-refundable upfront license fees, development and commercial milestones, partial or complete reimbursement of research and development costs, and royalties on net sales of licensed products. Each type of payments results in collaborative revenues except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues. To date, the Company has not received any royalty revenues. Revenue is recognized upon satisfaction of a performance obligation by transferring control of a good or service to the collaboration partners. As part of the accounting for these arrangements, the Company applies judgment to determine whether the performance obligations are distinct, and develop assumptions in determining the stand-alone selling price for each distinct performance obligation identified in the collaboration agreements. To determine the stand-alone selling price, the Company relies on assumptions which may include forecasted revenues, development timelines, reimbursement rates for R&D personnel costs, discount rates and probabilities of technical and regulatory success. 8 The Company had multiple deliverables under the collaborative agreements, including deliverables relating to grants of technology licenses, regulatory and clinical development, and marketing activities. Estimation of the performance periods of the Company’s deliverables requires the use of management’s judgment. Significant factors considered in management’s evaluation of the estimated performance periods include, but are not limited to, the Company’s experience in conducting clinical development, regulatory and manufacturing activities. The Company reviews the estimated duration of its performance periods under its collaborative agreements on an annually basis, and makes any appropriate adjustments on a prospective basis. Future changes in estimates of the performance period under its collaborative agreements could impact the timing of future revenue recognition. (i) Non-refundable upfront payments If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in an arrangement, the Company recognizes revenue from the related non-refundable upfront payments based on the relative standalone selling price prescribed to the license compared to the total selling price of the arrangement. The revenue is recognized when the license is transferred to the collaboration partners and the collaboration partners are able to use and benefit from the license. To date, the receipt of non-refundable upfront fees was solely for the compensation of past research efforts and contributions made by the Company before the collaborative agreements entered into and it does not relate to any future obligations and commitments made between the Company and the collaboration partners in the collaborative agreements. (ii) Milestone payments The Company is eligible to receive milestone payments under the collaborative agreement with collaboration partners based on achievement of specified development, regulatory and commercial events. Management evaluated the nature of the events triggering these contingent payments, and concluded that these events fall into two categories: (a) events which involve the performance of the Company’s obligations under the collaborative agreement with collaboration partners, and (b) events which do not involve the performance of the Company’s obligations under the collaborative agreement with collaboration partners. The former category of milestone payments consists of those triggered by development and regulatory activities in the territories specified in the collaborative agreements. Management concluded that each of these payments constitute substantive milestone payments. This conclusion was based primarily on the facts that (i) each triggering event represents a specific outcome that can be achieved only through successful performance by the Company of one or more of its deliverables, (ii) achievement of each triggering event was subject to inherent risk and uncertainty and would result in additional payments becoming due to the Company, (iii) each of the milestone payments is non-refundable, (iv) substantial effort is required to complete each milestone, (v) the amount of each milestone payment is reasonable in relation to the value created in achieving the milestone, (vi) a substantial amount of time is expected to pass between the upfront payment and the potential milestone payments, and (vii) the milestone payments relate solely to past performance. Based on the foregoing, the Company recognizes any revenue from these milestone payments in the period in which the underlying triggering event occurs. (iii) Multiple Element Arrangements The Company evaluates multiple element arrangements to determine (1) the deliverables included in the arrangement and (2) whether the individual deliverables represent separate units of accounting or whether they must be accounted for as a combined unit of accounting. This evaluation involves subjective determinations and requires management to make judgments about the individual deliverables and whether such deliverables are separate from other aspects of the contractual relationship. Deliverables are considered separate units of accounting provided that: (i) the delivered item(s) has value to the customer on a standalone basis and (ii) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially within its control. In assessing whether an item under a collaboration has standalone value, the Company considers factors such as the research, manufacturing, and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. The Company also considers whether its collaboration partners can use the other deliverable(s) for their intended purpose without the receipt of the remaining element(s), whether the value of the deliverable is dependent on the undelivered item(s), and whether there are other vendors that can provide the undelivered element(s). 9 The Company recognizes arrangement consideration allocated to each unit of accounting when all of the revenue recognition criteria in ASC 606 are satisfied for that particular unit of accounting. In the event that a deliverable does not represent a separate unit of accounting, the Company recognizes revenue from the combined unit of accounting over the Company’s contractual or estimated performance period for the undelivered elements, which is typically the term of the Company’s research and development obligations. If there is no discernible pattern of performance or objectively measurable performance measures do not exist, then the Company recognizes revenue under the arrangement on a straight-line basis over the period the Company is expected to complete its performance obligations. Conversely, if the pattern of performance in which the service is provided to the customer can be determined and objectively measurable performance measures exist, then the Company recognizes revenue under the arrangement using the proportional performance method. Revenue recognized is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the straight-line method or proportional performance method, as applicable, as of the period ending date. At the inception of an arrangement that includes milestone payments, the Company evaluates whether each milestone is substantive and at risk to both parties on the basis of the contingent nature of the milestone. This evaluation includes an assessment of whether: (1) the consideration is commensurate with either the Company’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from its performance to achieve the milestone, (2) the consideration relates solely to past performance and (3) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone and the level of effort and investment required to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether a milestone satisfies all of the criteria required to conclude that a milestone is substantive. Milestones that are not considered substantive are recognized as earned if there are no remaining performance obligations or over the remaining period of performance, assuming all other revenue recognition criteria are met. (iv) Royalties and Profit Sharing Payments Under the collaborative agreement with the collaboration partners, the Company is entitled to receive royalties on sales of products, which is at certain percentage of the net sales. The Company recognizes revenue from these events based on the revenue recognition criteria set forth in ASC 606. Based on those criteria, the Company considers these payments to be contingent revenues, and recognizes them as revenue in the period in which the applicable contingency is resolved. Revenues Derived from Research and Development Activities Services - Revenues related to research and development and regulatory activities are recognized when the related services or activities are performed, in accordance with the contract terms. The Company typically has only one performance obligation at the inception of a contract, which is to perform research and development services. The Company may also provide its customers with an option to request that the Company provides additional goods or services in the future, such as active pharmaceutical ingredient, API, or IND/NDA/ANDA/510K submissions. The Company evaluates whether these options are material rights at the inception of the contract. If the Company determines an option is a material right, the Company will consider the option a separate performance obligation. If the Company is entitled to reimbursement from its customers for specified research and development expenses, the Company accounts for the related services that it provides as separate performance obligations if it determines that these services represent a material right. The Company also determines whether the reimbursement of research and development expenses should be accounted for as revenues or an offset to research and development expenses in accordance with provisions of gross or net revenue presentation. The Company recognizes the corresponding revenues or records the corresponding offset to research and development expenses as it satisfies the related performance obligations. 