Notes to Condensed Financial Statements
For the Three Months Ended September
30, 2017 and 2018
(unaudited)
1.
|
Background Information
|
BioVie Inc. (the “Company”)
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 April 2017, the Company signed a Cooperative Research and Development Agreement (CRADA) with the McGuire Research
Institute Inc. in Richmond, VA, and began dosing patients with BIV201 in September 2017. As of September 2018, four patients
had been treated with BIV201 therapy in this ongoing Phase 2a clinical trial.
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 FDA Fast-Track status and 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. The Company
has an issued US Patent covering the use of BIV201 for the treatment of ascites patients in the outpatient setting using ambulatory
pump infusion, and has filed patent applications for its drug candidate in Japan, and Europe, and China.
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.
The Company currently owns all development and marketing rights to its drug candidate. The Company and PharmaIN, Corp. (“PharmaIN”),
LAT Pharma’s former partner focused on the development of new modified drug candidates in the same therapeutic field but
not including BIV201, have agreed to pay royalties equal to less than 1% of future net sales of each company's ascites drug development
programs, or if such program is licensed to a third party, less than 5% of each company's net license revenues. The Company’s
relationship with PharmaIN could advance into a collaboration or be terminated.
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.
The accompanying financial statements
have been prepared assuming the Company will continue as a going concern. The company has incurred recurring operational losses
and has an accumulated deficit of $5.2 million and as a development stage enterprise, the Company expects substantial losses in
future periods. The Company’s future operations are dependent on the success of the Company’s ongoing development and
commercialization efforts, as well as continuing to secure additional financing.
In July 2018 it completed a capital
raise from Acuitas Group Holding, LLC (“Acuitas”) and other purchasers and received net proceeds of $3 million and
has resumed to further clinical development of BIV201. The Acuitas investment agreement also stipulated that if the clinical development
of BIV201 continues, Acuitas may invest an additional $3 million to fund operations in year two, less any federal or FDA grant
funding received by the Company.
At September 30, 2018, the Company had
cash on hand of $2,135,000 and management believes we have sufficient funds to meet our operating and capital requirements for
at least the next 12 months.
BIOVIE INC.
Notes to Condensed Financial Statements
For the Three Months Ended September
30, 2017 and 2018
(unaudited)
3.
|
Significant Accounting Policies
|
Basis of Presentation
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable
rules and regulations of the Securities and Exchange Commission (“SEC”). Our unaudited condensed financial statements
reflect all adjustments, which are, in the opinion of management requires management to make estimates and assumptions that affect
the reported amounts of assets and necessary for a fair presentation of our financial position and results of operations. Such
adjustments are of a normal recurring nature, unless otherwise indicated. The balance sheet as of September 30, 2018 and the results
of operations for the three months ended September 30, 2018 are not necessarily indicative of the results to be expected for the
entire year. These interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated
financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended June 30, 2018. The condensed
balance sheet at June 30, 2018 has been derived from the audited financial statements as that date, but does not include all disclosures,
including notes, required by U.S. GAAP for complete financial statements.
Use of estimates
The preparation of the accompanying
condensed financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the condensed
financial statements, and the reported amounts of revenue and expenses during the periods reported. Actual results could differ
from those estimates,
Cash
Cash is the financial instrument
that potentially subjects the Company to a concentration of credit risk as cash is deposited with a financial institution and,
at times, the cash balances may exceed the Federal Deposit Insurance Corporation insurance limits. The carrying value of cash approximates
fair value at September 30, 2018 and June 30, 2018.
Financial Instruments
The
Company’s financial instruments include cash, accounts payable, related party loans and a demand promissory note. The carrying
amounts of cash and accounts payable approximate their fair value, due to the short-term nature of these items.
Research and Development
Research and development costs
are charged to operations when incurred and are included in operating expenses. The Company expensed $194,521 and $41,854 for research
and development for the three months ended September 30, 2018 and 2017 respectively.
BIOVIE INC.
Notes to Condensed Financial Statements
For the Three Months Ended September
30, 2017 and 2018
(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 September 30, 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 year. 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 year. For the three months ended September 30, 2018 all outstanding options have been excluded from
the calculation of the diluted net loss per share since their effect was anti-dilutive.
