ANL 20-F/A
Adlai Nortye Group Ltd. (ANL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Amendment No.1)
(Mark One)
OR
For the fiscal year ended
OR
OR
Date of event requiring this shell company report
For the transition period from to
Commission file number
| (Exact name of Registrant as specified in its charter) |
| (Jurisdiction of incorporation or organization) |
| |
| (Address of principal executive offices) |
| Zhejiang Province, The People’s Republic of Email: |
| (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) |
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
three Class A Ordinary Shares, par value $0.0001 per share | The Nasdaq Stock Market LLC (The |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each
of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 110,700,805 ordinary
shares, consisting of
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ☒
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | Emerging growth company |
If an emerging growth company that prepares its
financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the
Exchange Act.
| † | The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report.
If securities are registered pursuant to Section 12(b) of
the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an
error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| U.S. GAAP ☐ | by the International Accounting Standards Board ☒ | Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
☐ Yes
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐ Yes ☐ No
| Auditor Name | Auditor Location | Auditor Firm ID | ||
EXPLANATORY NOTE
This Amendment No. 1 to Form 20-F (the “Form 20-F/A”) amends our annual report on Form 20-F for the year ended December 31, 2023 (the “Original Form 20-F”), which was originally filed with the U.S. Securities and Exchange Commission on April 19, 2024. The purpose of this Form 20-F/A is to include in the Original Form 20-F (1) the Report of Independent Registered Public Accounting Firm (the “Auditor's Report”) dated April 13, 2023 in connection with the Company’s consolidated statements of operations and comprehensive loss, changes in shareholders’ equity and cash flows for the year ended December 31, 2021, and (2) the Company’s accompanying consolidated statements of operations and comprehensive loss, changes in shareholders’ equity and cash flows for the year ended December 31, 2021 and the related notes. This Form 20-F/A does not reflect events occurring after the filing of the Original Form 20-F and does not modify or update the disclosure therein in any way except as described above. No other changes have been made to the Original Form 20-F. The filing of this Form 20-F/A should not be understood to mean that any statements contained in the Original Form 20-F, as amended by this Form 20-F/A, are true or complete as of any date subsequent to the original filing date of the Original Form 20-F. Accordingly, this Form 20-F/A should be read in conjunction with the Original Form 20-F.
In addition, pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is including new certifications by the Company’s principal executive officer and principal financial officer as exhibits to this Form 20-F/A pursuant to Rule 13a-14(a) of the Exchange Act.
PART I
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
See “Item 18. Financial Statements.”
Legal Proceedings
We may be subject to legal proceedings, investigations, and claims arising from the ordinary course of our business from time to time, and we may also initiate legal proceedings in order to protect our intellectual property and other rights. Currently, we are not a party to any actual or threatened legal or administrative proceedings which would have a material and adverse impact on our business, financial condition, or results of operations. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Dividend Policy
Our board of directors has discretion as to whether and when to distribute dividends, subject to certain requirements of Cayman Islands law. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, a Cayman Islands exempted company may pay a dividend out of either profit, retained earnings or share premium, provided that in no circumstances may a dividend be paid if that would result in the company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to pay dividends, the form, frequency, and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions, and other factors that the Board may deem relevant.
We are a holding company incorporated in the Cayman Islands. For our cash requirements, including any payment of dividends to our shareholders, we rely upon payments from our operating entities. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us. See “Item 4. Information on the Company—B. Business Overview—Regulation— Regulations relating to foreign exchange control.” and “Item 4. Information on the Company—B. Business Overview—Regulation— PRC laws and regulations — Regulations relating to dividend distribution.”
If we pay any dividends on our ordinary shares, we will pay those dividends which are payable in respect of the Class A ordinary shares underlying the ADSs to the depositary, as the registered holder of such Class A ordinary shares, and the depositary then will pay such amounts to the ADS holders in proportion to the Class A ordinary shares underlying the ADSs held by such ADS holders, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. Cash dividends on our ordinary shares, if any, will be paid in U.S. Dollars.
B. Significant Changes
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
1
PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
The consolidated financial statements and the related notes required by Item 18 are included in this annual report, beginning on page F-1. The reports of Mazars USA LLP, the Company’s independent registered accounting firm with respect to the referenced financial statements, are included on pages F-2 and F-3.
ITEM 19. EXHIBITS
| Exhibit | ||
| Number | Description of Document | |
| 12.1 | Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 12.2 | Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 13.1 | Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 13.2 | Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | XBRL Taxonomy Extension Definitions Linkbase Document | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
2
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on this Form 20-F/A and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| Adlai Nortye Ltd. | |||
| By: | /s/ Yang Lu | ||
| Name: | Yang Lu | ||
| Title: | Chief Executive Officer | ||
| Date: February 14, 2025 | |||
3
ADLAI NORTYE LTD.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of Adlai Nortye Ltd.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Adlai Nortye Ltd. (the “Company”) as of December 31, 2022 and 2023, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with International Financial Reporting Standards (IFRS) and its related interpretations as issued by the International Accounting Standards Board.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Mazars USA LLP
We have served as the Company’s auditor since 2022.
New York, New York
April 19, 2024
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of operations and comprehensive loss, changes in shareholders’ equity and cash flows of Adlai Nortye Ltd. (the “Company”), for the year ended December 31, 2021, and the related notes (collectively referred to as the “financial statement”). In our opinion, the consolidated financial statement presents fairly, in all material respects, the results of its operations and its cash flow for the year ended December 31, 2021, in conformity with International Financial Reporting Standards (IFRS) and its related interpretations as issued by the International Accounting Standards Board.
Basis for Opinion
This financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Mazars USA LLP
We have served as the Company’s auditor since 2022.
New York, New York
April 13, 2023
F-3
ADLAI NORTYE LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS FOR THE YEARS ENDED DECEMBER 31, 2021, 2022 AND 2023
(All amounts in thousands, except share and per share data, or as otherwise noted)
| Year ended December 31, | ||||||||||||||
| Notes | 2021 | 2022 | 2023 | |||||||||||
| $’000 | $’000 | $’000 | ||||||||||||
| REVENUE | 4 | |||||||||||||
| Other operating income, net | ||||||||||||||
| Administrative expenses | ( | ) | ( | ) | ( | ) | ||||||||
| Research and development expenses | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating loss | ( | ) | ( | ) | ( | ) | ||||||||
| Other income and gains | ||||||||||||||
| Other expenses | ( | ) | ( | ) | ( | ) | ||||||||
| Investment income | ||||||||||||||
| Fair value gain on financial assets at fair value through profit or loss (“FVTPL”) | ||||||||||||||
| Fair value (loss)/gain on financial liabilities at FVTPL | 16 | ( | ) | ( | ) | |||||||||
| Finance costs | 5 | ( | ) | ( | ) | ( | ) | |||||||
| LOSS BEFORE TAX | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | 6 | ( | ) | |||||||||||
| LOSS FOR THE YEAR | ( | ) | ( | ) | ( | ) | ||||||||
| Attributable to: | ||||||||||||||
| Ordinary Equity Holders of the Parent | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER COMPREHENSIVE LOSS | ||||||||||||||
| Exchange differences on translation of the financial statements of subsidiaries | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive loss for the year, net of tax | ( | ) | ( | ) | ( | ) | ||||||||
| TOTAL COMPREHENSIVE LOSS FOR THE YEAR | ( | ) | ( | ) | ( | ) | ||||||||
| Attributable to: | ||||||||||||||
| Ordinary Equity Holders of the Parent | ( | ) | ( | ) | ( | ) | ||||||||
| LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT | ||||||||||||||
| Basic and diluted | ||||||||||||||
| Loss for the year ($ per share) | 8 | ( | ) | ( | ) | ( | ) | |||||||
| Weighted average common shares outstanding | 8 | |||||||||||||
The accompanying notes are an integral part of the Consolidated Financial Statements
F-4
ADLAI NORTYE LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF DECEMBER 31, 2022 AND 2023
(All amounts in thousands, except share and per share data, or as otherwise noted)
| Year ended December 31, | ||||||||||
| Notes | 2022 | 2023 | ||||||||
| $’000 | $’000 | |||||||||
| ASSETS | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | ||||||||||
| Financial assets at FVTPL | 12 | |||||||||
| Prepayments, other receivables and other assets | 11 | |||||||||
| Short-term investments at amortized cost | 13 | |||||||||
| Total current assets | ||||||||||
| Non-current assets | ||||||||||
| Property, plant and equipment | 9 | |||||||||
| Right-of-use assets | 10(a) | |||||||||
| Other intangible assets | ||||||||||
| Prepayments, other receivables and other assets | 11 | |||||||||
| Long-term investments at amortized cost | 13 | |||||||||
| Total non-current assets | ||||||||||
| Total assets | ||||||||||
| LIABILITIES | ||||||||||
| Current liabilities | ||||||||||
| Trade payables | ||||||||||
| Other payables and accruals | 14 | |||||||||
| Interest-bearing bank borrowings | 15 | |||||||||
| Lease liabilities | 10(b) | |||||||||
| Financial liabilities at FVTPL | 16 | |||||||||
| Total current liabilities | ||||||||||
| Non-current liabilities | ||||||||||
| Lease liabilities | 10(b) | |||||||||
| Total non-current liabilities | ||||||||||
| Total liabilities | ||||||||||
| SHAREHOLDERS’ (DEFICIT)/ EQUITY | ||||||||||
| 17 | ||||||||||
| Class A Ordinary shares (par value of $ | 17 | |||||||||
| Class B Ordinary shares (par value of $ | 17 | |||||||||
| Series A convertible preferred shares (par value of US$ | ||||||||||
| Additional paid-in capital | 18 | |||||||||
| Share option reserve | 18 | |||||||||
| Exchange fluctuation reserve | 18 | ( | ) | ( | ) | |||||
| Accumulated deficit | 18 | ( | ) | ( | ) | |||||
| Total shareholders’ (deficit)/equity | ( | ) | ||||||||
| Total liabilities and shareholders’ (deficit)/equity | ||||||||||
The accompanying notes are an integral part of the Consolidated Financial Statements
F-5
ADLAI NORTYE LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2021, 2022 AND 2023
(All amounts in thousands, except share and per share data, or as otherwise noted)
| Attributable to owners of the parent | ||||||||||||||||||||||||||||
| Series A | ||||||||||||||||||||||||||||
| Additional | convertible | Share | Exchange | |||||||||||||||||||||||||
| Ordinary | paid-in | preferred | option | fluctuation | Accumulated | Total | ||||||||||||||||||||||
| Shares | capital | shares | reserve | reserve | losses | deficits | ||||||||||||||||||||||
| $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | ||||||||||||||||||||||
| (note 17) | (note 18) | (note 18) | (note 18) | |||||||||||||||||||||||||
