ABVC

Business Context and Reporting Period

Company: American BriVision (Holding) Corporation (formerly Metu Brands, Inc.)
Filing Type: Form 10-Q (Unaudited)
Period Ended: March 31, 2016
Business Overview: The Company is a holding company operating through its wholly-owned subsidiary, American BriVision Corporation ("BriVision"). Following a reverse merger and share exchange completed in February 2016, the Company abandoned its prior business plan to focus on biotechnology, specifically the development of new drugs and medical devices. The business model involves integrating research from institutions like MSKCC and MD Anderson, conducting clinical trials for Proof of Concept (POC), and out-licensing to pharmaceutical companies.

Key Financial Metrics

Note: The Company reported no revenue and no research and development expenses for the six months ended March 31, 2016.

Material Changes vs. Prior Period

• Reverse Merger: On February 8, 2016, the Company consummated a share exchange with BriVision. BriVision is deemed the accounting acquirer. BriVision shareholders now own approximately 79.70% of the Company. The Company's historical operations prior to this date are those of BriVision.
• Stock Split: A forward stock split of 1 to 3:141 was approved on March 21, 2016, and became effective on April 8, 2016, increasing authorized shares to 360,000,000.
• Operating Expenses: Operating expenses decreased significantly compared to the prior period (July 21, 2015, to September 30, 2015). For the three months ended March 31, 2016, expenses were $108,732 compared to $315,602 in the prior period. This reduction is attributed to fewer professional fees.
• Liabilities: Total liabilities dropped from $369,103 as of September 30, 2015, to $5,723 as of March 31, 2016, primarily due to the settlement of amounts due to related parties and shareholders.

Guidance, Outlook, Risks, and Contingencies

• Revenue Outlook: Management states that most licensed products are in the development and trial stages. No revenue is expected in the near term.
• Liquidity and Capital Needs: The Company explicitly states it does not believe it has sufficient funds to operate for the next 12 months. It requires additional capital to meet long-term operating requirements and cannot guarantee future financing will be available. Failure to raise capital could force the Company to cease operations.
• Material Commitment: On December 29, 2015, the Company entered a Collaborative Agreement with BioLite, Inc. (a related party) for sole licensing rights to five drug candidates. The total consideration is $100,000,000, payable in cash or stock upon specific milestones (IND submission, Phase II/III completion, NDA submission). The first payment (3.5%) was due upon signing.
• Internal Controls: Management concluded that disclosure controls and procedures were not effective as of March 31, 2016, citing a lack of segregation of duties and monitoring. A new CFO was appointed in February 2016 to address these weaknesses.
• Risk Factors: Risks include limited operating history, dependence on future financing, volatility in the "penny stock" market, and the inherent risks of drug development and clinical trials.

Investor Verification Checklist

• Capital Sufficiency: Verify the Company's ability to raise the necessary capital to fund operations for the next 12 months, given the explicit statement of insufficient funds.
• Licensing Agreement Terms: Review the specific terms of the $100,000,000 licensing agreement with BioLite, Inc., particularly the payment schedule and the status of the upfront payment.
• Related Party Transactions: Scrutinize the relationship with BioLite, Inc., noting that the Company's CEO is also a director of BioLite.
• Internal Control Remediation: Monitor progress on the remediation of material weaknesses in internal controls over financial reporting.
• Stock Split Impact: Confirm the effective date and impact of the 1 to 3:141 forward stock split on share ownership and trading.