10 The Company then determines the transaction price by reviewing the amount of consideration the Company is eligible to earn under the contracts, including any variable consideration. Under the outstanding contracts, consideration typically includes fixed consideration and variable consideration in the form of potential milestone payments. At the start of an agreement, the Company’s transaction price usually consists of the payments made to or by the Company based on the number of full-time equivalent researchers assigned to the project and the related research and development expenses incurred. The Company does not typically include any payments that the Company may receive in the future in its initial transaction price because the payments are not probable. The Company would reassess the total transaction price at each reporting period to determine if the Company should include additional payments in the transaction price. The Company receives payments from its customers based on billing schedules established in each contract. Upfront payments and fees may be recorded as contract liabilities upon receipt or when due, and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the right of the Company to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customers and the transfer of the promised goods or services to the customers will be one year or less. Property and Equipment Property and equipment is carried at cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Expenditures that improve the functionality of the related asset or extend the useful life are capitalized. When property and equipment is retired or otherwise disposed of, the related gain or loss is included in operating income. Leasehold improvements are depreciated on the straight-line method over the shorter of the remaining lease term or estimated useful life of the asset. Depreciation is calculated on the straight-line method, including property and equipment under capital leases, generally based on the following useful lives: Estimated Life in Years Buildings and leasehold improvements 5 ~ 50 Machinery and equipment 5 ~ 10 Office equipment 3 ~ 6 Construction-in-Progress The Company acquires constructions that constructs certain of its fixed assets. All direct and indirect costs that are related to the construction of fixed assets and incurred before the assets are ready for their intended use are capitalized as construction-in-progress. No depreciation is provided in respect of construction-in-progress. Construction in progress is transferred to specific fixed asset items and depreciation of these assets commences when they are ready for their intended use. Impairment of Long-Lived Assets The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell. 11 Long-term Equity Investment The Company acquires the equity investments to promote business and strategic objectives. The Company accounts for non-marketable equity and other equity investments for which the Company does not have control over the investees as: ● Equity method investments when the Company has the ability to exercise significant influence, but not control, over the investee. Its proportionate share of the income or loss is recognized monthly and is recorded in gains (losses) on equity investments. ● Non-marketable cost method investments when the equity method does not apply. Significant judgment is required to identify whether an impairment exists in the valuation of the Company’s non-marketable equity investments, and therefore the Company considers this a critical accounting estimate. Its yearly analysis considers both qualitative and quantitative factors that may have a significant impact on the investee’s fair value. Qualitative analysis of its investments involves understanding the financial performance and near-term prospects of the investee, changes in general market conditions in the investee’s industry or geographic area, and the management and governance structure of the investee. Quantitative assessments of the fair value of its investments are developed using the market and income approaches. The market approach includes the use of comparable financial metrics of private and public companies and recent financing rounds. The income approach includes the use of a discounted cash flow model, which requires significant estimates regarding the investees’ revenue, costs, and discount rates. The Company’s assessment of these factors in determining whether an impairment exists could change in the future due to new developments or changes in applied assumptions. Other-Than-Temporary Impairment The Company’s long-term equity investments are subject to a periodic impairment review. Impairments affect earnings as follows: ● Marketable equity securities include the consideration of general market conditions, the duration and extent to which the fair value is below cost, and our ability and intent to hold the investment for a sufficient period of time to allow for recovery of value in the foreseeable future. The Company also considers specific adverse conditions related to the financial health of, and the business outlook for, the investee, which may include industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in the investee’s credit rating. The Company records other-than-temporary impairments on marketable equity securities and marketable equity method investments in gains (losses) on equity investments. ● Non-marketable equity investments based on the Company’s assessment of the severity and duration of the impairment, and qualitative and quantitative analysis of the operating performance of the investee; adverse changes in market conditions and the regulatory or economic environment; changes in operating structure or management of the investee; additional funding requirements; and the investee’s ability to remain in business. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred that is other than temporary and that shall be recognized even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method. A loss in value of an investment that is other than a temporary decline shall be recognized. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. The Company records other-than-temporary impairments for non-marketable cost method investments and equity method investments in gains (losses) on equity investments. Other-than-temporary impairment of equity investments were $ 0 and $ 0 for the six months ended June 30, 2024 and 2023, respectively. Goodwill The Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. In testing goodwill for impairment, the Company may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that goodwill impairment is more likely than not, the Company performs a two-step impairment test. The Company tests goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting units. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. The Company estimates the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions. 12 The Company completed the required testing of goodwill for impairment as of June 30, 2024 and December 31, 2023, and determined that goodwill was impaired because of the current financial condition of the Company and the Company’s inability to generate future operating income without substantial sales volume increases, which are highly uncertain. Furthermore, the Company anticipates future cash flows indicate that the recoverability of goodwill is not reasonably assured. Convertible Notes The Company accounts for the convertible notes issued at a discount, by comparing the principal amount and book value, with the calculation of discounted method. The amortization period of the convertible note discount is the term of the notes. Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. The Company determined that upon further review of the warrant agreement, the Public Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. Research and Development Expenses The Company accounts for the cost of using licensing rights in research and development cost according to ASC Topic 730-10-25-1. This guidance provides that absent alternative future uses the acquisition of product rights to be used in research and development activities must be charged to research and development expenses when incurred. For CDMO business unit, the Company accounts for R&D costs in accordance with Accounting Standards Codification (“ASC”) 730, Research and Development (“ASC 730”). Research and development expenses are charged to expense as incurred unless there is an alternative future use in other research and development projects or otherwise. Research and development expenses are comprised of costs incurred in performing research and development activities, including personnel-related costs, facilities-related overhead, and outside contracted services including clinical trial costs, manufacturing and process development costs for both clinical and preclinical materials, research costs, and other consulting services. Non-refundable advance payment for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. In instances where the Company enters into agreements with third parties to provide research and development services, costs are expensed as services are performed. 13 Post-retirement and post-employment benefits The Company’s subsidiaries in Taiwan adopted the government mandated defined contribution plan pursuant to the Labor Pension Act (the “Act”) in Taiwan. Such labor regulations require that the rate of contribution made by an employer to the Labor Pension Fund per month shall not be less than 6 % of the worker’s monthly salaries. Pursuant to the Act, the Company makes monthly contribution equal to 6 % of employees’ salaries to the employees’ pension fund. The Company has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $ 3,759 and $ 2,455 for the three months ended June 30, 2024 and 2023, respectively, and $ 6,138 and $ 5,259 for the six months ended June 30, 2024 and 2023, respectively. Other than the above, the Company does not provide any other post-retirement or post-employment benefits. Stock-based Compensation The Company measures expense associated with all employee stock-based compensation awards using a fair value method and recognizes such expense in the unaudited consolidated financial statements on a straight-line basis over the requisite service period in accordance with FASB ASC Topic 718 “Compensation-Stock Compensation”. Total employee stock-based compensation expenses were $ 187,001 and $ 0 for the three months and were $ 2,122,756 and $ 0 for the six months ended June 30, 2024 and 2023, respectively. The Company accounted for stock-based compensation to non-employees in accordance with FASB ASC Topic 718 “Compensation-Stock Compensation” and FASB ASC Topic 505-50 “Equity-Based Payments to Non-Employees” which requires that the cost of services received from non-employees is measured at fair value at the earlier of the performance commitment date or the date service is completed and recognized over the period the service is provided. Total non-employee stock-based compensation expenses were $ 225,740 and $ 225,740 for the three months ended June 30, 2024 and 2023, respectively, and were $ 834,980 and $ 592,229 for the six months ended June 30, 2024 and 2023, respectively. Income Taxes The Company accounts for income taxes using the asset and liability approach which allows the recognition and measurement of deferred tax assets to be based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will expire before the Company is able to realize their benefits, or future deductibility is uncertain. Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigations based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefits recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer satisfied. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the year incurred. No significant penalty or interest relating to income taxes has been incurred for the three and six months ended June 30, 2024 and 2023. GAAP also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transition. 