SynCore Biotechnology Co., Ltd and Subsidiaries

Transcription

1 Stock Code:4192 SynCore Biotechnology Co., Ltd and Subsidiaries Consolidated Financial Statements for the Three Months Ended March 31, 2018 and 2017 and Independent Auditors Review Report (Translation)

2 INDEPENDENT AUDITORS REVIEW REPORT The Board of Directors and Shareholders SynCore Biotechnology Co., Ltd Introduction We have reviewed the accompanying consolidated financial statements of SynCore Biotechnology Co., Ltd and its subsidiaries (the Company ) as of March 31, 2018 and 2017, and the consolidated statements of comprehensive income, changes in equity and cash flows for the three months ended March 31, 2018 and 2017, and the notes to the consolidated financial statements, including a summary of significant accounting policies. Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 Interim Financial Reporting endosed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews. Scope of Review We conducted our reviews in accordance with the Statement of Auditing Standards No. 65 Review of Financial Information Performed by the Independent Auditor of the Entity. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our reviews, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the financial position of the entity as at March 31, 2018 and 2017, and of its consolidated financial performance and its consolidated cash flows for the three months ended March 31, 2018 and 2017 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 Interim Financial Reporting endosed and issued into effect by the Financial Supervisory Commission of the Republic of China. Crowe Horwath Taipei, Taiwan The Republic of China May 4, 2018 For the convenience of readers and for information purpose only, the auditor s report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors report and financial statements shall prevail.

3 SynCore Biotechnology Co., Ltd and Subsidiaries CONSOLIDATED BALANCE SHEETS (In Thousands of New Taiwan Dollars) March 31, 2018 (Reviewed) December 31, 2017 (Audited) March 31, 2017 (Reviewed) ASSETS Note Amount % Amount % Amount % LIABILITIES AND EQUITY Note Amount % Amount % Amount % CURRENT ASSETS CURRENT LIABILITIES Cash and cash equivalents 6 (1) $ 399, $ 462, $ 607, Short-term loans 6 (12) and (27) $ 20,000 3 $ - - $ - - Financial assets at fair value through profit or loss 6 (2) 6, Notes payable Available-for-sale financial assets 6 (3) - - 6, ,660 1 Other payable 7 (2) 11, , ,292 1 Notes receivable, net 6 (4) Long-term payable - current portion 6 (13) and (27) 35, , ,135 3 Accounts receivable, net 6 (5) 1,312-1,588-1,568 - Other current liabilities Inventories 6 (6) 4, ,035-5,221 1 Total current liabilities 67, , ,715 4 Prepayments 6 (7) 7 (2) 27, , ,025 2 NONCURRENT LIABILITIES Other current assets Long-term payable 6 (13) and (27) 35, , ,102 6 Total current assets 439, , , Total liabilities 102, , , EQUITY ATTRIBUTABLE TO NONCURRENT ASSETS SHAREHOLDERS OF THE PARENT Financial assets at fair value through other comprehensive income 6 (8) 116, Capital stock 6 (15) 698, , , Available-for-sale financial assets 6 (3) , ,012 8 Capital surplus 6 (16) 214, , , Financial assets measured at cost 6 (9) Retained earnings Property, plant and equipment 6 (10) 15, , ,616 2 Accumulated deficit 6 (17) ( 273,307 ) ( 35 ) ( 257,993 ) ( 31 ) ( 225,278 ) ( 23 ) Intangible assets 6 (11) 213, , , Others Prepayments for equipment ,134 - Exchange differences arising on translation of foreign operations 6 (18) ( 17 ) ( - ) Refundable deposits Unrealized Gain (Loss) on Financial Assets at FVTOCI 6 (18) 42, Total noncurrent assets 345, , , Changes in fair value of available-for-sale financial assets 6 (18) , ,095 5 Total others 42, , ,078 5 Total equity 682, , , TOTAL $ 785, $ 845, $ 1,000, TOTAL $ 785, $ 845, $ 1,000, March 31, 2018 (Reviewed) December 31, 2017 (Audited) March 31, 2017 (Reviewed) ( The accompanying notes are an integral part of the consolidated financial statements ) - 1 -

