ABPO 10-Q
Abpro Holdings, Inc. (ABPO)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarter ended
or
For the transition period from __________ to __________
Commission
file number:
(Exact Name of Registrant as Specified in Its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| The |
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, a smaller reporting company or an emerging growth company. See definitions of “large, accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large, accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check
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Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
As of May 15, 2025, there were
ABPRO HOLDINGS, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2025
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
ABPRO HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except for share and per share data)
(unaudited)
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Forward purchase agreement asset | ||||||||
| Restricted cash | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use asset - operating lease | ||||||||
| Security deposits | ||||||||
| Patents, net | ||||||||
| SEPA put rights asset | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities, convertible preferred stock and stockholders’ deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Excise taxes payable | ||||||||
| Operating lease liability, current | ||||||||
| Income taxes payable | ||||||||
| Notes payable, current – related parties | ||||||||
| Convertible notes | ||||||||
| Embedded derivative liability | ||||||||
| Total current liabilities | ||||||||
| Commitments and Contingencies (Note 9) | ||||||||
| Stockholders’ deficit: | ||||||||
| Common stock, $ | ||||||||
| Treasury stock, | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Abpro Holdings, Inc.’s stockholders’ deficit | ( | ) | ( | ) | ||||
| Non-controlling interest | ||||||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
ABPRO HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except for share and per share data)
(unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating expenses: | ||||||||
| Research and development | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other (expense) income: | ||||||||
| Other income | ||||||||
| Change in fair value of forward purchase agreement asset | ( | ) | ||||||
| Change in fair value of SEPA put rights asset | ( | ) | ||||||
| Change in fair value of embedded derivative liability | ( | ) | ||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other (expense) income, net | ( | ) | ||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Less net income allocated to participating securities | ||||||||
| Net (loss) income allocated to common stock | $ | ( | ) | $ | ||||
| Net (loss) income per share, basic | $ | ( | ) | $ | ||||
| Net (loss) income per share, diluted | $ | ( | ) | $ | ||||
| Weighted averages shares outstanding | ||||||||
| Weighted average shares outstanding - basic | ||||||||
| Weighted average shares outstanding - diluted | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
ABPRO HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
(in thousands except share and per share data)
(unaudited)
| Series A Redeemable, | Series B | Series C | Series D | Series E | Series F | Total Convertible | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Preferred Stock | Convertible Preferred Stock | Convertible Preferred Stock | Convertible Preferred Stock | Convertible Preferred Stock | Convertible Preferred Stock | Preferred Stock | Common Stock | Treasury Stock | Additional Paid-In | Accumulated | Abpro’s Stockholders’ | Non- controlling | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | Interest | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balances, as of December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warrants issued to related party | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balances, as of March 31, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A Redeemable, | Series B | Series C | Series D | Series E | Series F | Total Convertible | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Preferred Stock | Convertible Preferred Stock | Convertible Preferred Stock | Convertible Preferred Stock | Convertible Preferred Stock | Convertible Preferred Stock | Preferred Stock | Common Stock | Treasury Stock | Additional Paid-In | Accumulated | Abpro’s Stockholders’ | Non- controlling | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | Interest | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balances, as of December 31, 2023 | $ | $ | $ | $ | $ | $ | $ | $ | | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balances, as of March 31, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
ABPRO HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands except share and per share data)
(unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | ||||||||
| Share-based compensation | ||||||||
| Amortization of operating lease right-of-use assets | ||||||||
| Noncash interest expense | ||||||||
| Other income (see Note 2) | ( | ) | ||||||
| Amortization of debt discount | ||||||||
| Change in fair value of forward purchase agreement asset | ||||||||
| Change in fair value of SEPA put rights asset | ||||||||
| Change in fair value of embedded derivative liability | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ||||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from settlement of forward purchase agreement | ||||||||
| Proceeds from promissory notes | ||||||||
| Payment of offering costs | ( | ) | ||||||
| Repayment of finance lease liabilities | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash and restricted cash | ( | ) | ( | ) | ||||
| Cash and restricted cash - beginning of period | ||||||||
| Cash and restricted cash - end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information and non-cash transactions: | ||||||||
| Interest paid | $ | $ | ||||||
| Fair value of common stock issued for services | $ | $ | ||||||
| As reported within the unaudited condensed consolidated balance sheets: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash and restricted cash as presented in the balance sheet | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
ABPRO HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
(unaudited)
| 1. | Organization and Description of the Business |
Organization
Abpro Holdings, Inc. and its subsidiaries, (the “Company”) is a biotechnology company headquartered in Woburn, Massachusetts, dedicated to developing next-generation antibody therapeutics to improve the lives of patients with severe and life-threatening diseases. The Company is focused on the development of novel antibodies using its proprietary discovery and engineering platforms, primarily in the areas of immuno-oncology, ophthalmology and infectious disease.
On November 13, 2024 (the “Closing Date”), Atlantic Costal Acquisition Corp. II (“ACAB”) consummated a merger (the “Merger”) pursuant to the terms of the Merger Agreement, dated as of December 11, 2023 (the “Merger Agreement”) by and among Abpro Corporation (“Legacy Abpro”), ACAB, and Abpro Merger Sub Corp., a Delaware corporation (“Merger Sub”) and wholly owned subsidiary of ACAB prior to the Closing Date. Pursuant to the Merger Agreement, on the Closing Date, (i) ACAB changed its name to “Abpro Holdings, Inc.” (“New Abpro”), and (ii) Merger Sub merged with and into Legacy Abpro, with Legacy Abpro as the surviving company in the Merger (such transactions, the “Merger,” and, collectively with the other transactions described in the Merger Agreement, the “Reverse Recapitalization”). Shares of the New Abpro common stock commenced trading on the Nasdaq Capital Market on November 14, 2024.
After giving effect to the Merger, Legacy Abpro became a wholly owned subsidiary of the Company. The Merger was accounted for as a reverse recapitalization in accordance with U.S. GAAP, and under this method of accounting, ACAB was treated as the acquired company for financial reporting purposes and Legacy Abpro was treated as the acquirer. Operations prior to the Merger are those of Legacy Abpro. Unless otherwise noted, the Company has retroactively adjusted all common and preferred share and related price information to give effect to the Exchange Ratio as set forth in the Merger Agreement. The “Company” refers to Abpro Holdings, Inc. and its subsidiaries, including Abpro Corporation, prior to and subsequent to the Merger. Legacy Abpro is the accounting acquirer in the Merger and, as such, the condensed consolidated financial statements for the three months ended March 31, 2024 present operations of Legacy Abpro prior to the Merger Date.
Refer to Note 3 — Merger for further details of the Merger.
Risks and Uncertainties
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of more advanced or effective therapies, dependence on key executives, protection of and dependence on proprietary technology, compliance with government regulations and ability to secure additional capital to fund operations. Programs currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure, and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
Going Concern
The Company is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. Through March 31, 2025, the Company has funded its operations mainly through equity and debt financings, including the proceeds from the Merger and the PIPE Financing (as further described in Note 3), and to a lesser extent, payments received in connection with collaboration and license agreements.
5
As of March 31, 2025 and December 31,
2024, the Company had an accumulated deficit of $
On April 2, 2025, the Company received written
notice (the “Notice”) from the Listing Qualifications Department staff (the “Staff”) of the Nasdaq Stock Market
(“Nasdaq”) notifying the Company that, based on the closing bid price of the Company’s common stock for the last 30
consecutive business days, the Company no longer complies with the minimum bid price requirement for continued listing on The Nasdaq Stock
Market LLC. Nasdaq Listing Rule 5450(a)(1) requires listed securities to maintain a minimum bid price of $
Further, on April 10, 2025, the Company received
two letters from the Staff of Nasdaq. One letter (the “MVPHS Notice”) indicated that based upon Nasdaq’s review of the
Company’s Market Value of Publicly Held Shares (“MVPHS”) for the last 30 consecutive business days prior to the date
of the MVPHS Notice, the Company no longer meets the requirements of Nasdaq Listing Rule 5450(b)(2)(C), which requires listed securities
to maintain a minimum MVPHS of $
Under Nasdaq Listing Rule 5810(c)(3)(D), the Company has a period of
180 calendar days (or until October 7, 2025) to regain compliance with the MVPHS Requirement. If at any time during this compliance period
the Company’s MVPHS closes at $
The Company also received a letter from the Staff
of Nasdaq (the “MVLS Deficiency Notice”) notifying the Company that from February 20, 2025, to April 9, 2025, the Company’s
Market Value of Listed Securities (“MVLS”) was below the minimum of $
As of March 31, 2025, the Company had cash
of $
Accordingly, based on the considerations discussed above, management has concluded there is substantial doubt as to the Company’s ability to continue as a going concern within one year after the date the condensed consolidated financial statements are issued. The Company plans to continue to fundraise, as well as seek alternate revenues from collaboration and license agreements. If adequate funds are not available, the Company may be required to initiate steps to slow cash burn, extending the cash runway until financing can be secured. The condensed consolidated financial statements do not include any adjustments with respect to the carrying amounts of assets and liabilities and their classification that might result from the outcome of this uncertainty.
