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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: March 31, 2023

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________to _____________

 

Commission File Number: 001-39015

 

BIOVIE INC.

(Exact name of registrant as specified in its charter)

 

Nevada   46-2510769
(State or other jurisdiction of 
incorporation or organization)		   (I.R.S. Empl. Ident. No.)

 

680 W Nye Lane Suite 204
Carson City, NV 89703
(Address of principal executive offices, Zip Code)
 
(775) 888-3162
(Registrant’s telephone number, including area code)
 
Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share BIVI The Nasdaq Stock Market, LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.

 

Yes ☒                                          No ☐

 

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).

 

Yes ☒                                          No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or emerging growth company. See the 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 ☐
Non-accelerated filer ☒ Smaller reporting company ☒
    Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐                                          No ☒

 

There were 36,280,541 shares of the Registrant’s $0.0001 par value Class A common stock outstanding as of May 5, 2023.

 

 

 

 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION  
     
Item 1. Financial Statements 1
  Condensed Balance Sheets at March 31, 2023 (unaudited) and June 30, 2022 1
  Condensed Statements of Operations and other comprehensive income (unaudited) - for the three months and nine months ended March 31, 2023 and 2022 2
  Condensed Statements of Cash Flows (unaudited) - for the nine months ended March 31, 2023 and 2022 3
  Condensed Statements of Changes in Stockholders’ Equity (unaudited) - for the periods from July 1, 2021 through March 31, 2022 and July 1, 2022 through March 31, 2023 4
  Notes to Unaudited Condensed Financial Statements 6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
Item 4. Controls and Procedures 22
     
PART II – OTHER INFORMATION  
     
Item 1. Legal Proceedings 23
Item 1A. Risk Factors 23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28
Item 3. Defaults Upon Senior Securities 28
Item 4. Mine Safety Disclosures 28
Item 5. Other Information 28
Item 6. Exhibits 29
     
SIGNATURES 30

 

FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Any statements contained in this report that are not statements of historical fact may be forward-looking statements. When we use the words “intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will” or the negative of these terms or other comparable terminology, we are identifying forward-looking statements. Forward-looking statements involve risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements. These factors include, among others: our research and development activities and distributor channel; compliance with regulatory requirements; and our ability to satisfy our capital needs. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

 

You are cautioned not to place undue reliance on the forward-looking statements in this report, which speak only as of the date of this report. Except as may be required by applicable law, we do not undertake or intend to update or revise our forward-looking statements, and we assume no obligation to update any forward-looking statements contained in this report as a result of new information or future events or developments, except as required by law. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. You should carefully review and consider the various disclosures we make in this report and our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks, uncertainties and other factors that may affect our business.

 

When used in this report, the terms “BioVie”, “Company”, “we”, “our”, and “us” refer to BioVie Inc.

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

BioVie Inc.

Condensed Balance Sheets

 

         
   March 31   June 30, 
   2023   2022 
ASSETS  (Unaudited)     
         
CURRENT ASSETS:          
Cash and cash equivalents  $31,276,197   $18,641,716 
Investments in U.S. Treasury Bills   12,521,448    - 
Prepaids and other assets   249,790    137,879 
Total current assets   44,047,435    18,779,595 
           
Operating lease right-of-use assets   90,549    118,254 
Intangible assets, net   694,439    866,472 
Goodwill   345,711    345,711 
Other assets, non-current   4,562    4,562 
           
TOTAL ASSETS  $45,182,696   $20,114,594 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
CURRENT LIABILITIES:          
Accounts payable and accrued expenses  $4,839,209   $2,442,804 
Current portion of other liabilities   193,542    1,304,925 
Current portion of operating lease liabilities   43,314    38,884 
Current portion of Note payable, net of financing cost, unearned premium and discount of $1,108,932 at March 31, 2023   6,391,068    - 
Warrant liabilities   1,956,781    194,531 
Embedded derivative liability   2,580,425    188,030 
Total current liabilities   16,004,339    4,169,174 
           
Other liabilities, net of current portion   -    48,385 
Operating lease liabilities, net of current portion   54,465    87,414 
Note payable, net of current portion, financing cost, unearned premium and discount of $94,368 at March 31, 2023 and $2,861,314 at June 30, 2022   7,405,632    12,138,686 
TOTAL LIABILITIES   23,464,436    16,443,659 
           
Commitments and contingencies (Note 12)          
           
STOCKHOLDERS’ EQUITY :          
           
Preferred stock; $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding   -    - 
Common stock, $0.0001 par value; 800,000,000 shares authorized at March 31, 2023 and June 30, 2022, respectively; 36,153,911 shares issued of which 36,131,311 shares outstanding at March 31, 2023 and 24,984,083 issued and outstanding at June 30, 2022;   3,613    2,496 
Additional paid in capital   313,811,910    254,638,329 
Accumulated other comprehensive income    

16,505

      
Accumulated deficit   (292,113,766)   (250,969,890)
Treasury Stock   (2)   - 
Total stockholders’ equity   21,718,260    3,670,935 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $45,182,696   $20,114,594 

 

See accompanying notes to unaudited condensed financial statements

 

-1-

 

BioVie Inc.

Condensed Statements of Operations and Other Comprehensive Income

(Unaudited)

 

                 
   Three Months Ended   Three Months Ended   Nine Months Ended   Nine Months Ended 
   March 31, 2023   March 31, 2022   March 31, 2023   March 31, 2022 
                 
OPERATING EXPENSES:                    
Amortization  $57,344   $57,344   $172,033   $172,032 
Research and development expenses   11,196,835    3,577,142    24,999,665    11,385,586 
Selling, general and administrative expenses   2,520,330    2,114,348    8,931,957    6,403,508 
TOTAL OPERATING EXPENSES   13,774,509    5,748,834    34,103,655    17,961,126 
                     
LOSS FROM OPERATIONS   (13,774,509)   (5,748,834)   (34,103,655)   (17,961,126)
                     
OTHER EXPENSE (INCOME):                    
Change in fair value of derivative liabilities   366,093    386,450    4,154,645    (1,168,804)
Interest expense   1,082,762    918,633    3,192,631    1,236,010 
Interest income   (182,201)   (13,273)   (307,055)   (32,621)
TOTAL OTHER EXPENSE, NET   1,266,654    1,291,810    7,040,221    34,585 
                     
NET LOSS  $(15,041,163)  $(7,040,644)  $(41,143,876)  $(17,995,711)
                     
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS  $(15,041,163)  $(7,040,644)  $(41,143,876)  $(17,995,711)
                     
NET LOSS PER COMMON SHARE                    
- Basic  $(0.43)  $(0.28)  $(1.32)  $(0.73)
- Diluted  $(0.43)  $(0.28)  $(1.32)  $(0.73)
                     
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                    
- Basic   35,325,580    24,984,083    31,217,382    24,555,382 
- Diluted   35,325,580    24,984,083    31,217,382    24,555,382 
                     
NET LOSS  $(15,041,163)  $(7,040,644)  $(41,143,876)  $(17,995,711)
                     
Other comprehensive income                    
Unrealized gain on investments for available-for-sale   16,505    -    16,505    - 
Other comprehensive income   16,505    -    16,505    - 
Comprehensive loss  $(15,024,658)  $(7,040,644)  $(41,127,371)  $(17,995,711)

 

See accompanying notes to unaudited condensed financial statements

 

-2-

BioVie Inc.

Condensed Statements of Cash Flows

(Unaudited)

 

         
   Nine Months Ended   Nine Months Ended 
   March 31, 2023   March 31, 2022 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(41,143,876)  $(17,995,711)
Adjustments to reconcile net loss to net cash used in operating activities:          
Amortization of intangible assets   172,033    172,032 
Stock based compensation - restricted stock units   1,589,526    384,454 
Stock based compensation expense - stock options   3,480,425    4,004,718 
Amortization of financing costs   127,664    56,740 
Accretion of unearned loan discount   1,201,083    533,815 
Accretion of loan premium   329,267    94,444 
Change in operating lease right-of-use assets   27,705    (77)
Change in fair value of derivative liabilities   4,154,645    (1,168,804)
Change in operating assets and liabilities          
Prepaids and other assets   (111,911)   (191,480)
Accounts payable and accrued expenses   2,396,405    209,949 
Operating lease liabilities   (28,519)   - 
Other liabilities   (1,159,768)   774,167 
Net cash used in operating activities   (28,965,321)   (13,125,753)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchases of U.S. Treasury Bills   (12,504,943)   - 
Net cash used in investing activities   (12,504,943)   - 
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Net proceeds from issuance of common stock   48,196,665    18,511,009 
Proceeds from note payable net of financing costs   -    14,609,915 
Proceeds from exercise of stock options   2,240    - 
Net proceeds from issuance of common stock - Related Party   5,905,840    - 
Net cash provided by financing activities   54,104,745    33,120,924 
           
Net increase in cash and cash equivalents   12,634,481    19,995,171 
           
Cash and cash equivalents, beginning of period   18,641,716    4,511,642 
           
Cash and cash equivalents, end of period  $31,276,197   $24,506,813 
           
SUPPLEMENTAL CASH FLOW INFORMATION:          
Cash paid for interest  $62,693   $551,011 
           
SCHEDULE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:          
Right of use assets obtained in exchange for lease obligations  $-   $130,039 
Unrealized gain on U.S. Treasury Bills   $ 16,505   $ -  

 

See accompanying notes to unaudited condensed financial statements

 

-3-

BioVie Inc.