4 SynCore Biotechnology Co., Ltd and Subsidiaries CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) For the Three Months Ended March Note Amount % Amount % NET REVENUE 6 (19) $ 1, $ 1, COST OF REVENUE 6 (6) ( 820 ) ( 45 ) ( 985 ) ( 54 ) GROSS PROFIT 1, OPERATING EXPENSES 6 (14) and (22) 7 (2) Marketing ( 908 ) ( 50 ) ( 949 ) ( 52 ) General and administrative ( 11,373 ) ( 623 ) ( 7,546 ) ( 412 ) Research and development ( 40,413 ) ( 2,216 ) ( 52,414 ) ( 2,862 ) Total operating expenses ( 52,694 ) ( 2,889 ) ( 60,909 ) ( 3,326 ) INCOME FROM OPERATIONS ( 51,690 ) ( 2,834 ) ( 60,063 ) ( 3,280 ) NON-OPERATING INCOME AND EXPENSES Other income 6 (20) Other gains and losses 6 (21) ( 316 ) ( 17 ) ( 3,134 ) ( 171 ) Finance costs 6 (23) ( 248 ) ( 14 ) ( 328 ) ( 18 ) Total non-operating income and expenses ( 218 ) ( 12 ) ( 2,976 ) ( 163 ) INCOME BEFORE INCOME TAX ( 51,908 ) ( 2,846 ) ( 63,039 ) ( 3,443 ) INCOME TAX EXPENSE 6 (24) ( - ) ( - ) ( - ) ( - ) NET INCOME ( 51,908 ) ( 2,846 ) ( 63,039 ) ( 3,443 ) OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Unrealized gain on investments in equity instruments at fair value through other comprehensive income 6 (18) and (25) 13, Items that may be reclassified subsequently to profit or loss Exchange differences arising on translation of foreign operations 6 (18) and (25) 5 - ( 34 ) ( 2 ) Changes in fair value of available-for-sale financial assets 6 (18) and (25) - - ( 7,423 ) ( 405 ) Other comprehensive loss for the period, net of income tax 13, ( 7,457 ) ( 407 ) TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ( $ 38,208 ) ( 2,095 ) ( $ 70,496 ) ( 3,850 ) NET INCOME (LOSS) ATTRIBUTABLE TO: Shareholders of the parent ( $ 51,908 ) ( 2,846 ) ( $ 63,039 ) ( 3,443 ) Noncontrolling interests ( $ - ) ( - ) ( $ - ) ( - ) TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Shareholders of the parent ( $ 38,208 ) ( 2,095 ) ( $ 70,496 ) ( 3,850 ) Noncontrolling interests ( $ - ) ( - ) ( $ - ) ( - ) LOSS PER SHARE Basic loss per share 6 (26) ( $ 0.74 ) ( $ 0.90 ) ( The accompanying notes are an integral part of the consolidated financial statements ) - 2 -

5 SynCore Biotechnology Co., Ltd and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) Capital Stock Others Unrealized Gain(Loss) on Financial Assets at Fair Unrealized Gain/Loss from Foreign Currency Value Through Other Available-for-sale Financial ITEM Common Stock Capital Surplus Accumulated Deficit Translation Reserve Comprehensive Income Assets Total Equity Balance, January 1, 2017 $ 698,670 $ 376,391 ( $ 162,239 ) $ 17 $ - $ 53,518 $ 966,357 Net loss for the three months ended March 31, ( 63,039 ) ( 63,039 ) Other comprehensive income (loss) for the three months ended March 31, 2017, net of income tax ( 34 ) - ( 7,423 ) ( 7,457 ) Total comprehensive income (loss) for the three months ended March 31, ( 63,039 ) ( 34 ) - ( 7,423 ) ( 70,496 ) Balance, March 31, 2017 $ 698,670 $ 376,391 ( $ 225,278 ) ( $ 17 ) $ - $ 46,095 $ 895,861 Balance, January 1, 2018 $ 698,670 $ 214,152 ( $ 257,993 ) $ 50 $ - $ 65,734 $ 720,613 Effect of retrospective application and retrospective restatement ,594-29,140 ( 65,734 ) - Adjusted Balance, January 1, , ,152 ( 221,399 ) 50 29, ,613 Net loss for the three months ended March 31, ( 51,908 ) ( 51,908 ) Other comprehensive income (loss) for the three months ended March 31, 2018, net of income tax ,695-13,700 Total comprehensive income (loss) for the three months ended March 31, ( 51,908 ) 5 13,695 - ( 38,208 ) Balance, March 31, 2018 $ 698,670 $ 214,152 ( $ 273,307 ) $ 55 $ 42,835 $ - $ 682,405 ( The accompanying notes are an integral part of the consolidated financial statements ) - 3 -