| At January 1, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Loss for the year | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive income for the year: | ||||||||||||||||||||||||||||
| Exchange differences on translation of the financial statements of subsidiaries | ( | ) | — | ( | ) | |||||||||||||||||||||||
| Issuance of shares for the trust arrangement under the Share Incentive Plan | ( | ) | — | — | ||||||||||||||||||||||||
| Share-based compensation | — | |||||||||||||||||||||||||||
| At December 31, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| At January 1, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Loss for the year | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive income for the year: | ||||||||||||||||||||||||||||
| Exchange differences on translation of the financial statements of subsidiaries | ( | ) | — | ( | ) | |||||||||||||||||||||||
| Share-based compensation | — | |||||||||||||||||||||||||||
| At December 31, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| At January 1, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Loss for the year | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive income for the year | ||||||||||||||||||||||||||||
| Exchange differences on translation of the financial statements of subsidiaries | ( | ) | — | ( | ) | |||||||||||||||||||||||
| Issuance of ordinary shares | — | |||||||||||||||||||||||||||
| Conversion of Financial liabilities at FVTPL | — | |||||||||||||||||||||||||||
| Conversion of Series A convertible preferred shares | ( | ) | — | |||||||||||||||||||||||||
| Share-based compensation | — | |||||||||||||||||||||||||||
| At December 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
The accompanying notes are an integral part of the Consolidated Financial Statements
F-6
ADLAI NORTYE LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2021, 2022 AND 2023
(All amounts in thousands, except share and per share data, or as otherwise noted)
| Year ended December 31, | ||||||||||||||||
| Notes | 2021 | 2022 | 2023 | |||||||||||||
| $’000 | $’000 | $’000 | ||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||||
| Net Loss | 5 | ( | ) | ( | ) | ( | ) | |||||||||
| Adjustments for: | ||||||||||||||||
| Finance costs | ||||||||||||||||
| Investment income | ( | ) | ( | ) | ( | ) | ||||||||||
| Fair value (gain)/loss on financial liabilities at FVTPL | 16 | ( | ) | |||||||||||||
| Fair value gain on financial assets at FVTPL | ( | ) | ( | ) | ||||||||||||
| Loss/(gain) on disposal of items of property, plant and equipment | ( | ) | ||||||||||||||
| Depreciation of property, plant and equipment | 9 | |||||||||||||||
| Amortization of intangible assets | ||||||||||||||||
| Depreciation of right-of-use assets | 10(a) | |||||||||||||||
| Equity-settled share-based payment expenses | 19 | |||||||||||||||
| (Increase)/Decrease in prepayments, other receivables and other assets | ( | ) | ( | ) | ||||||||||||
| (Increase)/Decrease in non-current assets | ( | ) | ||||||||||||||
| Increase in current assets | ( | ) | ||||||||||||||
| Increase in trade payables | ||||||||||||||||
| Increase in other payables and accruals | ||||||||||||||||
| Decrease in advances from customers | ( | ) | ||||||||||||||
| Net cash flows used in operating activities | ( | ) | ( | ) | ( | ) | ||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||||
| Purchases of property, plant and equipment | ( | ) | ( | ) | ( | ) | ||||||||||
| Purchases of intangible assets | ( | ) | ( | ) | ||||||||||||
| Proceeds from disposal of items of property, plant and equipment | ||||||||||||||||
| Purchases of financial assets at FVTPL | ( | ) | ( | ) | ( | ) | ||||||||||
| Disposal of financial assets at FVTPL | ||||||||||||||||
| Purchases of investments at amortized cost | ( | ) | ||||||||||||||
| Received investment income of financial assets at FVTPL | ||||||||||||||||
| Net cash flows provided/(used in) from investing activities | ( | ) | ( | ) | ||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||||
| Proceeds from issuance of ordinary shares | ||||||||||||||||
| Addition of bank borrowings | ||||||||||||||||
| Bank borrowings interest paid | ( | ) | ( | ) | ( | ) | ||||||||||
| Repayment of bank borrowings | ( | ) | ( | ) | ( | ) | ||||||||||
| Transaction costs for issuance of convertible redeemable preferred shares | ( | ) | ||||||||||||||
| Payment for lease liabilities | ( | ) | ( | ) | ( | ) | ||||||||||
| Net cash flows (used in)/from financing activities | ( | ) | ||||||||||||||
| NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||||||||||
| Cash and cash equivalents at beginning of year | ||||||||||||||||
| Effect of foreign exchange rate changes, net | ||||||||||||||||
| CASH AND CASH EQUIVALENTS AT END OF YEAR | ||||||||||||||||
The accompanying notes are an integral part of the Consolidated Financial Statements
F-7
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 1. | CORPORATE AND GROUP INFORMATION |
Adlai Nortye Ltd. (the “Company”) is a limited liability company incorporated in the Cayman Islands on 9 May 2018. The registered office of the Company is located at Harneys Fiduciary (Cayman) Limited, 4th Floor, Harbour Place, 103 South Church Street, P.O. Box 10240, Grand Cayman, KY1-1002, Cayman Islands.
The Company is an investing holding company. The Company’s subsidiaries were involved in the research and development of pharmaceutical products.
As of the date of this report, the Company had direct and indirect interests in its subsidiaries, all of which are private limited liability companies, the particulars of which are set out below:
| Percentage | ||||||||||||
| of equity | ||||||||||||
| Date and place of | Issued ordinary | attributable to | ||||||||||
| incorporation / registration | share/ | the Company | ||||||||||
| Name | Notes | and place of operations | registered capital | Direct | Indirect | Principal activities | ||||||
| Alpine Bioscience Ltd. (“Alpine BVI”) | — | |||||||||||
| Adlai Nortye USA Inc (“Adlai US”) | — | |||||||||||
| Adlai Nortye (Switzerland) AG (“Adlai Swiss”) | — | |||||||||||
| Adlai Nortye PTE.LTD (“Adlai SGP”) | — | |||||||||||
| Adlai Nortye (HK) Limited (“Adlai HK”) | — | |||||||||||
Hangzhou Adlai Nortye Biopharma Co., Ltd* (“Adlai Hangzhou”) | — | |||||||||||
Shanghai Adlai Nortye Biopharma Co., Ltd* (“Adlai Shanghai”) | — | |||||||||||
Hangzhou Tangchuang Weilai Technolegy Co., Ltd (“Hangzhou Tangchuang”) | — | |||||||||||
| * |
F-8
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.1 | BASIS OF PRESENTATION |
The consolidated financial statements of the Group include the financial statements of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation.
| 2.2 | BASIS OF PREPARATION |
As of December 31, 2023,
the Group’s balance of cash and cash equivalents was $
The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”), which comprise all standards and interpretations approved by the International Accounting Standards Board (the “IASB”). All IFRSs effective for the accounting period commencing from January 1, 2020, together with the relevant transitional provisions, have been early adopted by the Group in the preparation of the Consolidated Financial Statements throughout the Relevant Periods and in the period covered by the Interim Comparative Financial Information.
Recently issued accounting pronouncements:
In 2016, the IASB issued IFRS 16, which increases lease transparency and comparability among organizations. Under the new standard, lessees will be required to recognize all assets and liabilities arising from leases on the balance sheet, with the exception of leases with a term of 12 months or less, which permits a lessee to make an accounting policy election by class of underlying asset not to recognize lease assets and liabilities. IFRS 16 is effective for fiscal years beginning after January 1, 2019. The Company adopted the new lease accounting standard as of January 1, 2019. Adoption of this update increased the amounts of total assets and total liabilities on the Company’s consolidated financial position, and did not have a material impact on the Company’s consolidated results of operations and cash flows.
The Consolidated Financial Statements have been prepared under the historical cost convention except for certain financial liabilities which have been measured at fair value at the end of each of the Relevant Periods.
| 2.3 | ISSUED BUT NOT YET EFFECTIVE IFRSs |
The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective in the Consolidated Financial Statements.
| Effective for accounting year beginning on or after | ||||
| Amendments to IAS 1 | ||||
| Amendments to IFRS 16 | ||||
| Amendments to IAS 1 | ||||
| Amendments to IAS 28 and IFRS 10 |
The Group is in the process of making an assessment of the impact of these new and revised IFRSs upon initial application. So far, the Group expects that these standards will not have a significant effect on the Group’s financial performance and financial position.
F-9
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Subsidiaries
A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the investee). When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
| (a) | contractual arrangements with other vote holders of the investee; |
| (b) | rights arising from other contractual arrangements; and |
| (c) | the Group’s voting rights and potential voting rights. |
The financial statements of subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.
Profit or loss and each component of other comprehensive income are attributed to the owners of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
Fair value measurement
The Group measures certain financial instruments at fair value at the end of each of the Relevant Periods. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
F-10
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
All assets and liabilities for which fair value is measured or disclosed in the Consolidated Financial Statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
| Level 1 | — | based on quoted prices (unadjusted) in active markets for identical assets or liabilities |
| Level 2 | — | based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly |
| Level 3 | — | based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable |
For assets and liabilities that are recognized in the Consolidated Financial Statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each of the Relevant Periods.
Impairment of non-financial assets
Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than financial assets), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset or cash-generating unit’s value in use and its fair value less cost of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to profit or loss in the period in which it arises in those expense categories consistent with the function of the impaired asset.
An assessment is made at the end of each of the Relevant Periods as to whether there is an indication that previously recognized impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognized impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortization) had no impairment loss been recognized for the asset in prior years. A reversal of such an impairment loss is credited to profit or loss in the period in which it arises.
Related parties
A party is considered to be related to the Group if:
| (a) | the party is a person or a close member of that person’s family and that person |
| (i) | has control or joint control over the Group; |
| (ii) | has significant influence over the Group; or |
| (iii) | is a member of the key management personnel of the Group or of a parent of the Group; |
or
F-11
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
| (b) | the party is an entity where any of the following conditions applies: |
| (i) | the entity and the Group are members of the same group; |
| (ii) | one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity); |
| (iii) | the entity and the Group are joint ventures of the same third party; |
| (iv) | one entity is a joint venture of a third entity and the other entity is an associate of the third entity; |
| (v) | the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group; and the sponsoring employers of the post-employment benefit plan; |
| (vi) | the entity is controlled or jointly controlled by a person identified in(a); |
| (vii) | a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and |
| (viii) | the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the parent of the Group. |
Property, plant and equipment and depreciation
Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.
Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to profit or loss in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalized in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognizes such parts as individual assets with specific useful lives and depreciates them accordingly.
Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:
| Plant and machinery | ||
| Office equipment | ||
| Motor vehicles | ||
| Electronic equipment | ||
| Leasehold improvements |
Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at the end of each of the Relevant Periods.
F-12
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
An item of property, plant and equipment including any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognized in the statement of profit or loss and other comprehensive income in the year the asset is derecognized is the difference between the net sales proceeds and the carrying amount of the relevant asset.
Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.
Other intangible assets (other than goodwill)
Other intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value at the date of acquisition. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are subsequently amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each of the Relevant Periods.
Computer software
Computer software is stated
at cost less any impairment losses and amortized on a straight-line basis over its estimated useful life of
The estimated useful life of software is determined by considering the period of the economic benefits to the Group, as well as by referring to industry practice.
Research and development costs
All research costs are charged to expense as incurred.
Expenditure incurred on projects to develop new products is capitalized and deferred only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the project and the Group’s ability to measure reliably the expenditure during the development. Product development expenditure which does not meet these criteria is expensed when incurred.
Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
F-13
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
| (a) | Right-of-use assets |
Right-of-use assets are recognized
at the commencement date of the lease (the date the underlying asset is available for use). Right-of-use assets are measured at cost,
less any accumulated depreciation and any impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement
date less any lease incentives received.
| Offices | ||
| Office equipment |
If ownership of the leased asset transfers to the Group by the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
| (b) | Lease liabilities |
Lease liabilities are recognized at the commencement date of the lease at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for termination of a lease, if the lease term reflects the Group exercising the option to terminate the lease. Variable lease payments that do not depend on an index or a rate are recognized as an expense in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in lease payments (e.g., a change to future lease payments resulting from a change in an index or rate) or a change in assessment of an option to purchase the underlying asset.
| (c) | Short-term leases and leases of low-value assets |
The Group applies the short-term lease recognition exemption to its short-term leases of office equipment (that is those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the recognition exemption for leases of low-value assets to leases of office equipment that are considered to be of low value.
Lease payments on short-term leases and leases of low-value assets are recognized as an expense on a straight-line basis over the lease term.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through other comprehensive income, and fair value through profit or loss.
F-14
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient of not adjusting the effect of a significant financing component, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.
In order for a financial asset to be classified and measured at amortized cost or fair value through other comprehensive income, it needs to give rise to cash flows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortized cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows, while financial assets classified and measured at fair value through other comprehensive income are held within a business model with the objective of both holding to collect contractual cash flows and selling. Financial assets which are not held within the aforementioned business models are classified and measured at fair value through profit or loss.
All regular way purchases and sales of financial assets are recognized on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
Financial assets at amortized cost (debt instruments)
Financial assets at amortized cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognized in the statement of profit or loss and other comprehensive income when the asset is derecognized, modified or impaired.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognized in the statement of profit or loss and other comprehensive income.
This category includes derivative instruments and equity investments which the Group has not irrevocably elected to classify at fair value through other comprehensive income. Dividends on equity investments classified as financial assets at fair value through profit or loss are also recognized as other income in the statement of profit or loss and other comprehensive income when the right of payment has been established, it is probable that the economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.
F-15
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognized in the statement of profit or loss and other comprehensive income. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category.
A derivative embedded within a hybrid contract containing a financial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required to be classified in its entirety as a financial asset at fair value through profit or loss.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Group’s consolidated statement of financial position) when:
| ● | the rights to receive cash flows from the asset have expired; or |
| ● | the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. |
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognize the transferred asset to the extent of the Group’s continuing involvement. In that case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
Impairment of financial assets
The Group recognizes an allowance for expected credit losses (“ECLs”) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
General approach
ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
F-16
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
At the end of each of the Relevant Periods, the Group assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Group compares the risk of a default occurring on the financial instrument as of the reporting date with the risk of a default occurring on the financial instrument as of the date of initial recognition and considers reasonable and supportable information that is available without undue cost or effort, including historical and forward-looking information.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
Financial assets at amortized cost are subject to impairment under the general approach and they are classified within the following stages for measurement of ECLs except for trade receivables and contract assets which apply the simplified approach as detailed below.
| Stage 1 | — | Financial instruments for which credit risk has not increased significantly since initial recognition and for which the loss allowance is measured at an amount equal to 12-month ECLs |
| Stage 2 | — | Financial instruments for which credit risk has increased significantly since initial recognition but that are not credit-impaired financial assets and for which the loss allowance is measured at an amount equal to lifetime ECLs |
| Stage 3 | — | Financial assets that are credit-impaired at the reporting date (but that are not purchased or originated credit-impaired) and for which the loss allowance is measured at an amount equal to lifetime ECLs |
Simplified approach
For trade receivables that do not contain a significant financing component or when the Group applies the practical expedient of not adjusting the effect of a significant financing component, the Group applies the simplified approach in calculating ECLs. Under the simplified approach, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at the end of each of the Relevant Periods.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, derivative financial instruments, interest-bearing bank and other borrowings and certain financial instruments designated at FVTPL.
F-17
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Subsequent measurement
The subsequent measurement of financial liabilities depends on their classification as follows:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognized in the statement of profit or loss. The net fair value gain or loss recognized in the statement of profit or loss does not include any interest charged on these financial liabilities.
Financial liabilities designated upon initial recognition as at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IFRS 9 are satisfied. Gains or losses on liabilities designated at fair value through profit or loss are recognized in the statement of profit or loss, except for the gains or losses arising from the Group’s own credit risk which are presented in other comprehensive income with no subsequent reclassification to the statement of profit or loss. The net fair value gain or loss recognized in the statement of profit or loss does not include any interest charged on these financial liabilities.
The company assessed the contract characteristics of each series of convertible redeemable preferred shares to determine whether they should be classified as equity instruments or financial liabilities. The Series B, C, and D Preferred Shares and Series B Convertible Loans were classified as financial liabilities measured at fair value through profit or loss. The decision was based on the presence of a redemption feature and a conversion option with a price adjustment feature, which are considered financial liabilities under IAS 32.
The company also determined that the Series B Convertible Loans are a hybrid instrument that includes a non-derivative host contract and embedded derivatives, which should be accounted for at fair value through profit or loss.
Financial liabilities at amortized cost (loans and borrowings)
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognized in the statement of profit or loss and other comprehensive income when the liabilities are derecognized as well as through the effective interest rate amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortization is included in finance costs in the statement of profit or loss and other comprehensive income.
Derecognition of financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or cancelled, or expires.
F-18
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognized in the statement of profit or loss and other comprehensive income.
Derivative financial instruments
Initial recognition and subsequent measurement
The Group uses derivative financial instruments, such as warrants. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
Any gains or losses arising from changes in fair value of derivatives are taken directly to profit or loss.
Current versus non-current classification
Derivative instruments that are not designated as effective hedging instruments are classified as current or non-current or separated into current and non-current portions based on an assessment of the facts and circumstances (i.e., the underlying contracted cash flows):
| ● | Where the Group expects to hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond 12 months after the end of the reporting period, the derivative is classified as non-current (or separated into current and non-current portions) consistently with the classification of the underlying item. |
| ● | Embedded derivatives that are not closely related to the host contract are classified consistently with the cash flows of the host contract. |
| ● | Derivative instruments that are designated as, and are effective hedging instruments, are classified consistently with the classification of the underlying hedged item. The derivative instruments are separated into current portions and non-current portions only if a reliable allocation can be made. |
Cash and cash equivalents
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired.
For the purpose of the consolidated statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash and cash equivalents at high-quality and accredited financial institutions in amounts that could exceed the $250,000 maximum amount insured by the Federal Deposit Insurance Corporation (FDIC). The Company does not believe that its cash and cash equivalents are subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
F-19
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Provisions
A provision is recognized when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.
When the effect of discounting is material, the amount recognized for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the statement of profit or loss and other comprehensive income.
Income tax
Income tax comprises current and deferred tax. Income tax relating to items recognized outside profit or loss is recognized outside profit or loss, either in other comprehensive income or directly in equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Group operates.
Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
| ● | when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and |
| ● | in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. |
Deferred tax assets are recognized for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carryforward of unused tax credits and unused tax losses can be utilized, except:
| ● | when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and |
| ● | in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are only recognized to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. |
F-20
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
The carrying amount of deferred tax assets is reviewed at the end of each of the Relevant Periods and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at the end of each of the Relevant Periods and are recognized to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
In compliance with IFRIC 23, accruals for risk on income tax are part of the income tax within the statements of operations and comprehensive loss and income tax payable within the statements of financial position.
Government grants
Government grants are recognized at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the costs, for which it is intended to compensate, are expensed.
Revenue recognition
Sales of intellectual property
Revenue from sales of intellectual property is recognized when control of the intellectual property is transferred to the customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for the intellectual property.
When the consideration of sales of intellectual property includes a variable amount, the amount of consideration is estimated to which the Group will be entitled in exchange for transferring the intellectual property to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with the variable consideration is subsequently resolved.
Milestone payments and sales-based royalties represent a form of variable consideration which is included in the transaction price to the extent that it is highly probable that a significant reversal of accumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. When the Group cannot conclude that it is highly probable that a significant revenue reversal of cumulative revenue under the contract will not occur, the Group constrains the related variable consideration resulting in its exclusion from the transaction price.
As part of the accounting for this arrangement, the Group must use significant judgement to determine: (a) the performance obligations; and (b) the method to estimate variable consideration.
At contract inception, the Group assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct.
F-21
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
The Group uses judgement to determine whether milestones or other variable consideration, except for royalties, should be included in the transaction price. The transaction price is allocated to each performance obligation on a relative stand-alone selling price basis, for which the Group recognizes revenue as or when the performance obligations under the contract are satisfied. If a milestone or other variable consideration relates specifically to the Group’s efforts to satisfy a single performance obligation or to a specific outcome from satisfying the performance obligation, the Group generally allocates that milestone amount entirely to that performance obligation once it is highly probable that a significant revenue reversal would not occur.
The Group recognizes revenue only when it satisfies a performance obligation by transferring control of the promised goods or services. The transfer of control can occur over time or at a point in time. A performance obligation is satisfied over time if it meets one of the following criteria:
The counterparty simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs; or
The Group’s performance creates or enhances an asset that the counterparty controls as the asset is created or enhanced
The Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.
The portion of the transaction price that is allocated to performance obligations satisfied at a point in time is recognized as revenue when control of the goods or services is transferred to the counterparty. If the performance obligation is satisfied over time, the portion of the transaction price allocated to that performance obligation is recognized as revenue as the performance obligation is satisfied. The Group adopts an appropriate method of measuring progress for purposes of recognizing revenue. The Group evaluates the measure of progress at the end of each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
Upfront fees
Upfront payment is allocated to the performance obligations based on the Group’s best estimate of their relative stand-alone selling prices. The Group recognizes revenues from non-refundable upfront fees at a point in time when the transfer of control of the intellectual property to the counterparty occurs and the counterpary is able to use and benefit from the intellectual property.