14 On December 22, 2017, the SEC issued Staff Accounting Bulletin (“SAB 118”), which provides guidance on accounting for tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate to be included in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provision of the tax laws that were in effect immediately before the enactment of the Tax Act. While the Company is able to make reasonable estimates of the impact of the reduction in corporate rate and the deemed repatriation transition tax, the final impact of the Tax Act may differ from these estimates, due to, among other things, changes in our interpretations and assumptions, additional guidance that may be issued by the I.R.S., and actions the Company may take. The Company is continuing to gather additional information to determine the final impact. Valuation of Deferred Tax Assets A valuation allowance is recorded to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized. In assessing the need for the valuation allowance, management considers, among other things, projections of future taxable income and ongoing prudent and feasible tax planning strategies. If the Company determines that sufficient negative evidence exists, then it will consider recording a valuation allowance against a portion or all of the deferred tax assets in that jurisdiction. If, after recording a valuation allowance, the Company’s projections of future taxable income and other positive evidence considered in evaluating the need for a valuation allowance prove, with the benefit of hindsight, to be inaccurate, it could prove to be more difficult to support the realization of its deferred tax assets. As a result, an additional valuation allowance could be required, which would have an adverse impact on its effective income tax rate and results. Conversely, if, after recording a valuation allowance, the Company determines that sufficient positive evidence exists in the jurisdiction in which the valuation allowance was recorded, it may reverse a portion or all of the valuation allowance in that jurisdiction. In such situations, the adjustment made to the deferred tax asset would have a favorable impact on its effective income tax rate and results in the period such determination was made. Loss Per Share of Common Stock The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share”. Basic loss per share is computed by dividing the net loss by the weighted average number of common stock outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common stock that would have been outstanding if the potential common stock equivalents had been issued and if the additional common stock were dilutive. Diluted earnings per share excludes all dilutive potential shares if their effect is anti-dilutive. Commitments and Contingencies The Company has adopted ASC Topic 450 “Contingencies” subtopic 20, in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available before financial statements are issued or are available to be issued indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred. Foreign-currency Transactions For the Company’s subsidiaries in Taiwan, the foreign-currency transactions are recorded in New Taiwan dollars (“NTD”) at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under the Statements of Stockholders’ Equity (Deficit). 15 Translation Adjustment The accounts of the Company’s subsidiaries in Taiwan were maintained, and their financial statements were expressed, in New Taiwan Dollar (“NT$”). Such financial statements were translated into U.S. Dollars (“$” or “USD”) in accordance ASC 830, “Foreign Currency Matters”, with the NT$ as the functional currency. According to the Statement, all assets and liabilities are translated at the current exchange rate, stockholder’s deficit are translated at the historical rates and income statement items are translated at an average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income (loss) as a component of stockholders’ equity (deficit). Recent Accounting Pronouncements In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60) which requires certain joint ventures to apply a new basis of accounting upon formation by recognizing and initially measuring most of their assets and liabilities at fair value. The guidance does not apply to joint ventures that may be proportionately consolidated and those that are collaborative arrangements. ASU 2023-05 is effective for joint venture with a formation date on or after January 1, 2025, early adoption is permitted. The Company is currently evaluating the impact that the standard will have on its unaudited consolidated financial statements. 4. COLLABORATIVE AGREEMENTS Collaborative agreements with BHK, a related part y (i) On February 24, 2015, BioLite Taiwan and BioHopeKing Corporation (the “BHK”) entered into a co-development agreement, (the “BHK Co-Development Agreement”), pursuant to which it is collaborative with BHK to develop and commercialize BLI-1401-2 (Botanical Drug) Triple Negative Breast Cancer (TNBC) Combination Therapy (BLI-1401-2 Products) in Asian countries excluding Japan for all related intellectual property rights, and has developed it for medicinal use in collaboration with outside researchers. The development costs shall be shared 50/50 between BHK and the Company. The BHK Co-Development Agreement will remain in effect for fifteen years from the date of first commercial sale of the Product in in Asia excluding Japan. On July 27, 2016, BioLite Taiwan and BHK agreed to amend the payment terms of the milestone payment in an aggregate amount of $10 million based on the following schedule: ● Upon the signing of the BHK Co-Development Agreement: $1 million, or 10% of total payment ● Upon the first Investigational New Drug (IND) submission and BioLite Taiwan will deliver all data to BHK according to FDA Reviewing requirement: $1 million, or 10% of total payment ● At the completion of first phase II clinical trial: $1 million, or 10% of total payment ● At the initiation of phase III of clinical trial research: $3 million, or 30% of total payment ● Upon the New Drug Application (NDA) submission: $4 million, or 40% of total payment In December 2015, BHK has paid a non-refundable upfront cash payment of $ 1 million, or 10 % of $ 10,000,000 , upon the signing of BHK Co-Development Agreement. The Company concluded that the deliverables are considered separate units of accounting as the delivered items have value to the customer on a standalone basis and recognized this cash receipt as collaboration revenue when all research, technical, and development data was delivered to BHK in 2015. The receipt is for the compensation of past research efforts and contributions made by BioLite Taiwan before this collaborative agreement was signed and it does not relate to any future commitments made by BioLite Taiwan and BHK in this collaborative agreement. In August 2016, the Company has received the second milestone payment of NT$ 31,649,000 , approximately equivalent to $ 1 million, and recognized collaboration revenue for the year ended December 31, 2016. As of the date of this report, the Company has not completed the first phase II clinical trial. 16 In addition to the milestone payments, BioLite Taiwan is entitled to receive royalty on 12 % of BHK’s net sales related to BLI-1401-2 Products. As of June 30, 2024, the Company has not earned the royalty under the BHK Co-Development Agreement. (ii) On December 9, 2015, BioLite Taiwan entered into another two collaborative agreements (the “BHK Collaborative Agreements”), pursuant to which it is collaborative with BHK to co-develop and commercialize BLI-1005 for “Targeting Major Depressive Disorder” (BLI-1005 Products) and BLI-1006 for “Targeting Inflammatory Bowel Disease” (BLI-1006 Products) in Asia excluding Japan for all related intellectual property rights, and has developed it for medicinal use in collaboration with outside researchers. The development costs shall be shared 50/50 between BHK and the Company. The BHK Co-Development Agreement will remain in effect for fifteen years from the date of first commercial sale of the Product in in Asia excluding Japan. In 2015, the Company recognized the cash receipt in a total of NT$ 50 million, approximately equivalent to $ 1.64 million, as collaboration revenue when all research, technical, and development data was delivered to BHK. The Company concluded that the deliverables are considered separate units of accounting as the delivered items have value to the customer on a standalone basis and recognized this payment as collaboration revenue when all research, technical, data and development data was delivered to BHK. The cash receipt is for the compensation of past research efforts and contributions made by BioLite Taiwan before this BHK Collaborative Agreements was signed and it does not relate to any future commitments made by BioLite Taiwan and BHK in this BHK Collaborative Agreements. In addition to the total of NT$ 50 million, approximately equivalent to $ 1.64 million, BioLite Taiwan is entitled to receive 50% of the future net licensing income or net sales profit. As of June 30, 2024, the Company has not earned the royalty under the BHK Collaborative Agreements. Co-Development agreement with Rgene Corporation, a related party On May 26, 2017, BriVision entered into a co-development agreement (the “Co-Dev Agreement”) with Rgene Corporation (the “Rgene”), a related party under common control by controlling beneficiary shareholder of YuanGene Corporation and the Company (See Note 8). Pursuant to Co-Dev Agreement, BriVision and Rgene agreed to co-develop and commercialize ABV-1507 HER2/neu Positive Breast Cancer Combination Therapy, ABV-1511 Pancreatic Cancer Combination Therapy and ABV-1527 Ovary Cancer Combination Therapy. Under the terms of the Co-Dev Agreement, Rgene is required to pay the Company $ 3,000,000 in cash or stock of Rgene with equivalent value by August 15, 2017. The payment is for the compensation of BriVision’s past research efforts and contributions made by BriVision before the Co-Dev Agreement was signed and it does not relate to any future commitments made by BriVision and Rgene in this Co-Dev Agreement. In addition to $ 3,000,000 , the Company is entitled to receive 50 % of the future net licensing income or net sales profit earned by Rgene, if any, and any development costs shall be equally shared by both BriVision and Rgene. On June 1, 2017, the Company has delivered all research, technical, data and development data to Rgene. Since both Rgene and the Company are related parties and under common control by a controlling beneficiary shareholder of YuanGene Corporation and the Company, the Company has recorded the full amount of $ 3,000,000 in connection with the Co-Dev Agreement as additional paid-in capital during the year ended December 31, 2017. During the year ended December 31, 2017, the Company has received $ 450,000 in cash. On December 24, 2018, the Company received the remaining balance of $ 2,550,000 in the form of newly issued shares of Rgene’s Common Stock, at the price of NT$ 50 (approximately equivalent to $ 1.64 per share), for an aggregate number of 1,530,000 shares, which accounted for equity method long-term investment as of December 31, 2018. During the year ended December 31, 2018, the Company has recognized investment loss of $ 549 . On December 31, 2018, the Company determined to fully write off this investment based on the Company’s assessment of the severity and duration of the impairment, and qualitative and quantitative analysis of the operating performance of the investee, adverse changes in market conditions and the regulatory or economic environment, changes in operating structure of Rgene, additional funding requirements, and Rgene’s ability to remain in business. All projects that have been initiated will be managed and supported by the Company and Rgene. 