Notes to Financial Statements
For the Three and Nine Months Ended
March 31, 2017 and 2016
(unaudited)
1. Background Information
BioVie Inc. is a clinical-stage
company pursuing the discovery, development, and commercialization of innovative drug therapies. The Company is currently focused
on developing and commercializing BIV201, a novel approach to the treatment of ascites due to chronic liver cirrhosis. In March
2017, BioVie received notification from the FDA that it could initiate a Phase 2a US clinical trial and in April the Company signed
a Cooperative Research and Development Agreement (CRADA) with the McGuire Research Institute/VA in Richmond, VA, to begin dosing
patients with BIV201 in mid-2017.
BIV201 has the potential to improve
the health of thousands of patients suffering from life-threatening complications of liver cirrhosis due to hepatitis, NASH, and
alcoholism. It has Orphan Drug designation for the most common of these complications, ascites, which represents a significant
unmet medical need. The FDA has never approved any drug specifically for treating ascites. For more information about BioVie and
BIV201, please visit our website: www.biovieinc.com.
The BIV201 development program
began at LAT Pharma LLC. On April 11, 2016, the Company acquired LAT Pharma LLC and the rights to its BIV201 development program.
We currently own all development and marketing rights to our drug candidate, except as noted previously, the Company and PharmaIN
have exchanged small (low single-digit) ownership rights to each other’s ascites drug development programs. The Company recently
filed patent applications for its drug candidate in the US and Japan, as well as a PCT in Europe. We are currently completing the
work necessary to file our investigational new drug (IND) application, and aim to commence clinical trials should the FDA approve
our application.
The Company’s activities are subject to significant
risks and uncertainties including failure to secure additional funding to properly execute the company’s business plan.
2. Going Concern
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. For the nine months ended March 31, 2017, the Company
had a net loss of $887,637. As of March 31, 2017, the Company has not earned any revenues. In view of these matters,
the Company’s ability to continue as a going concern is dependent upon the Company’s ability to begin operations and
to achieve a level of profitability. Since inception, the Company has financed its activities principally from the sale of public
equity securities. The Company intends on financing its future development activities and its working capital needs largely from
the sale of public equity securities with some additional funding from other traditional financing sources, including term notes
and proceeds from sub-licensing agreements until such time that funds provided by operations are sufficient to fund working capital
requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification
of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue
as a going concern.
BIOVIE INC. (F/K/A NANOANTIBIOTICS,
INC.)
Notes to Financial Statements
For the Three and Nine Months Ended
March 31, 2017 and 2016
(unaudited)
3. Significant Accounting Policies
Unaudited Interim Financial Statements
The accompanying unaudited financial
statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim
financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the financial statements
do not include all of the information and footnotes required by generally accepted accounting principles for complete financial
statements.
In the opinion of management,
all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial
position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented
not misleading. The results of operations for such interim periods are not necessarily indicative of operations for
a full year.
Basis of Presentation
The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash
Cash is maintained at financial institutions
and, at times, balances may exceed federally insured limits. We have never experienced any losses related to these balances. All
of our cash balances were fully insured at March 31, 2017.
Financial Instruments
The Company’s financial
instruments include cash and accounts payable. The carrying amounts of cash and accounts payable approximate their fair value,
due to the short-term nature of these items.
The carrying amounts of debt
converted to long-term notes payable are reported at their original amounts.
Research and Development
Research and development costs
are charged to operations when incurred and are included in operating expenses. The Company expensed $375,872 for research and
development for the nine months ended March 31, 2017.
BIOVIE INC. (F/K/A NANOANTIBIOTICS,
INC.)
Notes to Financial Statements
For the Three and Nine Months Ended
March 31, 2017 and 2016
(unaudited)
3. Significant Accounting Policies (continued)
Income Taxes
Deferred income tax assets and
liabilities arise from temporary differences associated with differences between the financial statements and tax basis of assets
and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred
tax assets and liabilities are classified as current or non-current, depending on the classification of the assets or liabilities
to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or non-current
depending on the periods in which the temporary differences are expected to reverse.
The Company follows the provisions
of FASB ASC 740-10 “
Uncertainty in Income Taxes
” (ASC 740-10), January 1, 2007. The Company has not recognized
a liability as a result of the implementation of ASC 740-10. A reconciliation of the beginning and ending amount of unrecognized
tax benefits has not been provided since there are no unrecognized benefits at March 31, 2017 and since the date of adoption. The
Company has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. If there were an unrecognized
tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties
in operating expenses.
