PROSPECTUS SUMMARY

 

This summary highlights selected information from this prospectus and may not contain all of the information that is important to you. To better understand the Mergers, you should read this entire prospectus carefully, including the Merger Agreement attached as Exhibit 2.1, the opinion of The Benchmark Company, LLC (“Benchmark”) attached as Exhibit 99.1 and the other annexes to which you are referred herein. For more information, please see the section entitled “Where You Can Find More Information” in this prospectus.

 

Parties to the Mergers

 

American BriVision (Holding) Corporation

11 Sawyers Peak Drive

Goshen, NY 10924

(845) 291-1291

 

ABVC is a clinical stage biopharmaceutical company focused on utilizing its licensed technology to (i) further the development of pharmaceutical products with focuses on cancer and central nervous system indications, (ii) seek regulatory approvals for their drug candidates, and (iii) after receiving necessary regulatory approval, collaborate with selected pharmasecutical companies to commercialize such pharmaceutical products in various markets. ABVC’s business model includes the following stages: 1) engaging qualified medical research institutions to conduct clinical trials of translational drug candidates for Proof of Concept (“POC”) on behalf of the Company; 2) retaining ownership of the research results by the Company, and 3) out-licensing the research results and data to qualified pharmaceutical companies that will develop its research results to commercially ready pharmaceutical products. The Company is focused on clinical research and development on five new drug candidates and one Class III medical device, which collectively are its primary business operations. Since inception, the Company has not gerenated revenue from its primary operations.

 

BioLite Acquisition Corp.

11 Sawyers Peak Drive

Goshen, NY 10924

(845) 291-1291

 

BioLite Acquisition Corp. is a Nevada corporation and a direct wholly-owned subsidiary of ABVC which was formed by ABVC for the purpose of acquiring all equity interest in BioLite. Merger Sub 1 has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the BioLite Merger.

 

BioKey Acquisition Corp.

11 Sawyers Peak Drive

Goshen, NY 10924

(845) 291-1291

 

BioKey Acquisition Corp. is a California corporation and a direct wholly-owned subsidiary of ABVC which was formed by ABVC for the purpose of acquiring all equity interest in BioKey. Merger Sub 2 has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the BioKey Merger.

 

BioLite Holding, Inc.

20 Shengyi Road Section 2, 2 ^nd Fl.

Zhubei City, Hsinchu County, Taiwan

Telephone: 886-2-7720-8311

 

BioLite is a clinical stage pharmaceutical company focused on translational research of botanical and natural active pharmaceutical ingredients (“API”) based products in the fields of central nervous system, oncology/ hematology and autoimmune diseases. Because BioLite believes natural substances have many healing powers, BioLite focuses its research resources to the development of botanical products, which include plant materials, algae, macroscopic fungi and combinations thereof. BioLite mostly uses traditional cultivation, fermentation and purification techniques, excluding genetic modifications, to process the active natural constituents of its drug candidates. Its operational activities primarily focus on researching and developing novel botanical and natural drugs utilizing scientific methodology and approaches in compliance with the procedures and protocols prescribed by the U.S. Food and Drug Administration (the “FDA”). BioLite’s primary operations are located in Taiwan.

 

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BioKey, Inc.

44370 Old Warm Springs Blvd.

Fremont, CA 94538

Phone: 510-668-0881

 

BioKey is a specialty pharmaceutical company that has two main business lines: i) technologies of platform-based control release of active pharmaceutical ingredients and ii) integrated pharmaceutical services, such as clinical research contracting services, generic drug development, drug manufacturing and related pharmaceutical consulting. BioKey’s core expertise is the application of its proprietary oral control release technology to develop generic and branded pharmaceuticals and nutraceuticals. BioKey has four abbreviated new drug applications (“ANDA”s) approved by the FDA and more than ten generic and ANDA product candidates in the pipeline. In addition, Biokey provides integrated pharmaceutical services, including analytical services and pharmaceutical and nutraceutical product development and manufacturing.

 

The Mergers

 

The following description of the Mergers is not purported to be complete and the Merger Agreement dated January 31, 2018 is incorporated by reference, a copy of which is attached as Exhibit 2.1.

 

Reasons for the Mergers

 

Each of the board of directors of the Company, BioLite and BioKey considered the reasons for the Mergers, as described herein.

 

The Company’s Board of Directors considered the following factors in reaching its conclusion to approve the Mergers, all of which the Company’s Board of Directors viewed as supporting its decision to approve the business combination with BioLite and BioKey:

 

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The Company’s Board of Directors believes that the BioLite Merger is a vertical integration of the new drug development and the BioKey Merger is a horizontal integration of the pharmaceutical contracting and manufacturing business. The Board expects that the vertical integration of BioLite will enable ABVC to encompass the full spectrum of translational research for the new drug development from academic research outcomes, through preclinical animal studies, to POC human clinical trials. The Company’s Board hopes that the horizontal integration of BioKey will expand its business scope from a research-oriented entity to a revenue-generating Contract Development and Manufacturing Organization (“CDMO”). In reaching this belief, the Company’s Board considered that BioLite in the new drug development business, BioKey as a CDMO and ABVC in the clinical trial stage of new drug development have different business models, risks profiles, suppliers and customers, the combination of the three entities may mitigate sector specific exposure and associated risks.

 

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The Company’s Board of Directors considered that following the Mergers, ABVC will operate as a single entity with three relatively separate but integrated strategic business units (“SBU”), which are 1) New Drug Development SBU, including the new drug pipeline products from BioLite and the patented controlled release drug delivery technology from BioKey, 2) Innovative Medical Devices SBU, currently focusing on the development of Vitargus, a new invention of a biocompatible vitreous substitute for the treatment of rectinal detachment and vitreous hemorrhage, and 3) CDMO SBU, providing contract services for pharmaceutical companies in the U. S. and abroad to develop and manufacture new drug products in BioKey’s Good Manufacturing Practice certified (“GMP”) facility and conduct clinical studies to seek various types of FDA approvals for the combined entity’s own products and its clients’ products.  While each of these SBUs will be operated independent of one another, they will report to the same management team and share common resources and functions, including, but not limited to, administration, accounting, human resources, research and development, business development, legal, manufacturing facilities, and office and laboratory spaces. The Company’s Board expects that the sharing of common functions and resources will bring mutual operational and financial benefits to BioLite, BioKey and ABVC. While after the Mergers each SBU has its unit leader and reports to the parent entity (ABVC), the combined organization will be led by an experienced management team consisting of ABVC’s current management team and the Board of Directors with representation from each board of directors of BioLite, BioKey and ABVC.