6
| 2. | Summary of Significant Accounting Policies |
Basis of Presentation
The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The accompanying condensed consolidated financial statements include all of the accounts of the Company and its subsidiaries, Abpro Corporation and AbMed Corporation (“AbMed”). All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant estimates in these consolidated financial statements include stock-based compensation expense, fair value of derivative instruments, fair value of warrants, pre-clinical and clinical accrued expenses, valuation and realizability of deferred tax assets and the ability to continue as a going concern. On an ongoing basis, the Company evaluates its estimates, judgments, and methodologies. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Due to the inherent uncertainty involved in making estimates, actual results could differ materially from those estimates.
In March 2022, the Company received
an invoice from Mabwell (Shanghai) Bioscience Co., Ltd. (“Mabwell”) for approximately $
Unaudited Interim Condensed Consolidated Financial Statements
The accompanying interim condensed consolidated financial statements and the related footnote disclosures are unaudited. These unaudited interim financial statements have been prepared on the same basis as the audited financial statements, and in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2025 and its results of operations for the three months ended March 31, 2025 and 2024, and cash flows for the three months ended March 31, 2025 and 2024. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the year ended December 31, 2025 or any other period. The December 31, 2024 year-end condensed consolidated balance sheet was derived from audited annual financial statements but does not include all disclosures from the annual financial statements.
Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2024 and the related notes included in the Company’s Annual Report on Form 10-K, filed with the SEC on April 15, 2025 (the “Annual Report”), which provides a more complete discussion of the Company’s accounting policies and certain other information. There have been no significant changes to the significant accounting policies disclosed in Note 2 of the audited consolidated financial statements as of and for the year ended December 31, 2024 included in the Company’s Annual Report.
7
Segment Reporting
ASC Topic No. 280, Segment Reporting (“ASC 280”), establishes standards for the way that public business enterprises report information about operating segments in their annual consolidated financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company’s business segments are based on the organization structure used by the chief operating decision maker (“CODM”) for making operating and investment decisions and for assessing performance.
In accordance with ASC 280, the Company has determined that it operates as a single reportable segment, which is the business of development of novel antibodies, primarily in the areas of immuno-oncology, ophthalmology and infectious disease. The financial results of the Company’s operations are managed and reported to the Chief Executive Officer, who is considered the Company’s CODM, on a consolidated basis. The CODM assesses performance and allocates resources based on the Company’s consolidated statements of operations, and key components and processes of the Company’s operations are managed centrally. Segment asset information is not used by the CODM to allocate resources. The Chief Executive Officer uses operating losses and cash flows from operating activities to evaluate performance of the operating segment assets in deciding how to allocate the cash resources. Significant expenses presented to the CODM include research and development expenses, general and administrative expenses, and interest expenses, which are each separately presented on the Company’s condensed consolidated statements of operations.
Non-controlling Interest
The Company holds an
Net Income (Loss) Per Share
The Company follows the two-class method to compute basic and diluted net loss per share attributable to common stockholders when shares meet the definition of participating securities. Series A, Series B, Series C, Series D, Series E and Series F preferred stock (see Note 13), which were outstanding prior to the Closing Date, met the definition of participating securities. The two-class method determines net income (loss) per common share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in the earnings as if all income for the period had been distributed. During periods of loss, there is no allocation required under the two-class method due to there being no distributed earnings for the period coupled with the fact that the Company’s Series A, Series B, Series C, Series D, Series E and Series F preferred stock do not contain a contractual right to absorb losses. Thus, all undistributed losses were allocated entirely to the Company’s outstanding common stock for the three months ended March 31, 2025.
Basic net income (loss) per share attributable to common stockholders is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period without consideration of potentially dilutive common stock. Diluted net income (loss) per share attributable to common stockholders reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company unless inclusion of such shares would be anti-dilutive. As it relates to the participating securities, diluted earnings per share are calculated under both the treasury stock and two-class method, and the calculation that results in the most dilutive earnings per share amount for the common stock is reported.
8
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share and share data) for the three months ended March 31, 2025 and 2024:
| Three Months Ended March 31, | ||||||||
| Numerator: | 2025 | 2024 | ||||||
| Income (Loss) allocated to common shares - Basic | $ | ( | ) | $ | ||||
| Effect of dilutive securities: | ||||||||
| Income allocated to preferred stock | (1) | |||||||
| Income (Loss) allocated to common shares - Diluted | $ | ( | ) | $ | ||||
| Denominator: | ||||||||
| Weighted average common shares outstanding - Basic | ||||||||
| Effect of dilutive securities: | ||||||||
| Options and RSUs | ||||||||
| Convertible preferred stock | ||||||||
| Dilutive potential common shares | ||||||||
| Weighted average common shares outstanding - Diluted | ||||||||
| Net income (loss) per share: | ||||||||
| Basic | $ | ( | ) | $ | ||||
| Diluted | $ | ( | ) | $ | ||||
| (1) |
The following table presents the potentially dilutive shares that were excluded from the computation of diluted net loss per share of common stock attributable to common stockholders, because their effect was anti-dilutive:
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Warrants | ||||||||
| Stock options | ||||||||
| Convertible Notes | ||||||||
| Unvested restricted stock units | ||||||||
| Total | ||||||||
Recently Adopted Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” that addresses requests for improved income tax disclosures from investors that use the financial statements to make capital allocation decisions. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2024. The amendments in this ASU must be applied on a retrospective basis to all prior periods presented in the financial statements and early adoption is permitted. The Company adopted this standard on January 1, 2025 and determined that the adoption does not have a material impact on these unaudited condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
On November 4, 2024, the FASB issued ASU 2024-03, Accounting Standards Update 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses to improve financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The amendments in this ASU do not change or remove current expense disclosure requirements; however, the amendments affect where such information appears in the notes to financial statements because entities are required to include certain current disclosures in the same tabular format disclosure as the other disaggregation requirements in the amendments. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the potential impact that the adoption of this standard will have on its financial statements.
Management does not believe that any additional recently issued, but not yet effective, accounting standards, if currently adopted, would have a material impact on the Company’s financial statements.
9
| 3. | Merger |
On November 13, 2024, Merger Sub, a wholly-owned subsidiary of ACAB, merged with Legacy Abpro, with Legacy Abpro surviving as a wholly-owned subsidiary of ACAB. At the effective time of the Merger:
| ● | each outstanding share of Legacy
Abpro common stock was converted into approximately |
| ● | each outstanding share of preferred
stock of Legacy Abpro was converted into the aggregate number of shares of New Abpro’s common stock that would be issued upon conversion
of the shares of Legacy Abpro preferred stock based on the applicable conversion ratio immediately prior to the effective time, multiplied
by approximately |
| ● | each outstanding option or
warrant to purchase Legacy Abpro common stock was converted into an option or warrant, as applicable, to purchase a number of shares
of the Company’s common stock equal to the number of shares of Legacy Abpro common stock subject to such option or warrant multiplied
by approximately |
In addition, at the Closing Date,
Former holders of the Legacy Abpro common stock
and Legacy Abpro preferred stock are eligible to receive up to
At the Closing Date, the Company issued an aggregate
of
Pursuant to the terms of the Merger Agreement,
at the Closing Date, ACAB’s sponsor, Atlantic Coastal Management II LLC (the “Sponsor”) received
At the Closing, and in accordance with the Sponsor Letter Agreement
entered into on December 11, 2023, as amended, the Sponsor transferred
In addition, at the Closing, the Company issued
10
The number of shares of the Company’s common stock outstanding immediately following the consummation of the Merger was:
| Shares | ||||
| Common stock of ACAB, net of redemptions | ||||
| ACAB Founder Shares, less of forfeitures and transfers | ||||
| New Abpro shares issued to PIPE investors | ||||
| New Abpro shares issued to service providers | ||||
| New Abpro shares issued in Merger to Legacy Abpro stockholders | ||||
| New Abpro shares transferred to investors | ||||
| New Abpro shares issued to settle the promissory note with executive | ||||
| Total shares of common stock outstanding immediately after Merger | ||||
The Merger was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, ACAB is treated as the acquired company for financial reporting purposes and Legacy Abpro is treated as the acquirer. This determination is primarily based on the fact that subsequent to the Merger, the Legacy Abpro stockholders hold a majority of the voting rights of the combined company, Legacy Abpro comprises all of the ongoing operations of the combined company, Legacy Abpro comprises a majority of the carryover governing body of the combined company, and Legacy Abpro’s senior management comprises all of the senior management of the combined company. Accordingly, for accounting purposes, the Merger was treated as the equivalent of Legacy Abpro issuing shares for the net assets of ACAB, accompanied by a recapitalization. The net assets of ACAB were stated at historical costs. No goodwill or other intangible assets were recorded. Operations prior to the Merger are those of Legacy Abpro.
