ABVC BioPharma, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are with FY2022. This is an annual report, not a standalone fourth-quarter report. Amounts are U.S. dollars unless noted; share data reflects the 1-for-10 reverse split effected in July 2023.
Business context
ABVC is an early-stage biotechnology company developing plant-derived drug candidates and a medical device, with programs in CNS, oncology/hematology and ophthalmology. Its limited operating revenue is primarily from BioKey’s contract development and manufacturing services and supplement-related activity. The company says it generally intends to advance programs through Phase I/II and seek partners for later-stage development and commercialization; it has not commercialized a new drug candidate.
Financial results and liquidity
| Metric | FY2023 / Dec. 31, 2023 | FY2022 / Dec. 31, 2022 |
|---|---|---|
| Revenue | $152,430 | $969,783 |
| Gross profit (loss) | $(149,607) | $683,368 |
| Operating expenses | $8,066,902 | $15,797,780 |
| Operating loss | $(8,216,509) | $(15,114,412) |
| Interest expense | $2,493,340 | $293,968 |
| Net loss | $(10,910,288) | $(16,312,374) |
| Net cash used in operating activities | $(4,235,845) | $(7,398,391) |
| Cash and cash equivalents | $60,155 | $85,265 |
| Restricted cash | $656,625 | $1,306,463 |
| Current assets / current liabilities | $1,656,709 / $5,932,490 | $2,987,247 / $5,543,628 |
| Working capital (deficit) | $(4,275,781) | $(2,556,381) |
Operating cash use improved year over year, but the company remained loss-making and reported very limited unrestricted cash. Investing activities used $360,186 in FY2023; financing activities provided $3,918,960. Total assets were $14.5 million and total equity was $8.1 million at year-end, including $7.4 million of construction-in-progress recorded for the Zhonghui property transaction.
Year-end current debt included $899,250 of short-term bank loans and $569,456 of convertible notes payable, net. Accrued expenses and other current liabilities were $3,696,380. The filing’s auditor and management identify substantial doubt about the company’s ability to continue as a going concern, citing recurring losses, a working-capital deficit and operating cash outflows. Management plans to improve operations and seek additional financing and/or support from related parties and shareholders; there is no assurance these sources will be available.
Changes, outlook and material matters
- Revenue fell about 84%, which management attributed mainly to completed projects and delays awaiting new approvals. The company reported a gross loss in 2023 versus gross profit in 2022.
- Operating expenses declined by about $7.7 million, mainly due to lower stock-based compensation, selling, general and administrative expense, and R&D expense. Net loss narrowed, but interest expense rose sharply, principally due to convertible-note accounting.
- Clinical milestones include ongoing interim analysis of the ABV-1505 Phase II ADHD study; ABV-1701 Vitargus Phase II began in Australia and Thailand in 2023. The filing anticipates or plans trials for ABV-1601 and ABV-1703 in 2024 and ABV-1702 in the fourth quarter of 2024; timing is uncertain and ABV-1702 site and investigator selection remained outstanding.
- In November 2023, ABVC and BioLite entered global licensing agreements with AiBtl BioPharma (AIBL) covering MDD and ADHD products. The filing describes potential milestone payments and 5% net-sales royalties, subject to conditions; it reports no royalty revenue to date. The agreements and AIBL share valuation merit review.
- In August 2023, ABVC acquired a stated 20% interest in Zhonghui property for 370,000 shares valued at $7.4 million. Government asset-ownership certification was still pending. Nasdaq notified the company in September 2023 that it had regained compliance with the stockholders’ equity requirement, but warned compliance could need to be evidenced in the next periodic report. The company also reported regaining the minimum-bid-price requirement in August.
- Financing relies on convertible notes, warrants and equity issuance. Lind notes are secured and include conversion features, collateral and default provisions. A further $1.0 million-principal Lind note was issued in January 2024 for $833,333; subsequent amendments provide for a $1.00 variable-price floor and potential cash compensation. These post-year-end events affect financing and dilution risk.
- Management concluded internal control over financial reporting was ineffective at year-end due to insufficient accounting personnel with appropriate technical expertise. The auditor issued an unqualified opinion on the financial statements, noted substantial doubt about going concern, and identified property acquired with common stock and third-party stock compensation as critical audit matters. The auditor did not attest to internal control effectiveness.
Key investor verification points
- Assess near-term funding needs, unrestricted cash availability, debt repayment terms and the status of Lind covenant waivers and potential defaults.
- Check the timing, enrollment, interim analyses and subsequent results of clinical programs, and whether the stated 2024 trial plans were achieved.
- Verify AIBL’s ownership, the accounting and valuation of the licensing consideration, and the conditions for milestone and royalty payments.
- Confirm legal title, valuation and development status of the Zhonghui property interest, including the pending certification and any adjustment provisions.
- Review customer concentration: one customer accounted for 80.04% of FY2023 revenue and 87.24% of year-end accounts receivable, according to the filing.
- Reconcile reported figures: the statements show net loss attributable to ABVC of $10,515,656, while the EPS note gives a different numerator of $10,856,656; the filing also contains inconsistent descriptions of FY2022 other income/expense and cash flow. Confirm the authoritative amounts and any related disclosures.
- Track remediation of the material weakness, Nasdaq continued-listing compliance, and dilution from outstanding warrants, convertible securities and subsequent share issuances.