 

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The Company’s current Board of Directors concluded that the Mergers would provide the existing ABVC shareholders an opportunity to participate in the potential growth of the combined organization in the expanded pharmaceutical segments, including, without limitation, CDMO, oral control release technology and new drug applications in the autoimmune field.

 

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The Company’s Board of Directors also considered that the combined organization will be led by an experienced senior Board of Directors with representation from each of the current boards of directors of ABVC, BioLite and BioKey.

 

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The Company’s Board of Directors considered the financial analyses of The Benchmark Company, LLC (“Benchmark”), included in its opinion to the Board as to the fairness to the shareholders of ABVC, from a financial point of view and as of ____, 2018, the date of the opinion, of the exchange ratio.

 

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The expenses to be incurred in connection with the Mergers;

 

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The possible volatility, at least in the short term, of the trading price of the Company’s Common Stock resulting from the announcement of the Mergers;

 

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The strategic direction of the combined entity following the completion of the Mergers where the Company will operate as a single entity with three strategic business units, these SBUs will share common resources and functions, including, but not be limited to, human resources, legal, facilities, back office operations and administrative support.  The sharing of common functions and resources will be of mutual operational and financial benefits;

  

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The potentially strengthened balance sheet of the combined organization resulting from (i) that additional revenues from BioKey, and (ii) cost-savings on the sharing of the common expenses and costs;

 

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The Merger Consideration which is in the form of equity and not cash;

 

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The market price for the Company’s Common Stock and its impact on the Company’s ability to raise capital as a stand-alone entity;

 

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The Company’s history of losses over the prior years since its inception and its impact on the Company’s ability to raise capital as a stand-alone entity;

 

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The Company’s current economic condition and difficulties to be faced as a standalone company; and

 

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Various other risks associated with the combined organization and the Mergers, including those described in the section entitled “Risk Factors” in this prospectus.

 

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Overview of the Merger Agreement

 

1.

Structure of the Mergers

 

ABVC, BioLite and BioKey have entered into a Merger Agreement pursuant to which Merger Sub 1 will be merged with and into BioLite with BioLite surviving the BioLite Merger and Merger Sub 2 will merge with and into BioKey, which will be the surviving corporation. Upon consummation of the Mergers, BioLite and BioKey will be direct separate wholly-owned subsidiaries of ABVC.

 

2.

Merger Consideration

 

At the effective time of the Mergers (the “Effective Time”), each of the outstanding shares of BioLite capital stock, consisting solely of common stock, will be converted into the right to receive 1.82 shares of ABVC common stock, par value $0.001 per share and each of the outstanding shares of BioKey capital stock, consisting of common stock and Series A preferred stock, Series B preferred stock and Series C preferred stock, will be converted into the right to receive one (1) share of ABVC common stock, par value $0.001 per share.

 

3.

Ownership of ABVC Following the Mergers

 

In connection with the Mergers, ABVC will issue up to approximately 104.5 million shares of its common stock. Upon completion of the Mergers, ABVC, BioLite and BioKey estimate that current ABVC stockholders will own approximately 67% of the then outstanding shares of ABVC’s common stock, current BioLite stockholders will own approximately 24% of the then outstanding shares of ABVC common stock measured on an “as-converted” basis as of the Effective Time, and current BioKey stockholders will own approximately 9% of the then outstanding shares of ABVC common stock measured on an “as-converted” basis as of the Effective Time.

 

Lock-up Agreements

 

[To be updated]

 

Indemnification

 

The Merger Agreement provides that as of the Effective Time of the Mergers), each of ABVC, BioLite and BioKey (collectively the “Surviving Corporations”) shall indemnify and hold harmless each present (as of the Effective Time) and former officer, director or employee of such Surviving Corporation and its subsidiaries (the “Indemnified Parties”), against all claims, losses, liabilities, damages, judgments, inquiries, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any suit, claim, action, proceeding, arbitration, mediation or governmental investigation, whether civil, criminal, administrative or investigative (an “Action”), arising out of or pertaining to the fact that the Indemnified Party is or was an officer, director, fiduciary or agent of BioLite or BioKey, as applicable or any of their respective subsidiaries or another entity if such service to the other entity was at the request or for the benefit of BioLite or BioKey, as applicable or any of their respective subsidiaries, whether asserted or claimed prior to, at or after the Effective Time, to the extent provided under applicable law and BioLite or BioKey’s or a subsidiary’s Articles of Incorporation or Bylaws, as applicable, as at the date hereof. In the event of any such Action, each Indemnified Person shall be entitled to advancement of expenses incurred in the defense of any Action from the applicable Surviving Corporation to the fullest extent that BioLite or BioKey or their respective subsidiaries, as applicable, would be permitted under applicable law and BioLite’s, BioKey’s, or their respective subsidiaries’ Articles of Incorporation or Bylaws, as applicable, as at the date hereof; provided, that such Person shall execute and deliver an undertaking that such Person shall return such amounts to BioLite or BioKey, as applicable, if it is determined that such Person was not entitled to such funds. For a period of not less than five (5) years after the Effective Time, ABVC shall cause to be in effect either (i) BioLite’s and BioKey’s and their respective subsidiaries’ directors’ and officers’ liability insurance covering each Person currently covered by BioLite’s and BioKey’s liability insurance for acts or omissions occurring prior to the Effective Time by way of purchasing a “tail” or (ii) ABVC may substitute thereof policies of another insurance company.