The Company received $
In February 2025, the Company issued
| 4. | Property and Equipment |
The Company’s property and equipment include the following:
| March 31, 2025 | December 31, 2024 | |||||||
| Furniture and fixtures | $ | $ | ||||||
| Lab equipment | ||||||||
| Computer hardware and software | ||||||||
| Leasehold improvements | ||||||||
| Equipment under finance leases | ||||||||
| Property and equipment | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
Depreciation expense was $
| 5. | Accrued Expenses |
Accrued expenses consisted of the following:
| March 31, 2025 | December 31, 2024 | |||||||
| Accrued salaries and wages | $ | $ | ||||||
| Accrued professional fees | ||||||||
| Accrued license fees | ||||||||
| Accrued interest | ||||||||
| BOD compensation | ||||||||
| Other accrued expenses | ||||||||
| Total accrued expenses | $ | $ | ||||||
11
| 6. | Fair Value Measurements |
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024, and indicates the fair value hierarchy of the valuation inputs the Company’s utilized to determine such fair value:
| March 31, | December 31, | |||||||||||
| Description | Level | 2025 | 2024 | |||||||||
| Assets: | ||||||||||||
| Forward purchase agreement asset (Note 10) | 3 | $ | $ | |||||||||
| SEPA put rights asset (Note 11) | 3 | |||||||||||
| Liabilities: | ||||||||||||
| Embedded derivative liability (Note 11) | 3 | $ | $ | |||||||||
The Forward Purchase Agreement was fully settled
on January 28, 2025 for $
| December 31, | ||||
| 2024 | ||||
| Stock price | $ | |||
| Risk-free interest rate | % | |||
| Expected term (in years) | ||||
| Expected volatility | % | |||
| Expected dividend yield | % | |||
The fair value of the SEPA Put Rights was estimated
as the sum of the fair values of the put rights under each assumed advance notice over the term of the SEPA. The number of shares under
each advance notice was based on the historical trading volumes of the Company’s stock taking into account various beneficial ownership
and daily volume limitations.
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Stock price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Exercise price | ||||||||
| Expected term (in years) | ||||||||
| Expected volatility | |
% | |
% | ||||
| Expected dividend yield | % | % | ||||||
| Number of shares under each advance notice | ||||||||
The fair value of the Embedded Derivative Feature was estimated at
$
12
The changes in the fair value of Level 3 financial assets and liabilities for the three months ended March 31, 2025 are as follows:
| Forward Purchase Agreement asset | SEPA Put Rights Asset | Embedded Derivative Liability | ||||||||||
| Fair value as of January 1, 2025 | $ | $ | $ | |||||||||
| Settlement | ( | ) | ||||||||||
| Change in fair value | ( | ) | ( | ) | ||||||||
| Fair value as of March 31, 2025 | $ | $ | $ | |||||||||
| 7. | License and Collaboration Agreements |
NJCTTQ Collaboration Agreement
In January 2019, the Company entered into a collaboration
agreement with Nanjing Chia Tai Tianquing Pharmaceutical Co., Ltd. (“NJCTTQ”) to research, develop and commercialize two anti-Claudin
18.2 lead antibodies (the “NJCTTQ agreement”). Under the NJCTTQ agreement, the Company granted a non-exclusive, non-sublicensable
research license and an exclusive, sublicensable license to NJCTTQ within the People’s Republic of China and Thailand (the “NJCTTQ
Territory”). The initial term of this agreement was
The Company was eligible to receive up to an aggregate
of $
The Company and NJCTTQ agreed to pay reciprocal
royalties, with each of them paying the other party low single-digit royalties, tiered based on net sales per calendar year in its territory.
The agreement remains unrenewed as of March 31, 2025 after the expiration of its initial term. However, notwithstanding the agreement’s
expiration, the low single-digit royalties and the $
ABP-201 Collaboration and License Agreement
In January 2020, the Company’s consolidated subsidiary, AbMed, entered into a collaboration and license agreement with ABI (the “ABP-201 Agreement”), pursuant to which the Company granted to ABI an exclusive, royalty-bearing, license under specified patent rights to make, use and sell certain of its proprietary ANG-2/VEGF-HIRK bispecific antibodies within the licensed territory comprising People’s Republic of China, Japan, South Korea, Southeast Asia, the Middle East and the Commonwealth of Independent States. Unless earlier terminated in accordance with its terms, the agreement remains in effect on a country-by-country basis until the expiration of the last royalty term in such country.
Under the ABP-201 agreement, ABI agreed to use
commercially reasonable efforts to reach certain development and commercialization milestones for such bispecific antibodies within specified
territories and timeframes. ABI is committed to pay the Company up to $
13
Celltrion Collaboration and License Agreement
In September 2022, the Company entered into an exclusive collaboration and license agreement with Celltrion (the “Original Celltrion Agreement”). The Company and Celltrion entered into an amendment to the agreement in October 2024 in connection with the execution of the Celltrion Subscription Agreement (the “Amended Celltrion Agreement”). The amendment is subject to termination by the Company or Celltrion if (i) the share purchase under the Celltrion Subscription Agreement is not completed, or (ii) the Celltrion Subscription Agreement is terminated pursuant to Section 7 of the Celltrion Subscription Agreement. Under the Amended Celltrion Agreement, the Company granted to Celltrion a worldwide exclusive license under specified patent rights to develop, make, have made, import, export, use, have used, sell and have sold certain of its proprietary ABP-102 bispecific antibodies. The License Agreement also provides that the Company is to perform certain preclinical in vitro studies. The License Agreement will remain in effect for so long as ABP-102 is being developed or commercialized anywhere in the world. Celltrion may terminate the license agreement at any time by providing six months prior written notice to the Company.
Celltrion is committed to pay the Company up to
$
The first milestone of $
The Company’s initial obligation to perform in vitro testing for the research and development services represents a distinct performance obligation. The revenue for this performance obligation was be recognized on a straight-line based over the term of the studies. During both the three months ended March 31, 2025 and 2024, the Company recognized revenue in connection with this performance obligation.
Milestone Payments. The Company is
entitled to development milestones under the Celltrion Agreement and certain regulatory milestone payments which are paid upon receipt
of regulatory approvals. Except for the first milestone of $
Profit Splits. As the license is deemed to be the predominant item to which profit splits relate, the Company will recognize revenue when the related sales or third-party collaborator income occur. No profit split revenue has been recognized from inception through March 31, 2025.
14
| 8. | Commitments under Research and Collaboration Agreements |
MedImmune License Agreement
In August 2016, the Company entered into a collaboration and license agreement with MedImmune Limited (“MedImmune”), pursuant to which the Company received from MedImmune an exclusive, worldwide, royalty-bearing, sublicensable (subject to certain conditions) license to certain intellectual property rights relating to the Company’s ABP-200 product candidates (the “MedImmune License Agreement”). The Company agreed to use commercially reasonable efforts to reach certain development and commercialization milestones for such bispecific antibodies within specified timeframes. Unless earlier terminated in accordance with its terms, the MedImmune License Agreement, as amended, remains in effect on a country-by-country basis until the expiration of the last royalty term in such country as to be determined by the launch of products based on the ABP-200 product candidates. The Company is no longer developing ABP-200.
Under the MedImmune License Agreement, the Company
agreed to pay milestone and royalty payments, including up to $
NCI License Agreement
In August 2017, the Company entered into a patent license agreement with the National Cancer Institute (the “NCI”), a division of the National Institutes of Health (the “NIH”), pursuant to which the Company received an exclusive, worldwide license to make, use, sell, offer to sell and import products covered by the licensed patents in the field of using certain monoclonal antibodies as monospecific or bispecific antibodies for the treatment of liver cancer (the “NCI License Agreement”). The license agreement was amended in May 2020 and October 2023 and the field of use was narrowed to the development and commercialization of a bispecific antibody for the treatment of GPC-3 expressing liver cancer using a particular moiety for targeting GPC3 and the timeline for development and commercialization was extended. Unless earlier terminated, the Company’s agreement with NCI will expire upon expiration of all licensed patent rights. The Company may also terminate the agreement as to any licenses in any country or territory upon 60 days written notice.