The following potentially dilutive securities were excluded
from the computation of diluted loss per share for the three months ended June and September 30, 2018:
|
|
September 30, 2018
|
|
June 30, 2018
|
|
|
Number of Shares (Thousands)
|
|
Number of Shares (Thousands)
|
Stock Options
|
|
|
5,150
|
|
|
|
5,150
|
|
Warrants
|
|
|
216,441
|
|
|
|
4,774
|
|
Total
|
|
|
221,591
|
|
|
|
9,924
|
|
BIOVIE INC.
Notes to Condensed Financial Statements
For the Three Months Ended September
30, 2017 and 2018
(unaudited)
3.
|
Significant Accounting Policies (continued)
|
Stock-based Compensation
The Company has accounted for stock-based
compensation under the provisions of FASB ASC 718 – “Stock Compensation” which requires the use of the fair-value
based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity
instruments (stock options and common stock purchase warrants). For employee awards, the fair value of each stock option award
is estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected
dividends, expected term, and the risk-free interest rate. For non-employees, the fair value of each stock option award is estimated
on the measurement date using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends,
expected term, and the risk-free interest rate. For non-employees, the Company utilizes the graded vesting attribution method under
which the entity treats each separately vesting portion (tranche) as a separate award and recognizes compensation cost for each
tranche over its separate vesting schedule. Expected volatilities are based on historical volatility of peer companies and other
factors estimated over the expected term of the stock options. For employee awards, the expected term of options granted is derived
using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract
term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected
term.
Goodwill
Goodwill is recorded when the purchase
price paid for an acquisition exceeds the fair value of net identified tangible and intangible assets acquired. The Company performs
an annual impairment test of goodwill and further periodic tests to the extent indicators of impairment develop between annual
impairment tests. The Company’s impairment review process compares the fair value of the reporting unit to its carrying value,
including the goodwill related to the reporting unit. To determine the fair value of the reporting unit, the Company may use various
approaches including an asset or cost approach, market approach or income approach or any combination thereof. These approaches
may require the Company to make certain estimates and assumptions including future cash flows, revenue and expenses. These estimates
and assumptions are reviewed each time the Company tests goodwill for impairment and are typically developed as part of the Company’s
routine business planning and forecasting process. While the Company believes its estimates and assumptions are reasonable, variations
from those estimates could produce materially different results. The Company did not recognize any goodwill impairments for the
three months ended September 30, 2018.
Impairment of Long-Lived Assets
Long-lived assets, including intangible
assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be generated by the asset.
If the carrying amount of an asset
exceeds its undiscounted estimated future cash flows, an impairment review is performed. An impairment charge is recognized in
the amount by which the carrying amount of the asset exceeds the fair value of the asset. Generally, fair value is determined using
valuation techniques such as expected discounted cash flows or appraisals, as appropriate. Assets to be disposed of would be separately
presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer
depreciated or amortized. The assets and liabilities of a disposed group classified as held for sale would be presented separately
in the appropriate asset and liability sections of the balance sheet.
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.
Notes to Condensed Financial Statements
For the Three Months Ended September
30, 2017 and 2018
(unaudited)
4.
Intangible Assets
The company’s
intangible assets consist of intellectual property acquired from LAT Pharma, Inc., and are amortized over their estimated useful
lives as indicated below. The following is a summary of the intangible assets as of June and September 30, 2018.
|
|
September 30, 2018
|
|
June 30, 2018
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Intangible Assets subject to Amortization
|
|
$
|
2,293,770
|
|
|
$
|
2,293,770
|
|
Accumulated Amortization
|
|
|
567,134
|
|
|
|
509,790
|
|
Intangible Assets (Net of Amortization)
|
|
$
|
1,726,636
|
|
|
$
|
1,783,980
|
|
Future
expected Amortization of intangible assets is as follows:
Year Ending June 30,
|
|
Remaining for 2019
|
$ 172,033
|
2020
|
229,377
|
2021
|
229,377
|
2022
|
229,377
|
2023
|
229,377
|
Thereafter
|
866,472
|
|
$ 1,726,636
|
5. Renegotiated Debt
On July 19, 2018, Geis-Hides Consulting
LLC entered into an Accord and Debt Satisfaction Agreement with the Company in which the consulting firm agreed to release the
Company from all liabilities arising from the Original Contract and Debt Repayment Plan dated December 15, 2013 totaling $132,000
and received cash of $65,000 and 260,000 common shares in satisfaction. The common shares were valued at the market price on the
date of settlement at $0.06 per common share. The gain of $51,400 on the settlement of debt was reflected on the income statement
as “other income”.