 

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Directors and Officers Following the Mergers

 

Pursuant to the Merger Agreement, ABVC’s Board of Directors will consist of eleven (11) directors, five of whom are current members of the Board, five of whom are director nominees identified by BioLite and one of whom is a director nominee identified by BioKey. The appointment of the six new director nominees shall be effective upon the Closing of the Mergers.

 

The following table lists the names and positions of the individuals who are expected to serve as executive officers and directors of ABVC upon completion of the Mergers:

 

Name		Title
Eugene Jiang		Chairman of the Board and Interim Chief Financial Officer
Tsang Ming Jiang		Director
Ming-Fong Wu		Independent Director
Norimi Sakamoto		Independent Director
Yen-Hsin Chou		Independent Director
Tsung-Shann Jiang		Director and Chief Executive Officer of BioLite Surviving Corporation
Chang-Jen Jiang		Director
Shin-Yu Miao		Independent Director
Yoshinobu Odaira		Independent Director
Shih-Chen Tzeng		Independent Director
Hwalin Lee		Director and chairman of the board of directors of BioKey Surviving Corporation
Howard Doong		Chief Executive Officer
Chi-Hsin (Richard) King		Chief Science Officer

 

ABVC believes in good faith that at the Effective Time, it will have at least six (6) independent directors as defined by The Nasdaq Stock Market LLC. Six (6) directors will constitute a majority of ABVC’s Board of Directors at the Effective Time.

 

Further, following the completion of the Mergers, Dr. Howard Doong, Dr. Chi-Hsin (Richard) King and Mr. Eugene Jiang will remain as the Chief Executive Officer, Chief Science Officer and interim Chief Financial Officer, respectively, of ABVC and the terms and provisions of their respective employment agreements with ABVC, as applicable, shall remain the same until such agreements expire or are terminated accordingly.

 

Fairness Opinion of Benchmark

 

ABVC retained Benchmark on May 14, 2018 to act as its financial advisor in connection with the Mergers. On ____, Benchmark rendered its opinion to ABVC’s Board of Directors to the effect that, as of that date and based on and subject to the matters described in Benchmark’s opinion, the consideration to be issued by ABVC in connection with the Merger (in accordance with the terms of the Merger Agreement, dated as of January 31, 2018 was ____, from a financial point of view, to the stockholders of ABVC. Benchmark is a full service investment banking firm dedicated to the small-cap public market. Benchmark plans to assess the value of the Merger Consideration using publicly available and other information provided by the Company, such as financial information including financial performance and operating data of the Company, BioLite and BioKey. In addition, Benchmark engaged in discussions with management of the Company with respect to past and current operations and financial condition and prospects of the Company, BioLite and BioKey and the strategic rationale for, and the potential benefits of, the Mergers. Benchmark will receive $100,000 in totoal for the fairness opinion.

 

The full text of Benchmark’s written opinion, dated as of ______, which describes the assumptions made, procedures followed, matters considered and limitations on the reviews undertaken, will be attached as Exhibit 99.1 to this prospectus, and is incorporated by reference herein. The summary of the Benchmark opinion set forth in this prospectus is qualified by its entirety. A copy of the fairness opinion will be attached as Exhibit 99.1 to this prospectus and is incorporated by reference in its entirety herein.

 

The holders of ABVC stock are urged to read the Benchmark opinion carefully and in its entirety. Benchmark provided its opinion for the information and assistance of the ABVC Board of Directors. Benchmark’s opinion is not intended to be, and does not constitute a recommendation for or against the BioLite Merger or the BioKey Merger.

 

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For a more complete description of the written opinion of Benchmark, see “The Merger—Fairness Opinion of Benchmark” beginning on page 60.

 

Interest of Certain Directors and Executive Officers

 

Certain members of management of the Company have interests which may be different from your interests as shareholders of the Company.

 

Eugene Jiang is a member of the Company’s Board of Directors and Tsung-Shann Jiang, Eugene Jiang’s father, is the Chief Executive Officer and a member of the Board of Directors of BioLite and will be a member of the Company’s Board of Directors after the consummation of the BioLite Merger. Accordingly, Messrs. Eugene Jiang and Tsung-Shann Jiang have a substantial interest in approval of the BioLite Merger. The other members of the Board and executive officers of the Company do not have any interest in any that is not shared by all other shareholders of the Company.

 

Material U.S. Federal Income Tax Consequneces of the Mergers

 

Generally

 

The following discussion summarizes the material U.S. federal income tax consequences of the Merger to U.S. holders (as defined below) of BioLite and BioKey capital stock. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, administrative pronouncements and judicial decisions currently in effect, all of which are subject to change, possibly with retroactive effect.  Any such change could affect the accuracy of this discussion.

 

This discussion assumes you hold shares of BioLite or BioKey capital stock as capital assets within the meaning of Section 1221 of the Code.  This discussion does not address all aspects of U.S. federal income taxation that may be relevant to you in light of your particular circumstances or to U.S. holders of BioLite or BioKey capital stock subject to special treatment under the federal income tax laws such as:

 

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insurance companies;

 

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investment companies;

 

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tax-exempt organizations;

 

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financial institutions;

 

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dealers in securities or foreign currency;

 

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banks or trusts;

 

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persons that hold BioLite or BioKey capital stock as part of a straddle, hedge, constructive sale or other integrated security transaction;

 

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persons that have a functional currency other than the U.S. dollar;

 

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investors in pass-through entities; or

 

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persons who acquired their BioLite or BioKey capital stock through the exercise of options or otherwise as compensation or through a tax-qualified retirement plan.

 

Further, this discussion does not consider the potential effects of any state, local or foreign tax laws or U.S. federal tax laws other than federal income tax laws.

 

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This discussion is not intended to be tax advice to any particular holder of BioLite or BioKey capital stock.  Tax matters regarding the Merger are complicated, and the tax consequences of the Merger to you will depend on your particular situation.  You should consult your own tax advisor regarding the specific tax consequences to you of the Merger, including the applicability and effect of federal, state, local and foreign income and other tax laws.