6 SynCore Biotechnology Co., Ltd and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) ITEM For the Three Months Ended March 31, 2018 For the Three Months Ended March 31, 2017 CASH FLOWS FROM OPERATING ACTIVITIES Loss before income tax ( $ 51,908 ) ( $ 63,039 ) Adjustments for: Depreciation expense 2,289 1,883 Amortization expense 10,200 10,040 Finance costs Interest income ( 324 ) ( 486 ) Exchange evaluation on long-term payable 586 ( 4,340 ) Changes in operating assets and liabilities: Notes receivable, net 120 ( 54 ) Accounts receivable, net Inventories Prepayments ( 2,139 ) ( 4,482 ) Other current assets Notes payable ( 230 ) ( 480 ) Accounts payable ( - ) ( 3,772 ) Other payable ( 7,813 ) ( 1,958 ) Other current liabilities ( 35 ) ( 81 ) Cash used in operations ( 47,990 ) ( 65,578 ) Interest received Interest paid ( 466 ) ( 443 ) Net cash used in operating activities ( 48,054 ) ( 65,543 ) CASH FLOWS FROM INVESTING ACTIVITIES Acquision of Property, plant and equipment ( 84 ) ( 3,257 ) Intangible assets ( 82 ) ( 646 ) Prepayments for equipment ( 109 ) ( 1,134 ) Net cash used in investing activities ( 275 ) ( 5,037 ) CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term loan 20,000 - Other non-current liabilities ( 35,127 ) ( 33,457 ) Net cash used in financing activities ( 15,127 ) ( 33,457 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 5 ( 34 ) NET DECREASE IN CASH AND CASH EQUIVALENTS ( 63,451 ) ( 104,071 ) CASH AND CASH EQUIVALENT ON CONSOLIDATED BALANCE SHEET, BEGINNING OF PERIOD 462, ,966 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 399,218 $ 607,895 ( The accompanying notes are an integral part of the consolidated financial statements ) - 4 -

7 SynCore Biotechnology Co., Ltd and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2018 and 2017 (Reviewed, Not Audited) (Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise) 1.GENERAL INFORMATION SynCore Biotechnology Co., Ltd (SynCore) was incorporated in the Republic of China ( R.O.C. ) on June 26, The Company is mainly engaged in new drug developing and sale, food advisory, medicine inspection, biotechnology service and intellectual property. The main operations of SynCore and its subsidiaries (collectively as the Company ) are described in the Note 4(3.). SynCore s shares have been listed on the Emerging Stock Market of the Taipei Exchange since August 29, On October 28, 2014, SynCore listed its shares on the Taipei Exchange. The address of its registered office and principal places of business is No.84, Zhongshan Rd., Dongshan Township, Yilan County, Taiwan. SINPHAR PHARMACEUTICAL CO., LTD., which holds 50.44% of ordinary shares of the Company. The Company s ultimate parent and ultimate controlling party is SINPHAR PHARMACEUTICAL CO., LTD. The consolidated financial statements are presented in the Company s functional currency, New Taiwan dollars. 2. APPROVAL OF FINANCIAL STATEMENTS The accompanying consolidated financial statements were approved by the Company s board of directors and issued on May 4, APPLICATION OF NEW AND REVISED STANDARDS, AMENDMENTS AND INTERPRETATIONS (1) Effect of new issuance or amendments to International Financial Reporting Standards endorsed by Financial Supervisory Commission (FSC) and the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers adopted by the Company: Except for the following items, the Company believes that the adoption of new, revised or amended standards and interpretations will not have significant impact on the Company s financial position and performance. A. IFRS 9 Financial Instruments and related amendment IFRS 9 supersedes IAS 39 Financial Instruments: Recognition and Measurement, with consequential amendments to IFRS 7 Financial Instruments: Disclosures and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Please refer to Note 4 for information relating to the relevant accounting policies. The Company elects not to restate prior reporting period when applying the requirements for the classification, measurement and impairment of financial assets and financial liabilities under IFRS 9 with the cumulative effect of the initial application recognized at the date of initial application. The following table shows the measurement categories and carrying amount under IAS 39 and IFRS 9 for each class of the Group s financial assets and financial liabilities as at January 1, Measurement category Carrying amount Financial assets IAS 39 IFRS 9 IAS 39 IFRS 9 Remark Cash and cash equivalents Loans and receivables Amortized cost $ 462,669 $ 462,669 (A) Beneficiary certificates Available-for-sale Mandatorily at fair value through profit or loss ( FVTPL ) 6,660 6,660 (B) Stocks Available-for-sale Fair value through other comprehensive income ( FVTOCI ) - equity instrument 102, ,651 (C) Stocks Financial assets at cost Fair value through other comprehensive income ( FVTOCI ) - equity instrument - - (C) Notes receivable, trade Loans and receivables Amortized cost receivables and Refundable deposits 2,017 2,017 (A)

