BIOVIE INC. 10-Q

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, and Section 27A of the Securities Act of 1933. 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 our; research and development activities, distributor channel; compliance with regulatory impositions; and 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. 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. 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. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The Company assumes no obligation and does not intend to update these forward-looking statements, except as required by law. When used in this report, the terms “BioVie”, “Company”, “we”, “our”, and “us” refer to BioVie Inc. 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 document. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that in addition to the description of historical facts contained herein, this report contains certain forward-looking statements that involve risks and uncertainties as detailed herein and from time to time in the Company’s other filings with the Securities and Exchange Commission and elsewhere. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those, described in the forward-looking statements. These factors include, among others: (a) the Company’s fluctuations in sales, expenses and operating results; (b) risks associated with international operations; (c) regulatory, competitive and contractual risks; (d) product development risks; (e) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; and (f) pending litigation. Management’s Discussion BioVie Inc. is a clinical-stage company pursuing the discovery and development of innovative drug therapies to address severe unmet needs in chronic debilitating diseases. We are currently focused on developing and commercializing BIV201 (continuous infusion terlipressin), a novel approach to the treatment of ascites due to chronic liver cirrhosis. Our therapy BIV201 is based on a drug that is approved in about 40 countries to treat related complications of liver cirrhosis (part of the same disease pathway as ascites), but not yet available in the United States. BIV201’s active agent is a potent vasoconstrictor and has shown efficacy for reducing portal hypertension in studies around the world. The goal is for BIV201 to interrupt the ascites disease pathway, thereby halting the cycle of accelerating fluid generation in ascites patients. - 20 - Table of Contents Comparison of the three months ended March 31, 2021 to the three months ended March 31, 2020 Net income (loss) The net loss for the three months ended March 31, 2021 was approximately $3 million as compared to a net loss of $366,000 for the three months ended March 31, 2020. The increase in loss of approximately $2.6 million was primarily due an increase in operating expenses of $2.3 million, a change in fair value of derivative liabilities of approximately $367,000, and a decrease in interest expense of approximately $34,000. Total operating expenses for the three months ended March 31, 2021 were approximately $3 million as compared to $699,000 for the three months ended March 31, 2020. The net increase of approximately $2.3 was primarily consisted of increases in research and development expenses of $344,000 and selling, general and administrative expenses of $2 million related to stock-based compensation and due diligence services related to the Company’s purchase of NeurMedix’s assets. (See Note 9 Subsequent events in the accompanying condensed financial statements.) Research and Development Expenses Research and development expenses were approximately $697,000 for the three months ended March 31, 2021, a net increase of approximately $344,000, from $353,000 for the three months ended March 31, 2020. Research and development activities increased in preparation and launch of the Phase 2b clinical trials. Selling, General and Administrative Expenses Selling, general and administrative expenses were approximately $2.2 million for the three months ended March 31, 2021 compared to $289,000 for the three months ended March 31, 2020. The net increase of approximately $1.9 million was primarily attributed to legal and consulting expenses totaling approximately $1 million for due diligence services in the acquisition of NeurMedix assets, and approximately $804,000 related to stock-based compensation for stock options granted to certain management and the Company’s key consultants and amortization for stock options granted to directors. Comparison of the nine months ended March 31, 2021 to the nine months ended March 31, 2020 Net income (loss) The net income for the nine months ended March 31, 2021 was $1.3 million as compared to a net income of $2.5 million for the nine months ended March 31, 2020. The decrease in net income of $1.2 million was due to a decrease in interest expense of $3 million related to the embedded derivative liability warrants offset by operating expenses increases totaling $4.3 million. Total operating expenses for the nine months ended March 31, 2021 were approximately $6.5 million compared to $2.1 million for the nine months ended March 31, 2020. The net increase of approximately $4.4 million was primarily consisted of increases in research and development expenses of $757,000 and selling, general and administrative expenses of $3.6 million attributed to stock-based compensation expenses for due diligence related to the purchase of the NeurMedix assets. Research and Development Expenses Research and development expenses were approximately $1.8 million for