 

Reporting and Retention Requirements

 

If you receive the Merger Consideration as a result of the Mergers, you are required to retain certain records pertaining to the Mergers pursuant to the Treasury Regulations under the Code.  If you are a “significant holder” (as defined in the Treasury Regulations under the Code) of BioLite or BioKey capital stock, you must file with your U.S. federal income tax return for the year in which the Mergers take place a statement setting forth certain facts relating to the Mergers.  You are urged to consult your tax advisors concerning potential reporting requirements.

 

Material Taiwan Income Tax Consequences of the Mergers

 

In the view of  __________, by reasonable interpretation of the Republic Of China Mergers and Acquisitions Act based on current rules and regulations promulgated by Republic Of China tax authority, shareholders of the Company should not be subject to Republic Of China securities transaction tax upon the completion of Mergers. Taiwanese holders of BioLite and BioKey capital stock are strongly encouraged to seek advice from his or her tax advisors regarding the Taiwan tax consequences that could be incurred in connection with the Mergers.

 

For further information, see section entitled “Taiwan Tax Consequences to Taiwanese Holders of ABVC, BioLite or BioKey Stock,” beginning on page 63.

 

Appraisal Rights

 

Under the Nevada Revised Statutes and ABVC’s charter documents, holders of our Common Stock will not be entitled to statutory rights of appraisal, commonly referred to as dissenters’ rights or appraisal rights (i.e., the right to seek a judicial determination of the “fair value” of their shares and to compel the purchase of their shares for cash in that amount) with respect to the BioLite Merger and BioKey Merger.

 

With respect to the holders of BioLite securities, they are entitled to the statutory rights of appraisal in the BioLite Merger under NRS 92A.120 to 92A.160, inclusive, of the Nevada Revised Statutes and BioLite’s charter documents. With respect to the holders of BioKey securities, they are entitled to the statutory rights of appraisal in the BioKey Merger under the Chapter 13 of California Corporations Code and BioKey’s charter documents.

 

Anticipated Accounting Treatment

 

Due to the fact that ABVC will remain control of BioLite and BioKey as a result of the Mergers, the Mergers will be accounted for as a regular acquisition pursuant to which ABVC will be considered the acquiring entity for accounting purposes in accordance with generally accepted accounting principles in the United States of America, referred to as “U.S. GAAP.” See “The Merger – Anticipated Accounting Treatment” on page 63.

 

Regulatory Matters

 

The Merger does not meet the thresholds for furnishing premerger notification and other information to the Antitrust Division of the U.S. Department of Justice and the U.S. Federal Trade Commission (the “FTC”) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the parties are not aware of any other regulatory filings or approvals that are required in connection with the Mergers.

 

For a more complete discussion of regulatory matters relating to the merger, see “The Merger—Regulatory Approvals Required for the Merger” beginning on page 60.

 

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Conditions to Completion of the Mergers

 

Mutual Conditions : The obligations of ABVC, BioLite and BioKey to consummate the Mergers and the other transactions described in the Merger Agreement are subject to the satisfaction or waiver of the following conditions:

 

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Each of ABVC, BioLite and BioKey shall have received and approved the due diligence reports on each other and the updated Schedule of Exceptions to the Merger Agreement on or before Closing.

 

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This prospectus on Form S-4 shall have become effective under the Securities Act of 1933, as amended (the “Securities Act”) and shall not be the subject of any stop order or proceedings seeking a stop order.

 

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The Company’s Board of Directors shall consist of eleven persons as set forth on page 64 of this prospectus.

 

	●	No law (whether temporary, preliminary or permanent) shall have been enacted, entered, promulgated or enforced, nor any injunction shall have been issued and be in effect, by any United States or state court or United States Governmental Body which prohibits, restrains or enjoins the consummation of the Mergers.
	●	Benchmark will have delivered to ABVC the Fairness Opinion, which will have been included in the Prospectus  on Form S-4  that has been declared effective by the SEC.

 

Conditions to Obligations of BioLite . The obligations of BioLite to consummate BioLite Merger are also subject to the satisfaction or waiver by BioLite of the following conditions:

 

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The Merger Agreement shall have been approved by the stockholders of BioKey.

 

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The representations and warranties of Parent, BioKey, Merger Subs (solely with respect to the BioKey Merger) set forth in the Merger Agreement shall be true and correct in all material respects as of the Effective Time of the Merger as though made on and as of the Effective Time.

 

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The Parent and BioKey shall have complied in all material respects with their respective obligations set forth in the Merger Agreement.

  

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Merger Sub 1 shall have delivered 1.82 shares of the Company’s common shares for each share of BioLite’s common stock (“BioLite Merger Consideration” or “BioLite Exchange Ratio”).

 

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BioLite shall have received certificates from the Parent and BioKey certifying that the conditions precedent listed in the Merger Agreement have been satisfied or waived.

 

Conditions to Obligations of BioKey . The obligations of BioKey to consummate the BioKey Merger are also subject to the satisfaction or waiver by BioKey of the following conditions:

 

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The Merger Agreement shall have been approved by the stockholders of BioLite.

 

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The representations and warranties of Parent, BioLite (solely with respect to the BioLite Merger), Merger Subs set forth in the Merger Agreement shall be true and correct in all material respects as of the Effective Time of the Merger as though made on and as of the Effective Time.

 

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The Parent and BioLite shall have complied in all material respects with their respective obligations set forth in the Merger Agreement.

 

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Merger Sub 2 shall have delivered one (1) share of the Company’s common stock for each share of BioKey’s common stock (“BioKey Merger Consideration” or “BioKey Exchange Ratio”).

 

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BioKey shall have received certificates from the Parent and BioLite certifying that the conditions precedent listed in the Merger Agreement have been satisfied or waived.

 

Conditions to Obligations of ABVC or the Parent. The obligations of ABVC to consummate the Mergers are also subject to the satisfaction or waiver by ABVC of the following conditions:

 

	●	The Merger Agreement shall have been approved by the stockholders of BioLite and BioKey, respectively.
	●	BioLite shall have obtained and delivered to Parent any consent or authorization set forth on Schedule 3.5(a) of the BioLite Schedule of Exceptions.
	●	BioKey shall have obtained and delivered to Parent any consent or authorization set forth on Schedule 4.5(a) of the BioLite Schedule of Exceptions.