BIOVIE INC.
Notes to Condensed Financial Statements
For the Three Months Ended September
30, 2017 and 2018
(unaudited)
6. Related Party Transactions
On July 9, 2018, Jonathan Adams entered
into an Accord and Debt Satisfaction Agreement with the Company in which he agreed to release the Company from all liabilities
including the original contract to defer payment of his accrued salary dated March 23, 2017, the promissory note issued by the
Company to defer payment of accrued salary; and subsequent unpaid salary, totaling the amount of $534,722, and received cash of
$25,694 in satisfaction. The gain of $509,028 on the settlement of debt was reflected in the additional paid in capital.
On August 8, 2018, Barrett Ehrlich on
behalf of The Barrett Edge Inc. (“Barrett”) entered into an Accord and Debt Satisfaction Agreement with the Company
in which Barrett agreed to release the Company from all liabilities including the original contract to defer payment of accrued
consulting fees dated March 23, 2017, the promissory note issued by the Company to defer payment of accrued consulting fees; loan
to the Company for $14,000, and subsequent unpaid consulting fees, totaling $543,014, and received cash of $131,333 and 493,333
common shares in satisfaction. The common shares were valued at the market price on the date of settlement at $0.13 per common
share. The gain of $361,548 on the settlement of debt was reflected in the additional paid in capital.
On July 9, 2018, Elliot Ehrlich entered
into an Accord and Debt Satisfaction Agreement with the Company in which he agreed to release the Company from all liabilities
including the original contract to defer payment of accrued salary dated March 23, 2017, totaling the amount of $222,028 the promissory
note issued by the Company to defer payment of accrued salary; and received cash of $22,203 and 222,028 common shares in satisfaction.
The common shares were valued at the market price on the date of settlement at $0.06 per common share. The gain of $186,503 on
the settlement of debt was reflected in the additional paid in capital.
7.
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 $379. The Company notified the lessor that it will terminate the lease on December 30,
2018.
On October 1, 2018, the Company
executed a lease agreement with Acuitas Group Holdings, LLC for the Company’s office at 11601 Wilshire Blvd Ste 1100, Los
Angeles, CA 90025. The lease is a month-to-month lease that may be cancelled upon 30 days’ written notice and requires monthly
payments of $1,000.
Challenge to US Patent
On April 30, 2018, the Company
received notice that Mallinckrodt Pharmaceuticals Ireland Limited had petitioned the US Patent and Trademark Office (USPTO) to
institute an Inter Partes Review of BioVie’s US Patent No. 9,655,945 titled “Treatment of Ascites” (the ‘945
patent).
BIOVIE INC.
Notes to Condensed Financial Statements
For the Three Months Ended September
30, 2017 and 2018
(unaudited)
7.
Commitments and Contingencies (continued)
Inter Partes Review is a trial
proceeding conducted with the USPTO Patent Trial and Appeal Board (PTAB) to review the patentability of one or more claims of a
patent. Such review is limited to grounds of novelty and obviousness on the basis of prior art consisting of patents and printed
publications. Although a petition for Inter Partes Review has been filed, grant of the petition by the PTAB is required for the
proceeding to be instituted.
On August 15, 2018, BioVie submitted
a Preliminary Response to the PTAB providing a rationale as to why, in the Company’s opinion, Mallinckrodt’s request
to institute the IPR should not be granted. If he IPR is allowed to proceed, BioVie will seek to defend the ‘945 patent and/or
pursue a favorable settlement. As of June 30, 2018, no adjustments or accruals are reflected as the Company is unable to determine
a likely outcome at this time.