8 ITEM Financial assets at FVTPL Add: From available-for-sale (IAS 39) Carrying Amount as of January 1, 2018 (IAS 39) Reclassifications Remeasurements Carrying Amount as of January 1, 2018 (IFRS 9) Retained Earnings Effect on January 1, 2018 Other Equity Effect on January 1, 2018 Remark $ - $ 6,660 $ - $ 6,660 $ 185 ( $ 185 ) 6,660 ( 6,660 ) (B) Subtotal $ 6,660 $ - $ - $ 6,660 $ 185 ( $ 185 ) Financial assets at FVTOCI - equity instrument $ - $ 102,651 $ - $ 102,651 $ 36,409 ( $ 36,409 ) Add: From available-for-sale and financial assets at cost (IAS 39) 102,651 ( 102,651 ) (C) Subtotal $ 102,651 $ - $ - $ 102,651 $ 36,409 ( $ 36,409 ) Total $ 109,311 $ - $ - $ 109,311 $ 36,594 ( $ 36,594 ) (A.)Cash and cash equivalents, notes receivable, accounts receivable, and Refundable deposits, that were previously classified as loans and receivables under IAS 39 were classified as measured at amortized cost with an assessment of expected credit losses under IFRS 9. (B.)Beneficiary certificates previously classified as available-for-sale under IAS 39 were classified mandatorily as at FVTPL under IFRS 9, because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments. The retrospective adjustment resulted in a decrease of NT$185 thousand in other equity and an increase of NT$185 thousand in retained earnings on January 1, (C.)As equity investments that were previously classified as available-for-sale financial assets under IAS 39 are not held for trading, the Company elected to designate all of these investments as at FVTOCI under IFRS 9. As a result, the related other equity - unrealized gain/loss on available-for-sale financial assets of NT$65,549 thousand is reclassified to increase other equity - unrealized gain/loss on financial assets at FVTOCI. For those equity investments previously classified as measured at cost financial assets under IAS 39, since these investments were designated as at FVTOCI under IFRS 9, the value of such investments should be remeasured at fair value, and the adjustments would result in an increase in other equity - unrealized loss on financial assets at FVTOCI of NT$36,409 thousand. B. IFRS 15 Revenue from Contracts with Customers IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and supersedes IAS 18 Revenue, IAS 11 Construction Contracts and a number of revenue-related interpretations. Please refer to Note 4 for related accounting policies. C. IFRIC 22 Foreign Currency Transactions and Advance Consideration According to IAS 21, the initial recognition of foreign currency transactions shall be converted into functional currency for records at the spot exchange rate between the functional currency and foreign currency on the trade day. IFRIC 22 further states that if the considerations have been prepaid or collected before the initial recognition of the nonmonetary assets or liabilities by the enterprises, the initial recognition date of the prepaid or collected consideration is deemed as the trade day. If the considerations are prepaid or collected by the enterprises with installments arranged, the trade day of each prepaid or collected consideration should be determined separately. The consolidated company will prospectively adopt IFRIC 22 starting from January 1,2018. (2)Effect of amendments to the Regulation Governing the Preparation of Financial Reports by Securities Issuers and new issuance or amendments to IFRSs endorsed by FSC but not yet adopted by the Company: None. (3)New IFRSs issued by International Accounting Standards Board ( IASB ) but not yet endorsed and issued into effect by the FSC