 

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	●	Holders owning no more than five percent (5%), in the aggregate, of the outstanding BioLite Common Stock shall have perfected and not withdrawn a demand for dissenters’ rights pursuant to the Nevada Revised Statute and Section 2.3 of the Merger Agreement.
	●	Holders owning no more than five percent (5%), in the aggregate, of the outstanding BioKey Common Stock shall have perfected and not withdrawn a demand for dissenters’ rights pursuant to the California General Corporate Law and Section 2.3 of the Merger Agreement.
	●	ABVC shall have received certificates executed on behalf of BioLite by the chief executive officer of BioLite certifying that the conditions set forth in Section 8.2(a) and (b) of the Merger Agreement have been satisfied.
	●	ABVC shall have received certificates executed on behalf of BioKey by the chief executive officer of BioKey certifying that the conditions set forth in Section 8.2(a) and (b) of the Merger Agreement have been satisfied.

 

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The representations and warranties of BioLite (solely with respect to the BioLite Merger), BioKey (solely with respect to the BioKey Merger), Merger Subs set forth in the Merger Agreement shall be true and correct in all material respects as of the Effective Time of the Mergers as though made on and as of the Effective Time.

 

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BioKey and BioLite shall have complied in all material respects with their respective obligations set forth in Article 6 Conduct of Business Pending the Merger, and Article 7 Additional Agreements of the Merger Agreement.

  

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ABVC shall have received opinions of counsel of BioLite (solely with respect to the BioLite Merger) and (solely with respect to the BioKey Merger) BioKey in a form reasonably acceptable to ABVC.

 

For a more complete discussion of the conditions to the Mergers, see “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 66.

 

Timing of the Mergers

 

The Mergers are expected to be completed on or before July 31, 2018 which may be extended with written consent of all Parties involved in the Merger Agreement, subject to the receipt of any necessary regulatory approvals and the satisfaction or waiver of other closing conditions.

 

For a more complete discussion of the timing of the merger, see “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 66.

 

Interests of Certain of the Company’s Directors and Executive Officers in the Mergers

 

Certain BioLite’s and BioKey’s directors and officers have interests in the Mergers that are different from, or in addition to, interests as a stockholder of BioLite or BioKey. Eugene Jiang is a member of the Company’s Board of Directors and Tsung-Shann Jiang, Eugene Jiang’s father, is the Chief Executive Officer and a member of the Board of Directors of BioLite and will be a member of the Company’s Board of Directors after the consummation of the Merger. Accordingly, Messrs. Eugene Jiang and Tsung-Shann Jiang have a substantial interest in approval of the Merger. The other members of the Board and executive officers of the Company do not have any interest in any that is not shared by all other shareholders of the Company.

 

Restrictions on Alternative Transactions

 

The Merger Agreement contains restrictions on the ability of BioLite and BioKey to solicit or engage in discussions or negotiations with a third party with respect to a proposal to acquire a significant interest in the applicable company. Notwithstanding these restrictions, the Merger Agreement provides that under specified circumstances, if either party receives an acquisition proposal from a third party that constitutes a superior proposal, defined in the Merger Agreement as BioLite Superior Proposal and BioKey Superior Proposal, as applicable, it may furnish nonpublic information to that third party and engage in negotiations to enter into a definitive agreement regarding the superior proposal with that third party. Prior to withdrawing or adversely modifying its recommendation in favor of the BioLite Merger or BioKey Merger in light of a superior proposal or entering into a definitive agreement regarding a superior proposal, the board of directors of BioLite or BioKey, as applicable, must give proper and timely written notice to the Parent of receiving such superior proposal and take into account any changes of the terms of this Merger Agreement that the Parent proposes in response to such superior proposal that BioLite or BioKey has received. See “The Merger Agreement—Restrictions on Alternative Transactions” on page 68.

 

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The restrictions on BioLite and BioKey limiting their ability to engage in alternative transactions with a third party may discourage a third party from pursuing a competing acquisition proposal that could result in greater value to BioLite’s stockholders or BioKey’s stockholders.

 

BioLite Superior Proposal and BioKey Superior Proposal are defined in the Merger Agreement to mean any bona fide written acquisition proposal on terms which BioLite’s or BioKey’s board of directors has determined in its good faith judgment are more favorable to the stockholders of BioLite or BioKey, as applicable, if consummated in accordance with its terms from a financial point of view than the transactions contemplated by the Merger Agreement, after consultation with their respective legal counsel and financial advisor and taking into account all financial, regulatory, legal and other aspects of such proposal and transaction and any changes to the terms of the Merger Agreement proposed by Parent.

 

Termination of the Merger Agreement

 

The Merger Agreement may be terminated prior to the closing date as follows:

 

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by mutual written consent of the Parent, each Merger Sub, BioLite and BioKey;

 

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by Parent, BioLite, or BioKey if any court of competent jurisdiction or other governmental body located or having jurisdiction within the United States shall have issued a final order, decree or ruling or taken any other final action restraining, enjoining or otherwise prohibiting the Mergers and such order, decree, ruling or other action is or shall have become final and nonappealable;

 

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by Parent, BioLite, or BioKey prior to the Effective Time, if the Effective Time shall not have occurred on or before July 31, 2018 (the “Termination Date”), provided that, the Termination Date may be extended upon the written consent of the Parties, which will not require any shareholder approval;

 

●

by BioLite if there shall have been a breach of any representation, warranty, covenant or agreement on the part of Parent, BioKey or either Merger Sub contained in the Merger Agreement and, in either such case, such breach shall not have been cured prior to the earlier of (A) fifteen (15) days following notice of such breach to Parent or BioKey, as applicable, and (B) the Termination Date; provided that BioLite is not in material breach of the Merger Agreement.