Royalty Agreements
Pursuant to the Agreement and Plan
of Merger entered into on April 11, 2016 between LAT Pharma LLC and NanoAntibiotics, Inc., BioVie is obligated to pay a low single
digit royalty on net sales of BIV201 (continuous infusion terlipressin) to be shared among LAT Pharma Members, PharmaIn Corporation;
and The Barrett Edge, Inc.
Pursuant to the Technology Transfer
Agreement entered into on July 25, 2016 between BioVie and the University of Padova (Italy), BioVie is obligated to pay a low single
digit royalty on net sales of all terlipressin products covered by US patent no. 9,655,645 and any future foreign issuances capped
at a maximum of $200,000 per year.
The Company and PharmaIN Corporation,
LAT Pharma’s former partner focused on the development of new modified drug candidates in the same therapeutic field but
not including BIV201, agreed to pay royalties equal to less than 1% of future net sales of each company's ascites drug development
programs, or if such program is licensed to a third party, less than 5% of each company's net license revenues. The Company’s
relationship with PharmaIN could advance into a collaboration or be terminated.
8. Stockholders’ Equity
Stock Options
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.
During the three month ended September
30, 2018, the Company did not issue any stock options.
BIOVIE INC.
Notes to Condensed Financial Statements
For the Three Months Ended September
30, 2017 and 2018
(unaudited)
8. Stockholders’ Equity
(continued)
Stock option activity for the Company’s
plans for the period ended September 30, 2018 is summarized below:
|
Shares (Thousands)
|
|
Weighted-Average Exercise Price
|
|
Weighted Remaining Average Contractual Term
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
Outstanding at June 30, 2018
|
5,150
|
|
$ 0.12
|
|
6.3
|
Outstanding at September 30, 2018 (Unaudited)
|
5,150
|
|
$ 0.12
|
|
6.3
|
Exercisable at September 30, 2018 (Unaudited)
|
4,150
|
|
$ 0.12
|
|
6.3
|
The following is a summary of stock
options outstanding and exercisable by exercise price as of September 30, 2018 (Unaudited).
|
|
Weighted Average Contract Life
|
|
|
|
|
|
|
|
Exercise Price
|
Outstanding
|
Exercisable
|
$ 0.06
|
3,100,000
|
7.4
|
2,100,000
|
$ 0.10
|
500,000
|
4.3
|
500,000
|
$ 0.20
|
200,000
|
4.0
|
200,000
|
$ 0.21
|
550,000
|
3.6
|
550,000
|
$ 0.22
|
100,000
|
3.5
|
100,000
|
$ 0.23
|
200,000
|
3.9
|
200,000
|
$ 0.25
|
500,000
|
3.1
|
500,000
|
|
|
|
|
Total
|
5,150,000
|
|
4,150,000
|
BIOVIE INC.
Notes to Condensed Financial Statements
For the Three Months Ended September
30, 2017 and 2018
(unaudited)
8. Stockholders’ Equity
(continued)
The compensation expense for the
three months ended September 30, 2018 includes $3,412 related to the stock options described above. The Company expects to recognize
$8,378 of future compensation expense related to stock options through the next nine months.
Offerings of Common Stock and
Warrants
Issuance of Shares for Cash
On July 3, 2018, BioVie, Inc., the Company,
entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Acuitas Group Holdings, LLC (“Acuitas”)
and certain other purchasers identified in the Purchase Agreement (together with Acuitas, the “Purchasers”) pursuant
to which (i) the Purchasers agreed to purchase an aggregate of 2,133,332 shares of the Company’s newly created Series A Convertible
Preferred Stock (the “Preferred Stock”) at a price per share of $1.50 per share of Preferred Stock (the “Initial
Sale”) and (ii) the Company will issue associated warrants (the “Warrants”) to purchase 213,333,200 shares of
the Company’s Class A Common Stock (the “Common Stock”), each subject to the terms and conditions set forth in
the Purchase Agreement, for an aggregate consideration of $3.2 million. The Company received $160,000 of the $3.2 million in April
and May 2018 as prepaid equity. Acuitas also received an additional 833,333 Warrants in connection with the payoff of a note issued
by the Company in favor of Acuitas. The Initial Sale and issuance of the Warrants occurred on July 3, 2018. In addition, Acuitas
has the option to purchase up to an additional 200,000,000 shares of Common Stock at a price per share of $0.015, and associated
warrants on the same terms as the Warrants, within two weeks following the one year anniversary of the closing of the Initial Sale
(the “Subsequent Sale”) in the event that the Company has not obtained $3,000,000 of funding through various non-dilutive
grants prior to the one year anniversary of the closing of the Initial Sale.
