BioVie Inc. 8-K Summary: Material Definitive Agreement
Business Context and Reporting Period
This Form 8-K, dated November 30, 2021, reports that BioVie Inc. (Nasdaq: BIVI) entered into a Loan and Security Agreement with Avenue Venture Opportunities Fund II, L.P. and Avenue Venture Opportunities Fund, L.P. The filing details the terms of a new growth capital facility intended to fund general corporate purposes.
Key Financial Metrics and Capital Structure
- Total Loan Capacity: Up to $20,000,000 in aggregate principal.
- Initial Funding (Tranche 1): $15,000,000 funded on the closing date.
- Contingent Funding (Tranche 2): Up to $5,000,000 available on or before September 15, 2022, subject to clinical trial milestones.
- Optional Funding (Tranche 3): Up to $5,000,000 available upon achievement of additional milestones or mutual agreement.
- Interest Rate: The greater of (a) 7.00% plus the prime rate or (b) 10.75% annually.
- Maturity Date: December 1, 2024.
- Security: The loan is secured by a lien on all company assets, including intellectual property.
- Equity Component: Issuance of warrants to purchase 360,824 shares of Class A common stock at an exercise price of $5.82 per share.
Material Changes and Terms
The filing represents a significant change in the company's capital structure through the addition of secured debt. Key terms include:
- Repayment Structure: Monthly interest-only payments for the first 18 months (extendable by up to 6 months prior to Tranche 2 funding). Thereafter, equal monthly principal and interest payments until maturity.
- Prepayment Fees: 3.0% of prepaid principal during the interest-only period; 1.0% thereafter.
- Final Payment: A mandatory payment equal to 4.25% of the funded principal (Tranches 1, 2, and 3) is due at maturity or prepayment.
- Conversion Option: Lenders may convert up to $5,000,000 of the outstanding principal into Class A common stock at $6.98 per share.
- Commitment Fee: $200,000 paid upon execution.
Outlook, Risks, and Contingencies
The company intends to use proceeds for general corporate purposes. The availability of Tranche 2 and Tranche 3 funding is contingent upon the achievement of specific clinical trial milestones, introducing execution risk. The loan agreement includes customary events of default, including non-payment, covenant violations, bankruptcy, and material judgments. The warrants issued are exercisable until November 30, 2026, and include anti-dilution provisions.
Investor Verification Checklist
- Verify the current status of the clinical trials required to trigger Tranche 2 ($5M) and Tranche 3 ($5M) funding.
- Review the full text of the Loan and Security Agreement (Exhibit 10.1) for specific financial covenants and negative covenants.
- Assess the impact of the 4.25% final payment and prepayment fees on the company's future cash flow requirements.
- Monitor the dilution potential from the $5M conversion option at $6.98/share and the 360,824 warrants at $5.82/share.
- Confirm the company's current cash position to ensure ability to service the interest-only payments for the initial 18-month period.