BioVie(BIVI) - 2022 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents BioVie Inc.'s unaudited condensed financial statements, management's discussion, market risk disclosures, and internal controls Item 1. Financial Statements This section presents BioVie Inc.'s unaudited condensed financial statements and detailed notes for the periods ended December 31, 2021 and 2020 Condensed Balance Sheets This section details BioVie Inc.'s financial position, including assets, liabilities, and equity, as of December 31, 2021, and June 30, 2021 | Metric | December 31, 2021 (Unaudited) ($) | June 30, 2021 ($) | | :-------------------------- | :-------------------------------- | :---------------- | | ASSETS | | | | Cash | $30,391,675 | $4,511,642 | | Total current assets | $30,546,543 | $4,605,129 | | Total assets | $31,873,415 | $6,046,689 | | LIABILITIES & EQUITY | | | | Total current liabilities | $4,358,438 | $996,374 | | Total liabilities | $15,808,323 | $996,374 | | Total stockholders' equity | $16,065,092 | $5,050,315 | - The company's cash significantly increased from $4.5 million at June 30, 2021, to $30.4 million at December 31, 2021. Total assets grew from $6.0 million to $31.9 million, while total liabilities increased from $1.0 million to $15.8 million, primarily due to new debt and derivative liabilities. Stockholders' equity also saw a substantial increase from $5.1 million to $16.1 million[8] Condensed Statements of Operations This section outlines BioVie Inc.'s financial performance, presenting revenues, expenses, and net loss for the three and six months ended December 31, 2021 and 2020 | Metric | Three Months Ended Dec 31, 2021 ($) | Three Months Ended Dec 31, 2020 ($) | Six Months Ended Dec 31, 2021 ($) | Six Months Ended Dec 31, 2020 ($) | | :----------------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Research and development expenses | $4,591,432 | $938,101 | $7,437,026 | $1,063,112 | | Selling, general and administrative expenses | $2,016,234 | $2,067,920 | $4,660,579 | $2,272,320 | | Total operating expenses | $6,665,010 | $3,063,365 | $12,212,294 | $3,450,120 | | Loss from operations | $(6,665,010) | $(3,063,365) | $(12,212,294) | $(3,450,120) | | Change in fair value of derivative liabilities | $(1,555,254) | $— | $(1,555,254) | $(8,279,919) | | Interest expense | $316,263 | $143 | $317,378 | $559,455 | | Net (loss)/income | $(5,414,317) | $(3,057,807) | $(10,955,070) | $4,276,109 | | Net loss attributable to common stockholders | $(5,414,317) | $(3,057,807) | $(10,955,070) | $(49,322,211) | | Net loss per common share - Basic | $(0.22) | $(0.22) | $(0.45) | $(4.95) | - The company reported an increased net loss for both the three and six months ended December 31, 2021, primarily driven by a significant increase in research and development expenses due to ongoing clinical trials. For the six months ended December 31, 2021, net loss was $10.96 million, a substantial shift from a net income of $4.28 million in the prior year, largely influenced by changes in fair value of derivative liabilities and increased operating expenses[11] Condensed Statements of Cash Flows This section details BioVie Inc.'s cash flows from operating, investing, and financing activities for the six months ended December 31, 2021 and 2020 | Metric | Six Months Ended Dec 31, 2021 ($) | Six Months Ended Dec 31, 2020 ($) | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net (loss)/income | $(10,955,070) | $4,276,109 | | Stock option based compensation expense | $3,074,384 | $1,536,929 | | Change in fair value of embedded derivative liability | $(995,701) | $(2,225,798) | | Change in fair value of warrant liability | $(559,553) | $(6,054,121) | | Net cash used in operating activities | $(7,240,891) | $(2,403,168) | | Net proceeds from issuance of common stock | $18,511,009 | $15,628,010 | | Proceeds from note payable net of financing costs | $14,609,915 | $— | | Net cash provided by financing activities | $33,120,924 | $14,242,192 | | Net increase in cash | $25,880,033 | $11,839,024 | | Cash, end of period | $30,391,675 | $11,876,219 | - Net cash used in operating activities significantly increased to $7.24 million for the six months ended December 31, 2021, from $2.40 million in the prior year. This was offset by a substantial increase in cash provided by financing activities, reaching $33.12 million, primarily from common stock issuance and a new note payable, leading to a net increase in cash of $25.88 million and an ending cash balance of $30.39 million[13] Condensed Statements of Changes in Stockholders' Equity (Deficit) This section tracks changes in BioVie Inc.'s stockholders' equity, including common shares, paid-in capital, and accumulated deficit for the six months ended December 31, 2021 | Metric | Balance, June 30, 2021 ($) | Balance, December 31, 2021 ($) | | :----------------------------------------- | :------------------------- | :----------------------------- | | Common