Pursuant to the NCI agreement and amendments,
the Company agreed to pay low single-digit royalties based on net sales of licensed products as well as milestone payments of up to
The Company also has to pay the guaranteed annual
minimum royalties of $
The Company also agreed to reimburse patent costs for all documented out of pocket associated with the preparation, filing, prosecution and maintenance of patent rights. During the three months ended March 31, 2025 and 2024, the Company did not incur any expenses related to the patent costs reimbursements.
Mabwell License Agreement
In October 2020, the Company entered into an exclusive collaboration and license agreement with Mabwell (the “Mabwell License Agreement”). The agreement was amended in November 2020. Under the Mabwell license agreement, the Company received a non-exclusive, royalty-free research purpose license as well as an exclusive commercial license within certain territories, as defined in the agreement, to Mabwell’s series of anti-SARS-CoV-2 monoclonal antibodies. Under the agreement, the Company is responsible for conducting at its sole expense, research and preclinical, clinical and other developments of any licensed products and bears all development costs and expenses related to obtaining or maintenance of marketing authorizations of licensed products in its territories. Mabwell is obligated, at the Company’s request, to supply the Licensed Antibodies to the Company for clinical trial purpose at costs plus margin as defined in the agreement. The parties agreed to undertake certain joint clinical research and development activities with a portion of the costs contributed by Mabwell. Unless earlier terminated, the Mabwell License Agreement will expire on the occurrence of the last to expire royalty term, which is the later of a) the expiration of the last to expire valid claim of the patent rights and b) ten years from the first commercial sale of such Licensed Product, and determined on jurisdiction-by-jurisdiction basis. Either party may terminate the agreement in the event of any uncured material breach by the other party.
15
The agreement provides for development milestones
of up to $
During the three months ended March 31, 2025 and 2024, development activities under the Mabwell collaboration agreement were immaterial to the consolidated financial statements. No milestones have been reached and no products were sold under the Mabwell License Agreement through March 31, 2025.
In March 2025, the Company received a draft of
a termination agreement from Mabwell which outlines Mabwell’s claim for the total payment of $
MSK License Agreement
In March 2017, the Company entered into an exclusive license agreement with Memorial Sloan Kettering Cancer Center (the “MSK License Agreement”), pursuant to which the Company received an exclusive, royalty-bearing, worldwide license under specified patent rights to make, use and sell certain of MSK’s proprietary Her2-huOKT3 bispecific antibodies. The agreement was amended on March 31, 2017, on March 31, 2018, and January 1, 2020. Unless earlier terminated in accordance with its terms, the agreement was to remain in effect on a country-by-country basis until the expiration of the last royalty term in such country as to be determined by the launch of products based on MSK antibodies. On September 19, 2023, MSK License Agreement was terminated by MSK due to the Company’s failure to make the payments for the patent costs reimbursements discussed below.
Under the MSK License Agreement, as amended, the
Company agreed to use commercially reasonable efforts to reach certain development and commercialization milestones for such bispecific
antibodies within specified territories and timeframes. The Company was committed to pay MSK up to $
The Company also agreed to reimburse patent costs
for all documented out of pocket costs associated with the preparation, filing, prosecution and maintenance of patent rights in the license
territory. During the three months ended March 31, 2025 and 2024, the Company did not incur any patent reimbursement costs. As of both
March 31, 2025 and December 31, 2024, the liabilities for the patent costs reimbursements were $
As of both March 31, 2025 and December 31, 2024,
the accrued liabilities for the unpaid interest on the outstanding minimum royalty and milestone payments due to MSK were $
16
VAZYME License agreement
In April 2021, the Company entered into a License Agreement with VAZYME Biotech Co., Ltd (“VAZYME”) (the “VAZYME License Agreement”), pursuant to which the Company was granted an exclusive, perpetual, royalty-bearing, worldwide license under specified patent rights to research, develop and commercialize VAZYME proprietary anti-SARS-CoV-2 monoclonal antibodies. Unless earlier terminated in accordance with its terms, the agreement remains in effect on a country-by-country basis until the expiration of the last royalty term in such country.
Under the VAZYME License Agreement, the Company
agreed to use commercially reasonable efforts to reach certain research and development, and commercialization milestones for such antibodies.
The Company also agreed to pay $
In December 2021, the Company entered into a Cooperation Agreement with Chengdu Bio-Innovate Pharmaceutical Technology Co., Ltd (“Bio-Innovate”) and a three-way sharing agreement with VAZYME and Bio-Innovate (“the Company”, “VAZYME” and “Bio-Innovate”, collectively “all parties”), pursuant to which the Company entrusted Bio-Innovate to perform certain preclinical testing and all parties agreed that VAZYME will ship the agreed antibodies to Bio-Innovate rather than the Company to fulfill the requirements under the VAZYME License Agreement.
For the three months ended March 31, 2025 and
2024, the Company did not incur any expenses related to the VAZYME License Agreement. As of both March 31, 2025 and December 31, 2024,
the accrued liabilities under this agreement were $
| 9. | Commitments and Contingencies |
Litigation
The Company, from time to time, is subject to legal proceedings and claims that arise in the ordinary course of business. Resolution of any such matter could have a material adverse effect on the results of operations and financial condition. The Company considers all claims on a periodic basis and based on known facts assesses whether potential losses are considered reasonably possible, probable and estimable. Based upon this assessment, the Company then evaluates disclosure requirements and whether to accrue for such claims in its consolidated financial statements.
The Company records a provision for contingent liability when it is both probable that a loss has been incurred and the amount of the loss can be reasonably estimated.
On September 12, 2023, a contract research organization
(“CRO”) vendor filed a lawsuit against the Company based on the Company’s failure to make certain installments pursuant
to a settlement agreement entered into with this vendor on January 23, 2023. Under the settlement agreement, the Company agreed to pay
a total of $
17
In addition to the lawsuit from a CRO vendor above,
the Company accrued $
In June 2023, the Company received a notice of
breach from MSK followed by a notice of termination in September 2023, pursuant to which MSK demanded payments totaling $
The MedImmune License Agreement (see Note 8) provides for a research plan with target dates for an IND application (July 2021) and Phase II commencement (December 2022). These target dates were not met, which gives MedImmune (now AstraZeneca) a termination right. The Company does not expect a material impact on our business if MedImmune/AstraZeneca terminates this agreement. This license was originally entered into in connection with the development of ABP-200, which the Company is no longer developing. The Company believes that it does not need the intellectual property licensed under that agreement for the development and eventual commercialization of ABP-201 or any of its other programs.
Non-Redemption Agreement
On November 5, 2024, Legacy Abpro and ACAB entered
into a non-redemption agreement (the “Non-Redemption Agreement”), with Sandia Investment Management LP
on behalf of certain funds, investors, entities or accounts for which it or its affiliates acts as manager, sponsor or advisor (the “NRA
Investors”). Pursuant to such Non-Redemption Agreement, each NRA Investor agreed to rescind or reverse any previously
submitted redemption demand of the common stock of the Company held or to be acquired by such NRA Investor (the “NRA Investor Shares”)
up to
At the Closing Date, the NRA Investors reversed
redemption demands with respect to
Excise Tax Liability
At the Closing Date, the Company assumed the excise
tax liability of $
On August 16, 2022, the Inflation Reduction Act
of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal
During the second quarter of 2024, the Treasury and Internal Revenue Service (“IRS”) issued final regulations with respect to the timing and payment of the excise tax. Pursuant to those regulations, the Company would need to file a return and remit payment for any liability incurred during the period from January 1, 2023 to December 31, 2023 on or before October 31, 2024. The Company has filed the excise tax return and has engaged with the IRS in determining a payment plan for the balance.
The Company is unable to pay its obligation in
full, and, as such, it is subject to additional interest and penalties which are currently estimated at
18
In March 2025, the Company received the letter from the IRS, requesting
to set up a meeting with the Company to discuss the unsettled tax matters of ACAB and referencing $
| 10. | Forward Purchase Agreement |
On November 7, 2024, ACAB and Legacy Abpro entered
into a Confirmation of an OTC Equity Prepaid Forward Transaction (the “Forward Purchase Agreement” or “Transaction”)
with YA (the “Seller”) to which a maximum of up to
The number of Recycled Shares subject to the Forward Purchase Agreement was also subject to reduction following a termination of the Forward Purchase Agreement with respect to such shares as described under “Optional Early Termination” below. The contract was to settle based on the settlement terms discussed below.