Milestone payments
At the inception of each arrangement that includes milestone payments, the Group evaluates whether the milestones are considered highly probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is highly probable that a significant reversal of cumulative revenue would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Group, such as regulatory approvals, are not considered highly probable of being achieved until those approvals are received. The Group evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgement involved in determining whether it is highly probable that a significant reversal of cumulative revenue would not occur. At the end of each subsequent reporting period, the Group re-evaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Milestone payments are allocated to performance obligations based on the Group’s best estimate of their relative stand-alone selling prices unless the criteria under IFRS 15.85 are met, in which case the milestone payments are allocated entirely to the performance obligation which the milestone payments are specifically related to.
F-22
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
The Group assessed that achievement of all the remaining contractual milestones is highly uncertain and the related milestone payments are not included in the transaction price. Milestones are achieved when the triggering event described in the related agreement occurs.
Sales royalties
The Group recognizes revenue for a sales-based royalty promised in exchange for the sales of intellectual property only when (or as) the later of the following events occurs:
| (a) | the subsequent sale occurs; and |
| (b) | the performance obligation to which some or all of the sales-based royalty has been allocated has been satisfied. |
Revenue from other sources
Rental income is recognized on a time proportion basis over the lease terms. Variable lease payments that do not depend on an index or a rate are recognized as income in the accounting period in which they are incurred.
Interest income
Interest income is recognized on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset.
Share-based payments
The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. Employees (including directors) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (“equity-settled transactions”).
The cost of equity-settled transactions with employees for grants is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using a binomial model, further details of which are given in note 19 to the Consolidated Financial Statements.
The cost of equity-settled transactions is recognized in employee benefit expense, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognized for equity-settled transactions at the end of each of the Relevant Periods until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The charge or credit to the statement of profit or loss and other comprehensive income for a period represents the movement in the cumulative expense recognized as of the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.
F-23
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Other employee benefits
Pension schemes
The employees of the Group’s subsidiaries who operate in Mainland China are required to participate in a central pension scheme operated by the local municipal government. These subsidiaries are required to contribute a certain percentage of their payroll costs to the central pension scheme. The contributions are charged to profit or loss as they become payable in accordance with the rules of the central pension scheme.
The subsidiary in the U.S. maintains multiple qualified contributory savings plans as allowed under Section 401(k) of the Internal Revenue Code in the U.S. These plans are defined contribution plans covering substantially all its qualifying employees and provide for voluntary contributions by employees, subject to certain limits. The contributions are made by both the employees and the employer. The employees’ contributions are primarily based on specified dollar amounts or percentages of employee compensation. The only obligation of the subsidiary in the U.S. with respect to the retirement benefits plans is to make the specified contributions under the plans.
Housing fund — Mainland China
The Group contributes on a monthly basis to a defined contribution housing fund plan operated by the local municipal government. Contributions to this plan by the Group are expensed as incurred.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets (i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale) are capitalized as part of the cost of those assets. The capitalization of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalized. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
Foreign currencies
These consolidated financial statements are presented in United States dollars (“$”), which is the Company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions recorded by the entities in the Group are initially recorded using their respective functional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rates of exchange at the end of the reporting period. Differences arising on settlement or translation of monetary items are recognized in the statement of operations and comprehensive loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of a non-monetary item measured at fair value is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation difference on the item whose fair value gain or loss is recognized in other comprehensive income or profit or loss is also recognized in other comprehensive income or profit or loss, respectively).
F-24
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 2.4 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
In determining the exchange rate on initial recognition of the related asset, expense or income on the derecognition of a non-monetary asset or non-monetary liability relating to an advance consideration, the date of the initial transaction is the date on which the Group initially recognizes the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Group determines the transaction date for each payment or receipt of the advance consideration.
The functional currencies of certain subsidiaries established in the PRC are currencies other than $. As of the end of the reporting period, the assets and liabilities of these entities are translated into $ at the exchange rates prevailing at the end of the reporting period and their statements of profit or loss and other comprehensive income are translated into $ at the weighted average exchange rates for the year.
The resulting exchange differences are recognized in other comprehensive income and accumulated in the exchange fluctuation reserve. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognized in the statement of profit or loss and other comprehensive income.
For the purpose of the consolidated statement of cash flows, the cash flows of the subsidiaries established in the PRC are translated into $ at the exchange rates at the dates of the cash flows. Frequently recurring cash flows of the subsidiaries established in the PRC which arise throughout the year are translated into $ at the weighted average exchange rates for the year.
| 3. | SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES |
Use of Estimates
The preparation of the Group’s Consolidated Financial Statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are described below.
Fair value of financial liabilities measured at FVTPL
The fair value of the financial liabilities, including convertible redeemable preferred shares, convertible loans, forwards and warrants, are measured at FVTPL and determined using the valuation techniques, including the discounted cash flow method and the back-solve method. Such valuation requires the Group to make estimates of the key assumptions including the risk-free interest rate, discount for lack of marketability (“DLOM”) and volatility, which are subject to uncertainty and might materially differ from the actual results. Further details are included in note 16 to the Consolidated Financial Statements.
Fair value of share-based payment
The fair value of the awarded shares is determined at the grant dates by the binomial option-pricing model. Significant estimates on assumptions, including the underlying equity value, discount rate, expected volatility, and dividend yield, are made by management. Further details are included in note 19 to the Consolidated Financial Statements.
F-25
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 3. | SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (continued) |
The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reporting amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the consolidated financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the valuation and accounting for financial liabilities at FVTPL and equity awards.
Impairment of non-financial assets (other than goodwill)
The Group assesses whether there are any indicators of impairment for all non-financial assets (including the right-of-use assets) at the end of each of the Relevant Periods. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. An impairment exists when the carrying value of an asset or a cash-generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The calculation of the fair value less costs of disposal is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. When value-in-use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.
Deferred tax assets
Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies. Further details are contained in note 6 to the Consolidated Financial Statements.
Uncertain tax positions
In assessing any uncertainty over income tax treatments, the Group considers whether it is probable that the relevant tax authority will accept the uncertain tax treatment used, or proposed to be used, by individual group entities in their income tax filings. If it is probable, the current and deferred taxes are determined consistently with the tax treatment in the income tax filings. If it is not probable that the relevant taxation authority will accept an uncertain tax treatment, the effect of each uncertainty is reflected by using either the most likely amount or the expected value.
The Group has evaluated the uncertain tax position of each of the companies within the Group as of December 31, 2022 and 2023, the Group did not have any significant unrecognized uncertain tax positions.
Leases — Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in a lease, and therefore, it uses an incremental borrowing rate (“IBR”) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group “would have to pay”, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when it needs to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating).
F-26
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 4. | REVENUE |
An analysis of revenue is as follows:
| 2021 | 2022 | 2023 | ||||||||||
| $’000 | $’000 | $’000 | ||||||||||
| Sales of intellectual property | ||||||||||||
| Sales of an exclusive option. | ||||||||||||
| Total | ||||||||||||
Revenue of $
The Group entered into a
collaboration agreement with one customer in the year ended December 31,2021 for a list of patents and related research material, know-how,
and research results generated through studies of the five products. The terms of the arrangement include: non-refundable upfront fees
of RMB
Revenue of $
| 5. | FINANCE COSTS |
An analysis of finance costs is as follows:
| Year ended December 31, | ||||||||||||
| 2021 | 2022 | 2023 | ||||||||||
| $’000 | $’000 | $’000 | ||||||||||
| Transaction cost for issuance of the Group’s convertible redeemable preferred shares | ||||||||||||
| Interest expenses on bank and other borrowings | ||||||||||||
| Interest expenses on lease liabilities | ||||||||||||
| Total | ||||||||||||
| 6. | INCOME TAX |
The company is subject to income tax on an entity basis on profit arising in or derived from the jurisdictions in which members of the Group are domiciled and operate.
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains.
The United States
The subsidiary incorporated
in the United States (“U.S.”) is subject to U.S. federal income tax and New Jersey state income tax at the rates of
F-27
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 6. | INCOME TAX (continued) |
Mainland China
The provision for corporate
income tax in Mainland China is based on the statutory rate of
Pursuant to the relevant
regulations on extension for expiries of unused tax losses of High and New Technology Enterprises and Small and Medium-sized Technological
Enterprises issued in August 2018, the accumulated tax losses that did not expire from 2018 will have expiries extending from
The income tax expense of the company for the Relevant Periods is analyzed as follows:
| Year ended December 31, | ||||||||||||
| 2021 | 2022 | 2023 | ||||||||||
| $’000 | $’000 | $’000 | ||||||||||
| Current | ||||||||||||
| Deferred | ||||||||||||
| Total | ||||||||||||
A reconciliation of the tax expense applicable to loss before tax at the statutory rate to the tax expense at the effective tax rate is as follows:
| Year ended December 31, | ||||||||||||
| 2021 | 2022 | 2023 | ||||||||||
| $’000 | $’000 | $’000 | ||||||||||
| Loss before tax | ( | ) | ( | ) | ( | ) | ||||||
| Tax at the statutory tax rate ( | ( | ) | ( | ) | ( | ) | ||||||
| Foreign rate differential | ||||||||||||
| Expenses not deductible for tax | ||||||||||||
| Income not subject to tax | ( | ) | ( | ) | ||||||||
| Additional deductible allowance for qualified research and development costs | ( | ) | ( | ) | ( | ) | ||||||
| Unrecognized deferred tax assets | ||||||||||||
| Current income tax expense | ||||||||||||
| Tax charge at the Group’s effective rate | % | |||||||||||
F-28
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 6. | INCOME TAX (continued) |
Deferred tax
The Group considers positive
and negative evidence to determine whether some portion or all of the deferred tax assets will be probable realized.
| Year ended December 31 | ||||||||
| 2022 | 2023 | |||||||
| $’000 | $’000 | |||||||
| Fixed assets | ( | ) | ||||||
| Capitalized R&D | ||||||||
| Accrued and prepaid expenses | ( | ) | ||||||
| ROU Assets | ( | ) | ||||||
| Advertising expenses in excess of deduction limit | ||||||||
| Allowance against receivables | ||||||||
| State tax | ( | ) | ( | ) | ||||
| Stock options | ||||||||
| NOL | ||||||||
| Subtotal | ||||||||
| Unrecognized deferred tax assets | ( | ) | ( | ) | ||||
| Total Deferred tax | ||||||||
The Group has accumulated
tax losses arising in Adlai Hangzhou in Mainland China of $
The Group also has accumulated
tax losses in the U.S. of $
Uncertain Tax Position
The Company did not identify any significant unrecognized tax benefits for each of the periods presented. The Group did not incur any interest related to unrecognized tax benefits, did not recognize any penalties as income tax expense and also does not anticipate any significant change in unrecognized tax benefits within 12 months from December 31, 2023.