9 New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as endorsed by the FSC are as follows: Effective Date Announced by New Standards, Interpretations and Amendments IASB (Note 1) Amendments to IFRS 9 Prepayment Features with Negative January 1, 2019 (Note 2) Compensation Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture To be determined by IASB IFRS 16 Leases January 1, 2019 (Note 3) IFRS 17 Insurance Contracts January 1, 2021 Amendments to IAS 19 Plan Amendment, Curtailment or Settlement January 1, 2019 (Note 4) Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures January 1, 2019 IFRIC 23 Uncertainty Over Income Tax Treatments January 1, 2019 Annual Improvements to IFRSs Cycle January 1, 2019 Note 1: Unless stated otherwise, the above New, Revised or Amended IFRSs are effective for annual periods beginning on or after their respective effective dates. Note 2: The FSC permits the election for early adoption of the amendments starting from January 1, Note 3: On December 19, 2017, the FSC announced that IFRS 16 will take effect starting from January 1, Note 4: The Company shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, Except the following, the initial application of the above new standards and interpretations will not have material impact on the Company s accounting policies: A. IFRS 16 Leases IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations. Under IFRS 16, if the Company is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets, except for low-value and short-term leases that the Company may elect to apply the accounting method similar to the accounting for operating lease under IAS 17. On the consolidated statements of comprehensive income, the Company should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of the lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities. The application of IFRS 16 is not expected to have a material impact on the accounting treatment of the Company as a lessor. When IFRS 16 becomes effective, the Company may elect to apply this Standard either retrospectively to each prior reporting period presented or with the cumulative effect of the initial application of this Standard recognized at the date of initial application. B. IFRIC 23 Uncertainty Over Income Tax Treatments IFRIC 23 clarifies that when there is uncertainty over income tax treatments, the Company should assume that the taxation authority will have full knowledge of all related information when making related examinations. If the Company concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the Company should determine the taxable profit, tax bases, unused tax losses, unused tax credits and tax rates consistently with the tax treatments used in its income tax filings. If it is not probable that the taxation authority will accept an uncertain tax treatment, the Company should make estimates using either the most likely amount or the expected value of the tax treatment, depending on which method the entity expects to better predict the resolution of the uncertainty. The Company has to reassess its judgments and estimates if facts and circumstances change

10 The Company may elect to apply IFRIC 23 either retrospectively to each prior reporting period presented, if this is possible without the use of hindsight, or with the cumulative effect of the initial application of IFRIC 23 recognized at the date of initial application. Except for the aforementioned impact, as of the date that the accompanying consolidated financial statements were issued, the Company continues in evaluating the impact on its financial position and financial performance as a result of the initial adoption of the other standards or interpretations. The related impact will be disclosed when the Company completes the evaluation. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Except for the statement of compliance, basis of preparing the consolidated financial statements, basis of consolidation, and the additional parts, the accounting policies in the consolidated financial statements are consistent with those applied in Note4 of the consolidated financial statements for the year ended December 31,2017, unless specified otherwise. (1.) Statement of Compliance The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34 Interim Financial Reporting endorsed and issued into effect by the FSC. The consolidated financial report should be read with the Consolidated Financial Statements for the year ended December 31, (2.) Basis of Preparation the Consolidation Financial Statement A. Except for the following items, the accompanying consolidated financial statements have been prepared on the historical cost basis: (A.) The financial assets and liabilities measured at fair value through profit and loss (including derivative financial instruments). (B.) Financial assets are classified as available-for-safe financial assets at fair value in 2017 and classified as financial assets at fair value through other comprehensive income in B. The preparation of financial statements in compliance with IFRSs endorsed by FSC requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in process of applying the Company s accounting policies. The areas involving a high degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5. C. The Company used modified retrospective method recognizing the transition differences of initially applying IFRS 9 and IFRS 15 in retained earnings or in other components of equity at the date of initial application (January 1, 2018) and not to restate the consolidated financial statements for the year ended December 31, The Company s consolidated financial statements for the year ended December 31, 2017 were prepared in accordance with IAS 39, IAS 11, IAS 18 and related interpretations issued, revised or amended. (3.)Basis of Consolidation A. The basis for the preparation of consolidated financial statements (A.) All subsidiaries are included in the Company s consolidated financial statements. Subsidiaries are the entities (including structured entities) controlled by the Company. The Company controls an entity when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Company obtains control of the subsidiaries and ceases when the Company loses control of the subsidiaries. (B.) All intra-company transactions, balances, and unrealized gains or losses are eliminated in full on consolidation. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Company. (C.) Profit or loss and each component of other comprehensive income are attributed to the shareholders of the parent and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the shareholders of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance

11 (D.) Changes in the Company s ownership interests in subsidiaries that do not result in the Company losing control of the subsidiaries are accounted for as equity transactions. The carrying amounts of the Company s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in subsidiaries. Any difference between the amount of the non-controlling interests adjusted and the fair value of the consideration paid or received is recognized directly in equity. (E.) When the Company loses control of a subsidiary, the Company remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognized in profit or loss. All amounts previously recognized in other comprehensive income in relation to the subsidiary are reclassified to profit or loss on the same basis as if the related assets or liabilities were disposed of. That is, when the Company loses control of a subsidiary, all gains or losses previously recognized in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of. B. The subsidiaries included in the consolidated financial statements: Name of Investee SynCore Biotechnology Europe GmbH Main Business New drug development and Biotechnology service Percentage of Ownership March 31, December 31, March 31, % % % (A.) The financial statements of the subsidiary were consolidated based on reviewed financial statements. (B.) Increase/decrease of subsidiaries: None C. Subsidiaries not included in the consolidated financial statements: None D. Adjustments for subsidiaries with different balance sheet dates: None E. Significant restrictions: None F. Subsidiaries hold the securities issued by the parent company: None G. Subsidiaries that have material non-controlling interests to the Company: None (4) Financial Instruments Financial assets and financial liabilities are recognized in balance sheets when the Group becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss. A. Financial assets (A.) Measurement category The Company adopts trade-date accounting to recognize and derecognize financial assets Financial assets are classified into the following categories: financial assets at FVTPL, financial assets at amortized cost, and equity investments at FVTOCI. a. Financial assets at FVTPL Financial asset is classified as at FVTPL when the financial asset is mandatorily classified or designated as at FVTPL. Financial assets mandatorily classified as at FVTPL including equity investments not designated as at FVTOCI and debt instruments that do not meet the criteria of amortized cost or the FVTOCI

12 Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss including relevant dividend or interest income. Fair value is determined in the manner described in Note 12(4). b. Financial assets at amortized cost Financial assets that meet the following conditions are subsequently measured at amortized cost: (a.)the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and (b.)the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Subsequent to initial recognition, financial assets measured at amortized cost are measured at amortized cost, which equals to carrying amount determined by the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss. Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for: (a.)purchased or originated credit-impaired financial assets, For those financial assets, the Company applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition. (b.)financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, the Company applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods. c. Financial assets at amortized cost On initial recognition, the Company may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination. Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments, instead, they will be transferred to retained earnings. Dividends on these investments in equity instruments are recognized in profit or loss when the Group s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment Financial assets are classified into the following categories: financial assets at FVTPL, available-for-sale financial assets, and loans and receivables. a.financial assets at FVTPL Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL. Financial assets held for trading are acquired principally for the purpose of selling or repurchasing in the short-term. Financial assets that meet one of the following criteria are designated as at fair value through profit and loss on initial recognition. (a.)such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or (b.) Performance of the financial assets are evaluated on a fair value basis; or (c.) A hybrid instruments contain one or more embedded derivatives