Shares | 22,333,324 | 24,984,083 | | Common Stock Amount | $2,232 | $2,496 | | Additional Paid in Capital | $229,933,505 | $251,903,088 | | Accumulated Deficit | $(224,885,422) | $(235,840,492) | | Total Stockholders' Equity (Deficit) | $5,050,315 | $16,065,092 | - Stockholders' equity increased from $5.05 million at June 30, 2021, to $16.07 million at December 31, 2021. This increase was driven by proceeds from common stock issuance ($18.51 million) and stock-based compensation ($2.21 million), partially offset by a net loss of $5.41 million, leading to an increased accumulated deficit[15] Notes to Unaudited Condensed Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed financial statements, covering accounting policies, liquidity, and financial components 1. Background Information This note provides an overview of BioVie Inc.'s business, focusing on its clinical-stage drug development programs for liver and neurodegenerative diseases - BioVie Inc. is a clinical-stage company focused on developing drug therapies for chronic debilitating conditions, including liver disease and neurodegenerative disorders[16] - The company's lead candidate, BIV201 (continuous infusion terlipressin), is an Orphan Drug candidate for refractory ascites in advanced liver cirrhosis. A Phase 2b trial is underway with top-line results expected in mid-2022, potentially followed by a pivotal Phase 3 trial in late 2022[17] - NE3107, acquired from NeurMedix in June 2021, is a novel orally administered small molecule targeting inflammation-driven insulin resistance for Alzheimer's and Parkinson's Disease. A pivotal Phase 3 study for Alzheimer's was initiated in August 2021, with top-line results anticipated in H1 2023. A Phase 2 study for Parkinson's disease was initiated in January 2022, with top-line results expected in mid-2022[19][20] 2. Liquidity This note discusses BioVie Inc.'s financial resources, working capital, and ability to meet obligations, highlighting going concern risks and COVID-19 impact | Metric | December 31, 2021 ($) | | :------------------ | :-------------------- | | Working Capital | ~$26.2 million | | Cash | ~$30.4 million | | Stockholders' Equity| ~$16.1 million | | Accumulated Deficit | ~$235.8 million | - The company has not generated revenues and expects future operations to depend on successful development, commercialization, and securing additional financing. Current planned operations project cash flows to be depleted within the next 12 months, raising substantial doubt about the company's ability to continue as a going concern[22][25] - The COVID-19 pandemic poses a risk to the company's ability to raise funds and complete clinical trials on schedule due to potential impacts on financial markets, the economy, and labor shortages[24] 3. Significant Accounting Policies This note outlines key accounting principles and methods used in preparing BioVie Inc.'s unaudited interim financial statements, including fair value measurements and net loss per share - The unaudited interim condensed financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC instructions to Form 10-Q, reflecting all necessary adjustments for fair presentation[27] - Fair value measurements are categorized into a three-level hierarchy based on input observability (Level 1: quoted prices in active markets; Level 2: observable inputs other than quoted prices; Level 3: unobservable inputs)[29] - Basic and diluted net loss per common share are calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. Potentially dilutive shares (stock options, warrants, convertible debentures) were excluded due to their anti-dilutive effect during periods of net loss[30] 4. Intangible Assets This note details BioVie Inc.'s intangible assets, primarily intellectual property, including their carrying value and amortization expense | Metric | December 31, 2021 ($) | June 30, 2021 ($) | | :-------------------------- | :-------------------- | :---------------- | | Intellectual Property | $2,293,770 | $2,293,770 | | Less Accumulated Amortization | $(1,312,610) | $(1,197,921) | | Intellectual Property, Net | $981,161 | $1,095,849 | - Intangible assets consist of intellectual property acquired from LAT Pharma, Inc., amortized over an estimated useful life of 10 years. Amortization expense was $57,344 for each of the three-month periods ended December 31, 2021 and 2020, and $114,689 and $114,688 for the six-month periods, respectively[33] 5. Related Party Transactions This note describes BioVie Inc.'s transactions with related parties, including asset acquisitions and equity issuances, and their financial impact - In April 2021, BioVie acquired biopharmaceutical assets, including NE3107, from NeurMedix, Inc. and Acuitas Group Holdings, LLC (related parties). The consideration included cash and up to 18 million shares of common stock contingent on achieving certain clinical, regulatory, and commercial milestones[35][36] - In June 2021, the company