F-29
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 7. | DIVIDENDS |
dividends have been declared and paid by the Company or the Group during the Relevant Periods.
| 8. | LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT |
The calculation of the basic
loss per share amount is based on the loss for the year attributable to ordinary equity holders of the parent, and the weighted average
number of ordinary shares of
The calculation of the basic loss per share amount is based on the loss for the years attributable to ordinary equity holders of the parent, and the weighted average number of ordinary shares in issue or deemed to be in issue during the year ended December 31, 2021, 2022 and 2023.
Basic loss per share is computed on the basis of the weighted average number of ordinary shares outstanding during the period of the financial statements.
Diluted loss per share of
ordinary stock is computed on the basis of the weighted average number of shares of ordinary stock and dilutive securities (such as stock
options and convertible securities) outstanding. As of December 31, 2021 the Company had
No adjustment has been made to the basic loss per share amounts presented for the years ended December 31, 2021, 2022 and 2023 in respect of a dilution as the impact of the outstanding share options, restricted stock units and warrant liability had an anti-dilutive effect on the basic loss per share amounts presented.
| 9. |
| Leasehold | Plant and | Office | Motor | Electronic | ||||||||||||||||||||
| improvements | machinery | equipment | vehicles | equipment | Total | |||||||||||||||||||
| $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | |||||||||||||||||||
| At January 1, 2022, net of accumulated depreciation | ||||||||||||||||||||||||
| Additions | ||||||||||||||||||||||||
| Depreciation provided during the year | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Disposals | ( | ) | ( | ) | ||||||||||||||||||||
| Exchange realignment | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| At December 31, 2022, net of accumulated depreciation | ||||||||||||||||||||||||
| As of December 31, 2022: | ||||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||
| Accumulated depreciation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Net carrying amount | ||||||||||||||||||||||||
F-30
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 9. | PROPERTY, PLANT AND EQUIPMENT (continued) |
| Leasehold | Plant and | Office | Motor | Electronic | ||||||||||||||||||||
| improvements | machinery | equipment | vehicles | equipment | Total | |||||||||||||||||||
| $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | |||||||||||||||||||
| At January 1, 2023, net of accumulated depreciation | ||||||||||||||||||||||||
| Additions | ||||||||||||||||||||||||
| Depreciation provided during the year | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Disposals | ( | ) | ( | ) | ||||||||||||||||||||
| Exchange realignment | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| At Dec 31, 2023, net of accumulated depreciation | ||||||||||||||||||||||||
| As of December 31, 2023 | ||||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||
| Accumulated depreciation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Net carrying amount | ||||||||||||||||||||||||
During the Relevant Periods, none of the Group’s property, plant and equipment were pledged.
There was no impairment for the Group’s property, plant and equipment during the Relevant Periods.
| 10. | LEASES |
The Group has lease contracts
of properties and used in its operation with lease terms between
| (a) | Right-of-use assets |
The carrying amounts of the Group’s right-of-use assets and the movements during the Relevant Periods are as follows:
| Offices | Office equipment | Total | ||||||||||
| $’000 | $’000 | $’000 | ||||||||||
| As of January 1, 2022 | ||||||||||||
| Additions | ||||||||||||
| Depreciation provided during the year | ( | ) | ( | ) | ( | ) | ||||||
| Exchange realignment | ( | ) | ( | ) | ( | ) | ||||||
| As of December 31, 2022 | ||||||||||||
| Offices | Office equipment | Total | ||||||||||
| $’000 | $’000 | $’000 | ||||||||||
| As of January 1, 2023 | ||||||||||||
| Additions | ||||||||||||
| Depreciation provided during the year | ( | ) | ( | ) | ( | ) | ||||||
| Exchange realignment | ( | ) | ( | ) | ( | ) | ||||||
| As of December 31, 2023 | ||||||||||||
F-31
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 10. | LEASES (continued) |
| (b) | Lease liabilities |
The carrying amount of lease liabilities and the movements during the Relevant Periods are as follows:
| Lease liabilities | ||||
| $’000 | ||||
| As of January 1, 2022 | ( | ) | ||
| Additions | ( | ) | ||
| Accretion of interest recognized during the year | ( | ) | ||
| Payments | ||||
| Exchange realignment | ||||
| As of December 31, 2022 | ( | ) | ||
| As of January 1, 2023 | ( | ) | ||
| Additions | ||||
| Accretion of interest recognized during the year | ( | ) | ||
| Payments | ||||
| Exchange realignment | ||||
| As of December 31, 2023 | ( | ) | ||
| 2022 | 2023 | |||||||
| $’000 | $’000 | |||||||
| Analyzed into: | ||||||||
| Current portion | ||||||||
| Non-current portion | ||||||||
| Total | ||||||||
| (c) |
| Year ended December 31, | ||||||||||||
| 2021 | 2022 | 2023 | ||||||||||
| $’000 | $’000 | $’000 | ||||||||||
| Interest on lease liabilities | ||||||||||||
| Depreciation charge of right-of-use assets | ||||||||||||
| Total amount recognized in profit or loss | ||||||||||||
F-32
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 11. |
| As of December 31, | ||||||||
| 2022 | 2023 | |||||||
| $’000 | $’000 | |||||||
| Current: | ||||||||
| Prepayments (Note i) | ||||||||
| VAT deductible tax | ||||||||
| Deposits and other receivables | ||||||||
| Non-current: | ||||||||
| Deposits and other receivables | ||||||||
| Prepaid expenses | ||||||||
| Total | ||||||||
Note i:
The amount represents prepayments for Contract Research Organizations (“CROs”) and deposit of property, plant and equipment not yet placed in use.
Other receivables had no historical default. The financial assets included in the above balances relate to receivables which were categorized in stage 1 at the end of each of the Relevant Periods. In calculating the expected credit loss rate, the Group considers the historical loss rate and adjusts for forward-looking factors and information. During the Relevant Periods, the Group estimated that the expected credit loss rate for other receivables and deposits was minimal.
The Group seeks to maintain strict control over its outstanding receivables to minimize credit risk. Long ageing balances are reviewed regularly by senior management. In view of the fact that the Group’s deposits and other receivables relate to a large number of diversified counterparties, there is no significant concentration of credit risk. The Group does not hold any collateral or other credit enhancements over its deposits and other receivable balances.
| 12. | FINANCIAL ASSETS AT FVTPL |
| As of December 31, | ||||||||
| 2022 | 2023 | |||||||
| $’000 | $’000 | |||||||
| Current: | ||||||||
| Wealth management product | ||||||||
| Total | ||||||||
During the Relevant Periods, the Group used surplus capital to purchase dual currency structured deposit and wealth management product from domestic commercial banks, which preserved capital and liquidity.
The wealth management product
held as of December 31, 2022 was an investment into a mutual fund whose portfolio included a mixture of fixed income assets, preferred
shares and repos, which were redeemable every
F-33
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 13. | INVESTMENT AT AMORTIZED COST |
| As of December 31, | ||||||||
| 2022 | 2023 | |||||||
| $’000 | $’000 | |||||||
| Short-term investments at amortized cost | ||||||||
| Long-term investments at amortized cost | ||||||||
| Total | ||||||||
Short-term investment at
amortized cost represent time deposits placed with banks with original maturities between
Long-term
investment at amortized cost represent time deposits placed with banks with original maturities more than
| 14. | OTHER PAYABLES AND ACCRUALS |
| As of December 31, | ||||||||
| 2022 | 2023 | |||||||
| $’000 | $’000 | |||||||
| Other payables and accruals (Note i) | ||||||||
| Tax payable | ||||||||
| Payroll and bonus payables | ||||||||
| Total | ||||||||
Note i:
F-34
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 15. |
| As of December 31, | ||||||||
| 2022 | 2023 | |||||||
| $’000 | $’000 | |||||||
| Non-Revolving Facility, | ||||||||
| Non-Revolving Facility, | ||||||||
| Non Revolving Facility, | ||||||||
| Non Revolving Facility, | ||||||||
| Non Revolving Facility, | ||||||||
| Non Revolving Facility, | ||||||||
| Non Revolving Facility, | ||||||||
| Non Revolving Facility, | ||||||||
| Non Revolving Facility, | ||||||||
| Non Revolving Facility, | ||||||||
| Total | ||||||||
| Bank borrowings | Total | |||||||
| $’000 | $’000 | |||||||
| As of January 1, 2022 | ||||||||
| Additions | ||||||||
| Repayments | ( | ) | ( | ) | ||||
| Effect of foreign exchange rate changes | ( | ) | ( | ) | ||||
| As of December 31, 2022 | ||||||||
| Additions | ||||||||
| Repayments | ( | ) | ( | ) | ||||
| Effect of foreign exchange rate changes | ( | ) | ( | ) | ||||
| As of December 31, 2023 | ||||||||
All of the Group’s
bank borrowings were obtained from third party financial institutions. As of December 31, 2022 and 2023, the Group’s credit
facilities were $
Notes:
| (i) |
| (ii) | In October 2022, Adlai Hangzhou entered into a non-revolving facility agreement for a facility amount
of RMB |
In October 2023,
Adlai Hangzhou entered into a non-revolving facility agreement for a facility amount of RMB
| (iii) |
| (iv) |
F-35
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 15. | INTEREST-BEARING BANK BORROWINGS (continued) |
| (v) | In September 2023, Adlai Hangzhou entered into
a non-revolving facility agreement for a facility amount of RMB |
In September 2023,
Adlai Hangzhou entered into a non-revolving facility agreement for a facility amount of RMB
| (vi) | In November 2023, Adlai US entered into a non-revolving facility agreement for a facility amount of USD
|
In December 2023,
Adlai US entered into a non-revolving facility agreement for a facility amount of USD
| (vii) |
| 16. | FINANCIAL LIABILITIES AT FVTPL |
Preferred shares and convertible loans
In late 2015, Adlai Hangzhou
raised up to RMB
In June 2018, the Company
was established in the Cayman Island for seeking overseas listing opportunity, and the Company issued ordinary shares to the Founders
and an option to the Series A Investors, which entitled Series A Investors to convert their equity interests in Adlai Hangzhou
to up to
In June 2018, to accommodate
the Group’s Reorganization plan, certain onshore investors (“Series B Onshore Investors”) entered into convertible
loan subscription agreement (the “Series B Loan Agreement”) with Adlai Hangzhou to issue a loan (the “Series B
Convertible Loans”) to Series B Onshore Investors for a total consideration of RMB
Concurrently, certain offshore
investors (“Series B Offshore Investors”) subscribed
F-36
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 16. | FINANCIAL LIABILITIES AT FVTPL (continued) |
In December 2019, the
Company issued
In April 2021, the Company
entered into a Series D share purchase agreement with certain investors (“Series D Investors”) to issue an aggregate
of
According to the original and amended Memorandum and Articles of Association (“MOA”) upon the issuance of each series of convertible redeemable preferred shares, the Group designated Series B, C and D Preferred Shares and Series B Convertible Loans as financial liabilities measured at FVTPL and recognized Series A Preferred Shares as equity in accordance with the relevant IFRS. There is no significant change in the major terms of MOA among of each series except mentioned otherwise in the notes to the Consolidated Financial Statements.