Optional Early Termination
From time to time and on any date following the Closing Date (any such date, an “OET Date”) and subject to the terms and conditions in the Forward Purchase Agreement (“Optional Early Termination”), the Seller may, in its absolute discretion, terminate the Transaction in whole or in part by providing written notice to the Company (the “OET Notice”), by no later than the next payment date following the OET Date, (which will specify the quantity by which the Number of Shares will be reduced (such quantity, the “Terminated Shares”)). The effect of an OET Notice would be to reduce the Number of Shares by the number of Terminated Shares specified in such OET Notice with effect as of the related OET Date. As of each OET Date, the Company would be entitled to an amount from the Seller, and the Seller would pay to the Company an amount, equal to the product of (x) the number of Terminated Shares and (y) the reset price in respect of such OET Date.
The reset price (the “Reset Price”)
was initially $
Settlement
On the Cash Settlement Payment Date, which is
the tenth local business day immediately following the Valuation Date (defined below), the Seller had to remit to the Company a cash amount
(the “Settlement Amount”) equal to (i) the Number of Shares as of the Valuation Date, multiplied by (ii) the difference of
(a) the volume weighted daily VWAP price over the Valuation Period, less (b) $
19
On January 28, 2025, YA elected to effect an Optional
Early Termination with respect to all
The Forward Purchase Agreement was accounted for
at fair value as an asset in accordance with the guidance in ASC Topic No. 815 Derivatives and Hedging (“ASC 815”), with subsequent
changes in the fair value recorded in profits and losses. The fair value of the Forward Purchase Agreement asset was $
| 11. | Notes Payable – Related Parties |
Promissory Note with ABI
On October 18, 2023, the Company entered into
a promissory note agreement with ABI, a significant investor in the Company, to receive up to $
On October 7, 2024, the Company entered into an
additional promissory note with ABI (“the 2024 ABI Note”) to receive up to $
As of both March 31, 2025 and December 31, 2024,
the outstanding principal balances under the promissory notes with ABI was $
Promissory Notes with Executive and Director
On December 29, 2023, the Company issued promissory
notes to one of its executives and one of its directors, in the principal amount of $
On April 18, 2024, the Company entered into a
separate promissory note agreement with the same executive to receive, as amended, up to $
20
Pursuant to the terms of the promissory note,
the Company agreed to cause to be issued to the executive a number of New Abpro stock options or warrants in an amount equal to the outstanding
principal amount of such promissory note, subject to required approval by the New Abpro Board of Directors and Compensation Committee
and registration of such securities on Form S-8. On February 7, 2025, the Company issued
Promissory Note with ACAB Executive
On August 16, 2024, an executive at ACAB agreed
to loan Legacy Abpro $
On November 21, 2024, the ACAB Executive Note
was amended to clarify that it should have been between Legacy Abpro as borrower and ACAB as lender. Pursuant to the Severance Agreement
(see Note 16), the liability to the ACAB executive was cancelled. According to the terms of the amended note, Legacy Abpro was to repay
the principal amount of $
| 12. | Standby Equity Purchase Agreement |
Convertible Notes
On October 30, 2024, Legacy Abpro and ACAB entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“YA”).
Subject to the satisfaction of the conditions
set forth in the SEPA, YA committed to advance to the Company the aggregate principal amount of up to $
On November 14, 2024 (the “Issuance Date”),
pursuant to the SEPA, the Company entered into a Convertible Promissory Note (the “Convertible Note”) with YA for $
21
The Convertible Notes are convertible at the option
of the holder at any time after the Issuance Date based on the conversion price determined as the lower of (i) $
On April 20, 2025, the Company entered into an
amendment to SEPA with YA, pursuant to which, the definition of the conversion price was amended to state that the Fixed Price should
be adjusted (downwards only) to equal the VWAP of the Common Shares over the three (3) Trading Days immediately preceding the 20th Trading
Day following the Issuance Date if such price is lower than the initial Fixed Price. As a result, at the amendment date, the Fixed Price
was reset down to $
The Convertible Note is redeemable at the option
of the Company if the volume-weighted-average price (“VWAP”) of the Company’s Common Stock is less than $
Under the terms of the Convertible Notes, the
Amortization Event occurs if i) the daily VWAP is less than the Floor Price for
It was determined, in accordance with ASC 815,
that the Conversion Feature is required to be bifurcated due to the adjustments to the settlement amount of this embedded feature that
are not inputs to the fair value measurement of a fixed-for-fixed forward or option on equity shares, and should be recorded as a liability
(the “Embedded Derivative Liability”) at fair value with a corresponding amount recorded as a discount on the Convertible
Notes. The Embedded Derivative Liability is marked to market at each reporting period end with any changes recorded in other income or
expense. The fair value of the Embedded Derivative Liability was estimated at $
The total discount resulting from the Convertible
Note Discount and the bifurcation of the Embedded Derivative Liability at the Issuance Date was amortized over the term of the Convertible
Notes through non-cash interest expense using the effective interest method. The non-cash interest expense related to the discount amortization
was $
22
SEPA Put Rights
Under the terms of the SEPA, starting at the Closing
Date, the Company has the right, but not the obligation (“SEPA Put Rights”), to issue shares of its common stock to YA (“Advance
Shares”, and such issuance and sale, an “Advance”) and YA shall subscribe for and purchase from the Company such Advance
Shares, through written notice by the Company to YA (“Advance Notice”), provided (i) no balance is outstanding under
a Convertible Note, or (ii) if there is a balance outstanding under a Convertible Note, an Amortization Event (as defined above),
has occurred in accordance with and subject to the terms of the SEPA. The SEPA contemplates purchase by YA of up to $
For as long as there is an outstanding balance under a Convertible Note, YA has the right, but not the obligation, by delivery to the Company of Investor Notices (as defined in the SEPA), to cause an Advance Notice to be deemed delivered by YA, which triggers the issuance and sale of Advance Shares to YA, subject to terms and conditions as specified in the SEPA.
The purchase price for the Advance Shares shall
be the price per Advance Share obtained by multiplying the Company’s stock price (i) by
The Company accounted for the SEPA Put Rights
as an asset at fair value in accordance with the guidance in ASC 815, due to the adjustments to the settlement amount of this derivative
instrument that are not inputs to the fair value measurement of a fixed-for-fixed forward or option on equity shares. The fair value of
the SEPA Put Rights was $
As consideration for YA’s commitment to purchase shares of common
stock, upon execution of the SEPA, the Company engaged to remit YA the commitment fee of $
| 13. | Stockholders’ Equity |
Convertible Preferred Stock
As of December 31, 2023, and immediately prior
to the Closing Date, Legacy Abpro’s amended and restated articles of incorporation authorized the issuance of up to
In connection with the Merger, all previously
issued and outstanding Convertible Preferred Stock was converted into the aggregate number of shares of New Abpro’s common stock
that would be issued upon conversion of the shares of Legacy Abpro preferred stock based on the applicable conversion ratio immediately
prior to the effective time, multiplied by approximately
23
Common and Preferred Stock
In connection with the Closing, the Company’s
articles of incorporation were amended to designate two classes of stock; preferred and common stock. The articles of incorporation of
New Abpro authorize
The Company’s Amended and Restated Certificate
of Incorporation provides the Company’s board of directors with the authority to issue up to
Warrants
As of both March 31, 2025 and December 31, 2024,
there were
The Company will not be obligated to deliver any common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the common stock issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable, and the Company will not be obligated to issue shares of common stock upon exercise of a warrant unless common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company may redeem the Public Warrants:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than 30 days’ prior written notice of redemption given after the warrants become exercisable to each warrant holder; and |
| ● | if, and only if, the reported
last sale price of the Series A common stock equals or exceeds $ |
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
24
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants.
As of both March 31, 2025 and December 31, 2024,
there were
In addition, if (x) the Company were to issue
additional shares of common stock or equity-linked securities, for capital raising purposes in connection with the closing of a Merger
at an issue price or effective issue price of less than $
In November 2024, the “Down Round Feature”
was triggered and the exercise price of the Public and Private Warrants was adjusted down to $
The Company valued the deemed dividend as the difference between the
fair value of the warrants before and after the exercise price adjustment. The warrants were valued using the Black-Scholes option pricing
model immediately before and after the modification using the following assumptions: (a) fair value of common stock of $
The
On February 7, 2025, the Company issued
The following presents information about warrants to purchase common stock outstanding as of March 31, 2025:
| Shares | Weighted-Average Exercise Price | Weighted- Average Remaining Contractual Life | |||||||||
| Warrants | $ | | |||||||||
No warrants were exercised during the three months ended March 31, 2025.