issued 8,361,308 shares of common stock to Acuitas and made a cash payment of approximately $2.3 million for NeurMedix's expenditures, expensing the total consideration as research and development due to the common control transaction[37] - In September 2020, the company satisfied a $1.8 million debenture owed to Acuitas and issued 6,909,582 shares of common stock to Acuitas, including shares for purchase rights and automatic exercise of warrants[38][39] 6. Other Liabilities This note outlines BioVie Inc.'s other liabilities, specifically retention bonus arrangements with employees, and their recognition in the financial statements - Other liabilities include $1,161,000 recognized in August 2021 for retention bonus arrangements with certain employees, payable in equal monthly installments over 24 months[41] 7. Notes Payable This note details BioVie Inc.'s loan and security agreement, including principal, interest, conversion options, and net carrying value of the note payable - On November 30, 2021, BioVie entered into a Loan and Security Agreement with Avenue Venture Opportunities Fund, L.P. and Avenue Venture Opportunities Fund II, L.P. for growth capital loans up to $20 million. An initial $15 million was funded (Tranche 1), with up to $5 million (Tranche 2) available by September 15, 2022, contingent on clinical trial milestones[43] - The loan bears interest at an annual rate equal to the greater of 7.00% plus the prime rate or 10.75%, secured by all company assets. It includes a conversion option for lenders to convert up to $5 million of principal into Class A common stock at $6.98 per share[43][45] | Metric | December 31, 2021 ($) | | :---------------------------------------- | :-------------------- | | Note Payable | $15,000,000 | | Less debt financing costs | $(375,900) | | Less unearned discount | $(3,536,524) | | Plus accretion of loan premium | $23,611 | | Note Payable, net of financing costs and premiums | $11,111,187 | 8. Fair Value Measurements This note explains BioVie Inc.'s fair value measurements for derivative liabilities, including warrants and conversion options, and their valuation methodologies | Derivative Liability | December 31, 2021 ($) | | :------------------------------------ | :-------------------- | | Warrants | $896,959 | | Conversion option | $1,217,765 | | Total derivatives | $2,114,724 | - The fair values of derivative liabilities for warrants and the conversion option were approximately $897,000 and $1.2 million, respectively, at December 31, 2021. The total change in fair value of derivative liabilities, approximately $1.6 million, was recorded in the statement of operations for the three and six months ended December 31, 2021[55] - These derivative liabilities were valued using the Black-Scholes model, with key assumptions including stock price, exercise/conversion price, term, risk-free rate, and volatility[55][57][59] 9. Equity Transactions This note describes BioVie Inc.'s equity activities, including stock option grants, public offerings, and restricted stock unit awards, and their impact on compensation and capital | Stock Options Activity (Six Months Ended Dec 31, 2021) | Number of Options | Weighted Average Exercise Price ($) | | :----------------------------------------------------- | :---------------- | :---------------------------------- | | Outstanding at June 30, 2021 | 755,200 | $4.34 | | Granted | 1,365,835 | $7.74 | | Forfeited | (73,125) | $(13.91) | | Outstanding at December 31, 2021 | 2,047,910 | $9.79 | | Exercisable at December 31, 2021 | 509,667 | $9.36 | - Stock option-based compensation expense was $1,147,422 and $3,074,384 for the three and six months ended December 31, 2021, respectively. As of December 31, 2021, approximately $5.7 million of unrecognized compensation cost related to non-vested stock options is expected to be recognized over 4.5 years[62][63] - The company completed a public offering in August 2021, issuing 2,500,000 shares of Class A common stock at $8.00 per share, generating net proceeds of approximately $17.8 million. An additional 92,000 shares were issued in September 2021 from an over-allotment option, yielding approximately $707,000 net proceeds[66][67] - The company awarded 58,759 restricted stock units (RSUs) to the President and CEO, with 58,759 shares issued by December 31, 2021. Stock-based compensation expense related to these RSUs was $97,695 and $384,454 for the three and six months ended December 31, 2021, respectively[68][69] 10. Commitments and Contingencies This note outlines BioVie Inc.'s contractual obligations, including lease agreements and royalty payments, and discusses intellectual property and legal contingencies - The company relocated its headquarters to Reno, NV, effective November 1, 2021, and entered into a new office lease in San Diego, CA, commencing March 1, 2022, for 40 months with monthly base rent starting at $4,175[73][74][75] - A U.S. patent for 'Treatment of Ascites' (No. 