Each share of Preferred Stock automatically
converted into 100 shares of Common Stock upon the filing with the Secretary of State of the State of Nevada of a Certificate of
Amendment to the Company’s Articles of Incorporation (the “Amendment”) on August 13, 2018 that increased the
number of authorized shares of Common Stock to 800,000,000. The Amendment was approved by the written consent of the holders of
more than a majority of the Company’s issued and outstanding Common Stock on July 3, 2018, and was filed with the Secretary
of State of the State of Nevada 20 calendar days following the distribution of the Company’s Definitive Information that
was filed with the Securities and Exchange Commission.
The purchase price of the Preferred
Stock in the Initial Sale, the exercise price of the Warrants, and the Common Stock in the Subsequent Sale is subject to adjustment.
In the event that Mallinckrodt Pharmaceuticals Ireland Limited prevails in any proceeding which results in the useful life of the
Company’s current intellectual property rights being reduced by more than 75 percent, then the price per share of Common
Stock, the associated conversion ratio of the Preferred Stock, and the exercise price of the Warrants shall be retroactively adjusted
to 50 percent of the then-effective price per share of Common Stock under the Purchase Agreement (for example, if the then-effective
price per share of Common Stock is $0.015, then following such event, the price per share will be $0.0075). In this case, the Company
may be required to issue additional shares of Common Stock, but in no event will the Company be required to pay cash, to reflect
such lower price per share.
BIOVIE INC.
Notes to Condensed Financial Statements
For the Three Months Ended September
30, 2017 and 2018
(unaudited)
8. Stockholders’ Equity
(continued)
The Purchase Agreement contained customary
representations and warranties. In connection with the disclosure schedule associated with the representations and warranties,
the Company also disclosed customary information, including the following: (i) the existence of the Mallinckrodt Pharmaceuticals
Ireland Limited petition before the US Patent Trial and Appeal Board, (ii) the current capitalization of the Company, (iii) the
Company’s obligation to pay a low single digit royalty on the net sales of BIV201 (continuous infusion terlipressin) to be
shared among LAT Pharma LLC members, PharmaIN Corporation and The Barrett Edge, Inc. pursuant to the Agreement and Plan of Merger,
dated April 11, 2016, by and between LAT Pharma LLC and the Company, (iv) the Company’s obligation to pay a low single digit
royalty on net sales of all terlipressin products covered by specified patents up to a maximum of $200,000 per year pursuant to
the Technology Transfer Agreement, dated July 25, 2016, by and between the Company and the University of Padova (Italy), and (v)
certain recent issuances of Common Stock by the Company.
Pursuant to the Purchase Agreement,
Terren Peizer, the Chairman of Acuitas, was appointed as a member of the Company’s Board of Directors (the “Board”)
and as the Chief Executive Officer of the Company, effective July 3, 2018. The issuance of the Preferred Stock, the Warrants and
the underlying common stock under the Purchase Agreement is exempt from registration under the Securities Act of 1933, as amended
(the “Securities Act”), pursuant to the exemption for transactions by an issuer not involving any public offering under
Section 4(a)(2) of the Securities Act.
Issuance of Shares in Settlement
of Debt
During the three months ended
September 30, 2018, the Company settled $895,042 of debt including $765,042 owed to related parties, by issuing 975,361 shares
of common stock with a fair value of $93,055. See notes 5 and 6.
Warrant Price Adjustment
In December 2017, the Company issued
warrants to purchase 2,500,000 shares of common stock in a private placement transaction for aggregate gross proceeds of $100,000.
The warrants were exercisable at an exercise price of $0.20 at any time from date of issuance until 7 years from the date of issuance.