17 The Company and Rgene signed an amendment to the Co-Dev Agreement on November 10, 2020, pursuant to which both parties agreed to delete AB-1507 HER2/neu Positive Breast Cancer Combination Therapy and AB 1527 Ovary Cancer Combination Therapy and add ABV-1519 EGFR Positive Non-Small Cell Lung Cancer Combination Therapy and ABV-1526 Large Intestine / Colon / Rectal Cancer Combination Therapy to the products to be co-developed and commercialized. Other provisions of the Co-Dev Agreement remain in full force and effect. On June 10, 2022, the Company expanded its co-development partnership with Rgene. On that date, BioKey, ABVC has entered into a Clinical Development Service Agreement with Rgene to guide three Rgene drug products, RGC-1501 for the treatment of Non-Small Cell Lung Cancer (NSCLC), RGC-1502 for the treatment of pancreatic cancer and RGC 1503 for the treatment of colorectal cancer patients, through completion of Phase II clinical studies under the U.S. FDA IND regulatory requirements. Under the terms of the new Services Agreement, BioKey is eligible to receive payments totaling $ 3.0 million over a 3 -year period with each payment amount to be determined by certain regulatory milestones obtained during the agreement period. The Service Agreement shall remain in effect until the expiration date of the last patent and automatically renew for 5 more years unless terminated earlier by either party with six months written notice. Either party may terminate the Service Agreement for cause by providing 30 days written notice. Through a series of transactions over the past 5 years, the Company and Rgene have co-developed the three drug products covered by the Service Agreement, which has resulted in the Company owning 31.62 % of Rgene. As part of the Rgene Studies, the Company agreed to loan $ 1.0 million to Rgene, for which Rgene has provided the Company with a 5 % working capital convertible loan (the “Note”). If the Note is fully converted, the Company will own an additional 6.4 % of Rgene. The Company is expected to receive the outstanding loan from the related party either by cash or conversion of shares of Rgene. The Company may convert the Note at any time into shares of Rgene’s common stock at either (i) a fixed conversion price equal to $ 1.00 per share or (ii) 20 % discount of the stock price of the then most recent offering, whichever is lower; the conversion price is subject to adjustment as set forth in the Note. The Note includes standard events of default, as well as a cross default provision pursuant to which a breach of the Service Agreement will trigger an event of default under the Note if not cured after 5 business days of written notice regarding the breach is provided. Upon an event of default, the outstanding principal and any accrued and unpaid interest shall be immediately due and payable. The Service Agreement shall remain in effect until the expiration date of the last patent and automatically renew for 5 more years unless terminated earlier by either party with six months written notice. Either party may terminate the Service Agreement for cause by providing 30 days written notice. Rgene has further agreed, effective July 1, 2022, to provide the Company with a seat on Rgene’s Board of Directors until the loan is repaid in full. The Company has nominated Dr. Jiang, its Chief Strategy Officer and Director to occupy that seat; Dr. Jiang is also one of the Company’s largest shareholders, owning 12.8 % of the Company. The Rgene Studies is a related party transaction. Collaborative agreement with BioFirst Corporation, a related party On July 24, 2017, BriVision entered into a collaborative agreement (the “BioFirst Collaborative Agreement”) with BioFirst Corporation (“BioFirst”), pursuant to which BioFirst granted the Company the global licensing right for medical use of the product (the “Product”): BFC-1401 Vitreous Substitute for Vitrectomy. BioFirst is a related party to the Company because a controlling beneficiary shareholder of YuanGene Corporation and the Company is one of the directors and Common Stock shareholders of BioFirst (See Note 8). Pursuant to the BioFirst Collaborative Agreement, the Company will co-develop and commercialize the Product with BioFirst and pay BioFirst in a total amount of $ 3,000,000 in cash or stock of the Company before September 30, 2018. The amount of $ 3,000,000 is in connection with the compensation for BioFirst’s past research efforts and contributions made by BioFirst before the BioFirst Collaborative Agreement was signed and it does not relate to any future commitments made by BioFirst and BriVision in this BioFirst Collaborative Agreement. In addition, the Company is entitled to receive 50 % of the future net licensing income or net sales profit, if any, and any development cost shall be equally shared by both BriVision and BioFirst. 18 On September 25, 2017, BioFirst has delivered all research, technical, data and development data to BriVision. The Company determined to fully expense the entire amount of $ 3,000,000 since currently the related licensing rights do not have alternative future uses. According to ASC 730-10-25-1, absent alternative future uses the acquisition of product rights to be used in research and development activities must be charged to research and development expenses immediately. Hence, the entire amount of $ 3,000,000 is fully expensed as research and development expense during the year ended December 31, 2017. On June 30, 2019, BriVision entered into a Stock Purchase Agreement (the “Purchase Agreement”) with BioFirst Corporation. Pursuant to the Purchase Agreement, the Company issued 42,857 shares (post-split) of the Company’s common stock to BioFirst in consideration for $ 3,000,000 owed by the Company to BioFirst (the “Total Payment”) in connection with a certain collaborative agreement between the Company and BioFirst dated July 24, 2017 (the “Collaborative Agreement”). Pursuant to the Collaborative Agreement, BioFirst granted the Company the global licensing right to co-develop BFC-1401 or ABV-1701 Vitreous Substitute for Vitrectomy for medical purposes in consideration for the Total Payment. On August 5, 2019, BriVision entered into a second Stock Purchase Agreement (“Purchase Agreement 2”) with BioFirst Corporation. Pursuant to Purchase Agreement 2, the Company issued 41,470 shares (post-split) of the Company’s common stock to BioFirst in consideration for $ 2,902,911 owed by the Company to BioFirst in connection with a loan provided to BriVision from BioFirst. On November 4, 2020, the Company executed an amendment to the BioFirst Agreement with BioFirst to add ABV-2001 Intraocular Irrigation Solution and ABV-2002 Corneal Storage Solution to the agreement. ABV-2002 is utilized during a corneal transplant procedure to replace a damaged or diseased cornea while ABV-2001 has broader utilization during a variety of ocular procedures. Initially the Company will focus on ABV-2002, a solution utilized to store a donor cornea prior to either penetrating keratoplasty (full thickness cornea transplant) or endothelial keratoplasty (back layer cornea transplant). ABV-2002 is a solution comprised of a specific poly amino acid that protects ocular tissue from damage caused by external osmolarity exposure during pre-surgery storage. The specific polymer in ABV-2002 can adjust osmolarity to maintain a range of 330 to 390 mOsM thereby permitting hydration within the corneal stroma during the storage period. Stromal hydration results in (a) maintaining acceptable corneal transparency and (b) prevents donor cornea swelling. ABV-2002 also contains an abundant phenolic phytochemical found in plant cell walls that provides antioxidant antibacterial properties and neuroprotection. Early testing by BioFirst indicates that ABV-2002 may be more effective for protecting the cornea and retina during long-term storage than other storage media available today and can be manufactured at lower cost. Further clinical development was put on hold due to the lack of funding. In addition, BioFirst was incorporated on November 7, 2006, focusing on the R&D, manufacturing, and sales of innovative patented pharmaceutical products. The technology of BioFirst comes from the global exclusive licensing agreements BioFirst maintains with domestic R & D institutions. Currently, BioFirst’s main research and development product is the vitreous substitute (Vitargus ® ), licensed by the National Health Research Institutes. Vitargus is the world’s first bio-degradable vitreous substitute and offers a number of advantages over current vitreous substitutes by minimizing medical complications and reducing the need for additional surgeries. Vitargus has started the construction of a GMP factory in Hsinchu Biomedical Science Park, Taiwan, with the aim at building a production base to supply the global market, and promote the construction of bio-degradable vitreous substitute manufacturing centers in Taiwan. Completion of this factory would allow ABVC to manufacture Vitargus with world-class technology in a GMP certified pharmaceutical factory. BioFirst is targeting to complete the construction in 2024. Collaborative agreement with ForSeeCon Eye Corporation, a related party On March 25, 2024, the Company, and one of its co-development partners, BioFirst Corporation, a company registered in Taiwan (“BioFirst”), each entered into a twenty-year, global definitive licensing agreement (the “FEYE Licensing Agreement”) with ForSeeCon Eye Corporation, a company registered in the British Virgin Islands (“FEYE”) for the products in the Company and BioFirst’s Ophthalmology pipeline, including Vitargus (the “Vitargus Products”). The license covers the Vitargus Products’ clinical trial, registration, manufacturing, supply, and distribution rights; FEYE also has the rights to sublicense or partner with a third party to develop the Licensed Products. As per each of the respective FEYE Licensing Agreements, each of the Company and BioFirst shall receive a total licensing fee of $ 33,500,000 , composed of an upfront payment of $ 30,000,000 , which can instead be paid with 5 million shares of FEYE stock at $ 6 per share within 30 days after the execution of the FEYE Licensing Agreement, and a $3,500,000 cash milestone payment, due 30 days upon completion of next round fundraising. Additionally, each of the Company and BioFirst are eligible to receive royalties of 5 % of net Sales. As of June 30, 2024, the Company received 5,000,000 FEYE shares but did not recognize such licensing revenue since the fair value of FEYE stock is uncertain. On June 18, 2024, the Company and BioFirst, each entered into an amendment (the “ Amendment ”) to the Licensing Agreement with FEYE, pursuant to which the Company and BioFirst have agreed to allow FEYE to pay the second milestone payment in the amount of $3,500,000 per Licensing Agreement, incrementally (such as $ 100,000 ), at any given time, rather than in one lump sum. During the six months ended June 30, 2024, the Company received $ 116,000 pursuant to the Amendment, and recognized $ 116,000 revenue in the period ended June 30, 2024. 