BioVie Inc. — Form 10-Q Summary
Reporting period: Fiscal quarter and six months ended December 31, 2016. The company was a development-stage biotechnology business focused on BIV201, a candidate therapy for ascites associated with liver cirrhosis. It acquired LAT Pharma and the BIV201 development program in April 2016; prior-year comparisons therefore do not reflect the same development activities.
Financial results and position
- Revenue: None in the three- or six-month periods ended December 31, 2016 or 2015. With no sales or cost of goods sold, there was no gross margin.
- Loss: Net loss was $357,799 for the quarter, versus $49,878 in the prior-year quarter; six-month net loss was $709,141, versus $104,444. Six-month operating expenses were $709,152, compared with $104,555.
- Expenses: Six-month research and development expense was $255,829, compared with none in the prior-year period. Professional fees rose to $186,179 from $18,017, and payroll expense to $142,696 from $80,738. The filing attributes increases to development and commercialization-related work, legal and financial costs, and the new CEO’s accrued salary.
- Cash flow: For the six months, operating activities used $229,725; financing provided $110,487, including $99,987 from stock issuance and $10,500 from a loan. Cash declined by $119,238 to $4,519. No investing cash flows were reported.
- Liquidity and liabilities: At December 31, cash was $4,519 and current liabilities were $1,151,366, including $506,254 of accounts payable and accrued expenses, $624,612 of accrued payroll, a $10,500 loan payable, and a $10,000 demand loan from the CEO. Current assets were $4,519, implying a working-capital deficit of approximately $1.15 million. Total assets were $2,478,276, largely intangible assets and goodwill from the LAT Pharma acquisition; stockholders’ equity was reported as $1,326,910.
- Shares: 87,685,000 common shares were outstanding at December 31, 2016, versus 87,160,001 at June 30, 2016. The six-month weighted-average share count was 87,355,108.
Changes, outlook, and risks
- Quarterly net loss increased by $307,921 year over year; six-month net loss increased by $604,697. The company said the added R&D and amortization reflected its post-acquisition development stage.
- Management said it was completing work needed to submit an IND application and intended to begin clinical trials if the FDA approves it. The filing gives no specific approval or trial-start date.
- The company estimated it needed approximately $250,000–$500,000 of additional net financing for near-term needs and said it lacked sufficient funds for planned development over the next 12 months. Its stated 12-month budget, assuming financing, included $45,000 for R&D, $15,000 for corporate overhead, and $250,000 for staffing. Management also said existing cash and cash equivalents were expected to last until June 30, 2017; the filing does not reconcile this assertion with its reported $4,519 cash balance and stated financing need.
- The filing warns of substantial doubt about the company’s ability to continue as a going concern. Without financing or other funding, it may reduce or delay development, seek partners or licensing arrangements, or cease operations. No assurance is given that BIV201 will be developed successfully or receive regulatory approval.
- Subsequent to quarter-end, the company reported a $20,000 private placement and a January 4, 2017 agreement with Aspire Capital for potential purchases of up to $12 million of stock over 30 months. The agreement is subject to conditions, including an effective registration statement and a $0.10 minimum share price; purchases are at the company’s direction and pricing is formula-based. It also provided for an initial $200,000 transaction and issuance of 2.4 million commitment shares.
- Other commitments include a three-year CEO employment agreement with a minimum annual base salary of $250,000 and an office lease through December 2018. The company reported no material legal proceedings and no material off-balance-sheet arrangements.
- Management concluded that disclosure controls and procedures were not effective as of December 31, 2016. No material change in internal control over financial reporting during the quarter was reported.
Important facts for investors to verify
- Whether financing was completed and cash available after December 31, 2016, including actual proceeds and dilution under the Aspire Capital agreement and private placements.
- Current cash runway, overdue or accrued obligations, and the ability to meet payroll and other liabilities.
- IND submission status, FDA response, and the clinical-development timeline and budget for BIV201.
- The basis for the going-concern assessment and management’s statement that cash would last until June 30, 2017 despite the reported cash balance and financing requirement.
- Remediation plans and subsequent status of the ineffective disclosure controls.