 

	●	by BioKey if there shall have been a breach of any representation, warranty, covenant or agreement on the part of Parent, BioLite or either Merger Sub contained in the Merger Agreement and, in either such case, such breach shall not have been cured prior to the earlier of (A) fifteen (15) days following notice of such breach to Parent or BioLite, as applicable, and (B) the Termination Date; provided that BioKey is not in material breach of the Merger Agreement;
	●	by ABVC if there shall have been a breach of any representation, warranty, covenant or agreement on the part of BioKey, BioLite or either Merger Sub contained in the Merger Agreement and, in either such case, such breach shall not have been cured prior to the earlier of (A) fifteen (15) days following notice of such breach to Parent or BioLite, as applicable, and (B) the Termination Date; provided that ABVC is not in material breach of the Merger Agreement;
	●	by BioLite in the event that BioLite receives a BioLite Superior Proposal in accordance with the terms and subject to the conditions of Section 7.4 of the Merger Agreement;
	●	by BioKey in the event that BioKey receives a BioKey Superior Proposal in accordance with the terms and subject to the conditions of Section 7.5 of the Merger Agreement;
	●	By ABVC in the event that the board of directors of BioLite withdraws or modifies in an adverse manner its recommendation for the BioLite Merger in accordance with Section 7.4 or that the board of directors of BioKey withdraws or modifies in an adverse manner its recommendation for the BioKey Merger in accordance with Section 7.5 of the Merger Agreement.

 

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Upon termination of the Merger Agreement in accordance with terms thereof, this Merger Agreement shall forthwith become void and there shall be no liability or obligation on the part of any party hereto, except for certain provisions surviving such termination and liabilities and damages arising from fraud or intentional breach of the Merger Agreement. Except as otherwise specifically provided in the Merger Agreement, each party shall bear its own fees and expenses in connection with the Merger Agreement and the transactions contemplated thereby.

 

See “The Merger Agreement—Termination,” beginning on page 68, for a more complete discussion of the circumstances under which the parties may terminate and under what circumstances a party will be required to pay certain fees.

 

Risk Factors

 

The Company and its shareholders are subject to various risks associated with the Mergers, including without limitation the following:

 

●

ABVC is a new company with a short operating history and has a history of operating losses;

 

●

Since ABVC has a limited operating history, it is difficult for potential investors to evaluate its business;

 

●

New drug development is an inherently risky and capital consuming business;

 

●

ABVC’s business is subject to extensive FDA regulations which may change at any time;

 

●

ABVC has no history in obtaining regulatory approval for, or commercializing, any new drug candidate;

 

●

ABVC’s collaborations with third parties for the development and commercialization of its new drug candidates may not be successful;

 

●

ABVC’s existing indebtedness may adversely affect its ability to obtain additional funds and may increase its vulnerability to economic or business downturns;

 

●

ABVC’s independent auditors have issued an audit opinion for the Company, which includes a statement describing the going concern status and its financial status creates a doubt whether ABVC will continue as a going concern; and

 

●

ABVC’s share price is volatile and may be influenced by numerous factors, some of which are beyond its control.

 

Comparison of Rights of BioKey, BioLite and ABVC Stockholders

 

BioKey is a California corporation. Both BioLite and ABVC are Nevada corporations. The shares of ABVC’s common stock that BioKey stockholders will receive in the BioKey Merger will be shares of a Nevada corporation. BioKey stockholder rights under California law and ABVC stockholder rights under Nevada law are different. In addition, the Articles of Incorporation of BioKey, which we refer to in this prospectus as the “BioKey Articles of Incorporation,” and the bylaws of BioKey, as amended, which we refer to in this prospectus as the “BioKey Bylaws,” contain provisions that are different from the articles of incorporation of ABVC, as amended which we refer to in this prospectus as the “ABVC Articles of Incorporation,” and the bylaws of ABVC, which refer to in this prospectus as the “ABVC bylaws.”

 

The shares of ABVC common stock that BioLite stockholders will receive in the BioLite Merger will be shares of a Nevada corporation. BioLite stockholder rights and ABVC stockholder rights can be different although both companies were formed under the Nevada law. For instance, the Articles of Incorporation of BioLite, which we refer to in this prospectus as the “BioLite Articles of Incorporation,” and the bylaws of BioLite, as amended, which we refer to in this prospectus as the “BioLite Bylaws,” contain provisions that are different from ABVC Articles of Incorporation and ABVC Bylaws.

 

For a summary of certain differences among the rights of BioKey, BioLite and ABVC stockholders, see “Comparison of Rights of BioKey, BioLite and ABVC Stockholders” beginning on page 174.

 

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SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED

  COMBINED FINANCIAL DATA

 

The following tables set forth selected historical consolidated financial data of the Company. The selected historical consolidated financial information as of and for the years ended September 30, 2017 and 2016 has been derived from the Company’s audited historical consolidated financial statements, and are contained in its Transition Annual Report on Form 10-KT for the fiscal year ended December 31, 2017 which is included herein into this prospectus. The selected historical consolidated financial information for the three months ended March 31, 2018 and 2017 has been derived from the Company’s unaudited historical consolidated financial statements for the same periods.

 

The following information is only a summary and should be read together with the Company’s management’s discussion and analysis of results of operations and financial condition and the Company’s consolidated financial statements and the notes related thereto incorporated herein into this prospectus.

 

Selected Historical Financial Data of ABVC

 

		December 31, 2017				September 30, 2017
Assets
Total Current Assets		$	2,643,332			$	2,754,851
Total Assets		$	2,643,332			$	2,754,851
Liabilities and Equity
Accrued expense		$	170,927			$	34,914
Due to related parties			4,229,320				4,113,000
Total Liabilities		$	4,400,247			$	4,147,914
Total Equity(Deficit)		$	(1,756,915	)		$	(1,393,063	)
Total Liabilities and Equity(Deficit)		$	2,643,332			$	2,754,851

 

		Three months ended				Years ended
		December 31, 2017				September 30, 2017				September 30, 2016
										(Restated)
Revenues		$	-			$	-			$	-
Cost of revenues			-				-				32
Gross profit			-				-				(32	)
Operating expenses
Selling, general and administrative expenses			289,731				707,142				599,303
Research and development expenses			45,701				3,151,162				10,000,000
Stock based compensation			17,362				138,038				397,960
Loss from operations			(352,794	)			(3,996,342	)			(10,997,295	)
Other income (expense)
Total other expenses			(28,420	)			(74,811	)			(9,668	)
Loss before provision income tax			(381,214	)			(4,071,153	)			(11,006,963	)
Provision for income tax			-				830				836
Net loss			(381,214	)			(4,071,983	)			(11,007,799	)

 

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The following tables set forth selected historical consolidated financial data of BioLite, Inc. The selected historical consolidated financial information as of and for the years ended December 31, 2017 and 2016 has been derived from BioLite’s audited historical consolidated financial statements, and are contained elsewhere in this prospectus.