Condensed Statements of Changes in Stockholders’ Equity

For the periods July 1, 2021 through March 31, 2022

(Unaudited)

 

                                            
                        Accumulated         
           Additional            Other        Total 
   Common Stock   Common Stock   Paid in   Treasury Stock   Treasury Stock    Comprehensive    Accumulated   Stockholders’ 
   Shares   Amount   Capital   Shares   Amount    Income    Deficit   Equity 
                                     
Balance, June 30, 2021   22,333,324   $2,232   $229,933,505    -   $-     $ -   $(224,885,422)  $5,050,315 
                                            
Proceeds from issuance of common stock,net of cost of $2,224,992   2,592,000    259    18,510,750    -    -       -    -    18,511,009 
                                            
Stock-based compensation – restricted stock units   37,049    3    286,756    -    -       -    -    286,759 
                                            
Stock option based compensation   -    -    1,926,962    -    -       -    -    1,926,962 
                                            
Net loss   -    -    -    -    -       -    (5,540,753)   (5,540,753)
                                            
Balance, September 30, 2021   24,962,373    2,494    250,657,973    -    -       -    (230,426,175)   20,234,292 
                                            
Stock-based compensation – restricted stock units   21,710    2    97,693    -    -       -    -    97,695 
                                            
Stock option based compensation   -    -    1,147,422    -    -       -    -    1,147,422 
                                            
Net loss   -    -    -    -    -       -    (5,414,317)   (5,414,317)
                                            
Balance, December 31, 2021   24,984,083    2,496    251,903,088    -    -       -    (235,840,492)   16,065,092 
                                            
Stock option based compensation   -    -    930,334    -    -       -    -    930,334 
                                            
Net loss   -    -    -    -    -       -    (7,040,644)   (7,040,644)
                                            
Balance, March 31, 2022   24,984,083   $2,496   $252,833,422    -   $-     $ -   $(242,881,133)  $9,954,785 

 

See accompanying notes to unaudited condensed financial statements

 

-4-

Condensed Statements of Changes in Stockholders’ Equity

For the periods July 1, 2022 through March 31, 2023

(Unaudited)

 

                        Accumulated         
           Additional            Other        Total 
   Common Stock   Common Stock   Paid in   Treasury Stock   Treasury Stock    Comprehensive    Accumulated   Stockholders’ 
   Shares   Amount   Capital   Shares   Amount    Income    Deficit   Equity 
                                     
Balance, June 30, 2022   24,984,083   $2,496   $254,638,329    -   $-    $ -    $(250,969,890)  $3,670,935 
                                            
Stock option based compensation   -    -    878,640    -    -      -     -    878,640 
                                            
Stock-based compensation – restricted stock units   -    -    17,537    -    -      -     -    17,537 
                                            
Proceeds from issuance of common stock, net of costs of $368,370   1,544,872    155    5,903,527    -    -      -     -    5,903,682 
                                            
Proceeds from issuance of common stock, net of costs of $94,160 – Related Party   3,636,364    364    5,905,476    -    -      -     -    5,905,840 
                                            
Net loss   -    -    -    -    -      -     (10,415,711)   (10,415,711)
                                            
Balance, September 30, 2022   30,165,319    3,015    267,343,509    -    -      -     (261,385,601)   5,960,923 
                                            
Stock-based compensation – restricted stock units   -    -    1,554,453    -    -      -     -    1,554,453 
                                            
Stock option based compensation   -    -    1,712,787    -    -      -     -    1,712,787 
                                            
Cashless exercise of options   21,882    3    (3)   -    -      -     -    - 
                                            
Cashless exercise of warrants   3,590    -    -    -    -      -     -    - 
                                            
Proceeds from exercise of options   800    -    2,240    -    -      -     -    2,240 
                                            
Proceeds from issuance of common stock, net of costs of $1,206,206   4,312,741    431    32,524,230    -    -      -     -    32,524,661 
                                            
Net loss   -    -    -    -    -      -     (15,687,002)   (15,687,002)
                                            
Balance, December 31, 2022   34,504,332    3,449    303,137,216    -    -      -     (277,072,603)   26,068,062 
                                            
Stock-based compensation – restricted stock units   -    -    17,536    -    -      -     -    17,536 
                                            
Issuance of restricted stock units   134,501    13    (11)   (22,800)   (2)     -     -    - 
                                          - 
Stock option based compensation   -    -    888,998    -    -      -     -    888,998 
                                          - 
Proceeds from issuance of common stock, net of costs of $338,846   1,515,078    151    9,768,171    -    -      -     -    9,768,322 
                                            
Net loss   -    -    -    -    -      -     (15,041,163)   (15,041,163)
                                            
Unrealized gain on available-for-sale securities   -    -    -    -    -      16,505     -    16,505 
                                            
Balance, March 31, 2023   36,153,911   $3,613   $313,811,910    (22,800)  $(2)   $ 16,505    $(292,113,766)  $21,718,260 

 

See accompanying notes to unaudited condensed financial statements

 

-5-

BIOVIE INC.

Notes to Condensed Financial Statements

For the Three and Nine Months Ended March 31, 2023 and 2022

(unaudited)

 

1. Background Information

 

BioVie Inc. (the “Company” or “we” or “our”) is a clinical-stage company developing innovative drug therapies to treat chronic debilitating conditions including neurological and neuro-degenerative disorders and liver disease. 

 

The Company acquired the biopharmaceutical assets of NeurMedix, Inc. (“NeurMedix”), a privately held clinical-stage pharmaceutical company, in June 2021 (See Note 5 Related Party Transactions). The acquired assets included NE3107, a potentially selective inhibitor of inflammatory extracellular single-regulated kinase(“ERK”) signaling that, based on animal studies, is believed to reduce neuroinflammation. NE3107 is a novel orally administered small molecule that is thought to inhibit inflammation-driven insulin resistance and major pathological inflammatory cascades with a novel mechanism of action. There is emerging scientific consensus that both inflammation and insulin resistance may play fundamental roles in the development of Alzheimer’s Disease (AD) and Parkinson’s Disease (PD), and NE3107 could, if approved represent an entirely new medical approach to treating these devastating conditions affecting an estimated 6 million Americans suffering from AD and 1 million Americans suffering from PD. In August 2021, the Company initiated the FDA authorized potentially pivotal Phase 3 randomized, double-blind, placebo-controlled, parallel group, multicenter study to evaluate NE3107 in subjects who have mild to moderate AD (NCT04669028). The Company is targeting primary completion of this study in the fourth quarter of calendar year 2023.

 

The Phase 2 study of NE3107 in Parkinson’s disease (“PD” (NCT05083260), completed in December was a double-blind, placebo-controlled, safety, tolerability, and pharmacokinetics study in PD participants treated with carbidopa/levodopa and NE3107. 45 patients with a defined L-dopa “off state” were randomized 1:1 to placebo:NE3107 20 mg twice daily for 28 days. This trial was launched with two design objectives: 1) the primary objectives are safety and a drug-drug interaction study as requested by the FDA to demonstrate the absence of adverse interactions of NE3107 with levodopa; and 2) the secondary objective is to determine if preclinical indications of promotoric activity and apparent enhancement of levodopa activity can be seen in humans. Both objectives were met. The Company continues to process its findings from its completed NM201 study as it prepares for the next round of clinical studies in PD.   

 

Neuroinflammation, insulin resistance, and oxidative stress are common features in the major neurodegenerative diseases, including AD, PD, frontotemporal lobar dementia, and Amyotrophic lateral sclerosis (ALS). NE3107 is an oral small molecule, blood-brain permeable, compound with potential anti-inflammatory, insulin sensitizing, and ERK-binding properties that may allow it to selectively inhibit ERK-, NFκB- and TNF-stimulated inflammation. NE3107’s potential to inhibit neuroinflammation and insulin resistance forms the basis for the Company’s work testing the molecule in AD and PD patients. NE3107 is patented in the United States, Australia, Canada, Europe and South Korea.  