13 Financial assets at fair value through profit or loss are stated at fair value on initial recognition, Related transaction costs are expensed in profit and loss. Gains or losses arising on re-measurement are recognized in profit or loss. The re-measurement gains or losses recognized in profit or loss including dividend or interest earned are recognized in profit and loss under non-operating income and expense. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are subsequently measured at cost less any identified impairment loss at the end of each reporting period and presented in a separate line item as financial assets carried at cost. b.available-for-sale Financial Assets Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or not classified as other non-derivative financial assets. Available-for-sale financial assets are initially measured at fair value with directly attributed transaction cost. Changes in the carrying amounts of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and accumulated in changes in fair value of available-for-sale financial assets under equity. When derecognition, the cumulative gain or loss previously recognized in other comprehensive income is reclassified to profit or loss under non-operating income and expense. Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment loss at the end of each reporting period and presented in a separate line item as financial assets carried at cost. Interests on available-for-sale debt instruments are recognized in profit or loss under non-operating income and expense. c.loans and Receivables Loans and receivables including notes and accounts receivables, other receivables, refundable deposits and debt investments with fixed or determinable amount are not quoted in an active market and initially measured at fair value with directly attributable transaction costs, and subsequently measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial. Interests income are recognized in profit or loss under non-operating income and expense. (B.) Impairment of financial assets 2018 The Company recognizes a loss allowance for expected credit losses ( ECL ) on financial assets at amortized cost (including accounts receivable). The loss allowance for accounts receivable is measured at an amount equal to lifetime ECL. For other financial assets, when the credit risk on the financial instrument has not increased significantly since initial recognition, a loss allowance is recognized at an amount equal to 12-month ECL. If there has been a significant increase in credit risk since initial recognition, a loss allowance is recognized at an amount equal to lifetime ECL. ECL reflects the weighted average of credit losses with the respective risks of a default occurring as the weights. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. The Company recognizes an impairment loss for aforementioned financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account

14 2017 Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence, as a result of one or more events that occurred after the initial recognition of the financial asset, that the estimated future cash flows of the investments have been affected. For financial assets carried at amortized cost, such as trade receivables and other receivables, such assets are assessed for impairment individually and then on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Company s past experience of collecting payments, an increase in the number of delayed payments in the portfolio of past the average credit period, as well as observable changes in national or local economic conditions that correlate with a default on receivables, and other situations. For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the assets carrying amount and the present value of estimated future cash flows, discounted at the financial assets original effective interest rate. For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the use of an allowance account in profit or loss to the extent that the carrying amount of the financial assets at the date the impairment is reversed does not exceed what the amortized cost would have been recognized and the impairment not been recognized. When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss. In respect of available-for-sale equity instruments, impairment loss previously recognized in profit or loss is not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under other equity. In respect of available-for-sale debt securities, the impairment loss is subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss. Impairment losses and gains are recognized as other income and expense under non-operating income and expense item. (C.) Derecognition of financial assets The Company derecognizes a financial asset when one of the following conditions is met: a. The contractual rights to receive the cash flows from the financial asset expire. b. The contractual rights to receive cash flows of the financial asset have been transferred and the Company has transferred substantially all risks and rewards of ownership of the financial asset. c. The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the consideration received or to be received including any cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. However, the cumulative gain or loss of the investments in equity instruments at FVTOCI will not be reclassified to profit or loss on disposal of the equity investments. Instead, they will be transferred to retained earnings. B. Financial liabilities Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVTPL. Gains or losses on the subsequent measurement are recognized in profit or loss. Except for the financial liabilities at FVTPL, financial liabilities measured at amortized cost are measured using the effective interest rate method after initial recognition. C.Derecognition of financial liabilities When derecognition of financial liabilities, the difference between the carrying amounts and the consideration paid are recognized in profit a loss

15 (5) Revenue 2018 The Company identifies the contract with the customers, and recognizes revenue when performance obligations are satisfied. A.Revenue from sale of goods Revenue from the sale of goods is mainly from sale of medical product. When a customer obtains control of promised goods, at which time the goods are delivered to the customer's specific location and performance obligation is satisfied. B.Royalties Royalties are the rights of using intellectual property in authorization duration. The received royalties are recognized in royalty revenue on a time basis over the period of the authorization Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Allowance for sales returns and liability for returns are recognized at the time of sale based on the seller s reliable estimate of future returns and based on past experience and other relevant factors. A. Sale of goods Revenue from the sale of goods is recognized when all the following conditions are satisfied: (A.) The Company has transferred to the buyer the significant risks and rewards of ownership of the goods; (B.) The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (C.) The amount of revenue can be measured reliably; (D.) It is probable that the economic benefits associated with the transaction will flow to the Company; and (E.) The costs incurred or to be incurred in respect of the transaction can be measured reliably. The Company does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership. Sales of goods are recognized when goods are delivered and title has been transferred. B. Royalties Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement provided that it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably. Royalties determined on a time basis are recognized on a straight-line basis over the period of the agreement. Royalty arrangements that are based on production, sales and other measures are recognized by reference to the underlying arrangement. (6) Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The interim-period income tax expense is accrued using the tax rate that would be applicable to expected total annual earnings, that is, the estimated average annual effective income tax rate applied to the profit before tax of the interim-period. When tax rate changes during the interim period, the effect of a change in tax rate resulting from a change in tax law is recognized consistently with the accounting for the transaction itself which gives rise to the tax consequence and recognized in profit or loss when occurance. 5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY Except for the judgments on the initial application of IFRS 9 to financial assets of investment in equity instruments, the same critical accounting judgments and key sources of estimates and uncertainty have been followed in these consolidated financial statements as were applied in the preparation of the Company's consolidated financial statements for the year ended December 31,