According to the MOA of the Company in May 2021, the key terms of the Series A, B, C and D Preferred Shares (collectively “Preferred Shares”) are as follows:
Conversion Rights (applicable to all Preferred Shares)
Each holder of Preferred Shares may, at the option of the holder thereof, be converted at any time into fully-paid and nonassessable ordinary shares of the Company based on the then-effective applicable conversion price (“Applicable Conversion Price”). Each holder of Preferred Shares shall automatically be converted, based on the Applicable Conversion Price, into ordinary shares of the Company upon the closing of a Qualified IPO (as defined below).
The Applicable Conversion Price is initially equal to the original issue price for each class of Preferred Shares and shall be subject to adjustment from time to time, including but not limited to share splits, share subdivision, share combination and the like, being no less than par value.
If the Company issues any additional ordinary shares at a subscription price less than the corresponding original subscription price of the Series B, C and D Preferred Shares, the Company shall issue new corresponding Series B, C and D Preferred Shares to the holders of Series B, C and D Preferred Shares at the nominal price or the minimum price allowed by applicable laws until the Applicable Conversion Price for each holders of Series B, C and D Preferred Shares is reduced to such issue price.
If the Group fails to meet
any of the below two committed business objectives (“Business Objectives”) within the timelines, the holders of Series C
Preferred Shares are entitled to request the Founders, affiliates of the Founders and the Group (collectively referred to as “Warrantors”)
to jointly make up the share compensation necessary to make the pre-money valuation of the Company immediately before the investment by
the holders of Preferred Shares be adjusted to
| a) | promote at least |
| b) | obtain the approval of one new drug application from the competent authority for drug administration in the US or PRC by the 3rd anniversary of Series C Preferred Shares closing date. |
F-37
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 16. | FINANCIAL LIABILITIES AT FVTPL (continued) |
Qualified IPO means an underwritter
initial public offering of the Company completed no later than the earlier of (i) September 7, 2023 and (ii) years
after the date of Closing of the Series D Preferred Shares and which occurs on the New York Stock Exchange, NASDAQ, Hong Kong Exchanges
and Clearing Market or such other reputable stock exchange approved by the a majority of all of the investor directors with (i) the
pre-public offering market capitalization of no less than $
Voting Rights (applicable to all Preferred Shares)
Except as otherwise required
by law or as set forth herein, the holder of each ordinary share issued and outstanding shall have
Liquidation Preference (applicable to all Preferred Shares)
Upon any liquidation, closure,
dissolution, merger or acquisition of any Group company; or the transfer of a controlling interest (i.e., more than
| a) | Series D Preferred Shares |
| b) | Series C Preferred Shares |
| c) | Series B Preferred Shares |
| d) | Series A Preferred Shares |
If there are any assets or funds remaining after the aggregate Series A, B, C and D Preferred Shares have been distributed or paid fully, the remaining assets and funds of the Company available for distribution is distributed on a pro rata basis among all holders of outstanding ordinary shares and Preferred Shares.
Dividends (applicable to all Preferred Shares)
Each holder of the ordinary shares (on as-converted basis) shall be entitled to receive dividends on a pro rata basis on the number of ordinary shares, out of any funds legally available therefor, pro rata based on the number of ordinary shares held by each holder.
F-38
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 16. | FINANCIAL LIABILITIES AT FVTPL (continued) |
Redemption Rights (applicable to Series B, C and D Preferred Shares)
At any time after the earlier of the following, any investors of Preferred Shares shall be entitled to require the Company to redeem all or portion of the outstanding Preferred Shares held by them, and/or require each of the Warrantors to jointly and severally redeem or repurchase all or portion of the outstanding Preferred Shares held by them:
| i. | the Company fails to complete a Qualified IPO at the earlier of (a) September 7, 2023; and (b) years after the date of Closing; |
| ii. | (applicable to Series C Investors and Series D Investors only) with respect to any Series C
Investor or Series D Investor, such Series C Investor or Series D Investor fails to achieve the investment return which
is |
| iii. | (applicable to Series C Investors only) the applicable Group company fails to meet any of the Committed Business Objectives within the timelines specified under these Articles; |
| iv. | (applicable to Series C Investors only) the applicable Group company fails to obtain approval of a new medicine application from the competent authority for drug administration of its first medicine in the U.S. or the PRC by December 30, 2022; |
| v. | (applicable to Series C Investors and Series D Investors only) the first disapproval or rejection by any competent governmental authority (including, without limitation, the National Medical Products Administration of the PRC or the U.S. Food and Drug Administration) of the application made by any Group company with respect to any of its new drugs; |
| vi. | in case that the Group companies meet the requirements for a Qualified IPO, any of the Group companies or the management shareholders refuses the Qualified IPO or declines to make necessary cooperation for such Qualified IPO, or the Group companies fail to complete the Qualified IPO due to any reasons attributable to any management shareholder; |
| vii. | without the written consent of the majority of investor directors, Series C Investors and Series D Investors, Mr. Yang Lu and Mr. Donghui Yang terminate their employment contracts with the applicable Group company or fail to comply their commitment to work full time as per the agreement with certain Series C Investors or Series D Investors prior to the latest to occur of the following events: (a) such Series C Investors or Series D Investors’ exit; (b) the occurrence of a Qualified IPO; (c) the expiry of the years period after the closing of Series D; and (d) September 7, 2023; |
| viii. | material change of principal business or, business scope of the Group companies without the written consent of the majority of investor directors, Series C Investors and Series D Investors; |
| ix. | any significant intellectual property of any Group company becomes invalid, frozen, or is transferred, authorized, pledged, encumbered, hypothecated to any third party without prior written consent of the majority of investor directors; |
| x. | the occurrence of a material breach by any Group company or any management shareholders of any of their respective representations, warranties, covenants or undertakings under the Transaction Documents and failure by applicable Group companies or management shareholders to make remedy within days after so required; |
F-39
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 16. | FINANCIAL LIABILITIES AT FVTPL (continued) |
| xi. | the occurrence of a material breach by any Group company or any management shareholder of any of mandatory laws or regulations in the applicable jurisdiction; and |
| xii. | the occurrence of any material dishonesty problem by any Group company or any management shareholder.` |
Next Equity Financing Warrant
In June 2018, in connection
with the issuance of the Series B Preferred shares, the Company irrevocably issued to certain Series B Investors a warrant (“Next
Equity Financing Warrant”), by which each of these Series B Investors shall be entitled but not obligated to purchase a certain
number of the Company’s Preferred Shares with a par value of $
The Next Equity Financing Warrant expired upon the closing date of the Company’s Series C financing in August 2019 as none of these Series B Investors subscribed the Company’s Series C Preferred Shares.
CEHKL Warrant
On May 20, 2019, the
Company entered into a warrant agreement with China Equities HK Limited (“CEHKL”), under which the Company agreed to issue
certain Series B Preferred Shares to CEHKL with agreed price (“CEHKL Warrant”) and the CEHKL Warrant will expire on May 20,
2024. In July 2021, CEHKL elected to exercise the CEHKL Warrant and the Company issued
Presentation and classification
The Group and the Company have designated the Series B, C and D Preferred Shares and Series B Convertible Loans as financial liabilities measured at FVTPL upon initial recognition. The Next Equity Financing Warrant and CEHKL Warrant are initially recognized at fair value on the date on which the contract is entered into and are subsequently remeasured at fair value.
The change in fair value of financial liabilities at FVTPL is charged to profit or loss except for the portion attributable to credit risk change that shall be charged to other comprehensive income. The net gain or loss recognized in profit or loss includes any interest paid on the financial liabilities and is included in the loss on changes in fair value of financial liabilities at FVTPL line item. Management concluded that there is no credit risk of the financial liability that drives the change of the fair value of the financial liability.
The movements of the Group’s financial liabilities at FVTPL are set out as follows:
| Series B | Series C | Series D | ||||||||||||||
| Preferred | Preferred | Preferred | ||||||||||||||
| Shares | Shares | Shares | Total | |||||||||||||
| $’000 | $’000 | $’000 | $’000 | |||||||||||||
| At January 1, 2022 | ||||||||||||||||
| Change in fair value | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| At December 31, 2022 | ||||||||||||||||
| Change in fair value | ||||||||||||||||
| Conversion into ordinary shares upon IPO | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| At December 31, 2023 | ||||||||||||||||
F-40
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 16. | FINANCIAL LIABILITIES AT FVTPL (continued) |
The Company has used the discounted cash flow method and back-solve method to determine the underlying share value of the Company and adopted equity allocation model to determine the fair value of each financial liability as of the dates of issuance and at the end of each of the Relevant Periods.
Set out below is a summary of significant unobservable inputs to the valuation of financial instruments together with a quantitative sensitivity analysis as of December 31, 2022:
| As of December 31, | ||||
| 2022 | ||||
| Fair value of ordinary shares of the Company | $ | |||
| Risk-free interest rate (Note i) | % | |||
| Expected term | ||||
| Volatility (Note ii) | % | |||
The Group estimated the risk-free interest rate based on the yield of the United States Government Bond with maturity close to the expected exit timing as of the valuation date. Under the option-pricing method, the cost of a put option, which can hedge the price change before the privately held shares can be sold, was considered as a basis to determine the lack of marketability discount. Volatility was estimated based on the annualized standard deviation of the daily stock price return of comparable companies for a period from the valuation date and with a similar time span to expiration.