 

The Company’s Orphan drug candidate BIV201 (continuous infusion terlipressin), with FDA Fast Track status is being evaluated in a US Phase 2b study for the treatment of refractory ascites due to liver cirrhosis was paused in March 2023. Data from the first 15 patients treated with BIV201 plus standard of care (SOC) resulted in a 34% reduction in ascites fluid during the 28 days after treatment initiation compared to the 28 days prior to treatment (p=0.0046). This improvement was significantly different from those treated with SOC only who experienced a mean increase in ascites fluid of 3.1% (BIV201 vs. SOC p=0.05). Patients who completed the treatment with BIV201 experienced a 53% reduction in ascites fluid (p=0.001), which was significantly different from those treated with SOC (p=0.007). This improvement was sustained in this group during the 3 months after treatment initiation as compared to the 3-month pre-treatment period (43% reduction, p=0.06). Overall treatment appeared to be well tolerated. There were no unexpected serious adverse events and overall safety was consistent with the patient population. The current trial (NCT04112199) evaluates the efficacy of BIV201 combined with SOC, compared to SOC alone, for the treatment of refractory ascites. Terlipressin was administered with a continuous low dose infusion via a portable pump in two 28-day treatment cycles. The primary endpoints are the incidence of complications of at least Grade 2 severity, and the change in cumulative ascites in the 12-week period following randomization compared to a 12-week pre-treatment period. The BIV201 trial planned to enroll 30 patients to be treated in the home care setting. The active agent is approved in the U.S. and in about 40 countries for related complications of advanced liver cirrhosis.

 

The BIV201 development program was initiated by LAT Pharma LLC (“LAT Pharma”). On April 11, 2016, the Company acquired LAT Pharma and the rights to its BIV201 development program. The Company currently owns all development and marketing rights to this drug candidate. Pursuant to the Agreement and Plan of Merger entered into on April 11, 2016, between our predecessor entities, LAT Pharma and NanoAntibiotics, Inc., BioVie is obligated to pay a low single digit royalty on net sales of BIV201 (continuous infusion terlipressin), if approved, to be shared by the members of LAT Pharma, PharmaIn Corporation and The Barrett Edge, Inc

 

-6-

 

2. Liquidity

 

The Company’s operations are subject to a number of factors that can affect its operating results and financial conditions. Such factors include, but are not limited to: the results of clinical testing and trial activities; the Company’s ability to obtain regulatory approval to market its products; competition from products manufactured and sold or being developed by other companies; the price of, and demand for, Company products, if approved; the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products, if approved; and the Company’s ability to raise capital to support its operations. The Company’s financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of March 31, 2023, the Company had working capital of $28.0 million, cash and cash equivalents and US treasury bills totaling approximately $43.8 million, stockholders’ equity of approximately $21.7 million, and an accumulated deficit of approximately $292 million. The Company has not generated any revenue to date and no revenue is expected in the foreseeable future. The Company’s future operations are dependent on the success of the Company’s ongoing development and commercialization efforts, as well as its ability to secure additional financing as needed. Although our cash balance may sustain operations over the next 12 months from the balance sheet date if measures are taken to delay planned expenditures in our research protocols and slow the progress in the Company’s clinical programs, the Company’s current planned operations to meet certain goals and objectives project cash flows to be depleted within that period of time.

 

Management expects that future sources of funding may include sales of equity, obtaining loans, or other strategic transactions.

 

The duration and spread of the COVID-19 pandemic and the long-term impact of COVID-19 and any variants on the financial markets and the overall economy continue to be uncertain and cannot be predicted at this time. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s ability to raise funds may be materially adversely affected.

 

Although management continues to pursue the Company’s strategic plans, there is no assurance that the Company will be successful in obtaining sufficient financing on terms acceptable to the Company, if at all, to fund continuing operations. These circumstances raise substantial doubt on the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

3. Significant Accounting Policies

 

Basis of Presentation – Interim Financial Information

 

These unaudited interim condensed financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United State of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”) for Interim Reporting. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed financial statements furnished reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. The condensed balance sheet at June 30, 2022 was derived from audited annual financial statements but does not contain all the footnote disclosures from the annual financial statements. These unaudited interim condensed financial statements should be read in conjunction with the Company’s audited financial statements for the fiscal years ended June 30, 2022 and 2021 in our Annual Report on Form 10-K filed with the SEC on September 27, 2022. For a summary of significant accounting policies, see the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022, filed with the SEC on September 27, 2022 (the “2022 Form 10-K”).

 

-7-

 

Net loss per Common Share

 

Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of Class A common stock, par value $0.0001 per share (“common stock”), outstanding during the period. Diluted net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through stock options, warrants, and restricted stock units. For the three and nine months ended March 31, 2023, and 2022, such amounts were excluded from the diluted loss since their effect was considered anti-dilutive due to the net loss for the period.

 

The table below shows the number of outstanding stock options, warrants and restricted stock units as of March 31, 2023 and 2022:

         
   March 31, 2023   March 31, 2022 
   Number of Shares   Number of Shares 
Stock Options   3,443,997    2,438,044 
Warrants   7,770,285    511,463 
Restricted Stock Units   527,549    - 
Total   11,741,831    2,949,507 

 

Recent Accounting Pronouncements

 

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”). There have been no recent ASUs that are expected to have a material impact on the Company’s balance sheets or statements of operations since the 2022 Form 10-K.

 

Cash and cash equivalents

 

Cash and cash equivalents consisted of cash deposits and money market funds held at a bank and funds held in a brokerage account which included a U.S. treasury money market fund and U.S. Treasury Bills with original maturities of 3 months or less.

 

Adverse Developments Affecting the Financial Services Industry and Concentration of Risk

 

As of March 31, 2023 and December 31, 2022, the Company had cash deposited in certain financial institutions in excess of federally insured levels. The Company regularly monitors the financial stability of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents. However, in March and April 2023, certain U.S. government banking regulators took steps to intervene in the operations of certain financial institutions due to liquidity concerns, which caused general heightened uncertainties in financial markets. While these events have not had a material direct impact on the Company’s operations, if further liquidity and financial stability concerns arise with respect to banks and financial institutions, either nationally or in specific regions, the Company’s ability to access cash or enter into new financing arrangements may be threatened, which could have a material adverse effect on its business, financial condition and results of operations.

 

Investments in U.S. Treasury Bills

 

Investments in U.S. Treasury Bills with maturities greater than 3 months, are accounted for as available for sale and are recorded at fair value. Unrealized gains were included in other comprehensive income in the accompanying the statements of operations and other comprehensive income.

 

Fair value measurement of assets and liabilities

 

We determine the fair values of our financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

 

Level 2 - Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

 

Level 3 - Inputs are unobservable inputs based on our assumptions.

 

4. Investments in U.S. Treasury Bills available for sale

 

The following is a summary of the U.S. Treasury Bills held at March 31, 2023:

 

                    
                   Total Accumulated 
   Amortized
Cost Basis		   Gross
Unrealized Gain		   Gross
Unrealized loss		   Fair Value   Other Comprehensive Income 
U.S. Treasury Bills due is 3 - 6 months  $12,504,943   $16,505   $-   $12,521,448   $16,505 

 

5 . Intangible Assets

 

The Company’s intangible assets consist of intellectual property acquired from LAT Pharma. and are amortized over their estimated useful lives.

 

The following is a summary of the Company’s intangible assets as of March 31, 2023 and June 30, 2022:

         
   March 31, 2023   June 30, 2022 
         
Intellectual Property  $2,293,770   $2,293,770 
Less Accumulated Amortization   (1,599,331)   (1,427,298)
Intellectual Property, Net  $694,439   $866,472 
           

 

Amortization expense was $57,344 in each of the three-month periods ended March 31, 2023 and 2022. Amortization expense was $172,033 and $172,032 in each of the nine-month periods ended March 31, 2023 and 2022, respectively. The Company amortizes intellectual property over the expected, original useful lives of 10 years.

 

Estimated future amortization expense is as follows:

     
Year ending June 30, 2023 (Remaining three months)  $57,344 
2024   229,377 
2025   229,377 
2026   178,341 
 Intellectual Property, Net  $694,439 

 

-8-

 

6. Related Party Transactions

 

Equity Transactions with Acuitas

 

On July 15, 2022, the Company entered into a securities purchase agreement with Acuitas Group Holdings, LLC (Acuitas), the Company’s majority stockholder, pursuant to which Acuitas agreed to purchase from the Company, in a private placement, (i) an aggregate of 3,636,364 shares of the Company’s common stock, at a price of $1.65 per share (the “PIPE Shares”), and (ii) a warrant to purchase 7,272,728 shares of Common Stock (“PIPE Warrant Shares”), at an exercise price of $1.82, with a term of exercise of five years. The warrant has a down round feature that reduces the exercise price of the warrant if the Company sells stock at a price lower than the exercise price of the warrant. On August 15, 2022, the Company received net proceeds of approximately $5.9 million, net of costs of approximately $94,000, and entered into an amended and restated registration agreement with Acuitas, which amended and restated that certain registration rights agreement, dated as of June 10, 2021, by and between the Company and Acuitas (the “Existing Registration Rights Agreement”), to amend the definition of “Registrable Securities” in the Existing Registration Rights Agreement to include the PIPE Shares and the PIPE Warrant Shares as Registrable Securities thereunder.

 

Asset Acquisition with NeurMedix

 

On April 27, 2021, the Company entered into an Asset Purchase Agreement (“APA”) with NeurMedix and Acuitas, which are related party affiliates, pursuant to which the Company acquired certain assets from NeurMedix and assumed certain liabilities of NeurMedix,. The acquired assets include, among others, certain assets related to the drug candidates then being developed by NeurMedix, including NE3107. On June 10, 2021, and pursuant to the terms of the APA, the Company issued to Acuitas (as NeurMedix’s assignee) 8,361,308 shares of the Company’s common stock and made a cash payment to Acuitas of approximately $2.3 million. Since the transaction was between entities under common control, there were no fair value adjustments of the purchased assets, and the historical cost basis of the purchased assets was zero. The total consideration paid was expensed as in process research and development expense in the year ended June 30, 2021. 