Earnings (Loss) per Share
Basic earnings per share are
computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted
earnings per common share are computed by dividing net income by the weighted average number of shares of common stock outstanding
and dilutive options outstanding during the period. For the three and nine months ended March 31, 2017 and 2016 all outstanding
options have been excluded from the calculation of the diluted net loss per share since their effect was anti-dilutive.
Stock-based Compensation
The Company recognizes all share-based
payments to employees, including grants of employee stock options, as compensation expense in the financial statements based on
their fair values. That expense will be recognized over the period during which an employee is required to provide services in
exchange for the award, known as the requisite service period (usually the vesting period).
BIOVIE INC. (F/K/A NANOANTIBIOTICS,
INC.)
Notes to Financial Statements
For the Three and Nine Months Ended
March 31, 2017 and 2016
(unaudited)
3. Significant Accounting Policies (continued)
Fair Value Measurements
In September 2006, the Financial
Accounting Standards Board (FASB) introduced a framework for measuring fair value and expanded required disclosure about fair value
measurements of assets and liabilities. The Company adopted the standard for those financial assets and liabilities as of the beginning
of the 2013 fiscal year and the impact of adoption was not significant. FASB Accounting Standards Codification (ASC) 820 “
Fair
Value Measurements and Disclosures
” (ASC 820) defines fair value as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in
an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that
distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable
inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information
available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority
to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1 - Unadjusted quoted prices
in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 - Inputs other than quoted
prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted
prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets
that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and
inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 - Inputs that are both significant to the
fair value measurement and unobservable.
Fair value estimates discussed
herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2017. The respective
carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of
these instruments. These financial instruments include accrued payroll.
The carrying amounts of debt
converted to long-term notes payable are reported at their original amounts.
Recent accounting pronouncements
The Company has reviewed recent
accounting pronouncements issued by the FASB (including its EITF), the AICPA, and the SEC and did not or are not believed by management
to have a material impact on the Company’s financial statements.
BIOVIE INC. (F/K/A NANOANTIBIOTICS,
INC.)
Notes to Financial Statements
For the Three and Nine Months Ended
March 31, 2017 and 2016
(unaudited)
4. Related Party Loan
LAT Pharma was given a zero-interest
bearing loan by the company’s General Partner, Jonathan Adams in the amount of $5,000 in August 2015 and $5,000 in November
2015. The total of $10,000 was outstanding when the Company merged with LAT Pharma. As of March 31, 2017 the Company has an outstanding
balance of $10,000 payable on demand to the CEO, Jonathan Adams.
On March 23, 2017, Jonathan Adams
agreed to defer the payment of his salary debt of $180,555 until December 31, 2019, through the issuance of a Promissory note.
The promissory note does not carry any interest charge as long as the amount is paid in full before December 31, 2019. The salary
debt has thereby been reclassified from a current liability to a long term liability on the balance sheet.
On March 23, 2017, Elliot Ehrlich
agreed to forgive 50% of his salary debt of $444,056.25. The adjusted salary debt is $222,028.13. Elliot Ehrlich also agreed to
defer the payment of his salary debt of $222,028.13 until December 31, 2019, through the issuance of a Promissory note. The promissory
note does not carry any interest charge as long as the amount is paid in full before December 31, 2019. The salary debt has thereby
been reclassified from a current liability to a long term liability on the balance sheet and the salary debt forgiven has been
reflected on the income statement as other income.
5. Commitments and Contingencies
Office Lease
On January 1, 2014 the Company
executed a lease agreement with Cummings Properties for the company’s office of 270 square feet at 100 Cummings Center, Suite
247-C, Beverly, MA 01915. The lease is for a term of five years from January 1, 2014 to December 30, 2018 and requires monthly
payments of $369 ($4,428 annually for each of the five years, total aggregate of $22,140).
Employment Agreements
On April 11, 2016 the Company
entered into employment agreement with CEO Jonathan Adams. The Company’s agreement provides for a three-year term with minimum
annual base salary of $250,000 per year. Effective April 11, 2016, the (previous) CEO/CFO resigned.
BIOVIE INC. (F/K/A NANOANTIBIOTICS,
INC.)
Notes to Financial Statements
For the Three and Nine Months Ended
March 31, 2017 and 2016
(unaudited)
6. Income Taxes
Deferred taxes are recorded for
all existing temporary differences in the Company’s assets and liabilities for income tax and financial reporting purposes.