In September 29, 2023, each holder of Preferred Shares automatically be converted, based on the Applicable Conversion Price, into ordinary shares of the Company upon the closing of IPO.
| 17. | ORDINARY SHARES |
Issued and fully paid:
| Number of | Ordinary | |||||||
| shares | Shares | |||||||
| $’000 | ||||||||
| As of 1 January 2023 | ||||||||
| Issuance of ordinary shares | ||||||||
| Conversion of Series A convertible preferred shares | ||||||||
| Conversion of Financial liabilities at FVTPL | ||||||||
| As at 31 December 2023 | ||||||||
The authorized share capital
of the Company as of December 31, 2023 is $
In 2021, the Company issued
F-41
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 18. | DEFICITS |
The amounts of the Group’s deficits and the movement therein for the Relevant Periods are presented in the consolidated statements of changes in equity.
| (i) | Additional paid-in capital |
The additional paid-in capital represents the difference between the par value of the shares issued and the consideration received.
| (ii) | Share option reserve |
The share option reverse of the Group represents the equity-settled share-based payments granted by the Group. Please refer to note 19 for details.
| (iii) | Exchange fluctuation reserve |
The exchange fluctuation reserve represents exchange differences arising from the translation of the financial statements of Group companies whose functional currencies are different from the Group’s presentation currency.
| 19. | SHARE INCENTIVE PLAN |
Adlai Hangzhou Scheme
Adlai Hangzhou, a subsidiary
of the Company, was once listed on the National Equities Exchange and Quotations (“NEEQ”) (stock code 870946) and adopted
a share incentive scheme (the “Adlai Hangzhou Scheme”) for the primary purpose of providing incentives to eligible management
and employees who render services to Adlai Hangzhou. On June 15, 2017, awards up to
The fair value of the awards
granted to management and employees were $
The Group recognized $
Adlai Share Incentive Plan
On June 8, 2020, the
Company’s Board of Directors approved a share incentive scheme (the “Share Incentive Plan”) in order to provide additional
incentives to employees and to promote the success of the Group’s business. Unless otherwise cancelled or amended, the Share Incentive
Plan will remain in force for 10 years. Under the Share Incentive Plan, the maximum aggregate number of shares shall not exceed
F-42
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 19. | SHARE INCENTIVE PLAN (continued) |
On July 5, 2021, the
Company issued
On September 8, 2020
and November 1, 2020, awards for
On May 31, 2021,
On October 1, 2021,
On January 1, 2022,
On April 1, 2022,
On July 1, 2022,
On October 1, 2022,
On April 2023,
On April 2023, the Group
adopted the 2023 Share Incentive Plan, which is effective upon the completion of this offering. The maximum aggregate number of ordinary
shares that may be issued under this 2023 Share Incentive Plan is
On December 6, 2023,
F-43
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 19. | SHARE INCENTIVE PLAN (continued) |
Accordingly, the Group measured the fair value of the awards as of the grant date and recognizes the amount as a compensation expense over the vesting period for each separately vesting portion of the awards.
| Weighted | ||||||||||||||||||||
| Weighted | Weighted | Average | ||||||||||||||||||
| Average | Average | Remaining | Aggregate | |||||||||||||||||
| Exercise | Grant Fair | Contractual | intrinsic | |||||||||||||||||
| Number of | Price | Value | Life | value | ||||||||||||||||
| awards | $ per share | $ per share | (in years) | $ | ||||||||||||||||
| Balances, January 1, 2022 | ||||||||||||||||||||
| Options granted | ||||||||||||||||||||
| Options forfeited/cancelled | ( | ) | ||||||||||||||||||
| Options exercised | — | |||||||||||||||||||
| Balances, December 31, 2022 | ||||||||||||||||||||
| Options granted | ||||||||||||||||||||
| Options forfeited/cancelled | ( | ) | ||||||||||||||||||
| Options exercised | — | |||||||||||||||||||
| Balances, December 31, 2023 | ||||||||||||||||||||
| Vested but not exercisable as of December 31, 2022 | ||||||||||||||||||||
| Vested but not exercisable as of December 31, 2023 | ||||||||||||||||||||
As of December 31, 2022
and 2023, there were
The fair value of the award
granted during the years ended December 31, 2022 and 2023 were $
The fair value of awards
granted during the Relevant Periods was estimated as of the grant date using a binomial option-pricing model, taking into account the
terms and conditions upon which the awards were granted.
| Jan 1, | Apr 1, | July 1, | Oct 1, | Apr 21, | Dec 6, | |||||||||||||||||||
| 2022 | 2022 | 2022 | 2022 | 2023 | 2023 | |||||||||||||||||||
| Dividend yield (%) | ||||||||||||||||||||||||
| Expected volatility (%) | ||||||||||||||||||||||||
| Risk-free interest rate (%) | ||||||||||||||||||||||||
| Expected life of options (year) | ||||||||||||||||||||||||
As of December 31, 2022
and 2023, the Company had
F-44
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 20. | NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (a) | Major non-cash transactions |
During the year ended December 31, 2021, 2022 and 2023, the Group had non-cash additions to right-of-use assets and lease liabilities of and , respectively, in respect of lease arrangements for offices and equipment.
| (b) |
| Financial | New bank | |||||||||||||||||||
| instrument | loans and | Payable | ||||||||||||||||||
| measured at | other | Lease | for issue | |||||||||||||||||
| FVTPL | borrowings | liabilities | costs | Total | ||||||||||||||||
| $’000 | $’000 | $’000 | $’000 | $’000 | ||||||||||||||||
| At January 1, 2021 | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Transaction costs for the issuance of convertible redeemable preferred shares | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| Disposal | ||||||||||||||||||||
| Payment | ||||||||||||||||||||
| – financing cash flows | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| – operating cash flows | ||||||||||||||||||||
| Interest paid | ( | ) | ( | ) | ||||||||||||||||
| Change in fair value | ||||||||||||||||||||
| Exchange adjustment | ||||||||||||||||||||
| At December 31, 2021 | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Transaction costs for the issuance of convertible redeemable preferred shares | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| Disposal | ||||||||||||||||||||
| Payment | ||||||||||||||||||||
| – financing cash flows | ( | ) | ( | ) | ( | ) | ||||||||||||||
| – operating cash flows | ||||||||||||||||||||
| Interest paid | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Change in fair value | ( | ) | ( | ) | ||||||||||||||||
| Exchange adjustment | ( | ) | ( | ) | ( | ) | ||||||||||||||
| At December 31, 2022 | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Transaction costs for the issuance of convertible redeemable preferred shares | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| Conversion into ordinary shares | ( | ) | ( | ) | ||||||||||||||||
| Payment | ||||||||||||||||||||
| – financing cash flows | ( | ) | ( | ) | ( | ) | ||||||||||||||
| – operating cash flows | ||||||||||||||||||||
| Interest paid | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Change in fair value | ||||||||||||||||||||
| Exchange adjustment | ( | ) | ( | ) | ( | ) | ||||||||||||||
| At December 31, 2023 | ||||||||||||||||||||
F-45
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 20. | NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) |
| (c) |
| Dual currency | Wealth | |||||||||||||||
| structured | investments at | management | ||||||||||||||
| deposit | amortized cost | product | Total | |||||||||||||
| $’000 | $’000 | $’000 | $’000 | |||||||||||||
| Year ended December 31, 2021 | ||||||||||||||||
| purchase | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| disposal | ||||||||||||||||
| interest received | ||||||||||||||||
| Year ended December 31, 2022 | ||||||||||||||||
| purchase | ( | ) | ( | ) | ( | ) | ||||||||||
| disposal | ||||||||||||||||
| interest received | ||||||||||||||||
| Year ended December 31, 2023 | ||||||||||||||||
| purchase | ( | ) | ( | ) | ( | ) | ||||||||||
| disposal | ||||||||||||||||
| interest received | ||||||||||||||||
| 21. | COMMITMENTS |
The Group did not have capital commitments at the end of each of the Relevant Periods.
| 22. | RELATED PARTY TRANSACTIONS |
| (a) | Related parties |
Parties are considered to be related if one party has the ability, directly or indirectly, to control or exercise significant influence over the other party.
Parties are also considered to be related if they are subject to common control. Members of key management of the Group and their close family members are also considered as related parties.
| Name of related parties | Nature of relationship | |
| Mr. Yang Lu |
As disclosed in note 15 (i) to
15 (v) to the consolidated financial statements, the RMB
F-46
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
23. FINANCIAL INSTRUMENTS BY CATEGORY
The carrying amounts of each of the categories of financial instruments of the Group as of the end of each of the Relevant Periods are as follows:
| As of December 31, | ||||||||
| 2022 | 2023 | |||||||
| $’000 | $’000 | |||||||
| Financial assets: | ||||||||
| Financial assets at FVTPL: | ||||||||
| Dual currency structured deposit | ||||||||
| Wealth management product | ||||||||
| Total | ||||||||
| Other financial assets: | ||||||||
| Financial assets included in prepayments, other receivables and other assets | ||||||||
| Cash and cash equivalents | ||||||||
| Short-term investments at amortized cost. | ||||||||
| Long-term investments at amortized cost | ||||||||
| Total | ||||||||
| Financial liabilities: | ||||||||
| Trade payables | ||||||||
| Financial liabilities included in other payables and accruals | ||||||||
| Interest-bearing bank and other borrowings | ||||||||
| Total | ||||||||
| Financial liabilities at FVTPL: | ||||||||
| Financial instruments measured at FVTPL | ||||||||
| Total | ||||||||
| 24. | FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS |
The carrying amounts and fair values of the Group’s financial instruments, other than those with carrying amounts that reasonably approximate to fair values, are as follows:
| As of December 31, 2022 | As of December 31, 2023 | |||||||||||||||
| Carrying | Carrying | |||||||||||||||
| amount | Fair value | amount | Fair value | |||||||||||||
| $’000 | $’000 | $’000 | $’000 | |||||||||||||
| Financial assets | ||||||||||||||||
| Dual currency structured deposit | ||||||||||||||||
| Wealth management product | ||||||||||||||||
| Total. | ||||||||||||||||
| Financial liabilities | ||||||||||||||||
| Financial liabilities at FVTPL | ||||||||||||||||
| Total. | ||||||||||||||||
F-47
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 24. | FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (continued) |
Management has assessed that the fair values of cash and cash equivalents, interest-bearing bank and other borrowings, trade payables, financial assets included in prepayments, other receivables and other assets, and financial liabilities included in other payables and accruals approximate to their carrying amounts largely due to the short term maturities of these instruments.
The Group’s finance department headed by the finance manager is responsible for determining the policies and procedures for the fair value measurement of financial instruments. The finance manager reports directly to the chief financial officer and the audit committee. At the end of each of the Relevant Periods, the finance department analyses the movements in the values of financial instruments and determines the major inputs applied in the valuation. The valuation is reviewed and approved by the chief financial officer. The valuation process and results are discussed with the audit committee twice a year for interim and annual financial reporting.