 

Previously, the Company was obligated to deliver contingent stock consideration to NeurMedix (or its successor) consisting of shares of the Company’s common stock having an aggregate value of up to $3.0 billion, subject to the achievement of certain clinical, regulatory and commercial milestones related to the drug candidates to be acquired by the Company from NeurMedix, and subject to a cap limiting each issuance of shares if such issuance would result in the beneficial ownership of NeurMedix and its affiliates exceeding 89.9999% of the Company’s issued and outstanding common stock. Subject to the terms and conditions of the APA, as amended, the Company may now be obligated to deliver contingent stock consideration to NeurMedix (or its successor) consisting of up to 18 million shares of the Company’s common stock, with 4.5 million shares issuable upon the achievement of each of the four milestones set forth in the APA, subject to a cap limiting the issuance of shares if such issuance would result in the beneficial ownership of NeurMedix and its affiliates exceeding 87.5% of the Company’s issued and outstanding common stock.

 

7. Other Liabilities

 

The current portion of other liabilities at March 31, 2023 and June 30, 2022 were $193,542 and $1.3 million, and included $193,542 and $580,614, respectively, of a retention bonus payable for arrangements with certain employees. The payment terms of the total retention bonus arrangements of $1,161,000 recognized in August 2021 provided for equal monthly installments over a 24-month period and began in August 2021.

 

8. Notes Payable

 

On November 30, 2021 (the “Closing Date”), the Company entered into a Loan and Security Agreement and the Supplement to the Loan and Security Agreement and Promissory Notes (together, the “Loan Agreement”) with Avenue Venture Opportunities Fund, L.P. (“AVOPI”) and Avenue Venture Opportunities Fund II, L.P. (“AVOPII,” and together with AVOPI, “Avenue”) for growth capital loans in an aggregate commitment amount of up to $20 million (the “Loan”). On the Closing Date, $15 million of the Loan was funded (“Tranche 1”). The Loan provided for an additional $5 million to be available to the Company on or prior to September 15, 2022, subject to the Company’s achievement of certain milestones with respect to certain of its ongoing clinical trials, which were not achieved. The Loan bears interest at an annual rate equal to the greater of (a) the sum of 7.00% plus the prime rate as reported in The Wall Street Journal and (b) 10.75%. The prime rate at March 31, 2023 was 8.0%. The Loan is secured by a lien upon and security interest in all of the Company’s assets, including intellectual property, subject to agreed exceptions. The maturity date of the Loan is December 1, 2024.

 

-9-

 

The Loan Agreement requires monthly interest-only payments during the first eighteen months of the term of the Loan. Following the interest-only period, the Company will make equal monthly payments of principal, plus accrued interest, until the Loan’s maturity date when all remaining principal and accrued interest is due. If the Company prepays the Loan, it will be required to pay (a) a prepayment fee in an amount equal to 3.0% of the principal amount of the Loan that is prepaid during the interest-only period; and (b) a prepayment fee in an amount equal to 1.0% of the principal amount of the Loan that is prepaid after the interest-only period. At the Loan’s maturity date, or on the date of the prepayment of the Loan, the Company will be obligated to pay a final payment equal to 4.25% of the Loan commitment amount, the sum of Tranche 1 and Tranche 2.

 

The Loan Agreement includes a conversion option to convert up to $5.0 million of the principal amount of the Loan outstanding at the option of Avenue, into shares of the Company’s common stock at a conversion price of $6.98 per share.

 

On the Closing Date, the Company issued to Avenue warrants to purchase 361,002 shares of common stock of the Company (the “Avenue Warrants”) at an exercise price per share equal to $5.82. The Avenue Warrants are exercisable until November 30, 2026.

 

The amount of the carrying value of the notes payable was determined by allocating portions of the outstanding principal of the notes; approximately $1.4 million to the fair value of the Avenue Warrants and approximately $2.2 million to the fair value of the embedded conversion option. Accordingly, the total amount of unearned discount of approximately $3.7 million, the total direct financing cost of approximately $390,000 and premium of $850,000 are recognized on an effective interest method over the term of the Loan. The adjusted effective interest rate is 25%. The total interest expense of approximately $1.1 million for the three months ended March 31, 2023, was recognized in the accompanying statements of operations and included the interest only payments totaling approximately $547,000, the amortization of financing costs of approximately $43,000, unearned discount of approximately $400,000 and the accretion of loan premium of approximately $93,000. The total interest expense of approximately $3.2 million for the nine- months ended March 31, 2023, was recognized in the accompanying statements of operations and included interest only payments totaling approximately $1.5 million, the amortization of financing costs of approximately $128,000, unearned discount of approximately $1.2 million and the accretion of loan premium of approximately $329,000.

 

The carrying value of notes payable at March 31, 2022 was approximately $11.6 million, net of unearned discount of approximately $3.1 million, unamortized direct costs of approximately $333,000 and accreted premium of approximately $94,000 in the accompanying balance sheets. The total interest expense of approximately $919,000 and $1.2 million for the three and nine months ended March 31, 2022, respectively; was recognized in the accompanying statements of operations. The amortization of financing costs was approximately $43,000 and $57,000 for the three and nine months ended March 31, 2022, respectively. The accretion of loan premium was approximately $71,000 and $94,000 for the three and nine months ended March 31, 2022, respectively.

 

As of March 31, 2023, the remaining principal balance of $15 million under the Loan is payable in 18 monthly equal installments beginning July 1, 2023; for a total of $10.0 million and $5.0 million in the fiscal years ended June 30, 2024 and 2025 respectively.

 

The following is a summary of the Notes Payable as of March 31, 2023 and June 30, 2022:

 

Current portion of Notes Payable

 

         
   March 31, 2023   June 30, 2022 
         
Current portion of Notes Payable  $7,500,000   $- 
Less debt financing costs   (134,757)   - 
Less unearned discount   (1,267,811)   - 
Plus accretion of loan premium   293,636    - 
Current portion of Notes Payable, net of financing costs, unearned premiums and discount  $6,391,068   $- 
           

Non-current portion of Notes Payable

 

   March 31, 2023   June 30, 2022 
         
Notes Payable  $7,500,000   $15,000,000 
Less debt financing costs   (28,369)   (290,790)
Less unearned discount   (266,908)   (2,735,802)
Plus accretion of loan premium   200,909    165,278 
Notes Payable, net of the current portion, financing costs, unearned premiums and discount  $7,405,632   $12,138,686 
           

 

Estimated future amortization expense and accretion of premium is as follows:

 

                
   Unearned Discount   Debt Financing Costs   Loan accretion Premium 
                
Year ending June 30, 2023 (Remaining 3 months)  $400,362   $42,555   $92,727 
2024   1,023,145    108,751    236,970 
2025   111,212    11,820    25,758 
Total  $1,534,719   $163,126   $355,455 

 

-10-

 

9. Fair Value Measurements

 

At March 31, 2023 and June 30, 2022, the estimated fair value of derivative liabilities measured on a recurring basis are as follows:

 

                    
   Fair Value Measurements at 
   March 31, 2023 
   Level 1   Level 2   Level 3   Total 
Derivative liability - Warrants  $-   $-   $1,956,781   $1,956,781 
Derivative liability - Conversion option on notes payable   -    -    2,580,425    2,580,425 
Total derivatives  $-   $-   $4,537,206   $4,537,206 
                     
   Fair Value Measurements at 
   June 30, 2022 
   Level 1   Level 2   Level 3   Total 
Derivative liability - Warrants  $-   $-   $194,531   $194,531 
Derivative liability - Conversion option on note payable   -    -    188,030    188,030 
Total derivatives  $-   $-   $382,561   $382,561 
                     

 

The following table presents the activity for liabilities measured at fair value using unobservable inputs for the nine months ended March 31, 2023:

 

         
   Derivative liabilities - Warrants   Derivative liability - Conversion Option on Convertible Debenture 
         
Balance at July 1, 2022  $194,531   $188,030 
Additions to level 3 liabilities   -    - 
Change in in fair value of level 3 liability   1,762,250    2,392,395 
Transfer in and/or out of Level 3   -    - 
Balance at March 31, 2023  $1,956,781   $2,580,425 
           

 

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The following table presents the activity for liabilities measured at fair value using unobservable inputs for the nine months ended March 31, 2022:

 

   Derivative liabilities - Warrants   Derivative liability - Conversion Option on Convertible Debenture 
         
Balance at July 1, 2021  $-   $- 
Additions to level 3 liabilities   1,456,512    2,213,466 
Change in fair value of level 3 liability   (433,218)   (735,586)
Transfer in and/or out of Level 3   -    - 
Balance at March 31, 2022  $1,023,294   $1,477,880 
           

 

The fair values of derivative liabilities for the Avenue Warrants and conversion option at March 31, 2023 in the accompanying balance sheet, were approximately $2.0 million and approximately $2.6 million, respectively. The total change in the fair value of the derivative liabilities totaled approximately $366,000 and $4.2 million for the three and nine months ended March 31, 2023, respectively; and accordingly, was recorded in the accompanying statement of operations. The assumptions used in the Black Scholes model to value the derivative liabilities at March 31, 2023 included the closing stock price of $8.08 per share; for the Avenue Warrants, the exercise price of $5.82, remaining term 3.7 year, risk free rate of 3.7% and volatility of 83.7%; and for the embedded derivative liability of the conversion option, the conversion price of $6.98; remaining term 1.7 years, risk free rate of 4.35% and volatility of 76.24%.