25
| 14. | Share-Based Compensation |
2024 Equity Incentive Plan
The Company’s 2024 Equity Incentive Plan
(the “2024 Plan”) became effective at the Closing Date. As of March 31, 2025,
Under the 2024 Plan, the Company can grant non-statutory stock options, or NSOs, incentive stock options, or ISOs, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, performance awards and other forms of awards to eligible employees and nonemployees. Through March 31, 2025, the Company has not granted any awards under the 2024 Plan.
2014 Stock Incentive Plan
The 2014 Stock Incentive Plan (the “2014
Plan”) of Legacy Abpro was expired as of the Closing Date, in accordance with its original terms. As a result of the expiration,
no further awards may be granted under the 2014 Plan. All awards previously granted and outstanding as of the effective date of the Merger,
which totaled
Stock Options
The summary of the Company’s stock option activity is as follows:
| Number of Stock Options | Weighted- Exercise Price | Weighted- Remaining Contractual Life | ||||||||||
| Outstanding at December 31, 2024 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/Expired/Cancelled | ( | ) | $ | |||||||||
| Outstanding at March 31, 2025 | $ | |||||||||||
| Exercisable at March 31, 2025 | $ | |||||||||||
Restricted Stock Units
The Company granted restricted stock units (“RSUs”) to various employees and directors under the 2014 Plan. These RSUs cliff vest on the first anniversary of the grant date. The fair value of the RSUs is determined based upon the fair value of the underlying common stock as of the grant date.
26
The summary of the Company’s restricted stock unit activity is as follows:
| Number of Shares | Weighted- Average Grant Date Fair Value | Weighted- Average Remaining Vesting Period | |||||||||||
| Outstanding at December 31, 2024 | $ | ||||||||||||
| Granted | |||||||||||||
| Vested | ( | ) | |||||||||||
| Forfeited | |||||||||||||
| Outstanding at March 31, 2025 | $ | ||||||||||||
During the three months ended March 31, 2025,
On October 22, 2024, the Company’s board
of directors authorized the issuance of
Stock-Based Compensation Expense
The summary of the recorded stock-based compensation expense is as follows:
| Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Research and development | $ | $ | ||||||
| General and administrative | ||||||||
| Total stock-based compensation | $ | $ | ||||||
As of March 31, 2025, there was approximately
$
| 15. | Employee Benefit Plan |
The Company has a 401(k) retirement plan available
to all eligible employees. During the three months ended March 31, 2025 and 2024, the Company made $
| 16. | Related Parties |
On January 15, 2020, the Company entered into
an agreement for various consulting services, as defined in the agreement, with a member of the Company’s Board of Directors. On
January 1, 2023, the Company entered into a new consulting agreement with the same director, which superseded the agreement dated in January
2020. The agreement was terminated during the year ended December 31, 2024. During the three months ended March 31, 2025 and 2024, the
Company incurred
27
On April 18, 2024, the Company entered into a
promissory note agreement with an executive to receive, as amended, for up to $
On April 18, 2024, the Company entered into an
agreement with an executive to defer payment of compensation from April 18, 2024 until the earlier of (i) the closing of the Merger and
(ii) November 20, 2024. The executive’s deferred wages were repaid in the amount of $
On November 21, 2024, the Company entered into
a severance agreement with an executive (the “Severance Agreement”). Pursuant to the terms of the Severance Agreement, the
Company made a severance payment of $
On December 24, 2024, the Company made a payment
of $
| 17. | Subsequent Events |
In April 2025, the Company received the Notice, the MVPHS Notice, and the MVLS Deficiency Notice from Nasdaq, as further described in Note 1.
On April 8, 2025, at the special meeting of stockholders, the Company obtained stockholder approval for the issuance of shares under the SEPA in excess of the Exchange Cap. See Note 12.
On April 20, 2025, the Company entered into an
amendment to SEPA with YA, pursuant to which, the definition of the conversion price was amended to state that the Fixed Price should
be adjusted (downwards only) to equal the VWAP of the Common Shares over the three (3) Trading Days immediately preceding the 20th Trading
Day following the Issuance Date if such price is lower than the initial Fixed Price. As a result, at the amendment date, the Fixed Price
was reset down to $
On April 29, 2025, in accordance with the terms
of the Convertible Promissory Note with YA, the Company reduced the Floor Price down to $
In April 2025, YA exercised its conversion option for the total principal
amount of $
In May 2025, YA exercised its conversion option for the total principal
amount of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and with our audited financial statements and the notes thereto included in our Annual Report. In addition, you should read the “Risk Factors” and “Information Regarding Forward-Looking Statements” sections of this Quarterly Report and our Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Unless otherwise indicated or the context otherwise requires, references in this section to “New Abpro,” “we,” “us,” “our,” “the Company,” and other similar terms refer to Abpro Holdings, Inc. and its subsidiaries.
Overview
Abpro Holdings, Inc. and its subsidiaries (the “Company”) is a biotechnology company headquartered in Woburn, Massachusetts, dedicated to developing next-generation antibody therapeutics to improve the lives of patients with severe and life-threatening diseases. The Company is focused on the development of novel antibodies using its proprietary discovery and engineering platforms, primarily in the areas of immuno-oncology, ophthalmology and infectious disease.
By leveraging our proprietary DiversImmune® and MultiMabTM antibody discovery and engineering platforms, we are developing a pipeline of antibodies, both independently and through collaborations with global pharmaceutical and research institutions.
Our two lead product candidates, ABP-102 and ABP-201, feature our next generation tetravalent antibody format, or TetraBi antibody format, which binds to two different targets with two distinct binding sites per target. ABP-102 is designed to redirect a patient’s immune system to fight cancer by engaging T cells through co-targeting human epidermal growth factor receptor 2, or HER2, and cluster of differentiation 3, or CD3, T-cell co-receptor. We plan initially to develop ABP-102 for difficult to treat HER2+ solid tumors, focusing on orphan indications. ABP-201 is designed to block blood vessel formation and normalize damaged vessels through co-targeting vascular endothelial growth factor, or VEGF, and angiopoietin-2, or ANG-2. We plan to develop ABP-201 to treat vascular disease of the eye, focusing on wet age-related macular degeneration (Wet AMD). We intend to follow these two lead product candidates with a broad pipeline of CD3-targeting T-cell engagers based on the differentiated format of ABP-102. We expect to initiate clinical trials for ABP-102 and ABP-201 in 2026.
Merger
On November 13, 2024 (the “Closing Date”), Atlantic Costal Acquisition Corp. II (“ACAB”) consummated a merger (the “Merger”) pursuant to the terms of the Merger Agreement, dated as of December 11, 2023 (the “Merger Agreement”) by and among Abpro Corporation (“Legacy Abpro”), ACAB, and Abpro Merger Sub Corp., a Delaware corporation (“Merger Sub”) and wholly owned subsidiary of ACAB prior to the Closing. Pursuant to the Merger Agreement, on the Closing Date, (i) ACAB changed its name to “Abpro Holdings, Inc.” (“New Abpro”), and (ii) Merger Sub merged with and into Legacy Abpro, with Legacy Abpro as the surviving company in the Merger (such transactions, the “Merger,” and, collectively with the other transactions described in the Merger Agreement, the “Reverse Recapitalization”). After giving effect to the Merger, Legacy Abpro became a wholly owned subsidiary of the Company. Shares of the New Abpro commenced trading on the Nasdaq Global Market on November 14, 2024.
In addition, certain investors purchased an aggregate of 3,367,401 shares of Common Stock in a private placement that closed concurrently with the Closing for an aggregate purchase price of $11.2 million (the “PIPE Financing”). Unless otherwise noted, the Company has retroactively adjusted all common and preferred share and related price information to give effect to the Exchange Ratio as set forth in the Merger Agreement.
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Impact of Macroeconomic Events
Economic uncertainty in various global markets caused by political instability and conflicts, such as the ongoing conflicts in the Ukraine, and Israel, and economic challenges have led to market disruptions, including significant volatility in commodity prices, credit and capital market instability and supply chain interruptions, which have caused record inflation globally. Our business, financial condition, and results of operations could be materially and adversely affected by further negative impacts on the global economy and capital markets resulting from these global economic conditions, particularly if such conditions are prolonged or worsen. Although, to date, our results of operations have not been materially impacted by these global economic and geopolitical conditions, it is impossible to predict the extent to which our operations may be impacted in the short and long term. The extent and duration of these market disruptions, whether as a result of the military conflict between Russia and Ukraine, the effects of the Russian sanctions, the conflict between Israel and Hamas, geopolitical tensions, record inflation, or otherwise, are impossible to predict. Any such disruptions may also magnify the impact of other risks described or incorporated by reference in this Annual Report.