19 Collaborative agreement with OncoX BiopPharma, Inc. On April 16, 2024, the Company entered into a definitive agreement with OncoX BioPharma, Inc., a private company registered in the British Virgin Islands (“Oncox”), pursuant to which the Company will grant Oncox an exclusive right to develop and commercialize ABVC’s single-herb botanical drug extract from the dry fruit body of Maitake Mushroom (Grifola Frondosa) for treatment of Non-Small Cell Lung Cancer (the “Lung Cancer Products”), within North America for 20 years (the “April 2024 Oncox Agreement”). In consideration thereof, Oncox shall pay ABVC $ 6,250,000 (or 1,250,000 Oncox shares valued at $ 5 per share) 30 days after entering into the agreement and $ 625,000 , 30 days following the completion of Oncox’s next round of fundraising, of which there is no guarantee; ABVC is also entitled to 5 % royalties based on the Net Sales, as defined in the April 2024 Oncox Agreement, from the first commercial sale of the Lung Cancer Product in North America, of which there can be no guarantee. Oncox entered into the same agreement with ABVC’s affiliate, Rgene Corporation. On May 8, 2024, the Company entered into a definitive agreement with OncoX, pursuant to which the Company will grant Oncox an exclusive right to develop and commercialize ABVC’s BLEX 404 single-herb botanical drug extract from the dry fruit body of Maitake Mushroom (Grifola Frondosa) for treatment of Pancreatic (the Pancreatic Product), within a certain territory, specified as 50 % of the Worldwide Marketsfor 20 years (the “May 8, 2024 Oncox Agreement”). In consideration thereof, Oncox shall pay ABVC a total of $ 6,250,000 (or 1,250,000 Oncox shares valued at $ 5 per share 1 ) within 30 days of entering into the May 8, 2024 Oncox Agreement, with an additional milestone payment of $ 625,000 in cash after OncoX’s next round of fundraising, of which there can be no guarantee. Oncox may remit cash payments of at least $ 100,000 towards the licensing fees and deductible from the second milestone payment; ABVC is also entitled to royalties of 5 % of Net Sales, as defined in the May 8, 2024 Oncox Agreement, from the first commercial sale of the Pancreatic Product in the noted territory, which remains uncertain. The Company will permit Oncox to pay the license fee in installments or in a lump sum and will allow Oncox to use its revenue to fund such payments. Oncox entered into the same agreement with ABVC’s affiliate, Rgene Corporation. On May 23, 2024, the Company entered into a definitive agreement with OncoX, pursuant to which the Company will grant Oncox an exclusive right to develop and commercialize ABVC’s BLEX 404 single-herb botanical drug extract from the dry fruit body of Maitake Mushroom (Grifola Frondosa) for treatment of Myelodysplastic Syndrome (the “MS Products”), within a certain territory, specified as 50 % of the Worldwide Markets for 20 years (the “May 23, 2024 Oncox Agreement”). In consideration thereof, Oncox shall pay ABVC a total of $ 6,250,000 (or 1,250,000 Oncox shares valued at $ 5 per share1) 30 days after entering the May 23, 2024 Oncox Agreement, with an additional milestone payment of $ 625,000 in cash after OncoX’s next round of fundraising, of which there can be no guarantee. Oncox may remit cash payments of at least $ 100,000 towards the licensing fees and deductible from the second milestone payment; ABVC is also entitled to royalties of 5 % of Net Sales, as defined in the May 23, 2024 Oncox Agreement, from the first commercial sale of the MS Product in the noted territory, which remains uncertain. Oncox may use its revenue to fund the licensing fees. Oncox entered into the same agreement with ABVC’s affiliate, Biolite, Inc. 5. PROPERTY AND EQUIPMENT Property and equipment as of June 30, 2024 and December 31, 2023 are summarized as follows: June 30, 2024 December 31, 2023 (Unaudited) Land $ 342,300 $ 363,416 Construction-in-Progress 7,400,000 7,400,000 Buildings and leasehold improvements 2,220,361 2,227,431 Machinery and equipment 1,132,194 1,138,675 Office equipment 164,995 174,797 11,259,850 11,304,319 Less: accumulated depreciation ( 3,330,729 ) ( 3,335,041 ) Property and equipment, net $ 7,929,121 $ 7,969,278 Construction-in-progress consists of the property recently acquired in Chengdu, China. The Company entered into a cooperation agreement on August 14, 2023, with Zhong Hui Lian He Ji Tuan, Ltd. (the “Zhonghui”). Pursuant thereto, the Company acquired 20 % of the ownership of certain property and a parcel of the land, with a view to jointly develop the property into a healthcare center for senior living, long-term care, and medical care in the areas of ABVC’s special interests, such as Ophthalmology, Oncology, and Central Nervous Systems. The plan is to establish a base for the China market and global development of these interests. The valuation of such property is US$ 37,000,000 ; based on the Company’s 20 % ownership, the Company acquired the value of US$ 7,400,000 . In exchange, the Company issued to Zhonghui an aggregate of 370,000 shares (the “Shares”) of common stock, at a per share price of $ 20.0 . The Shares are subject to a lock-up period of one year following the closing date of the transaction. In addition, the parties agreed that, after one year following the closing of the transaction, if the market value of the Shares or the value of the Property increases or decreases, the parties will negotiate in good faith to make reasonable adjustments. The asset ownership certification is in the application process. However, the Company’s ownership rights to the property and the associated land parcel, or a suitable replacement property, are safeguarded under the terms of the cooperation agreement, which is legally binding and enforceable. The Construction-in-progress is planned to finish before the end of 2024. Depreciation expenses were $ 13,305 and $ 6,997 for three months ended June 30, 2024 and 2023, respectively. Depreciation expenses were $ 14,591 and $ 13,490 for six months ended June 30, 2024 and 2023, respectively. 20 6. LONG-TERM INVESTMENTS (1) The ownership percentages of each investee are listed as follows: Ownership percentage June 30, December 31, Accounting Name of related party 2024 2023 treatments Braingenesis Biotechnology Co., Ltd. 0.17 % 0.17 % Cost Method Genepharm Biotech Corporation 0.67 % 0.67 % Cost Method BioHopeKing Corporation 5.90 % 5.90 % Cost Method ForSeeCon Corporation 19.78 % - % Cost Method BioFirst Corporation 18.68 % 18.68 % Equity Method Rgene Corporation 26.65 % 26.65 % Equity Method (2) The extent the investee relies on the company for its business are summarized as follows: Name of related party The extent the investee relies on the Company for its business Braingenesis Biotechnology Co., Ltd. No specific business relationship Genepharm Biotech Corporation No specific business relationship BioHopeKing Corporation Collaborating with the Company to develop and commercialize drugs ForSeeCon Corporation Collaborating with the Company to develop and commercialize ophthalmic medical devices (referring to Note 4, Collaborative Agreements) BioFirst Corporation Loaned from investee and provides research and development support service Rgene Corporation Collaborating with the Company to develop and commercialize drugs BioLite Japan K.K. Prepaid investment for a Joint Venture (3) Long-term investment mainly consists of the following: June 30, 2024 December 31, 2023 (Unaudited) Non-marketable Cost Method Investments, net Braingenesis Biotechnology Co., Ltd. $ 6,794 $ 7,213 Genepharm Biotech Corporation 20,742 22,021 BioHopeKing Corporation 770,487 818,018 ForSeeCon Corporation (See Note 4) - - Sub total 798,023 847,252 Equity Method Investments, net BioFirst Corporation 1,579,526 1,680,488 Rgene Corporation - - Total $ 2,377,549 $ 2,527,740 (a) BioFirst Corporation (the “BioFirst”): The Company holds an equity interest in BioFirst Corporation, accounting for its equity interest using the equity method to accounts for its equity investment as prescribed in ASC 323, Investments-Equity Method and Joint Ventures (“ASC 323”). Equity method adjustments include the Company’s proportionate share of investee’s income or loss and other adjustments required by the equity method. As of June 30, 2024 and December 31, 2023, the Company owns 18.68 % and 18.68 % common stock shares of BioFirst, respectively. The Company made a prepayment for equity investment in BioFirst to purchase additional shares to be issued by BioFirst in the aggregate amount of $ 2,688,578 , recorded as prepayment for long-term investments as of December 31, 2022. On July 19, 2023, the Company successfully completed the registration process for this investment. The initial prepayment was $ 1,895,556 , which is a portion of the prepayment as of December 31, 2022, and was converted into 994,450 shares of BioFirst stock. As of June 30, 2024, the amount of prepayment for long-term investments in BioFirst is $ 1,124,842 . 21 Summarized financial information for the Company’s equity method investee, BioFirst, is as follows: Balance Sheet s June 30, 2024 December 31, 2023 (Unaudited) Current Assets $ 1,676,014 $ 1,451,877 Non-current Assets 606,553 686,206 Current Liabilities 3,063,359 2,286,058 Non-current Liabilities 105,548 347,193 Stockholders’ Equity (Deficit) ( 886,340 ) ( 495,168 ) Statement of Operations Six months Ended June 30, 2024 2023 (Unaudited) Net sales $ 358 $ - Gross profit 217 - Net loss ( 426,599 ) ( 788,788 ) Share of losses from investments accounted for using the equity method 79,057 - (b) Rgene Corporation (the “Rgene”) Both Rgene and the Company are under common control by Dr. Tsung-Shann Jiang, the CEO and Chairman of the BioLite Inc. Since Dr. Tsung-Shann Jiang is able to exercise significant influence, but not control, over the Rgene, the Company determined to use the equity method to account for its equity investment as prescribed in ASC 323, Investments-Equity Method and Joint Ventures (“ASC 323”). Equity method adjustments include the Company’s proportionate share of investee’s income or loss and other adjustments required by the equity method. As of June 30, 2024 and December 31, 2023, the Company owns 26.65 % and 26.65 % Common Stock shares of Rgene, respectively. Summarized financial information for the Company’s equity method investee, Rgene, is as follows: Balance Sheets June 30, 2024 December 31, 2023 (Unaudited) Current Assets $ 254,967 $ 50,538 Non-current Assets 3,258,797 250,716 Current Liabilities 2,508,301 2,591,960 Non-current Liabilities - 811 Shareholders’ Deficit ( 1,005,463 ) ( 2,291,517 ) Statement of Operations Six months Ended June 30, 2024 2023 (Unaudited) Net sales $ - $ - Gross Profit - - Net loss ( 78,161 ) ( 155,873 ) Share of loss from investments accounted for using the equity method - - 22 (c) BioLite Japan K.K. (BioLite JP) In October 2021, the Company, Lucidaim Co., Ltd., a Japanese corporation (“ Lucidaim ,” together with the Company, the “ Shareholders ”), and BioLite Japan K.K., a Japanese corporation (“ BioLite JP” ) entered into a Joint Venture Agreement. BioLite JP is a private limited company incorporated on December 18, 2018. The business of the joint venture is the research and development of drugs, medical device and digital media, investment, fund running and consulting, distribution and marketing of supplements carried on by BioLite JP and its subsidiaries in Japan, or any other territory or businesses. A t the date of the Agreement, BioLite JP has 10,000 ordinary shares authorized, with 3,049 ordinary shares issued and outstanding (the “ Ordinary Shares ”). Pursuant to the Agreement and the related share transfer agreement, Lucidaim shall own 1,555 Ordinary Shares ( 51 %) and the Company shall own 1,494 Ordinary Shares ( 49 %). The Company paid $ 150,000 towards the setup of the joint venture; BioLite Japan’s other shareholder also paid $ 150,000 after the Letter of Intent was signed. This prepayment is booked in prepayment for investment. (4) Disposition of long-term investment During the six months ended June 30, 2024 and 2023, there is no disposition of long-term investment. (5) Losses on Equity Investments The components of losses on equity investments for each period were as follows: Six months Ended June 30, 2024 2023 (Unaudited) Share of equity method investee losses $ 79,057 $ - 7. CONVERTIBLE NOTES PAYABLE On February 23, 2023, the Company entered into a securities purchase agreement with Lind Global Fund II, LP (“Lind”), pursuant to which the Company issued Lind a secured, convertible note in the principal amount of $ 3,704,167 , for a purchase price of $ 3,175,000 (the “Lind Note”), that is convertible into shares of the Company’s common stock at an initial conversion price of $ 10.5 per share, subject to adjustment. The Lind Note shall be due and payable on August 23, 2024 and bears no interest. The Company also issued Lind a common stock purchase warrant to purchase up to 529,167 shares (post-split) of the Company’s common stock at an initial exercise price of $ 10.5 per share, subject to adjustment. Beginning with the date that is six months from the issuance date of the Lind Note and on each one (1) month anniversary thereafter, the Company shall pay Lind an amount equal to $ 308,651 , until the outstanding principal amount of the Lind Note has been paid in full prior to or on the Maturity Date or, if earlier, upon acceleration, conversion or redemption of the Lind Note in accordance with the terms thereof (the “Monthly Payments”). At the Company’s discretion, the Monthly Payments shall be made in (i) cash, (ii) shares of the Company’s common stock, or (iii) a combination of cash and Shares; if made in shares, the number of shares shall be determined by dividing (x) the principal amount being paid in shares by (y) 90 % of the average of the 5 lowest daily VWAPs during the 20 trading days prior to the applicable payment date. The Lind Notes sets forth certain conditions that must be satisfied before the Company may make any Monthly Payments in shares of common stock. If the Company makes a Monthly Payment in cash, the Company must also pay Lind a cash premium of 5 % of such Monthly Payment. 