 

Derivative liability – Avenue Warrants

 

The Company accounts for stock purchase warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreements. Under applicable accounting guidance, stock warrants that are precluded from being indexed to the Company’s own stock because of full-rachet and anti-dilution provisions or adjustments to the strike price due to an occurrence of a future event are accounted for as derivative financial instruments. The Avenue Warrants were not considered to be indexed to the Company’s own stock, and accordingly, were recorded as a derivative liability at fair value in the accompany balance sheet at March 31, 2023.

 

The Black Scholes model was used to calculate the fair value of the warrant derivative to bifurcate the warrant derivative amount from the Avenue Loan amount funded. The Avenue Warrants are recorded at their fair values at the date of issuance and remeasured at March 31, 2023. The assumptions used for the fair value calculation at November 30, 2021 included: the closing stock price of $6.44 per share; the exercise price of $5.82; 5 year term; a risk free rate of 1.14% and volatility of 74.4%.

 

Embedded derivative liability – Conversion Option

 

The embedded derivative liability represents the optional conversion feature of up to $5.0 million of the outstanding Loan, which meets the definition of a derivative and requires bifurcation from the loan amount.

 

The Black Scholes model was used to calculate the fair value of the embedded derivative to bifurcate the embedded derivative amount representing the conversion option from the Loan amount funded. The assumption used for the fair value calculation at November 30, 2021 included: the closing stock price of $6.44 per share; the conversion price of $6.98; 3 year term; risk free rate of 0.81% and volatility of 76.85%.

 

Financial assets

 

As of March 31, 2023, investments in U.S. Treasury Bills were valued through use of quoted prices and are classified as Level 1. The following table presents information about our assets that are measured at fair value on a recurring basis using the above input categories.

 

                    
   Fair Value Measurements at 
   March 31, 2023 
   Level 1   Level 2   Level 3   Total 
                 

Cash and cash equivalent

  $13,098,912   $-   $-   $13,098,912 
U.S. Treasury Bills due in 3 months or less   18,177,285    -    -    18,177,285 
U.S. Treasury Bills due in 3 - 6 months   12,521,448    -    -    12,521,448 
                     
   Total  $43,797,645   $-   $-   $43,797,645 
                     

 

   Fair Value Measurements at 
   June 30, 2022 
   Level 1   Level 2   Level 3   Total 
                 
Cash and cash equivalent  $18,641,716   $-   $-   $18,641,716 
U.S. Treasury Bills due in 3 months or less   -    -    -    - 
U.S. Treasury Bills due in 3 - 6 months   -    -    -    - 
                     
   Total  $18,641,716   $-   $-   $18,641,716 
                     

 

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10. Equity Transactions

 

Stock Options

 

The following table summarizes the activity relating to the Company’s stock options for the nine months ended March 31, 2023:

 

                    
   Options   Weighed-Average Exercise Price   Weighted Remaining Average Contractual Term   Aggregate Intrinsic Value 
Outstanding at June 30, 2022   3,398,764    7.42    6.8    - 
Granted   205,000    6.08    5.2    347,350 
Options Expired   (10,000)   28.69    -    - 
Options Canceled   (49,667)   7.74    -    - 
Options Exercised   (100,100)   7.79    -    - 
Outstanding at March 31, 2023   3,443,997   $7.29    6.0   $6,474,701 
Exercisable at March 31, 2023   1,135,948   $8.60    5.8   $1,427,537 
                     

 

The fair value of each option grant on the date of grant is estimated using the Black-Scholes option. The pricing model reflects the following weighted-average assumptions for the nine months ended March 31, 2023 and 2022:

         
    March 31, 2023   March 31, 2022
Expected life of options (In years)   5   5
Expected volatility   79.52%   75.12%
Risk free interest rate   3.61%   1.60%
Dividend Yield   0%   0%

 

Expected volatility is based on the historical volatilities of the daily closing price of the common stock of three comparable companies and the expected life of options is based on historical data with respect to employee exercise periods. The Company accounts for forfeitures as they are incurred.

 

The total stock option-based compensation expense for three-month ended March 31, 2023 and 2022 was of $888,998 and $930,334, respectively and for the nine months ended March 31,2023 and 2022 was $3,480,425 and $4,004,718, respectively.

 

-13-

 

The following is a summary of stock options outstanding and exercisable by exercise price as of March 31, 2023:

 

                 
Exercise Price   Outstanding   Weighted Average Contract Life   Exercisable 
$1.69    124,520    4.3    - 
$1.81    10,000    4.2    - 
$1.98    72,000    4.2    2,000 
$2.74    124,167    8.9    28,972 
$2.80    5,600    1.9    5,600 
$3.20    248,167    8.9    73,634 
$3.24    25,000    8.9    5,417 
$3.75    4,800    0.9    4,800 
$5.04    755,000    4.4    188,750 
$5.21    10,000    9.7    - 
$6.12    195,000    4.7    48,750 
$6.25    1,600    0.6    1,600 
$7.50    800    1.6    800 
$7.74    1,241,668    8.4    447,000 
$8.75    1,600    0.8    1,600 
$9.54    800    2.6    800 
$9.90    800    2.6    800 
$13.91    618,475    2.8    321,425 
$42.09    4,000    2.9    4,000 
      3,443,997         1,135,948 

 

Issuance of common stock for cash

 

During the three months ended September 30, 2021, the Company issued 2,592,000 of its Class A common stock at $8.00 per share in connection with its registered public offering of approximately $18.5 million, net of issuance costs of approximately $2.2 million.

 

On September 24, 2021, the Company issued 92,000 of its Class A common stock at $8.00 per share in connection with the underwriters’ exercise of its over-allotment option in for the August 2021 registered public offering, resulting in net proceeds to the Company of approximately $707,000, net of issuance cost of approximately $29,000.

 

On August 31, 2022, the Company entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. and B. Riley Securities, Inc. (collectively, the “Agents”), pursuant to which the Company may issue and sell from time-to-time shares of the Company’s common stock through the Agents, subject to the terms and conditions of the Sales Agreement. On April 6, 2023, the Company and B. Riley Securities, Inc. mutually agreed to terminate B. Riley Securities, Inc.’s role as a sales agent under the Sales Agreement. During the three months ended March 31, 2023, the Company sold 1,515,078 shares of common stock under the Sales Agreement for total net proceeds of $9.8 million after 3% commissions and expenses of approximately $339,000. During the nine months ended March 31, 2023, the Company sold 7,372,691 shares of common stock under the Sales Agreement for total net proceeds of $48.2 million after 3% commissions and expenses of approximately $1.9 million.

 

Issuance of common stock through exercise of stock options and warrants

 

During the three months ended December 31, 2022, the Company issued 21,882 shares of common stock pursuant to a cashless exercise of stock options to purchase 99,300 shares at an average exercise price of $7.64.

 

In November 2022, the Company issued 800 shares of common stock pursuant to a cash exercise of stock options to purchase 800 shares at an average exercise price of $2.80 per share.

 

In October, the Company issued 3,590 shares of common stock pursuant to a cashless exercise of warrants to purchase 8,000 shares at an average exercise price of $2.25.

 

-14-

 

Issuance of restricted stock units for services

 

On August 20, 2021, the Company awarded 58,759 restricted stock units (“RSUs”) to the Company’s President and CEO under the Company’s 2019 Omnibus Incentive Equity Plan (the “2019 Omnibus Plan”) as his salary for the period from April 27, 2021, the date of his appointment, through December 31, 2021. The number of RSUs awarded was based on a prorated annual base salary of $600,000 at a 10% discount to the grant date fair value of $7.74 per share of the Company’s common stock. Each RSU awarded to the CEO entitled him to receive one share of common stock upon vesting. A total of 15,339 RSUs (representing the pro rata portion of the RSU award for the period from April 27, 2021 to June 30, 2021) vested at the grant date, 21,710 vested at September 30, 2021 and the remaining 21,710 vested at December 31, 2021. Accordingly, the CEO was issued an aggregate of 58,759 shares of common stock over the vesting period of the RSUs. The stock-based compensation expense related to these RSUs was $384,456.

 

On June 21, 2022, the Company awarded 124,520 RSUs to the President and CEO under the Company’s 2019 Omnibus Plan. Each RSU awarded to the CEO entitles him to receive one share of common stock upon vesting. The RSUs vest in three equal annual installments over three years on the anniversary grant date. The grant date fair value was $1.69 per share of the Company’s common stock. The stock-based compensation expense related to these RSUs was $17,536 and $52,610 for the three and nine months ended March 31, 2023, respectively.