9,655,945) was revoked in November 2019 following an Inter Partes Review, but this ruling does not affect the company's Orphan Drug designations for ascites and hepatorenal syndrome or its pending patent application for proprietary terlipressin formulations[76][77] - BioVie is obligated to pay low single-digit royalties on net sales of BIV201 to LAT Pharma Members, PharmaIn Corporation, and The Barrett Edge, Inc., and on terlipressin products covered by US patent no. 9,655,645 to the University of Padova, capped at $200,000 per year[78][79] 11. Employee Benefit Plan This note details BioVie Inc.'s 401K employee benefit plan, including eligibility, company matching contributions, and associated expenses - Effective August 1, 2021, the company sponsors a 401K Plan, allowing eligible employees to make pre-tax contributions. The company matches 5% of the first 5% of an employee's contributions[81][82] - Company contributions to the 401K Plan totaled approximately $22,800 for the three months and $46,600 for the six months ended December 31, 2021[82] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of BioVie Inc.'s financial condition and operational results, covering drug candidate progress, financial performance, liquidity, and accounting policies Management's Discussion This section provides an overview of BioVie Inc.'s clinical-stage drug development programs, focusing on BIV201 for liver disease and NE3107 for neurodegenerative disorders - BioVie Inc. is a clinical-stage company developing innovative drug therapies for chronic debilitating conditions, focusing on liver disease with BIV201 and neurodegenerative diseases (Alzheimer's and Parkinson's) with NE3107[86][87][88] - BIV201, an Orphan Drug candidate for refractory ascites, is currently in a multi-center Phase 2b trial with top-line results expected in mid-2022, potentially leading to a pivotal Phase 3 trial in late 2022[87] - NE3107, acquired in June 2021, is in a potentially pivotal Phase 3 study for mild to moderate Alzheimer's disease, initiated in August 2021 with primary completion targeted for H1 2023. A Phase 2 study for Parkinson's disease was initiated in January 2022, with top-line results expected in mid-2022[88][90] Comparison of the three months ended December 31, 2021 to the three months ended December 31, 2020 This section analyzes changes in BioVie Inc.'s net loss, operating expenses, and other income for the three months ended December 31, 2021, compared to the prior year - Net loss increased by $2.3 million to $5.4 million for the three months ended December 31, 2021, compared to $3.1 million in the prior year. This was primarily due to a $3.6 million increase in loss from operations, partially offset by a $1.3 million increase in other income from derivative liabilities, and increased interest expense[91] - Total operating expenses rose by approximately $3.6 million to $6.7 million, mainly driven by a $3.7 million increase in research and development expenses due to the Alzheimer's Phase 3 and BIV201 Phase 2b clinical trials, and increased compensation for neuroscience personnel[92][93] - Selling, general and administrative expenses remained stable at approximately $2.0 million, as a $451,000 decline in stock compensation expense was offset by a $458,000 increase in legal and investor relations expenses[95] Comparison of the six months ended December 31, 2021 to the six months ended December 31, 2020 This section analyzes changes in BioVie Inc.'s net loss, operating expenses, and derivative liabilities for the six months ended December 31, 2021, compared to the prior year - The company shifted from a net income of $4.3 million to a net loss of $11 million for the six months ended December 31, 2021, a decline of approximately $15.2 million. This was attributed to an $8.8 million increase in loss from operations and a $6.7 million change in the fair value of derivative liabilities[97] - Total operating expenses increased by approximately $8.7 million to $12.2 million. Research and development expenses surged by $6.3 million, primarily due to increased activity in Alzheimer's Phase 3, Parkinson's Phase 2 preparations, BIV201 Phase 2b, and compensation for neuroscience personnel[98][99] - Selling, general and administrative expenses increased by approximately $2.4 million to $4.7 million, mainly due to a $1.5 million increase in compensation expense (including $1.2 million in stock-based compensation) and $765,000 in expenses related to national exchange listing and operational expansion[100] Capital Resources and Liquidity This section discusses BioVie Inc.'s capital resources, liquidity, and future funding requirements, addressing the company's ability to continue as a going concern | Metric | December 31, 2021 ($) | | :------------------ | :-------------------- | | Working Capital | ~$26.2 million | | Cash | ~$30.4 million | | Stockholders' Equity| ~$16.1 million | | Accumulated Deficit | ~$235.8 million | - The company's future operations are dependent on securing additional financing, as current planned operations are expected to deplete cash within the next 12 months, raising substantial doubt about its ability to continue as a going concern[102][103][107] - Management intends to secure funding through additional equity or debt financings, sales/out-licensing of intellectual property, or partnerships. Failure to obtain sufficient funding may require curtailing or ceasing operations, potentially leading to bankruptcy[104][105] Off-Balance Sheet Arrangements This section confirms that BioVie Inc. has no material off-balance sheet arrangements impacting its financial condition or results of operations - The company has no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on its financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources[108] Critical Accounting Policies and Estimates This section states that there were no significant changes to BioVie Inc.'s critical accounting policies and estimates during the reported interim periods - There were no significant changes to the company's critical accounting policies for the three-month and six-month periods ended December 31, 2021, as identified in the Annual Report Form 10-K for the fiscal year ended June 30, 2021[110] New Accounting Pronouncements This section addresses the impact of recent accounting pronouncements on BioVie Inc.'s financial statements, concluding they are not applicable or have minimal effect - The company assessed recent accounting pronouncements and determined they are either not applicable or are expected to have a minimal impact on its balance sheets or statement of operations[111] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that quantitative and qualitative disclosures about market risk are not applicable to the company as a smaller reporting company - Quantitative and Qualitative Disclosures About Market Risk are not applicable to the company as it is a smaller reporting company[112] Item 4. Controls and Procedures This section confirms the effectiveness of BioVie Inc.'s disclosure controls and procedures as of December 31, 2021, and reports no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021[114] - There were no changes in internal control over financial reporting during the quarter ended December 31, 2021, that materially affected or are reasonably likely to materially affect internal control over financial reporting[115] PART II – OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, defaults, mine safety, and a list of exhibits Item 1. Legal Proceedings The company reports no knowledge of any material legal proceedings or litigation involving itself or its officers and directors, nor any judgments against them - Neither the company nor its officers or directors are party to any material legal proceeding or litigation, and there are no judgments against them[117] Item 1A. Risk Factors This section highlights the risk of future stockholder dilution from equity offerings, outstanding options, warrants, loan conversion, and contingent share issuances for drug candidate milestones - Stockholders may experience future dilution from additional equity offerings or the issuance of shares subject to options, warrants, stock awards, or other arrangements[118][119] - As of December 31, 2021, there were warrants to purchase 519,763 shares and options for 2,047,910 shares outstanding. The loan agreement also includes a conversion feature for up to $5 million of outstanding principal into common stock[120] - The company is obligated to issue up to 18 million shares of common stock upon achieving certain clinical, regulatory, and commercial milestones for its drug candidates (NE3107, NE3291, NE3413, NE3789), which could further dilute existing stockholders[121] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities[122] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period - There were no defaults upon senior securities[122] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[122] Item 5. Other Information The company reports no other information to disclose in this section - There is no other information to disclose[122] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Loan and Security Agreement, Supplement, Form of Warrant, and certifications from the CEO and CFO - Key exhibits include the Loan and Security Agreement (10.1), Supplement to Loan and Security Agreement (10.2), Form of Warrant (10.3), and certifications from the CEO (31.1, 32.1) and CFO (31.2, 32.2)[122] SIGNATURES This section formally attests to the accuracy and completeness of the report, signed by BioVie Inc.'s Chairman, CEO, and CFO SIGNATURES The report is duly signed by Cuong V Do, Chairman and CEO, and Joanne Wendy Kim, CFO, on behalf of BioVie Inc. on February 7, 2022 - The report was signed by Cuong V Do, Chairman and Chief Executive Officer, and Joanne Wendy Kim, Chief Financial Officer, on February 7, 2022[127]