ABVC BioPharma has raised $3.39 million in cash through a private placement of senior convertible notes, while also agreeing to pay $625,000 to settle a dispute with lender Lind Global Fund II. The financing adds debt that can convert into ABVC shares at a discount, subject to limits and company consent.
The proceeds are intended for working capital, subsidiary funding and the Lind settlement. The settlement would clear Lind’s outstanding notes and related liens once the payment is made, but gives Lind additional warrant shares and a right to participate in some future financings.
Note financing
- The notes have a total principal amount of about $4.11 million, but investors paid $3.39 million. The difference reflects a 17.5% original issue discount.
- The notes mature on June 30, 2027. ABVC can extend the maturity once for three months, but doing so increases the outstanding principal by 5%.
- Investors may begin converting the notes into common shares after eight months. Any conversion before the original maturity date requires ABVC’s prior written consent.
- The conversion price is 85% of the average share trading price for the three trading days before conversion, subject to a floor of $0.20 per share. Each holder’s conversions are also limited so that the holder would not own more than 4.99% of ABVC, or 9.99% if the holder elects the higher limit.
- Until shareholders approve a higher limit, ABVC may issue shares for conversions only up to a total equal to 19.99% of the shares outstanding when the financing agreement was signed. ABVC agreed to seek approval; failure to obtain it by June 30, 2027, is an event of default under the notes.
- ABVC may repay the notes early at 102.5% of outstanding principal. If it completes a qualifying financing, it must use the lesser of 20% of that financing’s net proceeds or the notes’ outstanding principal to repay them.
- For six months, ABVC agreed not to enter into most variable-rate transactions, with exceptions for an at-the-market offering and an acceptable equity line of credit. The note investors also have the right to participate in up to 100% of certain subsequent financings during that period, subject to the same exceptions.
- WallachBeth Capital received a $237,125 cash fee, equal to 7% of the gross proceeds, plus $65,000 in expense reimbursement. After those stated costs and the $625,000 Lind payment, about $2.46 million of the cash proceeds would remain, before any other expenses.
Lind settlement
- ABVC agreed to pay Lind $625,000. Once Lind receives the payment, its outstanding notes will be treated as fully paid and cancelled, and related liens and security interests will be released.
- Lind’s warrant, which originally covered 398,000 shares at an exercise price of $1.00 per share, will increase by 20%. ABVC agreed to register the warrant shares within 90 days of the settlement agreement.
- Lind receives a 12-month right to participate in cash financings by ABVC or its subsidiaries, with an allocation of 10% to 25%. The right does not apply to a financing in which a single investor contributes at least $2 million before Lind’s participation.
- Lind agreed to remove restrictions and consent requirements relating to variable-rate and similar transactions, including for future financings. After receiving the payment, Lind is to dismiss its lawsuit against ABVC with prejudice.
What changes for investors
The financing provides cash now but adds senior debt and the potential for share dilution at a price tied to ABVC’s trading price and set at a discount, subject to the floor and share-issuance cap. The settlement uses part of the proceeds to resolve Lind’s claims and release its liens, while giving Lind additional warrant shares and participation rights in some future financings.