 

On November 23, 2022, the Company awarded 506,496 RSUs to certain employees and a consultant, with a grant date fair value of $6.12 per share. Twenty-five percent of these RSU vested on the grant date and the remaining RSUs vest in three equal installments over three years beginning on the first anniversary of the grant date. For the three months ended December 31, 2022, the stock-based compensation expense related to these RSUs was $584,424. On February 16, 2023, the Company delivered the vested portion of the RSU’s and issued 72,612 shares of common stock net of 25% withholding. 22,800 shares issued to employees were withheld in Treasury stock in exchange for payment of withholding tax on behalf of the employees.

 

On November 23, 2022, the Company issued equity awards for the board of directors’ annual compensation. Four directors received RSUs to purchase a total of 155,636 shares of common stock at the grant date fair value of $6.12 per share, a total cost of $952,492 recognized as stock compensation in the three months ended December 31, 2022. Three directors received stock options to purchase 195,000 shares of common stock at an exercise price of $6.12 per share, the grant date fair value. The total stock compensation cost of stock options of $791,700 was recognized in the three months ended December 31, 2022. The equity awards vest every three months beginning from the last annual shareholders’ meeting on November 9, 2022, on February 9, 2023, May 9, 2023, August 9, 2023 and earlier of November 9, 2023 or the next annual shareholders’ meeting. While the agreements contain certain contractual vesting terms, there are circumstances where the vesting can be accelerated that is not within the Company’s control and as a result, for accounting purposes, the awards are assumed to have been fully vested on the grant date, accordingly, the Company recognized the total compensation cost of $1,744,192 on November 23, 2022. On February 9, 2023, the Company delivered the vested portion and issued 39,089 shares of common stock.

 

-15-

 

Issuance of Stock Options

 

On August 20, 2021, the Company granted, under the 2019 Omnibus Plan, stock options to purchase 1,365,835 shares of common stock to the executive management team. Twenty percent of the shares underlying the options awarded vested on the grant date, and the remaining 80% will vest equally over a 5-year period, on the first, second, third, fourth and fifth anniversary of the grant date. The exercise price of the options is $7.74 per share, the grant date fair value of the stock, and the options terminate on the earlier of the tenth anniversary of the grant date or the date on which the options have been fully exercised.

 

On February 1, 2022, the Company granted stock options to purchase 124,167 shares of common stock to a new employee. Twenty percent (20%) of the shares underlying the options awarded vested on the grant date, and the remaining 80% vest equally over a 5-year period, on the first, second, third, fourth and fifth anniversary of the grant date. The exercise price is $3.20 per share, the grant date fair value, and the options terminate on the tenth anniversary of the grant date.

 

During the three months ended March 31, 2022, the Company granted, stock options to purchase shares of common stock totaling 273,167 to four new employees.

 

Pursuant to a former employee Separation Agreement, dated April 11, 2022, the Company modified a former employee’s stock option award granted on August 20, 2021, pursuant to the 2019 Omnibus Plan (“2021 Options Grant”). Pursuant to the terms of the Separation Agreement, effective on July 8, 2022 (“the Separation Date”), the Company accelerated the vesting of options scheduled to vest on the first and second anniversary of the grant date as deemed vested (“Accelerated Options”) and after giving effect to the Accelerated Options, extended the exercise period of the total vested outstanding and unexercised options (totaling 74,500 options) to one year following the Separation Date. The unvested portion of the 2021 Option Grant (totaling 49,667 options) was canceled. The modification was remeasured as of July 8, 2022, and the incremental difference totaled $181,154, net credit, due to the original exercise price of $7.74 being greater than the stock price of $1.80 on the remeasurement date, and accordingly was recognized on July 8, 2022.

 

On December 6, 2022, stock options to purchase 10,000 shares of common stock were granted to new employees as part of their compensation package. Twenty percent (20%) of the shares underlying the options awarded vest on the one-year anniversary of the grant date, and the remaining 80% vest in equal monthly installments over 48 months. The exercise price is $5.21 per share, the grant date fair value, and the options terminate on the tenth anniversary of the grant date.

 

On April 4, 2023, stock options to purchase 124,167 shares of common stock were granted to new employees as part of their compensation package. Twenty percent (20%) of the shares underlying the options awarded vest on the one-year anniversary of the grant date, and the remaining 80% vest in equal monthly installments over 48 months. The exercise price is $7.36 per share, the grant date fair value, and the options terminate on the tenth anniversary of the grant date.

 

Stock Warrants

 

The following table summarizes warrant activity during the nine months ended March 31, 2023:

 

                    
   Number of Shares   Weighted Average Exercise Price   Weighted Average Remaining Life (Years)   Aggregate Intrinsic Value 
Outstanding and exercisable at June 30, 2022   510,372   $6.17    3.8   $- 
Granted   7,272,728    1.82    4.9    - 
Expired   (4,815)   75.00    -    - 
Exercised   (8,000)   2.25    -    - 
Outstanding and exercisable at March 31, 2023   7,770,285   $2.06    4.3   $46,935,207 
                     

 

Of the above warrants, 101,380 expire in the fiscal year ending June 30, 2025, 35,175 expire in the fiscal year ending June 30, 2026, and 7,633,730 expire in the fiscal year ending June 30, 2027.

 

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11. Leases

 

Office Lease

 

The Company paid an annual rent of $2,200 for its headquarters at 680 W Nye Lane, Suite 201, Carson City Nevada 897603. The rental agreement is for a one-year term.

 

On February 26, 2022, the Company’s San Diego office relocated to 5090 Shoreham Place, San Diego, CA 92122. The term for the new office lease is 38 months and commenced on March 1, 2022. The monthly base rate of $4,175 begins June 1, 2022, with annual increases of three percent.

 

The operating lease costs recognized in our statement of operations were approximately $13,000 and $23,000 for the three months ended March 31, 2023, and 2022, respectively; and approximately $36,900 and $76,500 for the nine months ended March 31, 2023 and 2022, respectively.

 

The following table provides balance sheet information related to leases as of March 31, 2023 and June 30, 2022:

         
   March 31, 2023   June 30, 2022 
Assets        
Operating lease, right-of-use asset, net  $90,549   $118,254 
           
Liabilities          
Current portion of operating lease liabilities  $43,314   $38,884 
Operating lease liabilities, net of current portion   54,465    87,414 
Total operating lease liabilities  $97,779   $126,298 

 

At March 31, 2023, the future estimated minimum lease payments under non-cancelable operating leases are as follows:

 

     
Year ending June 30, 2023 (Remaining 3 months)  $12,900 
2024   52,156 
2025   44,636 
Total minimum lease payments   109,692 
Less amount representing interest   (11,913)
Present value of future minimum lease payments   97,779 
Less current portion of operating lease liabilities   (43,314)
Operating lease liabilities, net of current portion  $54,465 

 

Total cash paid for amounts included in the measurement of lease liabilities were $12,650 and $37,700 for the three and nine months ended March 31, 2023, respectively.

 

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The weighted average remaining lease term and discount rate as of March 31, 2023 and June 30, 2022 were as follows:

 

         
   March 31, 2023   June 30, 2022 
         
Weighted average remaining lease term (Years)          
Operating leases   2.0    2.8 
Weighted average discount rate          
Operating leases   10.75%   10.75%

 

12. Commitments and Contingencies

 

Royalty Agreements

 

Pursuant to the Agreement and Plan of Merger entered into on April 11, 2016, by and between our predecessor entities, LAT Pharma and NanoAntibiotics, Inc., the Company is obligated to pay a low single digit royalty on net sales of BIV201 (continuous infusion terlipressin) to be shared by the members of LAT Pharma Members, PharmaIn Corporation, and The Barrett Edge, Inc.

 

Pursuant to the Technology Transfer Agreement entered into on July 25, 2016, by and between the Company and the University of Padova (Italy), the Company is obligated to pay a low single digit royalty on net sales of all terlipressin products covered by US patent no. 9,655,645 and any future foreign issuances, capped at a maximum of $200,000 per year.

 

13. Employee Benefit Plan

 

On August 1, 2021, the Company began sponsoring an employee benefit plan subject to Section 401(K) of the Internal Revenue Service Code (the “401K Plan”).

 

Subject to certain limitations in the Internal Revenue Code, eligible employees are permitted to make contributions to the 401K Plan on a pre-tax salary reduction basis and the Company will match 5% of the first 5% of an employee’s contributions to the 401K Plan., The Company made contributions of approximately $16,000 and $28,700, for the three months ended March 31, 2023 and 2022, respectively and approximately $80,100 and $75,100, for the nine months ended March 31, 2023 and 2022, respectively.

 

14. Subsequent Events

 

Subsequent to March 31, 2023 the Company sold 162,767 shares of common stock for net proceeds of $1.3 million net of 3% commission and expenses totaling approximately $40,000 under the Sales Agreement with the Agent.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Any statements contained in this report that are not statements of historical fact may be forward-looking statements. When we use the words “intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will” or the negative of these terms or other comparable terminology, we are identifying forward-looking statements. Forward-looking statements involve risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements. These factors include, among others: our research and development activities and distributor channel; compliance with regulatory requirements; and our ability to satisfy our capital needs Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. 