23 Upon the occurrence of any Event of Default (as defined in the Lind Note), the Company must pay Lind an amount equal to 120 % of the then outstanding principal amount of the Lind Note (the “Mandatory Default Amount”), in addition to any other remedies under the Note or the other Transaction Documents. The Company and Lind entered into a letter agreement on September 12, 2023, pursuant to which the Mandatory Default Amount was reduced to 115 % of the then outstanding principal amount of the Lind Note; pursuant to the letter agreement, Lind also agreed to waive any default associated with the Company’s market capitalization being below $ 12.5 million for 10 consecutive days through February 23, 2024, but retained its right to convert its Note. The principal amount was revised to $ 3,167,292 in the agreement. As of June 30, 2024, the Company has fully repaid the Lind Note with issuance of the Company’s common stock in installments. The warrant exercise price was reset to $ 3.5 in accordance with the issuance of common stock in relation to securities purchase agreement on July 2023. On May 22, 2024, the exercise price of these warrants was reset to $ 0.75 along with the immediate exercise of existing warrants and issuance of the New Warrants. As of June 30, 2024, these warrants were fully exercised. On November 17, 2023, the Company entered another securities purchase agreement with Lind, pursuant to which the Company issued Lind a secured, convertible note (the “2 nd Lind Note”) in the principal amount of $ 1,200,000 , for a purchase price of $ 1,000,000 , that is convertible into shares of the Company’s common stock at a conversion price, which shall be the lesser of (i) $ 3.50 and (ii) 90 % of the average of the three lowest VWAPs during the 20 trading days prior to conversion. The 2 nd Lind Note shall be due and payable on May 19, 2025 and bear no interest. The Company may prepay all, but not less than all, outstanding principal amount prior to the maturity, and Lind shall have the right to convert up to one third of the principal amount when the Company prepays. Upon the occurrence of any Event of Default (as defined in the 2 nd Lind Note), the Company must pay Lind an amount equal to 120 % of the then outstanding principal amount of the Lind Note, in addition to any other remedies under the Note or the other transaction documents. Lind also received a 5-year common stock purchase warrant to purchase up to 1,000,000 shares of the Company’s common stock at an initial exercise price of $ 2 per share for a period of 5 years. The warrants were valued using the Black-Scholes model. The fair value of the warrants was determined to be $ 480,795 , which was recorded to debt discount. An amendment was filed with the SEC on February 29, 2024 to disclose that due to Nasdaq requirements, the parties entered into an amendment to the Note, pursuant to which the conversion price shall have a floor price of $ 1.00 . Additionally, the amendment requires the Company to make a cash payment to Lind if in connection with a conversion, the conversion price is deemed to be the floor price. On January 17, 2024, the Company entered another securities purchase agreement with Lind, pursuant to which the Company issued Lind a secured, convertible note (the “3 rd Lind Note”) in the principal amount of $ 1,000,000 , for a purchase price of $ 833,333 , that is convertible into shares of the Company’s common stock at a conversion price, which shall be the lesser of (i) $ 3.50 and (ii) 90 % of the average of the three lowest VWAPs during the 20 trading days prior to conversion. The 3 rd Lind Note shall be due and payable on July 17, 2025 and bear no interest. The Company may prepay all, but not less than all, outstanding principal amount prior to the maturity, and Lind shall have the right to convert up to one third of the principal amount when the Company prepays. Upon the occurrence of any Event of Default (as defined in the 3 rd Lind Note), the Company must pay Lind an amount equal to 120 % of the then outstanding principal amount of the Lind Note, in addition to any other remedies under the Note or the other transaction documents Lind also received a 5 -year, common stock purchase warrant to purchase up to 1,000,000 shares of the Company’s common stock at an initial exercise price of $ 2 per share. The warrants were valued using the Black-Scholes model. The fair value of the warrants was determined to be $ 394,071 , which was recorded to debt discount. An amendment was filed with the SEC on February 29, 2024 to disclose that due to Nasdaq requirements, the parties entered into an amendment to the Note, pursuant to which the conversion price shall have a floor price of $ 1.00 . Additionally, the amendment requires the Company to make a cash payment to Lind if in connection with a conversion, the conversion price is deemed to be the floor price. In connection with above three Lind Note offerings, the Company and its subsidiaries: BioKey, BioLite, Biolite BVI, and American BriVision, jointly and severally guaranteed all of the obligations of the Company in connection with the offering with certain collateral, as set forth in the related transaction documents. On May 22, 2024, Lind has exercised 1,000,000 of the existing warrants to purchase shares of Common Stock at a reduced exercise price of $ 0.75 per share. Refer to the details in Note 12, Equity. As of June 30, 2024 and December 31, 2023, the aggregate carrying values of the convertible debentures were $ 956,880 and $ 569,456 , respectively, with unamortized debt discount and issuance costs of $ 1,243,120 and $ 1,441,719 , respectively. The estimated aggregate fair value (Level 2) of the convertible debentures were $ 2,640,000 and $ 2,372,851 , respectively. Total interest expenses in connection with the above convertible note payable were $ 244,488 and $ 93,155 for the three months ended June 30, 2024 and 2023, respectively; were $ 916,504 and $ 124,742 for the six months ended June 30, 2024 and 2023, respectively. 24 8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consisted of the following as of the periods indicated: June 30, December 31, 2024 2023 Accrued research and development expense $ 1,799,583 $ 1,799,583 Accrued compensation and employee benefits 1,243,638 1,184,505 Accrued royalties 258,106 274,028 Others 659,723 438,264 Total $ 3,961,050 $ 3,696,380 9. BANK LOANS (1) Short-term bank loan consists of the following: June 30, December 31, 2024 2023 (Unaudited) Cathay United Bank $ 231,000 $ 245,250 CTBC Bank 616,000 654,000 Total $ 847,000 $ 899,250 Cathay United Bank On June 28, 2016, BioLite Taiwan and Cathay United Bank entered into a one-year bank loan agreement (the “Cathay United Loan Agreement”) in a credit limit amount of NT$ 7,500,000 , equivalent to $ 231,000 . The term started June 28, 2016 with maturity date at June 28, 2017. The loan balance bears interest at a floating rate of prime rate plus 1.31 %. The prime rate is based on term deposit saving interest rate of Cathay United Bank. The Company renews the agreement with the bank every year. On September 6, 2022, BioLite Taiwan extended the Cathay United Loan Agreement with the same principal amount of NT$ 7,500,000 , equivalent to $ 231,000 for one year , which is due on September 6, 2023. On September 6, 2023, BioLite Taiwan extended the Cathay United Loan Agreement with the same principal amount of NT$ 7,500,000 , equivalent to $ 231,000 for one year, which is due on September 6, 2024. As of June 30, 2024 and December 31, 2023, the effective interest rates per annum was 2.99 % and 2.87 %, respectively. The loan is collateralized by the building and improvement of BioLite Taiwan, and is also personal guaranteed by the Company’s chairman. Interest expenses were $ 1,752 and $ 1,745 for the three months ended June 30, 2024 and 2023, respectively. Interest expenses were $ 3,488 and $ 3,394 for the six months ended June 30, 2024 and 2023, respectively. CTBC Bank On June 12, 2017 and July 19, 2017, BioLite Taiwan and CTBC Bank entered into two short-term saving secured bank loan agreements (the “CTBC Loan Agreements”) in a credit limit amount of NT$ 10,000,000 , equivalent to $ 308,000 , and NT$ 10,000,000 , equivalent to $ 308,000 , respectively. Both two loans with the same maturity date at January 19, 2018 . In February 2018, BioLite Taiwan combined two loans and extended the loan contract with CTBC for one year . The Company renews the agreement with the bank every year. The loan balances bear interest at a fixed rate of 2.5 % per annum. The loan is secured by the money deposited in a savings account with the CTBC Bank. This loan was also personal guaranteed by the Company’s chairman and BioFirst. During the year ended December 31, 2020, BioLite Taiwan has opened a TCD account with CTBC bank to guarantee the loan going forward. Interest expenses were $ 3,882 and $ 4,098 for the three months ended June 30, 2024 and 2023, respectively. Interest expenses were $ 7,846 and $ 7,929 for the six months ended June 30, 2024 and 2023, respectively. 25 10. RELATED PARTIES TRANSACTIONS The related parties of the Company with whom transactions are reported in these financial statements are as follows: Name of entity or Individual Relationship with the Company and its subsidiaries BioFirst Corporation (the “BioFirst”) Entity controlled by controlling beneficiary shareholder of YuanGene BioFirst (Australia) Pty Ltd. (the “BioFirst (Australia)”) 100% owned by BioFirst; Entity controlled by controlling beneficiary shareholder of YuanGene Rgene Corporation (the “Rgene”) Shareholder of the Company; Entity controlled by controlling beneficiary shareholder of YuanGene; the Chairman of Rgene is Mr. Tsung-Shann Jiang ForSeeCon Corporation (the “FEYE”) Cost method investment YuanGene Corporation (the “YuanGene”) Controlling beneficiary shareholder of the Company GenePharm Inc. (the “GenePharm”) Dr. George Lee, Board Director of BioKey, is the Chairman of GenePharm. The Jiangs Mr. Tsung-Shann Jiang, the controlling beneficiary shareholder of the Company; the Chairman of Rgene; the Chairman and CEO of the BioLite Holding Inc. and BioLite Inc. and the President and a member of board of directors of BioFirst Ms. Shu-Ling Jiang, Mr. Tsung-Shann Jiang’s wife, and a member of board of directors of BioLite Inc. Mr. Eugene Jiang is Mr. and Ms. Jiang’s son. Mr. Eugene Jiang is the chairman, and majority shareholder of the Company and a member of board of directors of BioLite Inc. Mr. Chang-Jen Jiang is Mr. Tsung-Shann Jiang’s sibling and the director of the Company. Ms. Mei-Ling Jiang is Ms. Shu-Ling Jiang’s sibling. BioLite Japan Entity controlled by controlling beneficiary shareholder of ABVC BioHopeKing Corporation (“BHK”) Entity controlled by controlling beneficiary shareholder of ABVC Revenues – related parties During the six months ended June 30, 2024, the Company received $ 