16 6. DETAILS OF SIGNIFICANT ACCOUNTS (1.) Cash and Cash Equivalents ITEM 31-Mar Dec Mar-17 Cash on hand $ 765 $ 875 $ 853 Demand deposits 100,711 81, ,825 Cash equivalent Time deposits (investments with original maturities less than 1 year) 297, , ,217 Total $ 399,218 $ 462,669 $ 607,895 The cash and cash equivalents were not pledged. (2.) Financial Assets at Fair Value through Profit or Loss current 2018 ITEM 31-Mar-18 Financial assets mandatorily measured at fair value through profit or loss Beneficiary certificates $ 6,475 Valuation adjustments 185 Total $ 6,660 A.As of March 31, 2018, the financial assets at fair value through profit or loss was not pledged or held as collateral. B.Please refer to Note12 for information about the related credit risk management and the valuation techniques. (3.) Available-for-sale Financial Assets Current : ITEM 31-Dec Mar-17 Beneficiary certificates $ 6,475 $ 6,475 Unrealized gains(losses) adjustments Total $ 6,660 $ 6,660 Non-current : Foreign Investments Publicly traded stocks $ 37,102 $ 37,102 Unrealized gains(losses) Adjustments 65,549 45,910 Total $ 102,651 $ 83,012 As of December 31, 2017 and March 31, 2017 the available-for-sale financial assets were not pledged or held as collateral

17 (4.) Notes Receivable, Net ITEM 31-Mar Dec Mar-17 Notes receivable $ 279 $ 399 $ 420 Less: Allowance for impairment loss ( - ) ( - ) ( - ) $ 279 $ 399 $ 420 As of March 31, 2018, December 31, 2017 and March 31, 2017, the notes receivable were not pledged. (5.) Accounts Receivable, Net ITEM 31-Mar Dec Mar-17 Trade receivables Total amounts of trade receivable measured at amortized cost $ 1,312 $ 1,638 $ 1,618 Less: Allowance for impairment loss ( -) ( - ) ( -) Less: Allowance for Sales returns and ( -) ( 50 ) ( 50) For the Three Months Ended March 31, 2018 $ 1,312 $ 1,588 $ 1,568 The Company average credit terms were 30 to 120. The Company uses other publicly available financial information or its own trading records to rate its customers. The Company continues to monitor the credit exposure and credit ratings of its counterparties and spread the credit risk amongst qualified counterparties. In order to mitigate credit risk, the management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure the recoverability of receivables. In addition, the Company reviews the recoverable amount of accounts receivable at balance sheet dates to ensure that adequate allowance is provided for possible irrecoverable amounts. In this regard, the management believes the Company's credit risk could be reasonably reduced. The Company applies the simplified approach to provisions for expected credit losses prescribed by IFRS 9, which permits the use of a lifetime expected credit losses provision for all accounts receivable. The expected credit losses on accounts receivables are estimated using a provision matrix by reference to past default experience with the respective debtors and an analysis of the debtors current financial positions, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate. The expected credit losses on accounts receivables are estimated by reference to past default experience of the debtor and an analysis of the debtor's current financial position and general economic conditions. According to the past experience of credit loss, there is no significant difference between different customer categories, thus the provision matrix doesn t further distinguish customer categories, and is set up the expected credit loss ratio by the past due days. The Company writes off accounts receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. For accounts receivable that have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivables due. The recovery amount is recognized in profit or loss. The following table details the loss allowance of accounts receivables based on the Company s provision matrix