Due to the valuation allowance for deferred tax assets, as noted below, there were no net deferred tax benefit or expense for the
nine months ended March 31, 2017.
There is no current or deferred
income tax expense or benefit allocated to continuing operations for the nine months ended March 31, 2017.
The provision for income taxes
is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes.
The items causing this difference are as follows:
|
|
March 31, 2017
|
|
June 30, 2016
|
Tax expense (benefit) at U.S. statutory rate
|
|
$
|
(301,797
|
)
|
|
$
|
(146,889
|
)
|
State income tax expense (benefit), net of federal benefit
|
|
|
(44,382
|
)
|
|
|
(21,659
|
)
|
Effect of non-deductible expenses
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
|
346,179
|
|
|
|
168,548
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The tax effects of temporary differences that give rise
to significant portions of the deferred tax assets and deferred tax liabilities at March 31, 2017 were as follows:
Deferred tax assets (liability), noncurrent:
|
|
|
Net operating loss
|
|
$
|
346,179
|
|
Valuation allowance
|
|
|
(346,179
|
)
|
|
|
$
|
—
|
|
Change in valuation allowance:
Balance, June 30, 2016
|
|
$
|
391,848
|
|
Increase in valuation allowance
|
|
|
346,179
|
|
Balance, March 31, 2017
|
|
|
738,027
|
|
Since
management of the Company believes that it is more likely than not that the net deferred tax assets will not provide future benefit,
the Company has established a 100 percent valuation allowance on the net deferred tax assets as of March 31, 2017.
As of March 31, 2017, the Company
had federal and state net operating loss carry-forwards totaling approximately $1,870,000 which begin expiring in 2022.
BIOVIE INC. (F/K/A NANOANTIBIOTICS,
INC.)
Notes to Financial Statements
For the Three and Nine Months Ended
March 31, 2017 and 2016
(unaudited)
7. Purchase of LAT Pharma
On April 11, 2016, the Company entered
into and consummated an Agreement and Plan of Merger (the “Merger Agreement”), with LAT Acquisition Corp., a Nevada
corporation and wholly-owned subsidiary of the Company (“Acquisition”) and LAT Pharma, LLC an Illinois limited liability
company (“LAT”). Pursuant to the terms of the Merger Agreement, Acquisition merged with and into LAT in a statutory
triangular merger (the “Merger”) with LAT surviving as a wholly-owned subsidiary of the Company. As consideration for
the Merger, the Company issued the interest holders of LAT (the “LAT Holders”) an aggregate of 39,820,000 shares of
our Common Stock issued to the LAT Holders in accordance with their pro rata ownership of LAT membership interests prior to the
Merger. Following the Merger, the Registrant will continue the development of LAT’s lead clinical therapeutic candidate Continuous
low-dose Infusion (CI) Terlipressin.
Immediately prior to the Merger, the
Company had 87,210,000 shares of Common Stock issued and outstanding. In connection with the Merger, certain shareholders of the
Company collectively agreed to retire and cancel an aggregate of 39,869,999 shares of Common Stock. Following the consummation
of the Merger, the issuance of the Merger Shares of the 39,820,000 shares of Common Stock, the Company had 87,160,001 shares of
Common Stock issued and outstanding and the LAT Holders beneficially own 39,820,000 shares or approximately forty-six percent (46%)
of such issued and outstanding Common Stock.
Under the purchase method of accounting,
the transaction was valued for accounting purposes at $2,389,200, which was the estimated fair value of the consideration paid
by the Company. The estimate was based on the consideration paid of 39,820,000 shares of common stock valued based on the closing
price on 04/11/2016 of $0.06 per share.
The assets and liabilities of
LAT Pharma, Inc. were recorded at their respective fair values as of the closing date of the Merger Agreement, and the following
table summarizes these values based on the balance sheet at April 11, 2016.
$
|
2,303,682
|
|
Assets Purchased
|
|
260,193
|
|
Liabilities Assumed
|
|
2,043,489
|
|
Net Assets Purchased
|
|
2,389,200
|
|
Purchase Price
|
$
|
345,711
|
|
Goodwill from Purchase
|
Intangible asset detail
$
|
2,293,770
|
|
Intangible Intellectual Property
|
|
345,711
|
|
Goodwill
|
|
2,639,481
|
|
Intangible Asset from Purchase
|
BIOVIE INC. (F/K/A NANOANTIBIOTICS,
INC.)