116,000 pursuant to the licensing agreement and related amendment with FEYE, and recognized $ 116,000 revenue in the period ended June 30, 2024. Please refer to Note 4, Collaborative Agreements for details. June 30, June 30, 2024 2023 (Unaudited) FEYE $ 116,000 $ - Total $ 116,000 $ - Accounts receivable - related parties Accounts receivable due from related parties consisted of the following as of the periods indicated: June 30, December 31, 2024 2023 (Unaudited) Rgene $ 10,463 $ 10,463 Total $ 10,463 $ 10,463 26 Due from related parties Amount due from related parties consisted of the following as of the periods indicated: Due from related-party - Current June 30, December 31, 2024 2023 (Unaudited) Rgene $ 553,229 $ 541,486 BioFirst 705,083 206,087 Total $ 1,258,312 $ 747,573 Due from related parties - Non-Current June 30, December 31, 2024 2023 BioFirst (Australia) $ 839,983 $ 839,983 BioHopeKing Corporation 121,392 113,516 Total 961,375 953,499 Less: allowance for expected credit losses accounts ( 839,983 ) ( 839,983 ) Net $ 121,392 $ 113,516 (1) On June 16, 2022, the Company entered into a one-year convertible loan with Rgene, with a principal amount of $ 1,000,000 to Rgene which bears interest at 5 % per annum for the use of working capital that, if fully converted, would result in ABVC owning an additional 6.4 % of Rgene. The Company may convert the Note at any time into shares of Rgene’s common stock at either (i) a fixed conversion price equal to $1.00 per share or (ii) 20% discount of the stock price of the then most recent offering, whichever is lower; the conversion price is subject to adjustment as set forth in the Note. The Note includes standard events of default, as well as a cross default provision pursuant to which a breach of the Service Agreement will trigger an event of default under the convertible note if not cured after 5 business days of written notice regarding the breach is provided. As of June 30, 2024 and December 31, 2023, the outstanding loan balance were both $ 500,000 ; and accrued interest was $ 51,319 and $ 38,819 , respectively. The Company expects to receive the repayment within next 12 months once Rgene receives the licensing fees from OncoX. As of June 30, 2024 and December 31, 2023, the Company has other receivables amounted $ 1,910 and $ 2,667 from Rgene due to daily operations, respectively. (2) The balances mainly represent advances to BioFirst (Australia) for research and development purposes. The business conditions of BioFirst (Australia) deteriorated and, as a result, the Company recognized expected credit losses of $ 839,983 for the year ended December 31, 2023. (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 June 30, 2024 and December 31, 2023, due from BHK was $ 121,392 and $ 113,516 , respectively. (4) On December 31, 2023, the Company entered into a loan agreement with BioFirst, with a principal amount of $ 341,029 to BioFirst which bears interest at 12 % per annum for the use of working capital. During the period ended June 30, 2024, the Company entered into another loan agreement with BioFirst, with a principal amount of $ 346,685 to BioFirst which bears interest at 12 % per annum for the use of working capital. As of June 30, 2024 and December 31, 2023, the outstanding loan balance was $ 687,714 and $ 206,087 , respectively; accrued interest was $16,362 and $ 0 , respectively. The Company expects to receive the repayment within next 12 months once BioFirst receives the licensing fees from FEYE. As of June 30, 2024 and December 31, 2023, the Company has other receivables from BioFirst amounted $ 1,007 and $ 0 , respectively, due to daily operations. 27 Potential risks for receivable: 1. Credit Risk: Delayed Payments:There's a risk that OncoX or ForSeeCon may delay their payments to Rgene or BioFirst, respectively. This delay can affect the timing of the repayment. Default Risk: OncoX or ForSeeCon may default on their payments due to financial instability, which would directly impact Rgene’s or BioFirst’s ability to repay the loan. 2. Operational Risk: Dependency on Licensing Revenue: Both Rgene and BioFirst are dependent on receiving licensing fees from OncoX and ForSeeCon. Any disruption in these business relationships, such as contract disputes or changes in market conditions, could impact their revenue and, in turn, their ability to meet repayment obligations. Collection Risk: Challenges in collecting licensing fees, such as administrative errors or disputes over payment amounts, could delay the receivables. 3. Market Risk: Economic Downturn: A general economic downturn could affect the financial health of OncoX, ForSeeCon, Rgene, and BioFirst. Reduced market demand or adverse changes in regulations could reduce the licensing fees received, leading to potential issues in repayment. Currency Fluctuations: If the licensing fees or loans are in different currencies, exchange rate volatility could reduce the value of receivables, impacting the repayment ability. 4. Legal and Regulatory Risks: Contractual Obligations: Any ambiguity or changes in the licensing agreements between the parties could lead to legal disputes or renegotiations, potentially delaying the repayment process. Compliance Risks: If either party fails to comply with relevant laws and regulations (e.g., intellectual property laws or tax regulations), it could result in fines, penalties, or legal costs that could deplete the funds available for repayment. 5. Counterparty Risk: Financial Health of Counterparties: If OncoX or ForSeeCon face financial difficulties or insolvency, it could severely impact their ability to pay licensing fees, thus affecting the repayment to Rgene and BioFirst. Changes in Business Strategy: OncoX or ForSeeCon may shift their business strategy or priorities, potentially reducing their focus on the products or technologies licensed from Rgene or BioFirst, leading to lower-than-expected fees. 6. Timing Risk: 12-Month Repayment Window:** While the repayment can be made within 12 months, any delays toward the end of this period can increase uncertainty. If the receivables are delayed beyond the 12-month window, it may lead to financial stress or breach of agreements. 7. Changes to the Repayment Plan: Negotiation Risk: Any proposed changes to the repayment plan require mutual agreement. Disagreements or prolonged negotiations could delay repayment or lead to disputes. By identifying and managing these risks, the parties involved will better ensure that the repayment process is smooth and any potential issues are mitigated in advance. 28 Due to related parties Amount due to related parties consisted of the following as of the periods indicated: June 30, December 31, 2024 2023 (Unaudited) The Jiangs $ 178,533 $ 19,789 Due to shareholders 143,528 152,382 Due to a Director 4,237 961 Total $ 326,298 $ 173,132 (1) Since 2019, the Jiangs advanced funds to the Company for working capital purpose. As of June 30, 2024, and December 31, 2023, the outstanding balance due to the Jiangs amounted to $ 178,533 and $ 19,789 , respectively. These loans bear interest rate of 0 % to 1 % per month, and are due on demand. (2) Since 2018, the Company’s shareholders have advanced funds to the Company for working capital purpose. The advances bear interest rate of 12 % per annum. As of June 30, 2024 and December 31, 2023, the outstanding principal and accrued interest was $ 143,528 and $ 152,382 , respectively. Interest expenses in connection with these loans were $ 4,019 and $ 5,171 for the three months ended June 30, 2024 and 2023, respectively, and were $ 9,957 and $ 10,067 for the six months ended June 30, 2024 and 2023, respectively. (3) The Director of AiBtl has been paying on behalf of the company for setup fees and certain operating expenses. As of June 30, 2024, and December 31, 2023, the outstanding balance due to the Director amounted to $ 4,273 and $ 961 , respectively. 11. INCOME TAXES Deferred tax assets (liability) as of June 30, 2024 and December 31, 2023 consist approximately of: June 30, 2024 December 31, 2023 (Unaudited) Loss on impairment of Assets $ 634,300 $ 713,223 Net operating loss carryforwards 5,608 ,185 5,568,391 Operating lease liabilities 213,482 213,482 Operating lease assets ( 213,482 ) ( 213,482 ) Deferred tax assets, Gross 6,242,485 6,281,614 Valuation allowance ( 6,242,485 ) ( 6,281,614 ) Deferred tax assets, net $ - $ - 12. EQUITY On January 3, 2023, the Company issued 22,341 shares (post-split) of common stock to a consultant for providing consulting services on listing to NASDAQ in 2021. On July 27, 2023, the Company entered into that certain securities purchase agreement. relating to the offer and sale of 300,000 shares of common stock and 200,000 pre-funded warrants, at an exercise price of $ 0.001 per share, in a registered direct offering. Pursuant to the Purchase Agreement, the Company agreed to sell the Shares and/or Pre-funded Warrants at a per share purchase price of $ 3.50 , for gross proceeds of $ 1,750,000 , before deducting any estimated offering expenses. On August 1, 2023, the pre-funded warrants were exercised. On August 14, 2023, the Company entered into a cooperation agreement with Zhonghui. Pursuant thereto, the Company acquired 20 % of the ownership of a property and the parcel of the land owned by Zhonghui in Leshan, Sichuan, China. During the third quarter of 2023, the Company issued to Zhonghui, an aggregate of 370,000 shares of the Company’s common stock, at a per share price of $ 20 . On January 27, 2024, the Company granted 1,302,726 restricted shares to its employees and directors under the 2016 Equity Incentive Plan, with an issuance date of February 2, 2024. These shares are subject to a three-year restriction period. On May 24, 2024, the Company issued 200,000 shares of common stock to a consultant for providing business and funding opportunities. 29 Noncontrolling Interests On March 14, 2024, AiBtl BioPharma Inc. issued 1,610,700 AiBtl BioPharma Inc.’s common stocks to a land acquisition transaction in Taiwan, including the consulting fee of $ 383,500 and the cost of land of $ 7,670,000 . Due to certain administrative processes and restrictions, AiBtl BioPharma Inc. has not acquired ownership of the land and no asset was recognized. AiBtl BioPharma Inc. is in the process of resolving this issue. On April 11, 2024 and May 10, 2024, AiBtl BioPharma Inc. entered into share purchase agreements with an investor to sell 100,000 shares of AiBtl BioPharma Inc. common stocks at $ 1.00 per share. As of the issuance date of the interim financial statements, the stock has not been issued. Lind Offerings and Repayments On February 23, 2023, in connection with the issuance of the Lind Note (referring to Note 7), the Company also issued Lind a common stock purchase warrant to purchase up to 529,167 shares (post-split) of the Company’s common stock at an initial exercise price of $ 10.5 per share, subject to adjustment. During the period ended March 31, 2024, the Company has been repaying Lind with securities for 751,795 shares, totaling $ 681,000 . During the three months ended June 30, 2024, the Company further repaid Lind with securities for 153,508 shares of common stock, totaling $ 130,175 . As of June 30, 2024, this convertible note was fully repaid. During July 2023, the warrant exercise price was reset to $ 3.5 in accordance with the issuance of common stock in relation to securities purchase agreement in July 2023. On May 22, 2024, the exercise price of these warrants was reset to $ 0.75 along with the immediate exercise of existing warrants and issuance of the New Warrants. As of June 30, 2024, these warrants were fully exercised. On November 17, 2023, in connection with the issuance of