 

You are cautioned not to place undue reliance on the forward-looking statements in this report, which speak only as of the date of this report. Except as may be required by applicable law, we do not undertake or intend to update or revise our forward-looking statements, and we assume no obligation to update any forward-looking statements contained in this report as a result of new information or future events or developments, except as required by law. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. You should carefully review and consider the various disclosures we make in this report and our other reports filed with the Securities and Exchange Commission (the “SEC”) that attempt to advise interested parties of the risks, uncertainties and other factors that may affect our business. 

 

The following discussion of the Company’s financial condition and the results of operations should be read in conjunction with the Financial Statements and Notes thereto appearing elsewhere in this report. 

 

Management’s Discussion

 

 BioVie Inc. (the “Company” or “we” or “our”) is a clinical-stage company developing innovative drug therapies to treat chronic debilitating conditions including neurological and neuro-degenerative disorders and liver disease. 

 

The Company acquired the biopharmaceutical assets of NeurMedix, Inc. (“NeurMedix”), a privately held clinical-stage pharmaceutical company, in June 2021 (See Note 5 Related Party Transactions). The acquired assets included NE3107, a potentially selective inhibitor of inflammatory extracellular single-regulated kinase(“ERK”) signaling that, based on animal studies, is believed to reduce neuroinflammation. NE3107 is a novel orally administered small molecule that is thought to inhibit inflammation-driven insulin resistance and major pathological inflammatory cascades with a novel mechanism of action. There is emerging scientific consensus that both inflammation and insulin resistance may play fundamental roles in the development of Alzheimer’s Disease (AD) and Parkinson’s Disease (PD), and NE3107 could, if approved represent an entirely new medical approach to treating these devastating conditions affecting an estimated 6 million Americans suffering from AD and 1 million Americans suffering from PD. In August 2021, the Company initiated the FDA authorized potentially pivotal Phase 3 randomized, double-blind, placebo-controlled, parallel group, multicenter study to evaluate NE3107 in subjects who have mild to moderate AD (NCT04669028). The Company is targeting primary completion of this study in the fourth quarter of calendar year 2023.

 

The Phase 2 study of NE3107 in Parkinson’s disease (“PD” (NCT05083260), completed in December was a double-blind, placebo-controlled, safety, tolerability, and pharmacokinetics study in PD participants treated with carbidopa/levodopa and NE3107. 45 patients with a defined L-dopa “off state” were randomized 1:1 to placebo:NE3107 20 mg twice daily for 28 days. This trial was launched with two design objectives: 1) the primary objectives are safety and a drug-drug interaction study as requested by the FDA to demonstrate the absence of adverse interactions of NE3107 with levodopa; and 2) the secondary objective is to determine if preclinical indications of promotoric activity and apparent enhancement of levodopa activity can be seen in humans. Both objectives were met. The Company continues to process its findings from its completed NM201 study as it prepares for the next round of clinical studies in PD.  

 

Neuroinflammation, insulin resistance, and oxidative stress are common features in the major neurodegenerative diseases, including AD, PD, frontotemporal lobar dementia, and Amyotrophic lateral sclerosis (ALS). NE3107 is an oral small molecule, blood-brain permeable, compound with potential anti-inflammatory, insulin sensitizing, and ERK-binding properties that may allow it to selectively inhibit ERK-, NFκB- and TNF-stimulated inflammation. NE3107’s potential to inhibit neuroinflammation and insulin resistance forms the basis for the Company’s work testing the molecule in AD and PD patients. NE3107 is patented in the United States, Australia, Canada, Europe and South Korea. 

 

The Company’s Orphan drug candidate BIV201 (continuous infusion terlipressin), with FDA Fast Track status, that is being evaluated in a US Phase 2b study for the treatment of refractory ascites due to liver cirrhosis was paused in March 2023. Data from the first 15 patients treated with BIV201 plus standard of care (SOC) resulted in a 34% reduction in ascites fluid during the 28 days after treatment initiation compared to the 28 days prior to treatment (p=0.0046). This improvement was significantly different from those treated with SOC only who experienced a mean increase in ascites fluid of 3.1% (BIV201 vs. SOC p=0.05). Patients who completed the treatment with BIV201 experienced a 53% reduction in ascites fluid (p=0.001), which was significantly different from those treated with SOC (p=0.007). This improvement was sustained in this group during the 3 months after treatment initiation as compared to the 3-month pre-treatment period (43% reduction, p=0.06). Overall treatment appeared to be well tolerated. There were no unexpected serious adverse events and overall safety was consistent with the patient population. The current trial (NCT04112199) evaluates the efficacy of BIV201 combined with SOC, compared to SOC alone, for the treatment of refractory ascites. Terlipressin was administered with a continuous low dose infusion via a portable pump in two 28-day treatment cycles. The primary endpoints are the incidence of complications of at least Grade 2 severity, and the change in cumulative ascites in the 12-week period following randomization compared to a 12-week pre-treatment period. The BIV201 trial planned to enroll 30 patients to be treated in the home care setting. The active agent is approved in the U.S. and in about 40 countries for related complications of advanced liver cirrhosis.

 

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Comparison of the three months ended March 31, 2023 to the three months ended March 31, 2022

 

Net loss

 

The net loss for the three months ended March 31, 2023, was approximately $15.0 million as compared to $7.0 million for the three months ended March 31, 2022. The increase in net loss of approximately $8.0 million was primarily due to increased operating expenses primarily attributed to increased clinical activities.

 

Total operating expenses for the three months ended March 31, 2023, were approximately $13.8 million as compared to $5.7 million for the three months ended March 31, 2022. The net increase of approximately $8.1 million for the three months ended March 31, 2023 was due to an increase in research and development expenses of approximately $7.6 million due to increased clinical activities and an increase in selling general and administrative expenses of approximately $406,000.

 

Research and Development Expenses

 

Research and development expenses were approximately $11.2 million and $3.6 million for the three months ended March 31, 2023, and 2022, respectively. The net increase of approximately $7.6 million, was comprised of an increase in clinical study activities of approximately $7.1 million, and an increase in the clinical team and consultants’ compensation expense of approximately $676,000 to support such increased clinical activities over the three months ended March 31, 2022, offset by Chemistry, Manufacturing and Control expenses of approximately $188,000 and other research of $122,000.

 

The increase in research and development expenses of approximately $6.7 million was primarily due to the Neuroscience NE3107 studies, which were significantly more active during the three months ended March 31, 2023, compared to the three months ended March 31, 2022. The Parkinson’s Phase 2 study initiated in January 2022 reported top results and the Alzheimer Phase 3 study reached full enrollment. Our Orphan drug candidate BIV201’s Phase 2b study, which was initiated in June 2021, accounted for approximately $124,000 of the net increase in research and development expenses for three months ended March 31, 2023.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses were approximately $2.5 million and $2.1 million for the three months ended March 31, 2023, and 2022, respectively. The net increase of approximately $400,000 was primarily attributed to increased legal fees of $156,000 and other business development and promotions of approximately $100,000 and an increase in compensation expense of approximately $129,000.

 

Other Income and Expense

 

Other expense, net was $1.3 million for the three months ended March 31, 2023 was comparable to other expense, net of $1.3 million for the three months ended March 31, 2022. Other expense, net was comprised of the change in fair value of the derivative liabilities which totaled $366,000 and $386,000 and net interest expense of approximately $1.1 million and $918,000 for the three months ended March 31, 2023, and 2022, respectively.

 

Comparison of the nine months ended March 31, 2023, to the nine months ended March 31, 2022

 

Net loss

 

The net loss for the nine months ended March 31, 2023, was approximately $41.1 million as compared to $18.0 million for the nine months ended March 31, 2022. The increase in net loss of approximately $23.1 million was primarily due to increased administrative expenses of approximately $2.5 million, increased clinical activities of approximately $13.5 million, an increase in other expense of approximately $7.0 million primarily attributed to the change in fair value of derivative liabilities of approximately $5.3 million.

 

Total operating expenses for the nine months ended March 31, 2023, were approximately $34.1 million as compared to $18.0 million for the nine months ended March 31, 2022. The net increase of approximately $16.1 million during the nine months ended March 31, 2023, was due to an increase in research and development expenses of approximately $13.6 million due to our increased clinical activities, and an increase in selling general and administrative expenses of approximately $2.5 million.

 

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Research and Development Expenses

 

Research and development expenses were approximately $25.0 million and $11.4 million for the nine months ended March 31, 2023, and 2022, respectively. The net increase of approximately $13.6 million, was comprised of a net increase of $12.3 million from increased clinical activities, offset by a decline in other development activities of approximately $354,000 an increase in Chemistry, Manufacturing and Control expense of approximately $237,000, and an increase in clinical promotion and publications of approximately $237,000 and an increase compensation expense of approximately $557,000 for the clinical team and consultants.