 

The selected historical consolidated financial information for the three months ended March 31, 2018 and 2017 has been derived from BioLite’s unaudited historical consolidated financial statements for the same periods.

 

The following information is only a summary and should be read together with BioLite’s management’s discussion and analysis of results of operations and financial condition and its consolidated financial statements and the notes related thereto included elsewhere in this prospectus.

 

Selected Historical Financial Data of BioLite

 

BIOLITE HOLDING, INC. AND SUBSIDIARIES

 

		December 31,				December 31,
		2017				2016
ASSETS
Total Current Assets		$	760,973			$	5,435,758
Long-term investments			4,185,969				3,594,241
Total Assets		$	6,604,291			$	10,420,520
LIABILITIES AND EQUITY
Due to related parties		$	2,390,498			$	319,910
Total Current Liabilities		$	4,088,430			$	1,564,042
Total Liabilities		$	4,144,120			$	1,564,042
Total Stockholders’ Equity		$	1,653,410			$	6,444,449
Noncontrolling Interest			806,761				2,412,029
Total Equity		$	2,460,171			$	8,856,478
Total Liabilities and Equity		$	6,604,291			$	10,420,520

 

BIOLITE  HOLDING, INC. AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

 

		2017				2016
Net revenue		$	3,196			$	988,148
Cost of revenue			2,249				24,318
Gross profit			947				963,830
Research and development expenses			256,682				823,046
Selling, general and administrative expenses			1,735,931				1,752,168
Total operating expenses			1,992,613				2,575,214
Loss from operations			(1,991,666	)			(1,611,384	)
Total other income (expenses)			(5,038,650	)			(5,041,062	)
Loss before income taxes			(7,030,316	)			(6,652,446	)
Provision for income taxes expense (benefit)			(360,395	)			(60,660	)
Net loss			(6,669,921	)			(6,591,786	)
Net loss per share attributable to common stockholders
Basic and Diluted		$	(0.16	)		$	(0.25	)

  

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BIOLITE HOLDING, INC. AND SUBSIDIARIES

 

		March 31,				December 31,
		2018				2017
ASSETS		(UNAUDITED)
Total Current Assets		$	664,758			$	760,973
Long-term investments			4,224,839				4,185,969
Total Assets		$	6,662,944			$	6,604,291
LIABILITIES AND EQUITY
Current Liabilities
Due to related parties		$	2,475,514			$	2,390,498
Total Current Liabilities			4,546,033				4,088,430
Total Liabilities		$	4,589,361			$	4,144,120
Equity
Total Stockholders’ Equity		$	1,379,057			$	1,653,410
Noncontrolling Interest			694,526				806,761
Total Equity		$	2,073,583			$	2,460,171
Total Liabilities and Equity		$	6,662,944			$	6,604,291

 

BIOLITE HOLDING, INC. AND SUBSIDIARIES

FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017

(UNAUDITED)

 

		2018				2017
Net revenue		$	-			$	2,210
Cost of revenue			-				1,562
Gross profit			-				648
Operating expenses
Research and development expenses			203,056				67,735
Selling, general and administrative expenses			244,598				332,162
Total operating expenses			447,654				399,897
Loss from operations			(447,654	)			(399,249	)
Total other income (expenses)			(100,060	)			(4,636,139	)
Loss before income taxes			(547,714	)			(5,035,388	)
Provision for income taxes expense (benefit)			(96,132	)			(82,617	)
Net loss			(451,582	)			(4,952,771	)
Net loss per share attributable to common stockholders
Basic and Diluted		$	(0.01	)		$	(0.18	)

  

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The following tables set forth selected historical consolidated financial data of BioKey, Inc. The selected historical consolidated financial information as of and for the years ended December 31, 2017 and 2016 has been derived from BioKey’s audited historical consolidated financial statements, and are contained elsewhere in this prospectus.

 

The selected historical consolidated financial information for the three months ended March 31, 2018 and 2017 has been derived from BioKey’s unaudited historical financial statements for the same periods.

 

The following information is only a summary and should be read together with BioKey’s management’s discussion and analysis of results of operations and financial condition and its consolidated financial statements and the notes related thereto included elsewhere in this prospectus.

 

Selected Historical Financial Data of BioKey

 

BIOKEY, INC.

 

		December 31,				December 31,
		2017				2016
ASSETS
Total Current Assets		$	1,418,789			$	1,729,939
Total Assets		$	1,466,829			$	1,781,565
LIABILITIES AND EQUITY
Total Current Liabilities		$	79,757			$	101,349
Total Liabilities		$	82,637			$	104,229
Total Equity		$	1,384,192			$	1,677,336
Total Liabilities and Equity		$	1,466,829			$	1,781,565

 

BIOKEY, INC.

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

 

		2017				2016
Revenues		$	983,218			$	1,555,594
Cost of revenues			17,312				29,420
Gross profit			965,906				1,526,174
Operating expenses:
Research and development expenses			497,947				486,004
Selling, general and administrative expenses			767,504				918,271
Total operating expenses			1,265,451				1,404,275
Income (loss) from operations			(299,545	)			121,899
Total other income (expenses)			7,201				8,792
Income (loss) before income tax			(292,344	)			130,691
Provision for income tax			800				800
Net income (loss) and comprehensive income (loss)		$	(293,144	)		$	129,891

   

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BIOKEY, INC.

