BioVie Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2016 (the company’s fiscal first quarter). BioVie is a development-stage biotechnology company developing BIV201, a continuous low-dose terlipressin infusion intended to treat ascites associated with liver cirrhosis. The company acquired LAT Pharma and the BIV201 program in April 2016.
Financial performance and position
| Metric | Quarter ended September 30, 2016 | Comparable 2015 quarter |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $351,353 | $54,627 |
| Research and development | $127,270 | $0 |
| Net loss | $351,342 | $54,566 |
| Net loss per share, basic and diluted | $0.00 loss | $0.00 loss |
| Cash used in operating activities | $128,012 | $1,965 |
- With no revenue, gross margin is not meaningful. The statements report $57,344 of amortization and $93,165 of professional fees for the quarter.
- Cash fell from $123,757 at June 30, 2016 to $8,745 at September 30. Current liabilities were $961,401, versus current assets of $8,745, implying a working-capital deficit of $952,656.
- Total assets were $2,539,846, including $2,185,390 of net intangible assets and $345,711 of goodwill. Stockholders’ equity was $1,578,445.
- Current liabilities included $381,289 of accounts payable and accrued expenses, $562,112 of accrued payroll, an $8,000 loan payable on demand, and a $10,000 zero-interest related-party loan payable on demand.
- Financing activities provided $13,000: $8,000 from a loan and $5,000 from share issuance. The company reported no investing cash flow and no cash interest or income-tax payments.
- Common shares outstanding were 87,210,000 at September 30, 2016. Subsequent to quarter-end, the company sold 500,000 shares at $0.20 for $100,000.
Material changes and unusual items
- Operating expenses and net loss rose substantially from the prior-year quarter, including newly reported R&D and amortization associated with the LAT Pharma acquisition.
- The acquisition consideration was 39,820,000 shares, valued for accounting purposes at $2,389,200. The company also reports that existing shareholders retired 39,869,999 shares in connection with the transaction.
- The CEO received options to acquire 3 million shares at $0.06 per share, vesting in three annual installments beginning April 2017. The quarter included $8,848 of share-based compensation expense.
- The filing’s statement of operations appears internally inconsistent: it reports operating expenses of $351,353 and zero revenue, but lists loss from operations as only $57,854. The reported net loss of $351,342 is consistent with operating expenses less $11 of interest income, not with the listed operating-loss figure.
Outlook, risks and contingencies
- Management says it is completing work toward an IND application and aims to begin clinical trials if the FDA approves the application. The filing gives no specific IND submission date or clinical-trial start date.
- The company estimates next-12-month spending, assuming financing is obtained, of $45,000 for R&D, $15,000 for corporate overhead and $250,000 for staffing. It says it needs approximately $250,000–$500,000 in additional net financing for near-term needs.
- Management states existing cash is insufficient for the next 12 months and is not expected to meet operating and capital requirements through June 30, 2017. The filing identifies substantial doubt about the company’s ability to continue as a going concern. Funding options include equity or debt, licensing, partnerships or other transactions; none is assured. Without funding, the company may reduce or stop development, curtail operations, or cease operations.
- The company had no product revenue and had not established profitability. BIV201’s development, regulatory approval and commercial success are uncertain. Management also identifies funding, R&D execution and regulatory compliance as risks.
- Disclosure controls and procedures were concluded to be ineffective as of September 30, 2016. The company reported no material change in internal control during the quarter. It disclosed no material legal proceedings or material off-balance-sheet arrangements.
- The filing reports a five-year office lease requiring $357 monthly payments through December 2018. The CEO’s employment agreement provides a three-year term and minimum annual base salary of $250,000.
Important facts for investors to verify
- Whether the company raised sufficient capital after quarter-end, and the resulting cash runway, dilution and financing terms.
- The timetable and funding required for the IND filing and any FDA-authorized clinical trials of BIV201.
- The apparent operating-loss inconsistency in the statements of operations and whether any correction or clarification was filed.
- What remediation, if any, management planned for ineffective disclosure controls.
- The status and terms of demand loans, accrued payroll and other liabilities, and the company’s ability to meet them.
- The effect of acquisition-related intangible amortization, goodwill and the option award on future reported results and share dilution.