the 2 nd Lind Note (referring to Note 7, Convertible Notes Payable), Lind also received a 5 -year, common stock purchase warrant to purchase up to 1,000,000 shares of the Company’s common stock at an initial exercise price of $ 2 per share for a period of 5 years. The warrants were valued using the Black-Scholes model and the fair value was determined to be $ 480,795 , which was recorded as a debt discount. On January 17, 2024, in connection with the issuance of the 3 rd Lind Note (referring to Note 7, Convertible Notes Payable), Lind also received a 5 -year, common stock purchase warrant to purchase up to 1,000,000 shares of the Company’s common stock at an initial exercise price of $ 2 per share. On May 22, 2024, the Company and Lind entered into a letter agreement, pursuant to which Lind will exercise, for cash, 1,000,000 of its Pre-Existing Warrants (all of the warrants issued to Lind on February 23, 2023, November 17, 2023 and January 17, 2024 are hereinafter referred to as the “Pre-Existing Warrants”), to purchase shares of Common Stock at a reduced exercise price of $ 0.75 per share. Concurrently, the exercise price of all Pre-Existing Warrants was reduced to $ 0.75 per share according to this agreement. Lind will also receive a new warrant to purchase 1,000,000 shares of common stock, exercisable at any time on or after the date of its issuance and until the five-year anniversary thereof, for $ 1.00 per share (the “ New Warrant ”). The fair value of the New Warrants was determined to be $ 925,210 using the Black-Scholes model. The New Warrant may be exercised via cashless exercise or resale pursuant to the registration statement that was declared effective. As of June 30, 2024, Lind has exercised 1,000,000 shares of Pre-Existing Warrants and received 1,000,000 shares of New Warrants according to this agreement. All w arrants issued to Lind may be exercised via cashless exercise. Warrants issued and outstanding in connection with above Lind convertible notes as of June 30, 2024, and their activities during the six months ended are as follows: Number of Underlying Shares Weighted- Average Exercise Price Per Share Weighted- Average Contractual Life Remaining in Years Aggregate Intrinsic Value Outstanding as of January 1, 2024 1,529,167 $ 0.75 4.38 $ - Issued 2,000,000 $ 0.88 4.72 - Exercised ( 1,000,000 ) - - - Outstanding as of June 30, 2024 2,529,167 $ 0.85 4.65 $ - 13. STOCK OPTIONS On October 30, 2020, the Company issued an aggregate of 545,182 shares of common stock in lieu of unpaid salaries of certain employees and unpaid consulting fees under the 2016 Equity Incentive Plan, as amended, at a conversion price of $ 2 per share; the total amount of converted salaries and consulting fees was $ 1,090,361 . On November 21, 2020, the Company entered into acknowledgement agreements and stock option purchase agreements with these employees and consultant; pursuant to which the Company granted stock options to purchase 545,182 shares of the Company’s common stock in lieu of common stock. The options were vested at the grant date and become exercisable for 10 years from the grant date. 30 On October 15, 2021, the Company entered into stock option agreements with 11 directors and 3 employees, pursuant to which the Company granted options to purchase an aggregate of 1,280,002 shares of common stock under the 2016 Equity Incentive 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. On April 16, 2022, the Company entered into stock option agreements with 5 directors, pursuant to which the Company agreed to grant options to purchase an aggregate of 761,920 shares of common stock under the 2016 Equity Incentive Plan, at an exercise price of $ 3 per share, exercisable for 10 years from the grant date. As of June 30, 2024, these stock options have not been granted. Options issued and outstanding as of June 30, 2024, and their activities during the six months ended are as follows: Number of Underlying Shares (post-split) Weighted- Average Exercise Price Per Share Weighted- Average Contractual Life Remaining in Years Aggregate Intrinsic Value Outstanding as of January 1, 2024 258,710 $ 27.9 7.74 $ - Granted - - - - Forfeited - - - - Outstanding as of June 30, 2024 258,710 27.9 7.25 $ - Exercisable as of June 30, 2024 258,710 27.9 7.25 $ - Vested and expected to vest 258,710 $ 27.9 7.25 $ - There are 386,021 options (post-split) available for grant under the 2016 Equity Incentive Plan as of June 30, 2024. Compensation costs associated with the Company’s stock options are recognized, based on the grant-date fair values of these options over vesting period. Accordingly, the Company recognized $0 stock-based compensation expense for the six months ended June 30, 2024 and 2023, respectively. There were no options exercised during the six months ended June 30, 2024. As of June 30, 2024, there were no unvested options. The fair value of stock options granted for the year ended December 31, 2023 was calculated using the Black-Scholes option-pricing model applying the following assumptions: Year ended December 31, 2023 Risk free interest rate 2.79 % Expected term (in years) 5.00 Dividend yield 0 % Expected volatility 83.86 % 14. LOSS PER SHARE Basic loss per share is computed by dividing net loss by the weighted-average number of common stock outstanding during the year. Diluted loss per share is computed by dividing net loss by the weighted-average number of common stock and dilutive potential common stock outstanding during the three and six months ended June 30, 2024 and 2023. For the Three Months Ended June 30, 2024 June 30, 2023 (Unaudited) Numerator: Net loss attributable to ABVC’s common stockholders $ ( 1,012,645 ) $ ( 2,263,511 ) Denominator: Weighted-average shares outstanding: Weighted-average shares outstanding - Basic 11,321,277 3,308,074 Stock options - - Weighted-average shares outstanding - Diluted 11,321,277 3,308,074 Loss per share -Basic and Diluted $ ( 0.09 ) $ ( 0.68 ) 31 For the Six Months Ended June 30, 2024 June 30, 2023 (Unaudited) Numerator: Net loss attributable to ABVC’s common stockholders $ ( 4,945,621 ) $ ( 4,087,206 ) Denominator: Weighted-average shares outstanding: Weighted-average shares outstanding - Basic 10,529,651 3,307,826 Stock options - - Weighted-average shares outstanding - Diluted 10,526,951 3,307,826 Loss per share -Basic and Diluted $ ( 0.47 ) $ ( 1.24 ) Diluted loss per share takes into account the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised and converted into Common Stock. 15. LEASE The Company adopted FASB Accounting Standards Codification, Topic 842, Leases (“ASC 842”) using the modified retrospective approach, electing the practical expedient that allows the Company not to restate its comparative periods prior to the adoption of the standard on January 1, 2019. The Company applied the following practical expedients in the transition to the new standard and allowed under ASC 842: ● Reassessment of expired or existing contracts: The Company elected not to reassess, at the application date, whether any expired or existing contracts contained leases, the lease classification for any expired or existing leases, and the accounting for initial direct costs for any existing leases. ● Use of hindsight: The Company elected to use hindsight in determining the lease term (that is, when considering options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of right-to-use assets. ● Reassessment of existing or expired land easements: The Company elected not to evaluate existing or expired land easements that were not previously accounted for as leases under ASC 840, as allowed under the transition practical expedient. Going forward, new or modified land easements will be evaluated under ASU No. 2016-02. ● Separation of lease and non- lease components: Lease agreements that contain both lease and non-lease components are generally accounted for separately. ● Short-term lease recognition exemption: The Company also elected the short-term lease recognition exemption and will not recognize ROU assets or lease liabilities for leases with a term less than 12 months. The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. The Company’s future minimum based payments used to determine the Company’s lease liabilities mainly include minimum based rent payments. As most of Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. 32 The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, unamortized lease incentives provided by lessors, and restructuring liabilities. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in Selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur. The Company has no finance leases. The Company’s leases primarily include various office and laboratory spaces, copy machine, and vehicles under various operating lease arrangements. The Company’s operating leases have remaining lease terms of up to approximately five years. June 30, 2024 December 31, 2023 (Unaudited) ASSETS Operating lease right-of-use assets $ 607,001 $ 809,283 LIABILITIES Operating lease liabilities (current) 378,199 401,826 Operating lease liabilities (non-current) 228,802 407,457 Supplemental Information The following provides details of the Company’s lease expenses: Three Months Ended June 30, 2024 2023 (Unaudited) Operating lease expenses $ 100,685 $ 97,577 Six Months Ended June 30, 2024 2023 (Unaudited) Operating lease expenses $ 199,187 $ 191,876 Other information related to leases is presented below: Six months Ended June 30, 2024 2023 (Unaudited) Cash paid for amounts included in the measurement of operating lease liabilities $ 199,187 $ 191,876 33 June 30, 2024 December 31, 2023 Weighted Average Remaining Lease Term: Operating leases 1.1 years 1.73 years Weighted Average Discount Rate: Operating leases 1.4 % 1.5 % The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows: Operating leases 2024 (excluding six months ended June 30, 2024) $ 201,371 2025 350,615 2026 56,916 2027 - 2028 - Thereafter - Total future minimum lease payments, undiscounted 608,902 Less: Imputed interest ( 1,901 ) Present value of future minimum lease payments $ 607,001 16. SUBSEQUENT EVENTS In July 2024, the Company entered into an agreement with its landlord in California, pursuant that the Company will issue 169,992 shares of common stock for the rent payable through July 2024, in total of $ 127,494 . The Company will also issue variable number of shares equivalent to the August and September 2024 rent amount in total of $ 64,147 at the average VWAP (Volume Weighted Average Price) of last five trading days of July 2024. These shares are restricted for six months from the issuance but no later than February 15, 2025. 169,992 shares were issued on July 25, 2024. In June 2024, the Company entered into a stock purchase agreement with an investor, which the Company will issue 41,387 shares of common stock at $ 0.75 per share to the investor for cash. As of June 30, 2024, the proceeds was received. Due to certain stock transfer processes, the Company’s shareholder transferred such shares to this investor on behalf of the Company in July 2024. The Company plans to issue these shares to the transferring shareholder once the process is complete. $ 31,040 was booked as “Stock to be issued” on the consolidated balance sheet. Except as disclosed above, the Company has evaluated subsequent events and transactions that occurred after June 30, 2024 up through the date the Company issued these unaudited consolidated financial statements on August 14, 2024. All subsequent events requiring recognition as of June 30, 2024 have been incorporated into these unaudited consolidated financial statements and there are no other subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.” 34