Notes to Financial Statements
For the Three and Nine Months Ended
March 31, 2017 and 2016
(unaudited)
7. Purchase of LAT Pharma(continued)
Under the 338(h)(10) election,
intangibles and goodwill related to the acquisition of LAT Pharma will be fully deductible for tax purposes.
The intangible intellectual property
is amortized over 10 years.
|
|
March 2017
|
|
December 2015
|
Intangible Assets subject to Amortization
|
|
$
|
2,293,770
|
|
|
$
|
—
|
|
Amortization Expense for 9 Months
|
|
$
|
172,033
|
|
|
$
|
—
|
|
Accumulated Amortization as of March 31, 2017
|
|
$
|
280,413
|
|
|
$
|
—
|
|
The previous year amortization
expense has been amortized for the period from April 11, 2016 to June 30, 2016. The estimated Amortization expense for each of
the five succeeding fiscal years will be approximately $229,300 per year.
8. Stockholders’ Equity
Offering of Stock Options
In connection with the employment
agreement signed with the Chief Financial Officer on April 11, 2016, Jonathan Adams received options to acquire 3 million shares
exercisable at $0.06 per share, the closing price on that date. These Options Group A shall become vested and exercisable (i) as
to 1 million shares on April 11, 2017, (ii) as to 1 million shares on April 11, 2018, and (iii) as to 1 million shares on April
11, 2019.
The fair market value of the stock
options is estimated using the Black Scholes valuation model and the Company uses the following methods to determine its underlying
assumptions: expected volatilities are based on the historical volatilities of 3 comparable companies of the daily closing price
of their respective common stock; the expected term of options granted is based on the average time outstanding method; and the
risk free interest rate is based on the US Treasury bonds issued with similar life terms to the expected life of the grant.
BIOVIE INC. (F/K/A NANOANTIBIOTICS,
INC.)
Notes to Financial Statements
For the Three and Nine Months Ended
March 31, 2017 and 2016
(unaudited)
8. Stockholders’ Equity(continued)
The following key assumptions were
used in the valuation model to value stock option grants for each respective period:
Valuation Date
|
|
4/11/2016
|
4/11/2016
|
4/11/2016
|
Stock Price
|
|
$
|
0.06
|
|
$
|
0.06
|
|
$
|
0.06
|
|
Exercise Price
|
|
$
|
0.06
|
|
$
|
0.06
|
|
$
|
0.06
|
|
Term (expected term for options)
|
|
|
1.00
|
|
|
2.00
|
|
|
3.00
|
|
Volatility
|
|
|
56.49
|
%
|
|
58.45
|
%
|
|
97.82
|
%
|
Annual Rate of Quarterly Dividends
|
|
|
0.00
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
Discount Rate - Bond Equivalent Yield
|
|
|
0.53
|
%
|
|
0.70
|
%
|
|
0.85
|
%
|
Call Option Value ($Millions)
|
|
$
|
0.01
|
|
$
|
0.02
|
|
$
|
0.04
|
|
Fair Value
|
|
$
|
13,467
|
|
$
|
19,523
|
|
$
|
36,489
|
|
The Company issued stock options
to consultants and board of directors for services provided to the company. The following key assumptions were used in the valuation
model to value stock option grants for each respective period:
Valuation Date
|
|
11/16/2016
|
12/18/2016
|
03/14/17
|
Stock Price
|
|
$
|
0.25
|
|
$
|
0.21
|
|
$
|
0.22
|
|
Exercise Price
|
|
$
|
0.25
|
|
$
|
0.21
|
|
$
|
0.22
|
|
Term (expected term for options)
|
|
|
2.00
|
|
|
2.00
|
|
|
2.00
|
|
Volatility
|
|
|
43.12
|
%
|
|
43.12
|
%
|
|
40.02
|
%
|
Annual Rate of Quarterly Dividends
|
|
|
0.00
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
Discount Rate - Bond Equivalent Yield
|
|
|
1.02
|
%
|
|
1.15
|
%
|
|
1.40
|
%
|
Call Option Value ($Millions)
|
|
$
|
0.06
|
|
$
|
0.05
|
|
$
|
0.05
|
|
Fair Value
|
|
$
|
30,919
|
|
$
|
15,646
|
|
$
|
5,143
|
|
BIOVIE INC. (F/K/A NANOANTIBIOTICS,
INC.)