 

The increase in research and development expenses of approximately $12.3 million was primarily due to the Neuroscience NE3107 studies, which were significantly more active during the nine months ended March 31, 2023 compared to the nine months ended March 31, 2022. The Parkinson’s Phase 2 study initiated in January 2022, reported its top-line data results, and the Alzheimer Phase 3 study is reached full enrollment. Our Orphan drug candidate BIV201’s Phase 2b study, which was initiated in June 2021, accounted for approximately $63,000 of the net increase in research and development expenses for nine months ended March 31, 2023.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses were approximately $8.9 million and $6.4 million for the nine months ended March 31, 2023, and 2022, respectively. The net increase of approximately $2.5 million was primarily attributed to increased stock compensation expense of approximately $2.0 million related to the board of directors’ annual compensation; a net increase in legal, investor relations and other professional fees totaling approximately $787,000, offset by decreased management compensation expense of approximately $198,000.

 

Other Income and Expense

 

Other expense, net was $7.0 million compared to other expense, net of $35,000, for the nine months ended March 31, 2023 and 2022, respectively. The net increase in other expenses of $7.0 million represented an increase in interest expense of approximately $2.0 million and the change in fair value of the related derivative liabilities of approximately $5.3 million.

 

Capital Resources and Liquidity

 

As of March 31, 2023, the Company had cash and cash equivalents and US treasury bills totaling of approximately $43.8 million, working capital of approximately $28.0 million, stockholders’ equity of approximately $21.7 million, and an accumulated deficit of approximately $292.1 million. In the three months ended March 31, 2023, the Company sold approximately 1.5 million shares of its common stock under its Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co for total net proceeds of approximately $9.8 million after 3% commissions and cost totaling approximately $339,000.

 

The Company has not generated any revenue and no revenues are expected in the foreseeable future. The Company’s future operations are dependent on the success of the Company’s ongoing development and commercialization efforts, as well as its ability to secure additional financing. Management expects that future sources of funding may include sales of equity, obtaining loans, or other strategic transactions.

 

The duration and spread of the COVID-19 pandemic and the long-term impact of COVID-19 and any variants on the financial markets and the overall economy continue to be uncertain and cannot be predicted at this time. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s ability to raise funds may be materially adversely affected.

 

Although management continues to pursue the Company’s strategic plans, there is no assurance that the Company will be successful in obtaining sufficient financing on terms acceptable to the Company, if at all, to fund continuing operations. These circumstances raise substantial doubt on the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Critical Accounting Policies and Estimates

 

For the nine-month period ended March 31, 2023, there were no significant changes to the Company’s critical accounting policies as identified in the Annual Report Form 10-K for the fiscal year ended June 30, 2022.  

 

-21-

New Accounting Pronouncements

 

The Company considered the applicability and impact of recent accounting pronouncements and determined those to be either not applicable or expected to have minimal impact on our balance sheets or statement of operations.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable to smaller reporting companies.

 

Item 4. Controls and Procedures

 

We maintain “disclosure controls and procedures.” Such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Office and Chief Financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgement in evaluating the cost-benefit relationship of possible disclosure and procedures. The design of and disclosure controls and procedures also are based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15f and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

To our knowledge, neither the Company nor any of its officers or directors is a party to any material legal proceeding or litigation and such persons know of no material legal proceeding or contemplated or threatened litigation. There are no judgments against us or our officers or directors. None of our officers or directors has been convicted of a felony or misdemeanor relating to securities or performance in corporate office.

 

Item 1A. Risk Factors

 

Except as described below, there have been no material changes to the Risk Factors previously disclosed in our Form 10-K. The risks described in our Form 10-K and below are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.

 

Adverse Developments Affecting the Financial Services Industry and Concentration of Risk

 

As of March 31, 2023 and December 31, 2022, the Company had cash deposited in certain financial institutions in excess of federally insured levels. The Company regularly monitors the financial stability of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents. However, in March and April 2023, certain U.S. government banking regulators took steps to intervene in the operations of certain financial institutions due to liquidity concerns, which caused general heightened uncertainties in financial markets. While these events have not had a material direct impact on the Company’s operations, if further liquidity and financial stability concerns arise with respect to banks and financial institutions, either nationally or in specific regions, the Company’s ability to access cash or enter into new financing arrangements may be threatened, which could have a material adverse effect on its business, financial condition and results of operations.

 

-26-

Risks Relating To Our Common Stock

 

You may experience future dilution as a result of future equity offerings or if we issue shares subject to options, warrants, stock awards or other arrangements.

 

In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock, including under the Controlled Equity Offering Sales Agreement (the “Sales Agreement”), dated as of August 31, 2022, with Cantor Fitzgerald & Co. and B. (the “Agent”), pursuant to which the Company may issue and sell from time to time shares of common stock through the Agent. We may sell shares or other securities in any other offering at a price per share that is less than the current market price of our securities, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The sale of additional shares of common stock or other securities convertible into or exchangeable for our common stock would dilute all of our stockholders, and if such sales of convertible securities into or exchangeable into our common stock occur at a deemed issuance price that is lower than the current exercise price of our outstanding warrants sold to Acuitas Group Holdings, LLC (“Acuitas”) in August 2022, the exercise price for those warrants would adjust downward to the deemed issuance price pursuant to price adjustment protection contained within those warrants.

 

In addition, as of March 31, 2023, there were warrants outstanding to purchase an aggregate of 7,770,285 shares of common stock at exercise prices ranging from $1.82 to $12.50 per share and 3,443,997 shares issuable upon exercise of outstanding options at exercise prices ranging from $1.69 to $42.09 per share and restricted stock units totaling 527,549. Our Loan Agreement entered into on November 30, 2021 contains a conversion feature whereby at the option of lender, up to $5 million of the outstanding loan amount may be converted into shares of common stock at a conversion price of $6.98 per share. We may grant additional options, warrants or equity awards. To the extent such shares are issued, the interest of holders of our common stock will be diluted.

 

Moreover, we are obligated to issue shares of common stock upon achievement of certain clinical, regulatory and commercial milestones with respect to certain of our drug candidates (i.e., NE3107, NE3291, NE3413, and NE3789) pursuant to the asset purchase agreement, dated April 27, 2021, by and among the Company, NeurMedix, Inc. and Acuitas, as amended on May 9, 2021. The achievement of these milestones could result in the issuance of up to 18 million shares of our common stock, further diluting the interest of holders of our common stock.

 

Certain stockholders who are also officers and directors of the Company may have significant control over our management.

 

As of March 31, 2023, our directors and executive officers and affiliate currently own an aggregate 24,431,826 shares of our common stock, which currently constitutes 65% of our issued and outstanding common stock. As a result, directors and executive officers may have a significant influence on our affairs and management, as well as on all matters requiring member approval, including electing and removing members of our board of directors, causing us to engage in transactions with affiliated entities, causing or restricting our sale or merger, and certain other matters. Our majority shareholder, Mr. Terren Peizer, may be deemed to beneficially own the shares held by Acuitas. Such concentration of ownership and control could have the effect of delaying, deferring or preventing a change in control of us even when such a change of control would be in the best interests of our stockholders.

 

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We may, in the future, issue additional common stock, which would reduce investors’ percent of ownership and may dilute our share value.

 

As of March 31, 2023, our Articles of Incorporation, as amended, authorize the issuance of 800,000,000 shares of common stock, and we had 36,153,911 shares of common stock issued and 36,131,311 issued and outstanding. Accordingly, we may issue up to an additional 752,147,919 shares of common stock. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. We may value any common stock in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, might have an adverse effect on any trading market for our common stock and could impair our ability to raise capital in the future through the sale of equity securities.

 

Item 2. Unregistered sales of equity securities

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

None

 

Item 5. Other Information

 

None

 

-28-

Item 6. Exhibits

 

(a) Exhibit index

 

Exhibit
 
3.1   First Amendment to the Amended and Restated Bylaws of BioVie Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-39015) filed on March 13, 2023)
     
10.1   Amendment No. 2 to Asset Purchase Agreement, dated January 13, 2023, by and between BioVie Inc. and Acuitas Group Holdings, LLC, and Acuitas Group Holdings, LLC, solely for purposes of Section 10.16 of the Agreement
     
31.1*   Certification of Chief Executive Officer (Principal Executive Officer) required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
     
31.2*   Certification of Chief Financial Officer (Principal Financial Officer) required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
     
32.1**   Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2**   Certification of Chief Financial Officer (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Extension Schema Document
     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document
     
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document

 

* Filed herewith.
   
** Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filings of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

-29-

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

BioVie Inc.,

 

Signature   Titles   Date
         
/s/ Cuong V Do        
     Cuong V Do   Chairman and Chief Executive Officer (Principal Executive Officer)   May 12, 2023
         
/s/ Joanne Wendy Kim        
     Joanne Wendy Kim   Chief Financial Officer (Principal Financial and Accounting Officer)   May 12, 2023

 

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BioVie (NASDAQ:BIVI)
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BioVie (NASDAQ:BIVI)
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De Juin 2023 à Juin 2024 Plus de graphiques de la Bourse BioVie