the nine months ended March 31, 2021, an increase of $757,000, from $1 million for the nine months ended March 31, 2020. Research and development activities increased in preparation and launch of Phase 2b clinical trials. - 21 - Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses were approximately $4.5 million for the nine months ended March 31, 2021, a net increase of approximately $3.6 million, from $941,000 for the nine months ended March 31, 2020. The net increase primarily consisted of stock-based compensation of $2.3 million related to stock options granted to the Board of Directors, management and certain key consultants to the Company and amortization for stock options granted to directors; and legal and consulting expenses totaling approximately $1 million for due diligence services in the acquisition of NeurMedix assets as described below. Capital Resources and Liquidity As of March 31, 2021, the Company had working capital of approximately $10 million and cash of $11.4 million and, stockholders’ equity was approximately $11.4 million, and its accumulated deficit was approximately $93.4 million. In addition, the Company has not generated any revenues 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 effort, as well as continuing to secure additional financing. As described in Note 9 Subsequent Events in the accompany condensed interim financial statements, on April 27, 2021, the Company entered into an Asset Purchase Agreement which was amended by Amendment No. 1 to the Asset Purchase Agreement on May 9, 2021, (collectively “the Amended Asset Purchase Agreement”) with Neurmedix to acquire certain assets from NeurMedix and assume certain liabilities of NeurMedix, in exchange for the consideration of cash and common stock of the Company. At the close of the transaction, the Company will issue 8,361,308 shares of the Company’s common stock and make a cash payment equal to the aggregate amount of NeurMedix’s direct and documented cash expenditures to advance certain clinical programs from March 1, 2021 through the closing, which cash payment is estimated to be approximately $3.0 million. The cash requirements for expenses such as the due diligence, legal fees and the fairness opinion and including the $3 million cash consideration totals approximately $ 7.4 million and will be due at the close of the transaction, currently anticipated in the last quarter of our fiscal year. These expenditures will have a significant impact on the Company’s cash position and the funding of its future operations over the next 12 months, raising substantial doubt about its ability to meet its financial cash flow requirements. Subject to the terms and conditions of the Amended Asset Purchase Agreement following the closing, BioVie will also be obligated to deliver contingent consideration to NeurMedix (or its successor) consisting of (i) a cash payment of approximately $7.3 million, subject to a pivotal clinical trial for NE3107 meeting its primary endpoint(s) and BioVie having successfully raised at least $50 million in new capital, and (ii) contingent stock consideration to NeurMedix (or its successor) consisting of up to 18.0 million shares of BioVie’s common stock, with 4.5 million shares issuable upon the achievement of each of the four milestones set forth in the Purchase Agreement, 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 BioVie’s issued and outstanding common stock. The future viability of the Company is largely dependent upon its ability to raise additional capital to finance its operations. We cannot assure you that our drug candidate will be developed, work, or receive regulatory approval; that we will ever earn revenues sufficient to support our operations or that we will ever be profitable. Furthermore, since we have no committed source of sufficient financing, we cannot assure that we will be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations. Management intends to attempt to secure additional required funding primarily through additional equity or debt financings. We may also seek to secure required funding through sales or out-licensing of intellectual property assets, seeking partnerships with other pharmaceutical companies or third parties to co-develop and fund research and development efforts, or similar transactions. However, there can be no assurance that we will be able to obtain required funding. If we are unsuccessful in securing funding from any of these sources, we will defer, reduce or eliminate certain planned expenditures in our research protocols. If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that could result in our stockholders losing some or all of their investment in us. Although management continues to pursue these 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. The emergence of widespread health emergencies or pandemics of the coronavirus ("Covid-19"), may lead to continued regional quarantines, business shutdowns, labor shortages, disruptions to supply chains, and overall economic instability, including the duration and spread of the outbreak and restrictions and the impact of Covid-19 on the financial markets and the overall economy, all of which are highly uncertain and cannot be predicted. 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. - 22 - Table of Contents Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets. Critical Accounting Policies and Estimates For the nine-month period ended March 31, 2021, 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, 2020. 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