Notes to Financial Statements
For the Three and Nine Months Ended
March 31, 2017 and 2016
(unaudited)
8. Stockholders’ Equity(continued)
Stock option transactions under
the Company’s plans for the years ended March 31, 2017 is summarized below:
|
|
|
Weighted
|
|
|
|
Weighed-
|
Average
|
Aggregate
|
|
|
Average
|
Remaining
|
Intrinsic
|
|
Shares
|
Exercise
|
Contractual
|
Value
|
Options
|
(Thousands)
|
Price
|
Term
|
(Thousands)
|
Outstanding at June 30, 2016
|
3,000
|
0.06
|
2
|
-
|
Granted
|
-
|
-
|
-
|
-
|
Exercised
|
-
|
-
|
-
|
-
|
Forfeited
|
-
|
-
|
-
|
-
|
Outstanding at September 30, 2016
|
3,000
|
0.06
|
2
|
-
|
Granted
|
800
|
0.24
|
2
|
-
|
Exercised
|
-
|
-
|
-
|
-
|
Forfeited
|
-
|
-
|
-
|
-
|
Outstanding at December 31, 2016
|
3,800
|
0.10
|
2
|
-
|
Granted
|
100
|
0.22
|
2
|
-
|
Exercised
|
-
|
-
|
-
|
-
|
Forfeited
|
-
|
-
|
-
|
-
|
Outstanding at March 31, 2017
|
3,900
|
0.10
|
2
|
-
|
The compensation expense for
the 9 months ended March 31, 2017 includes $26,544 related to the stock options described above. The Legal and Professional fee
for the 9 months ended March 31, 2017 includes $8,340 related to the stock options described above.
Offerings of Common Stock
and Warrants
In September 2016, the Company
sold and issued an aggregate of 49,999 shares of common stock in a private placement transaction for aggregate gross proceeds of
approximately $5,000. The purchase price for the common stock was $0.10 per share.
In October 2016, the Company
sold and issued an aggregate of 225,000 shares of common stock and warrants to purchase 112,500 shares of common stock in a private
placement transaction for aggregate gross proceeds of approximately $45,000. The purchase price for the common stock and warrants
was $0.20 per unit. The warrants are exercisable at an exercise price of $0.50 at any time from date of issuance until 5 years
from the date of issuance.
In November 2016, the Company
sold and issued an aggregate of 250,000 shares of common stock and warrants to purchase 125,000 shares of common stock in a private
placement transaction for aggregate gross proceeds of approximately $50,000. The purchase price for the common stock and warrants
was $0.20 per unit. The warrants are exercisable at an exercise price of $0.50 at any time from date of issuance until 5 years
from the date of issuance.
BIOVIE INC. (F/K/A NANOANTIBIOTICS,
INC.)
Notes to Financial Statements
For the Three and Nine Months Ended
March 31, 2017 and 2016
(unaudited)
8. Stockholders’ Equity(continued)
In January 2017, the Company
sold and issued an aggregate of 100,000 shares of common stock and warrants to purchase 50,000 shares of common stock in a private
placement transaction for aggregate gross proceeds of approximately $20,000. The purchase price for the common stock and warrants
was $0.20 per unit. The warrants are exercisable at an exercise price of $0.50 at any time from date of issuance until 5 years
from the date of issuance.
In January 2017, the Company,
entered into a common stock purchase agreement (the “Purchase Agreement”) with Aspire Capital Fund, LLC, an Illinois
limited liability company (“Aspire Capital”) which provides that, on the terms and subject to the conditions and limitations
set forth therein, Aspire Capital is committed to purchase up to an aggregate of $12.0 million of shares of the Company’s
common stock over the 30-month term of the Purchase Agreement. On execution of the Purchase Agreement, the Company agreed to sell
to Aspire Capital 1,000,000 shares of common stock and warrants to purchase 500,000 shares of common stock for proceeds of $200,000.
The Warrant Shares will each have a five-year term and will be exercisable at $0.50 per share. Concurrently with entering into
the Purchase Agreement, the Company also entered into a registration rights agreement with Aspire Capital (the “Registration
Rights Agreement”), in which the Company agreed to file one or more registration statements, as permissible and necessary
to register under the Securities Act of 1933, as amended (the “Securities Act”), registering the sale of the shares
of the Company’s common stock that have been and may be issued to Aspire Capital under the Purchase Agreement.
Under the Purchase agreement,
after the Securities and Exchange Commission (the “SEC”) has declared effective the registration statement referred
to above, on any trading day selected by the Company, the Company has the right, in its sole discretion, to present Aspire Capital
with a purchase notice (each, a “Purchase Notice”), directing Aspire Capital (as principal) to purchase up to 100,000
shares of the Company’s common stock per business day, up to $12.0 million of the Company’s common stock in the aggregate
at a per share price (the “Purchase Price”) equal to the lesser of:
-
the lowest sale price of the Company’s
common stock on the purchase date; or
-
the arithmetic average of the three
(3) lowest closing sale prices for the Company’s common stock during the twelve (12) consecutive trading days ending on the
trading day immediately preceding the purchase date.