Recent Developments
On March 3, 2025, the Board removed Ian Chan as Chief Executive Officer of the Company for cause, and Miles Suk was appointed as Chief Executive Officer of the Company. In addition, pursuant to Mr. Chan’s employment agreement with the Company’s wholly-owned subsidiary, Abpro Corporation, Mr. Chan was notified that he was terminated as Chief Executive Officer and director of Abpro Corporation, effective March 3, 2025.
Results of Operations
Results of Operations for the Three Months Ended March 31, 2025 and 2024
The following is a comparative discussion of our results of operations for the three months ended March 31, 2025 and 2024 (in thousands):
| For the Three Months Ended March 31, | ||||||||||||||||
| 2025 | 2024 | Change | % | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | 325 | $ | 1,000 | $ | (675 | ) | -68 | % | |||||||
| General and administrative | 2,633 | 1,879 | 754 | 40 | % | |||||||||||
| Total operating expenses | 2,958 | 2,879 | 79 | 3 | % | |||||||||||
| Loss from operations | (2,958 | ) | (2,879 | ) | (79 | ) | 3 | % | ||||||||
| Other (expense) income, net | (929 | ) | 3,515 | (4,444 | ) | -126 | % | |||||||||
| Net (loss) income | $ | (3,887 | ) | $ | 636 | $ | (4,523 | ) | 711 | % | ||||||
Revenue
We did not generate revenue during the three months ended March 31, 2025 and 2024. Our ability to generate product revenue in the future will depend almost entirely on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize a drug candidate, or enter into collaborations that provide for payments to us.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of salaries, payroll taxes, employee benefits and stock-based compensation for those individuals involved in research and development efforts, as well as consulting expenses, third-party research and development expenses, laboratory supplies and clinical materials.
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The following table summarizes our research and development expenses by product candidate and program for the three months ended March 31, 2025 and 2024 (in thousands):
| For the Three Months Ended March 31, | ||||||||
| Research and development expenses | 2025 | 2024 | ||||||
| ABP-110 | $ | 10 | $ | 36 | ||||
| ABP-102 | 90 | 275 | ||||||
| ABP-150 | 5 | 5 | ||||||
| ABP-201 | 33 | 7 | ||||||
| ABP-100 | - | - | ||||||
| SARS-Co V-2 neutralizing antibody program | - | - | ||||||
| Unallocated research and development expenses | 187 | 677 | ||||||
| Total | $ | 325 | $ | 1,000 | ||||
Unallocated research and development expenses include engineering platform-related expenses that are not allocable to a specific product candidate or program, as well as stock-based compensation, other employee- related expenses that are not related to a specific product candidate or program, and facilities and depreciation expenses.
Research and development expenses decreased by $0.7 million for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to the decrease in the majority of the personnel being on furlough since October 2024. The overall decrease in expenses was a result of the decrease in research and development activities while raising additional capital necessary to restart our research and development programs.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation and benefits to our personnel not, involved in research and development efforts, costs related to our directors, and senior advisors; professional service fees, including accounting and legal services and other consulting services. General and administrative expenses increased by $0.8 million for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to an increase of approximately $1.2 million in costs of operating as a public company, including legal, accounting, and insurance expenses, partially offset by a decrease in payroll and related expenses of approximately $0.4 million as a result of the reduction in employee headcount.
Other Income (Expense), Net
The net balance in other income (expense) decreased by $4.4 million for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. This change is primarily due to other income recognized during the three months ended March 31, 2024 of approximately $3.5 million related to the reversal of the liability to one of the Company’s research and development providers, as this provider informed the Company they were not pursuing collection on this liability. The remaining decrease is related to the increase in interest expense of approximately $0.7 million, primarily related to the fair value of the warrants issued under the promissory note with an executive, and the loss of approximately $0.2 million for the change in fair value of the SEPA put rights asset during the three months ended March 31, 2025.
Liquidity, Capital Resources and Going Concern
To date, we have financed our operations primarily through the sale of equity securities and convertible debt, proceeds from the Merger and related PIPE Financing, borrowings under loan facilities and, to a lesser extent, through payments received in connection with collaboration and license agreements. Since our inception, we incurred significant recurring losses, including a net (loss) income of ($3.9 million) and $0.6 million for the three months ended March 31, 2025, and 2024, respectively. As of March 31, 2025, we had an accumulated deficit of $120.0 million. We expect to incur operating losses in the foreseeable future.
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On April 2, 2025, the Company received written notice (the “Notice”) from the Listing Qualifications Department staff (the “Staff”) of Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, based on the closing bid price of the Company’s common stock for the last 30 consecutive business days, the Company no longer complies with the minimum bid price requirement for continued listing on The Nasdaq Stock Market LLC. Nasdaq Listing Rule 5450(a)(1) requires listed securities to maintain a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”), and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the Minimum Bid Price Requirement exists if the deficiency continues for a period of 30 consecutive business days. Pursuant to the Nasdaq Listing Rules, the Company has been provided an initial compliance period of 180 calendar days to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the closing bid price of the Company’s common stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to September 29, 2025.
Further, on April 10, 2025, the Company received two letters from the listing qualifications department staff (the “Staff”) of The Nasdaq. One letter (the “MVPHS Notice”) indicated that based upon Nasdaq’s review of the Company’s Market Value of Publicly Held Shares (“MVPHS”) for the last 30 consecutive business days prior to the date of the MVPHS Notice, the Company no longer meets the requirements of Nasdaq Listing Rule 5450(b)(2)(C), which requires listed securities to maintain a minimum MVPHS of $15,000,000 (the “MVPHS Requirement”). The Company intends to monitor the market value of the Company’s listed securities and may, if appropriate, consider available options to regain compliance with the MVPHS Requirement.
Under Nasdaq Listing Rule 5810(c)(3)(D), the Company has a period of 180 calendar days (or until October 7, 2025) to regain compliance with the MVPHS Requirement. If at any time during this compliance period the Company’s MVPHS closes at $15,000,000 or more for a minimum of ten consecutive business days, Nasdaq will provide the Company with written confirmation of compliance and this matter will be closed. In the event the Company does not regain compliance with the rule prior to the expiration of the compliance period, it will receive written notification that its securities are subject to delisting. At that time, the Company may appeal the delisting determination to a Nasdaq hearing’s panel.
The Company also received a letter from the Staff (the “MVLS Deficiency Notice”) notifying the Company that from February 20, 2025, to April 9, 2025, the Company’s Market Value of Listed Securities (“MVLS”) was below the minimum of $50 million required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(b)(2)(A) (the “MVLS Requirement”). An indicator will be displayed with quotation information related to the Company’s securities on NASDAQ.com and NASDAQTrader.com and may be displayed by other third-party providers of market data information, however, the Notice does not impact the listing of the Company’s securities on The Nasdaq Global Market at this time.
As of March 31, 2025, the Company had cash of $1,261. Due to its current liabilities, the cash available to the Company will not be sufficient to allow the Company to operate for at least 12 months from the date these financial statements are available for issuance. The future viability of the Company is largely dependent on its ability to raise additional capital to finance its operations. The Company expects to seek additional funding through equity and debt financings, collaboration agreements and research grants. Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing on terms acceptable to the Company, if at all. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects.
Accordingly, based on the considerations discussed above, management has concluded there is substantial doubt as to the Company’s ability to continue as a going concern within one year after the date the condensed consolidated financial statements are issued. The Company plans to continue to fundraise, as well as seek alternate revenues from collaboration and license agreements. If adequate funds are not available, the Company may be required to initiate steps to slow cash burn, extending the cash runway until financing can be secured. The unaudited condensed consolidated financial statements included elsewhere in this filing do not include any adjustments with respect to the carrying amounts of assets and liabilities and their classification that might result from the outcome of this uncertainty.