The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The methods and assumptions used to estimate the fair value, including a summary of significant unobservable inputs together with a quantitative sensitivity analysis, are set out in note 15 to the Consolidated Financial Statements.
The fair values of the non-current portion of interest-bearing bank and other borrowings have been calculated by discounting the expected future cash flows using rates currently available for instruments with similar terms, credit risk and remaining maturities. The changes in fair value as a result of the Group’s own non-performance risk for interest-bearing bank and other borrowings as of the end of each of the Relevant Periods were assessed to be insignificant.
Fair value hierarchy
The following tables illustrate the fair value measurement hierarchy of the Group’s financial instruments:
As of December 31, 2022
| Fair value measurement using | ||||||||||||||||
| Quoted prices | Significant | Significant | ||||||||||||||
| in active | observable | unobservable | ||||||||||||||
| markets | inputs | inputs | ||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
| $’000 | $’000 | $’000 | $’000 | |||||||||||||
| Financial assets | ||||||||||||||||
| Dual currency structured deposit | ||||||||||||||||
| Wealth management product | ||||||||||||||||
| Total. | ||||||||||||||||
| Financial liabilities | ||||||||||||||||
| Financial liabilities at FVTPL | ||||||||||||||||
As of December 31, 2023
| Fair value measurement using | ||||||||||||||||
| Quoted prices | Significant | Significant | ||||||||||||||
| in active | observable | unobservable | ||||||||||||||
| markets | inputs | inputs | ||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
| Financial assets | ||||||||||||||||
| Dual currency structured deposit | ||||||||||||||||
| Wealth management product | ||||||||||||||||
| Total | ||||||||||||||||
F-48
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 25. | FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES |
The Group’s principal financial instruments comprise interest-bearing bank and other borrowings, convertible redeemable preferred shares and cash and cash equivalents. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial assets and liabilities such as trade payables, other payables and accruals, which arise directly from its operations.
The main risks arising from the Group’s financial instruments are foreign currency risk and liquidity risk. The board of directors reviews and agrees policies for managing each of these risks and they are summarized below.
Foreign currency risk
The Group has transactional currency exposures. Such exposures arise from purchases by operating units in currencies other than the units’ functional currencies.
The following table demonstrates the sensitivity at the end of each of the Relevant Periods to a reasonably possible change in the $ and RMB exchange rate, with all other variables held constant, of the Group’s profit before tax (due to changes in the fair values of monetary assets and liabilities).
| Increase/ | Increase/ | |||||||||||
| (decrease) in | (decrease) | Increase/ | ||||||||||
| $/RMB | in net | (decrease) | ||||||||||
| rate% | loss | in equity | ||||||||||
| $’000 | $’000 | |||||||||||
| At December 31, 2021 | ||||||||||||
| If the $ strengthens against the RMB | ||||||||||||
| If the $ weakens against the RMB | ( | ) | ( | ) | ||||||||
| Increase/ | Increase/ | |||||||||||
| (decrease) in | (decrease) | Increase/ | ||||||||||
| $/RMB | in net | (decrease) | ||||||||||
| rate% | loss | in equity | ||||||||||
| $’000 | $’000 | |||||||||||
| At December 31, 2022 | ||||||||||||
| If the $ strengthens against the RMB | ( | ) | ||||||||||
| If the $ weakens against the RMB | ( | ) | ||||||||||
| Increase/ | Increase/ | |||||||||||
| (decrease) in | (decrease) | Increase/ | ||||||||||
| $/RMB | in net | (decrease) | ||||||||||
| rate% | loss | in equity | ||||||||||
| $’000 | $’000 | |||||||||||
| As of December 31, 2023 | ||||||||||||
| If the $ strengthens against the RMB | ( | ) | ( | ) | ||||||||
| If the $ weakens against the RMB | ( | ) | ||||||||||
Liquidity risk
The Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management of the Group to finance the operations and mitigate the effects of fluctuations in cash flows.
F-49
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 25. | FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued) |
The maturity profile of the Group’s financial liabilities as of the end of each Relevant Periods, based on the contractual undiscounted payments, is as follows:
| As of December 31, 2022 | ||||||||||||||||||||
| Less than | ||||||||||||||||||||
| On demand | 1 year | 1 to 5 years | Over 5 years | Total | ||||||||||||||||
| $’000 | $’000 | $’000 | $’000 | $’000 | ||||||||||||||||
| Financial liabilities at FVTPL | ||||||||||||||||||||
| Trade and bills payables | ||||||||||||||||||||
| Financial liabilities included in other payables and accruals | ||||||||||||||||||||
| Interest-bearing bank borrowings | ||||||||||||||||||||
| Total | ||||||||||||||||||||
| As of December 31, 2023 | ||||||||||||||||||||
| Less than | ||||||||||||||||||||
| On demand | 1 year | 1 to 5 years | Over 5 years | Total | ||||||||||||||||
| $’000 | $’000 | $’000 | $’000 | $’000 | ||||||||||||||||
| Financial liabilities at FVTPL | ||||||||||||||||||||
| Trade and bills payables | ||||||||||||||||||||
| Financial liabilities included in other payables and accruals | ||||||||||||||||||||
| Interest-bearing bank borrowings | ||||||||||||||||||||
| Total | ||||||||||||||||||||
Capital management
The primary objectives of the Group’s capital management are to safeguard the Group’s ability to continue as a going concern and to maintain healthy capital ratios in order to support its business and maximize shareholders’ value.
The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group is not subject to any externally imposed capital requirements. No changes were made in the objectives, policies or processes for managing capital during the Relevant Periods.
The asset-liability ratios as of the end of each of the Relevant Periods are as follows:
| As of December 31, | ||||||||
| 2022 | 2023 | |||||||
| $’000 | $’000 | |||||||
| Total assets | ||||||||
| Total liabilities | ||||||||
| Asset-liability ratio (Note i) | ||||||||
Note i:
F-50
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 26. | SUBSEQUENT EVENTS |
| (a) | Bank loan |
In February 2024, Adlai Hangzhou
entered into a non-revolving facility agreement with a third party financial institution for a facility amount of RMB
In February 2024, Adlai US
entered into a non-revolving facility agreement with a third party financial institution for a facility amount of at an interest
rate of
In February 2024, Adlai Hangzhou
entered into a non-revolving facility agreement with a third party financial institution for a facility amount of RMB
In March 2024, Adlai Hangzhou
entered into a non-revolving facility agreement with a third party financial institution for a facility amount of RMB
In March 2024, Adlai Hangzhou
repaid three non-revolving facility amount of RMB
In April 2024, Adlai Hangzhou
repaid a non-revolving facility amount of RMB
| (b) | Subsidiaries |
In March 2024, Shareholder
of Hangzhou Tangchuang agreed to increase the company’s registered capital to RMB
| 27. | CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY |
The business transactions and assets of Adlai Hangzhou and Shanghai Adlai Nortye Biopharma Co., Ltd (“PRC Subsidiaries”) are primarily denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. These currency exchange control measures imposed by the PRC government may restrict the ability of PRC Subsidiaries to transfer their net assets to the Company through loans, advances or cash dividends.
The net assets of PRC Subsidiaries
in aggregate exceeded
The subsidiaries did not pay any dividends to the Company for the periods presented. For the purpose of presenting parent-only financial information, the Company records its investment in its subsidiaries under the cost method of accounting. Such investment is presented on the separate condensed balance sheets of the Company as “Investment in subsidiaries”. Certain information and footnote disclosures generally included in financial statements prepared in accordance with IFRSs are not required.
F-51
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 27. | CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (continued) |
As of December 31, 2022 and 2023, there were no material contingencies, significant provisions for long-term obligations, or guarantees of the Company, except for those which have been separately disclosed in the consolidated financial statements, if any.
PARENT COMPANY BALANCE SHEETS
| December 31, | ||||||||
| 2022 | 2023 | |||||||
| $’000 | $’000 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | ||||||||
| Prepayments, other receivables and other assets | ||||||||
| short-term investments at amortized cost | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Due from related parties | ||||||||
| Investment in subsidiaries | ||||||||
| Total non-current assets | ||||||||
| Total assets | ||||||||
| LIABILITIES | ||||||||
| Current liabilities | ||||||||
| Accounts payable | ||||||||
| Other payables and accruals. | ||||||||
| Due to related parties | ||||||||
| Interest payables | ||||||||
| Non-current liabilities due within one year | ||||||||
| Financial liabilities at FVTPL | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Long-term loans | ||||||||
| Financial liabilities at FVTPL | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Ordinary shares (par value of $ | ||||||||
| Class A Ordinary shares (par value of $ | ||||||||
| Class B Ordinary shares (par value of $ | ||||||||
| Series A convertible preferred shares (par value of US$ | ||||||||
| Additional paid-in capital | ||||||||
| Share option reserve | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ||||||
| Total liabilities and shareholders’ equity | ||||||||
F-52
ADLAI NORTYE LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2021, 2022 AND 2023 (continued)
(All amounts in thousands, except share and per share data, or as otherwise noted)
| 27. | CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (continued) |
PARENT COMPANY STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
| For the Years Ended December 31, | ||||||||||||
| 2021 | 2022 | 2023 | ||||||||||
| $’000 | $’000 | $’000 | ||||||||||
| REVENUE | ||||||||||||
| Other operating income, net | ||||||||||||
| Administrative expenses | ( | ) | ( | ) | ( | ) | ||||||
| Research and development expenses | ||||||||||||
| Total operating loss | ( | ) | ( | ) | ( | ) | ||||||
| Other income and gains | ||||||||||||
| Other expenses | ||||||||||||
| Investment income | ||||||||||||
| Fair value loss on financial liabilities at FVTPL | ( | ) | ( | ) | ||||||||
| Finance costs | ( | ) | ( | ) | ||||||||
| LOSS BEFORE TAX | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||
| LOSS FOR THE YEAR | ( | ) | ( | ) | ||||||||
| TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR | ( | ) | ( | ) | ||||||||
PARENT COMPANY STATEMENTS OF CASH FLOWS
| Year ended December 31, | ||||||||||||
| 2021 | 2022 | 2023 | ||||||||||
| $’000 | $’000 | $’000 | ||||||||||
| Net cash flows used in operating activities | ( | ) | ( | ) | ( | ) | ||||||
| Net cash flows used in investing activities | ( | ) | ( | ) | ( | ) | ||||||
| Net cash flows from financing activities | ||||||||||||
| NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||||||
| Cash and cash equivalents at beginning of year | ||||||||||||
| CASH AND CASH EQUIVALENTS AT END OF YEAR | ||||||||||||
F-53