The warrants have a down round feature that reduces the exercise price if the Company sells stock for a lower price. In January
2018, the Company sold shares at $0.15, which therefore triggered the reduction in the strike price. The Company calculated the
difference in fair value of the warrants between the stated exercise price and the reduced exercise price and recorded $20,995
as a deemed dividend. In July 2018, the Company sold shares at $0.015, which therefore triggered the reduction in the strike price.
The Company calculated the difference in fair value of the warrants between the stated exercise price and the reduced exercise
price and recorded $44,888.08 as a deemed dividend. The fair value of the warrants granted was estimated using the Black Scholes
Method and the following assumptions: volatility – 170.6%; Term – 6.4 years; Risk Free Rate – 2.79%; dividend
rate – 0.00%. On August 4, 2018, the Company issued 2,241,913 shares of common stock pursuant to a cash less exercise of
warrants to purchase 2,500,000 shares at an exercise price of $0.015 per share. As a result of the conversion of the Series A Preferred
Stock in July 2018, the exercise of warrants to purchase 2,500,000 shares of common stock was reduced from $0.15 per share to $0.015
per share. On August 4, 2018, the Company issued 2,241,913 shares of common stock pursuant to a cash less exercise of warrants
to purchase 2,500,000 shares at an exercise price of $0.015 per share.
BIOVIE INC.
Notes to Condensed Financial Statements
For the Three Months Ended September
30, 2017 and 2018
(unaudited)
8. Stockholders’ Equity
(continued)
In January 2018, the Company
issued warrants to purchase 210,000 shares of common stock in exchange for banking services. The warrants were exercisable at an
exercise price of $0.15 at any time from date of issuance until 7 years from the date of issuance. The warrants have a down round
feature that reduces the exercise price if the Company sells stock for a lower price. In July 2018, the Company sold shares at
$0.015, which therefore triggered the reduction in the strike price. The Company calculated the difference in fair value of the
warrants between the stated exercise price and the reduced exercise price and recorded $3,770 as a deemed dividend. The fair value
of the warrants granted was estimated using the Black Scholes Method and the following assumptions: volatility – 170.6%;
Term – 6.4 years; Risk Free Rate – 2.79%; dividend rate – 0.00%.
The following table summarizes
the warrants that have been issued:
|
|
|
|
Weighted Average
|
|
Weighted Average
|
|
|
Number of Shares
|
|
Exercise Price
|
|
Remaining Life (Years)
|
|
Outstanding at June 30, 2018
|
|
|
|
4,774,015
|
|
|
$
|
0.29
|
|
|
|
5.2
|
|
|
Granted
|
|
|
|
214,166,533
|
|
|
$
|
0.02
|
|
|
|
5.8
|
|
|
Exercised
|
|
|
|
(2,500,000
|
)
|
|
$
|
0.02
|
|
|
|
(6.1
|
)
|
|
Outstanding at September 30, 2018 (Unaudited)
|
|
|
|
216,440,548
|
|
|
$
|
0.02
|
|
|
|
5.8
|
|
The following table summarizes
the warrants by exercise price as of September 30, 2018:
Weighted Average
|
|
|
|
Weighted Average
|
Exercise Price
|
|
Number of Shares
|
|
Remaining Life (Years)
|
$
|
0.02
|
|
|
|
214,166,533
|
|
|
|
5.8
|
|
$
|
0.15
|
|
|
|
543,333
|
|
|
|
6.3
|
|
$
|
0.50
|
|
|
|
1,037,501
|
|
|
|
3.2
|
|
$
|
0.60
|
|
|
|
693,181
|
|
|
|
3.9
|
|
|
|
|
|
|
216,440,548
|
|
|
|
5.8
|
|
9. Subsequent Event
In October 2018, the Company issued
stock options to purchase 200,000 shares of common stock as part of their annual board of director compensation. The stock options
are exercisable at an exercise price of $0.05 at any time from date of issuance until 5 years from the date of issuance.
In October 2018, the Company issued
stock options to purchase 100,000 shares of common stock to the Chief Financial Officer as part of her compensation. The stock
options are exercisable at an exercise price of $0.07 at any time from date of issuance until 5 years from the date of issuance.