In addition, on any date on which
the Company submits a Purchase Notice to Aspire Capital in an amount equal to 100,000 shares and the closing sale price of our
stock is equal to or greater than $0.30 per share, the Company also has the right, in its sole discretion, to present Aspire Capital
with a volume-weighted average price purchase notice (each, a “VWAP Purchase Notice”) directing Aspire Capital to purchase
an amount of stock equal to up to 30% of the aggregate shares of the Company’s common stock traded on its principal market
on the next trading day (the “VWAP Purchase Date”), subject to a maximum number of shares the Company may determine.
The purchase price per share pursuant to such VWAP Purchase Notice is generally 95% of the volume-weighted average price for the
Company’s common stock traded on its principal market on the VWAP Purchase Date.
BIOVIE INC. (F/K/A NANOANTIBIOTICS,
INC.)
Notes to Financial Statements
For the Three and Nine Months Ended
March 31, 2017 and 2016
(unaudited)
8. Stockholders’ Equity(continued)
The Purchase Price will be adjusted
for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the period(s)
used to compute the Purchase Price. The Company may deliver multiple Purchase Notices and VWAP Purchase Notices to Aspire Capital
from time to time during the term of the Purchase Agreement, so long as the most recent purchase has been completed.
The Purchase Agreement provides
that the Company and Aspire Capital shall not effect any sales under the Purchase Agreement on any purchase date where the closing
sale price of the Company’s common stock is less than $0.10. There are no trading volume requirements or restrictions under
the Purchase Agreement, and the Company will control the timing and amount of sales of the Company’s common stock to Aspire
Capital. Aspire Capital has no right to require any sales by the Company, but is obligated to make purchases from the Company as
directed by the Company in accordance with the Purchase Agreement. There are no limitations on use of proceeds, financial or business
covenants, restrictions on future fundings, rights of first refusal, participation rights, penalties or liquidated damages in the
Purchase Agreement. In consideration for entering into the Purchase Agreement, concurrently with the execution of the Purchase
Agreement, the Company issued to Aspire Capital 2,400,000 shares of the Company’s common stock (the “Commitment Shares”).
The Purchase Agreement may be terminated by the Company at any time, at its discretion, without any cost to the Company. Aspire
Capital has agreed that neither it nor any of its agents, representatives and affiliates shall engage in any direct or indirect
short-selling or hedging of the Company’s common stock during any time prior to the termination of the Purchase Agreement.
Any proceeds that the Company receives under the Purchase Agreement are expected to be used for working capital and general corporate
purposes.
In March 2017, the Company sold
and issued an aggregate of 500,000 shares of common stock and warrants to purchase 250,000 shares of common stock in a private
placement transaction for aggregate gross proceeds of approximately $100,000. The purchase price for the common stock and warrants
was $0.20 per unit. The warrants are exercisable at an exercise price of $0.50 at any time from date of issuance until 5 years
from the date of issuance.
9. Renegotiated Debt
On March 23, 2017, Barrett Ehrlich
agreed to defer the payment of his consulting fee debt of $173,333.33 until December 31, 2019, through the issuance of a Promissory
note. The promissory note does not carry any interest charge as long as the amount is paid in full before December 31, 2019. The
consulting fee debt has thereby been reclassified from a current liability to a long term liability on the balance sheet.
On March 23, 2017, Elliot Ehrlich
agreed to forgive 50% of his salary debt of $444,056.25. The adjusted salary debt is $222,028.13. Elliot Ehrlich also agreed to
defer the payment of his salary debt of $222,028.13 until December 31, 2019, through the issuance of a Promissory note. The promissory
note does not carry any interest charge as long as the amount is paid in full before December 31, 2019. The salary debt has thereby
been reclassified from a current liability to a long term liability on the balance sheet and the salary debt forgiven has been
reflected on the income statement as other income.
On March 23, 2017, Jonathan Adams
agreed to defer the payment of his salary debt of $180,555.64 until December 31, 2019, through the issuance of a Promissory note.
The promissory note does not carry any interest charge as long as the amount is paid in full before December 31, 2019. The salary
debt has thereby been reclassified from a current liability to a long term liability on the balance sheet.