 

		March 31,				December 31,
		2018				2017
ASSETS		(Unaudited)
Total Current Assets		$	1,171,469			$	1,418,789
Total Assets		$	1,257,901			$	1,466,829
LIABILITIES AND EQUITY
Total Current Liabilities		$	108,540			$	79,757
Total Liabilities			111,420				82,637
Total Equity			1,146,481				1,384,192
Total Liabilities and Equity		$	1,257,901			$	1,466,829

 

BIOKEY, INC.

FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017

(UNAUDITED)

 

		2018				2017
Revenues		$	38,152			$	189,034
Cost of revenues			1,423				2,873
Gross profit			36,729				186,161
Operating expenses:
Research and development expenses			100,237				126,104
Selling, general and administrative expenses			184,762				204,776
Total operating expenses			284,999				330,880
Loss from operations			(248,270	)			(144,719	)
Total other income			559				2,810
Loss before income tax			(247,711	)			(141,909	)
Provision for income tax			-				-
Net loss and comprehensive loss		$	(247,711	)		$	(141,909	)

 

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

The unaudited pro forma condensed combined financial statements contained in this prospectus were prepared using the acquisition method of accounting. The selected unaudited pro forma condensed combined balance sheet information is presented as if the transaction occurred on December 31, 2017 and March 31, 2018, plus pro forma adjustments.

 

The selected unaudited pro forma condensed combined financial information is presented for information purposes only and is not intended to represent or be indicative of the combined results of operation or financial position that ABVC would have reported had the transaction been completed as of the date for the periods presented, and should not be taken as representative of ABVC’s consolidated results of operations of financial condition following the completion of the transaction. In addition, the selected unaudited pro forma condensed combined financial information is not intended to project future financial position or results of the combined company. Future results may vary significantly from the results reflected because of various factors, including those discussed in the section entitled “Risk Factors” beginning on page 23 of this prospectus. The following selected unaudited pro forma condensed combined financial information should be read in conjunction with the section entitled “Unaudited Pro Forma Condensed Financial Information” and related notes beginning on page 161 of this prospectus.

 

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SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DATA

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2017

 

														Pro Forma						Pro Forma
		ABVC				BioKey				BioLite				Adjustment				Note		Combined
ASSETS
Current Assets
Cash and cash equivalents		$	93,332			$	1,225,397			$	256,925									$	1,575,654
Goodwill, net															52,728,835			{e}			52,728,835
Total Assets		$	2,643,332			$	1,466,829			$	6,604,291			$	52,619,615					$	63,334,067
LIABILITIES AND EQUITY
Total Current Liabilities			4,400,247				79,757				4,088,430				(109,220	)					8,459,214
Total Liabilities			4,400,247				82,637				4,144,120				(109,220	)					8,517,784
Equity
Total Equity			(1,756,915	)			1,384,192				2,460,171				52,728,835						54,816,283
Total Liabilities and Equity		$	2,643,332			$	1,466,829			$	6,604,291			$	52,619,615					$	63,334,067

  

SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED OPERATIONS DATA

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2017

 

														Pro Forma						Pro Forma
		ABVC				BioKey				BioLite				Adjustment				Note		Combined
Revenues		$	-			$	983,218			$	3,196									$	986,414
Cost of revenues			-				17,312				2,249										19,561
Gross profit			-				965,906				947										966,853
Operating expenses
Selling, general and administrative expenses			811,685				767,504				1,735,931										3,315,120
Research and development expenses			3,171,665				497,947				256,682										3,926,294
Stock based compensation			155,400				-				-										155,400
Total operating expenses			4,138,750				1,265,451				1,992,613										7,396,814
Loss from operations			(4,138,750	)			(299,545	)			(1,991,666	)									(6,429,961	)
Other income (expense)
Interest income			180				6,742				7,207										14,129
Interest expense			(103,460	)							(222,060	)									(325,520	)
Rental income											11,814										11,814
Investment loss											(34,139	)									(34,139	)
Gain/Loss on foreign exchange  changes											(409,170	)									(409,170	)
Gain/Loss on investment in equity securities											(4,443,876	)			4,313,725						(130,151	)
Other income (expense)			-				459				51,574										52,033
Total other income (expenses)			(103,280	)			7,201				(5,038,650	)			4,313,725						(821,044	)
Loss before provision for income tax			(4,242,030	)			(292,344	)			(7,030,316	)			4,313,725						(7,250,965	)
Provision for income tax (benefit)			830				800				(360,395	)									(358,765	)
Net loss			(4,242,860	)			(293,144	)			(6,669,921	)			4,313,725						(6,892,200	)
Comprehensive Income (Loss)		$	(4,242,860	)		$	(293,144	)		$	(4,352,698	)			4,313,725					$	(4,574,977	)

 

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COMPARATIVE PER SHARE DATA

 

The following table sets forth certain historical and pro forma per share financial information for ABVC common shares. The pro forma per share information gives effect to the Mergers as if the Mergers had occurred on January 1, 2016, in the case of earnings per share for the year ended December 31, 2017 and the year ended December 31, 2016, and on December 31, 2017, in the case of book value. The information in the table below has been derived from and should be read in conjunction with the historical consolidated financial statements of ABVC included or incorporated by reference in this prospectus. See “Where You Can Find Additional Information” beginning on page 185.

 

The pro forma earnings per share was calculated using the methodology described under the heading “Unaudited Pro Forma Condensed Combined Financial Information” included in this prospectus above, and is subject to all the assumptions, adjustments and limitations described thereunder. The pro forma information set forth below, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the possible impact on the combined company that may result as a consequence of the arrangement and, accordingly, does not attempt to predict or suggest future results.

 

		ABVC Historical				BioLite Historical				BioKey Historical				Pro Forma
Earnings per share for the year ended December 31, 2017
Basic		$	(0.02	)			(0.16	)			(0.05	)			(0.02	)
Diluted		$	(0.02	)			(0.16	)			(0.05	)			(0.02	)
Earnings per share for the year ended December 31, 2016
Basic		$	(0.04	)			(0.25	)			0.02				N/A
Diluted		$	(0.04	)			(0.25	)			0.02				N/A
Book value per share as of December 31, 2017 (1)		$

 

(1)	Calculated as total shareholders’ equity divided by total number of common stock outstanding.

 

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