BioVie Inc. — Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2016, with fiscal 2015 comparatives. The request refers to “2015 Q4,” but this filing reports full fiscal years, not a standalone quarter. BioVie was a development-stage company and reported no product revenue.
Business context
BioVie’s focus shifted to BIV201, a therapy candidate for ascites associated with liver cirrhosis, after its April 11, 2016 acquisition of LAT Pharma LLC. The company said it was preparing an FDA investigational new drug application; clinical trials had not begun. Its prior nanoantibiotics program was inactive. BioVie also described limited cross-ownership arrangements with PharmaIN concerning ascites drug-development programs.
Financial performance and position
| Metric | FY2016 | FY2015 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $432,028 | $233,377 |
| Operating loss | $432,028 | $233,377 |
| Net loss | $431,923 | $233,008 |
| Research and development expense | $37,901 | $4,196 |
| Cash used in operating activities | $163,631 | $65,383 |
| Cash at year-end | $123,757 | $267,481 |
At June 30, 2016, total assets were $2,719,184, including $2,242,734 of net intangible assets and $345,711 of goodwill recorded in connection with the LAT acquisition. Current liabilities were $803,244, including $293,633 of accounts payable and accrued expenses, $499,612 of accrued payroll, and a $10,000 related-party loan payable on demand. Stockholders’ equity was $1,915,939. The filing reports no cash interest paid and no material off-balance-sheet arrangements.
The reported net loss per share was $0.00, rounded, for both years. The company had 87,160,001 common shares outstanding at June 30, 2016; 3 million options were outstanding at a $0.06 exercise price, vesting in three annual tranches.
Material changes and unusual items
- Operating expenses increased by about $199,000 year over year; professional fees rose to $143,235 from $50,779, and R&D expense increased to $37,901 from $4,196.
- The LAT Pharma acquisition was accounted for as a purchase valued at $2,389,200, based on 39,820,000 BioVie shares valued at $0.06 each. The company recorded $2,293,770 of acquired intellectual property, amortized over 10 years, and $345,711 of goodwill.
- In connection with the transaction, 39,869,999 existing shares were retired and canceled; LAT holders received 39,820,000 shares and owned approximately 46% of the company after the merger.
- Subsequent to year-end, BioVie issued and sold 49,999 shares at $0.10 per share.
Outlook, risks, and contingencies
Management said available cash was insufficient for the next 12 months and estimated a need for approximately $250,000–$500,000 of additional financing. Its stated 12-month spending estimates, assuming financing, included $45,000 for R&D, $15,000 for corporate overhead, and $250,000 for staffing. Management cautioned that estimates and timelines could change as development work progressed.
The auditor’s report and management’s disclosures state that substantial doubt exists about BioVie’s ability to continue as a going concern. The company had no committed financing and warned that failure to raise funds could force it to delay or reduce development, seek partners or a sale, or cease operations. BIV201’s development and commercialization depend on completing the IND process, FDA authorization, successful clinical trials, regulatory approval, and additional capital. Approval and clinical success are not assured.
Other notable risks include dependence on part-time management and third parties, lack of commercial manufacturing and sales capabilities, uncertain patent protection and competition, potential shareholder dilution, and limited liquidity in OTC-traded shares. The filing states that disclosure controls and internal control over financial reporting were ineffective at June 30, 2016, citing insufficient formal controls and segregation of duties and no independent audit committee chair. The CEO’s employment agreement provides a $250,000 annual base salary for a three-year term; the filing also reports substantial accrued payroll.
Important facts for investors to verify
- Current cash, financing raised since the reporting date, and whether the stated $250,000–$500,000 near-term funding need was met.
- Progress and costs to complete the BIV201 IND application, and whether the FDA permitted clinical trials to begin.
- Reconciliation of accrued payroll and related-party obligations, including the $499,612 accrued payroll balance and $10,000 demand loan.
- Acquisition accounting, valuation and ownership terms for LAT Pharma, including the intangible asset and goodwill balances.
- Remediation of the disclosed material weaknesses and effectiveness of disclosure and financial-reporting controls.
- Potential dilution from outstanding options and future financing, and the market liquidity and resale status of the company’s shares.