32
Future Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates. In addition, subsequent to the Closing of the Merger, we expect to incur additional costs associated with operating as a public company. The timing and amount of our operating expenditures will depend largely on:
| ● | the scope, number, initiation, progress, timing, costs, design, duration, any potential delays, and results of clinical trials and nonclinical studies for our current or future product candidates, particularly the planned Phase 1/2 clinical trial for ABP-102, focusing on HER2+ breast and gastric cancers, as well as Phase 1 clinical trials for ABP-201 for the treatment of Wet AMD; |
| ● | the clinical development plans we establish for our product candidates; |
| ● | the number and characteristics of product candidates and programs that we develop or may in-license; |
| ● | the outcome, timing and cost of regulatory reviews, approvals or other actions to meet regulatory requirements established by the FDA and comparable foreign regulatory authorities, including the potential for the FDA or comparable foreign regulatory authorities to require that we perform more studies for our product candidates than those that we currently expect; |
| ● | our ability to obtain marketing approval for our product candidates; |
| ● | the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights covering our product candidates, including any such patent claims and intellectual property rights that we have licensed pursuant to the terms of its license agreement; |
| ● | our ability to maintain, expand and defend the scope of its intellectual property portfolio, including the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us or our product candidates; |
| ● | the cost and timing of completion of commercial-scale outsourced manufacturing activities with respect to our product candidates; |
| ● | our ability to establish and maintain licensing, collaboration or similar arrangements on favorable terms and whether and to what extent we retain development or commercialization responsibilities under any new licensing, collaboration or similar arrangement; |
| ● | the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize its products on our own; |
| ● | the success of any other business, product or technology that we acquire or in which we invest; |
| ● | the costs of acquiring, licensing or investing in businesses, product candidates and technologies; |
| ● | our need and ability to hire additional management and scientific and medical personnel; |
| ● | the costs to operate as a public company in the United States, including the need to implement additional financial and reporting systems and other internal systems and infrastructure for our business; |
| ● | market acceptance of our product candidates, to the extent any are approved for commercial sale; and |
| ● | the effect of competing technological and market developments. |
33
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect the rights of our stockholders and the rights of the stockholders of the combined organization following the Closing of the merger. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions.
The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024:
| For the Three Months Ended March 31, |
||||||||||||||||
| 2025 | 2024 | Change | % | |||||||||||||
| Net cash used in operating activities | $ | (1,719 | ) | $ | (2,848 | ) | $ | 1,129 | -40 | % | ||||||
| Net cash used in investing activities | $ | - | $ | - | $ | - | 0 | % | ||||||||
| Net cash provided by financing activities | $ | 132 | $ | 2,345 | $ | (2,213 | ) | -94 | % | |||||||
Net cash used in operating activities for the three months ended March 31, 2025, decreased by $1.1 million as compared to the three months ended March 31, 2024. The decrease in cash used in operating activity is primarily due to the timing of payments of accounts payable, with approximately $0.7 million increase in accounts payable for the three months ended March 31, 2025 as compared to $0.4 million decrease in accounts payable for the three months ended March 31, 2024.
Net cash provided by financing activities decreased by $2.2 million for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. During the three months ended March 31, 2025, the Company received proceeds of $0.1 million from the settlement of the Forward Purchase Agreement. During the three months ended March 31, 2024, the Company received proceeds of $2.6 million from the issuance of notes payable to related parties, which were partially offset by the payments of $0.2 million in offering costs and a less than $0.1 million remaining payment on finance lease liabilities.
Critical Accounting Policies and Estimates
This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported expenses and net loss incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Recent Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies of the Notes to the Unaudited Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
34
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Management, under the supervision and with the participation of the Company’s principal executive and principal financial officer, have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the quarter ended March 31, 2025, our disclosure controls and procedures were not effective as of March 31, 2025 due to the material weaknesses described below.
Remediation Efforts to Address a Previously Identified Material Weakness in Internal Control over Financial Reporting
As described in Item 9.A Controls and Procedures of our 2024 Form 10-K, management has identified material weaknesses in its internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in a company’s internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its annual or interim financial statements will not be prevented or detected on a timely basis. The Company identified material weaknesses in its internal controls related to the Company having inadequate segregation of duties over internal wire transfer authorization and access to bank accounts, inadequate existing control to ensure timely identification and evaluation of contractual obligations such as license agreements and failing to design and maintain formal written policies and procedures regarding internal controls over financial reporting.
To address these material weaknesses, management, under the oversight of the audit committee, has devoted, and plans to continue to devote, significant effort and resources to the remediation and improvement of its internal control over financial reporting:
| ● | The Company redesigned and implemented proper authorization procedures and access controls with respect to wire transfers and bank account access. |
| ● | The Company is in process of designing formal written policies and procedures regarding internal controls over financial reporting. |
| ● | The Company is in process of implementing enhanced review processes to ensure timely identification of appropriate accounting related to all contractual obligations and license agreements. |
Such material weaknesses and control deficiencies will not be remediated until the Company’s remediation plan has been fully implemented, and it has concluded that its internal controls are operating effectively for a sufficient period of time.
We can offer no assurance that these initiatives will ultimately have the intended effects.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined by Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the most recently completed quarter, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Our failure to meet Nasdaq’s continued listing requirements could result in a delisting of our shares.
On April 2, 2025, the Company received written notice (the “Notice”) from the Listing Qualifications Department Staff of Nasdaq (the “Staff”) notifying the Company that, based on the closing bid price of the Company’s Common Stock for the last 30 consecutive business days, the Company no longer complies with the minimum bid price requirement for continued listing on The Nasdaq Stock Market LLC. Nasdaq Listing Rule 5450(a)(1) requires listed securities to maintain a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”), and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the Minimum Bid Price Requirement exists if the deficiency continues for a period of 30 consecutive business days. Pursuant to the Nasdaq Listing Rules, the Company has been provided an initial compliance period of 180 calendar days to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the closing bid price of the Company’s Common Stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to September 29, 2025. If the Company does not regain compliance by September 29, 2025, the Company may be eligible for an additional 180 calendar day compliance period. If the Company does not regain compliance within the compliance period(s), including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Company’s Common Stock will be subject to delisting.
On April 10, 2025, the Company received two letters from the Staff. One letter (the “MVPHS Notice”) indicated that based upon Nasdaq’s review of the Company’s Market Value of Publicly Held Shares (“MVPHS”) for the last 30 consecutive business days prior to the date of the MVPHS Notice, the Company no longer meets the requirements of Nasdaq Listing Rule 5450(b)(2)(C), which requires listed securities to maintain a minimum MVPHS of $15,000,000 (the “MVPHS Requirement”). The Company intends to monitor the market value of the Company’s listed securities and may, if appropriate, consider available options to regain compliance with the MVPHS Requirement. Under Nasdaq Listing Rule 5810(c)(3)(D), the Company has a period of 180 calendar days (or until October 7, 2025) to regain compliance with the MVPHS Requirement. If at any time during this compliance period the Company’s MVPHS closes at $15,000,000 or more for a minimum of ten consecutive business days, Nasdaq will provide the Company with written confirmation of compliance and this matter will be closed. In the event the Company does not regain compliance with the rule prior to the expiration of the compliance period, it will receive written notification that its securities are subject to delisting. At that time, the Company may appeal the delisting determination to a Nasdaq hearing’s panel.
The Company also received a letter from the Staff (the “MVLS Deficiency Notice”) notifying the Company that from February 20, 2025, to April 9, 2025, the Company’s Market Value of Listed Securities (“MVLS”) was below the minimum of $50 million required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(b)(2)(A) (the “MVLS Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), the Company has 180 calendar days from the date of the MVLS Deficiency Notice, or until October 7, 2025 (the “Compliance Date”), to regain compliance with respect to the MVLS Requirement. The MVLS Deficiency Notice states that to regain compliance with the MVLS Requirement, the Company’s MVLS must close at $50 million or more for a minimum of ten consecutive business days during the compliance period ending on the Compliance Date.
The Notice, MVPHS Notice and MVLS Deficiency Notice have no immediate effect on the listing of the Company’s Common Stock, and the Company’s Common Stock continues to trade on the Nasdaq Global Market under the symbol “ABP.”
If we are unable to regain compliance with the Minimum Bid Price Rule, MVPHS Requirement and MVLS Requirement, and maintain compliance with other continued listing requirements, Nasdaq may take steps to delist our shares. Such a delisting would likely have a negative effect on the price of our shares and would impair your ability to sell or purchase our shares when you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our shares to become listed again, stabilize the market price or improve the liquidity of our shares, prevent our shares from dropping below Nasdaq’s Minimum Bid Price Requirement or prevent future non-compliance with Nasdaq’s listing requirements.
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If Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our securities; |
| ● | reduced liquidity for our securities; |
| ● | a determination that our Common Stock is “penny stock” which will require brokers trading in the Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
| ● | a limited amount of news and analyst coverage; and |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ABPRO HOLDINGS, INC. | ||
| Date: May 15, 2025 | By: |
/s/ Miles Suk |
| Name: | Miles Suk | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
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