Biovie Inc 10-Q for FY2023 Q1
Biovie Inc. (BIVI)
About this 10-Q
Biovie Inc filed this 10-Q on November 4, 2022, covering the quarter ended September 30, 2022 (FY2023 Q1).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $10.42M
- compared with a net loss of $5.54M a year earlier
- Diluted EPS
- -$0.38
- compared with -$0.23 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended:
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________to _____________
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S. Empl. Ident. No.) |
| (Address of principal executive offices, Zip Code) |
| ( |
| (Registrant’s telephone number, including area code) |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐
There were shares of the Registrant’s $0.0001 par value Class A common stock outstanding as of November 3, 2022.
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, and Section 27A of the Securities Act of 1933. Any statements contained in this report that are not statements of historical fact may be forward-looking statements. When we use the words “intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will” or the negative of these terms or other comparable terminology, we are identifying forward-looking statements. Forward-looking statements involve risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements. These factors include, among others; our research and development activities and, distributor channel; compliance with regulatory impositions requirements; and our capital needs. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Except as may be required by applicable law, we do not undertake or intend to update or revise our forward-looking statements, and we assume no obligation to update any forward-looking statements contained in this report as a result of new information or future events or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. You should carefully review and consider the various disclosures we make in this report and our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks, uncertainties and other factors that may affect our business.
When used in this report, the terms “BioVie”, “Company”, “we”, “our”, and “us” refer to BioVie Inc.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
BioVie Inc.
Condensed Balance Sheets
| September 30 | June 30, | |||||||
| 2022 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Prepaids and other assets | ||||||||
| Total current assets | ||||||||
| OTHER ASSETS: | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets, non-current | ||||||||
| Total other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Current portion of other liabilities | ||||||||
| Current portion of operating lease liabilities | ||||||||
| Warrant liabilities | ||||||||
| Embedded derivative liability | ||||||||
| Total current liabilities | ||||||||
| Other liabilities, net of current portion | ||||||||
| Operating lease liabilities, net of current portion | ||||||||
| Note payable net of financing costs and unearned premium
and discount ($ | ||||||||
| TOTAL LIABILITIES | $ | |||||||
| Commitments and contingencies (Note 11) | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock; $ par value; shares authorized; shares issued and outstanding | $ | $ | ||||||
| Common stock, $ par value; shares authorized at September 30, 2022 and June 30, 2022, respectively; and shares issued and outstanding at September 30, 2022 and June 30, 2022, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to unaudited condensed financial statements
-1-
BioVie Inc.
Condensed Statements of Operations
(Unaudited)
| Three Months Ended | Three Months Ended | |||||||
| September 30, 2022 | September 30, 2021 | |||||||
| OPERATING EXPENSES: | ||||||||
| Amortization | $ | $ | ||||||
| Research and development expenses | ||||||||
| Selling, general and administrative expenses | ||||||||
| TOTAL OPERATING EXPENSES | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER EXPENSE (INCOME): | ||||||||
| Change in fair value of derivative liabilities | ||||||||
| Interest expense | ||||||||
| Interest income | ( | ) | ( | ) | ||||
| TOTAL OTHER EXPENSE (INCOME), NET | ( | ) | ||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | ( | ) | $ | ( | ) | ||
| NET LOSS PER COMMON SHARE | ||||||||
| - Basic | $ | ( | ) | $ | ( | ) | ||
| - Diluted | $ | ( | ) | $ | ( | ) | ||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||
| - Basic | ||||||||
| - Diluted | ||||||||
See accompanying notes to unaudited condensed financial statements
-2-
BioVie Inc.
Condensed Statements of Cash Flows
(Unaudited)
| Three Months Ended | Three Months Ended | |||||||
| September 30, 2022 | September 30, 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of intangible assets | ||||||||
| Stock based compensation - restricted stock | ||||||||
| Stock based compensation expense - stock options | ||||||||
| Amortization of financing costs | ||||||||
| Accretion of unearned loan discount | ||||||||
| Accretion of loan premium | ||||||||
| Amortization of operating lease right-of-use assets | ||||||||
| Change in fair value of derivative liability | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Other assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ||||||
| Other liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Net proceeds from issuance of common stock | ||||||||
| Net proceeds from issuance of common stock - Related Party | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | $ | ||||||
See accompanying notes to unaudited condensed financial statements
-3-
BioVie Inc.
Condensed Statements of Changes in Stockholders’ Equity
For the Three Months Ended September 30, 2022 and September 30, 2021
(Unaudited)
| Common Stock | Common Stock | Additional Paid in | Accumulated | Total Stockholders’ | ||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Proceeds from issuance of common stock, net of cost of
$ | ||||||||||||||||||||
| Stock-based compensation - restricted stock | ||||||||||||||||||||
| Stock option based compensation | - | |||||||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock option based compensation | - | |||||||||||||||||||
| Stock-based compensation - restricted stock | - | |||||||||||||||||||
| Proceeds from issuance of common stock, net of costs of $ | ||||||||||||||||||||
| Proceeds from issuance of common stock, net of costs of $ | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to unaudited condensed financial statements
-4-
BIOVIE INC.
Notes to Condensed Financial Statements
For the Three Months Ended September 30, 2022 and 2021
(unaudited)
| 1. | Background Information |
BioVie Inc. (the “Company” or “we” or “our”) is a clinical-stage company developing innovative drug therapies to treat chronic debilitating conditions including neurological and neuro-degenerative disorders and liver disease.
In neurodegenerative disease, BioVie acquired the biopharmaceutical assets of NeurMedix, Inc. (“NeurMedix”), a privately held clinical-stage pharmaceutical company, in June 2021 (See Note 5 Related Party Transactions). The acquired assets included NE3107, a potentially selective inhibitor of inflammatory extracellular single-regulated kinase(“ERK”) signaling that, based on animal studies, is believed to reduce neuroinflammation. NE3107 is a novel orally administered small molecule that is thought to inhibit inflammation-driven insulin resistance and major pathological inflammatory cascades with a novel mechanism of action. There is emerging scientific consensus that both inflammation and insulin resistance may play fundamental roles in the development of Alzheimer’s and Parkinson’s Disease, and NE3107 could, if approved represent an entirely new medical approach to treating these devastating conditions affecting an estimated 6 million Americans suffering from Alzheimer’s and 1 million from Parkinson’s. The FDA has authorized a potentially pivotal Phase 3 randomized, double-blind, placebo-controlled, parallel group, multicenter study to evaluate NE3107 in subjects who have mild to moderate Alzheimer’s disease (NCT04669028). In August 2021, the study was initiated and the Company is anticipating top line results in mid-calendar year 2023.
On January 20, 2022, the Company initiated a study by treating the first patient, in it’s Phase 2 study assessing NE3107’s safety and tolerability and potential pro-motoric impact in Parkinson’s disease patients. The NM201 study (NCT05083260) is a double-blind, placebo-controlled, safety, tolerability, and pharmacokinetics study in Parkinson’s Disease (PD). Participants will be treated with carbidopa/levodopa and NE3107 or placebo. Forty patients with a defined PD medication “off state” will be randomized 1:1 placebo to: active NE3107 20 mg twice daily for 28 days. Safety assessments will look at standard measures of patient health and potential for drug-drug interactions affecting L-dopa pharmacokinetics and activity. Exploratory efficacy assessments will use the Motor Disease Society Unified Parkinson’s Disease Rating (MDS-UPDRS) parts 1-3, ON/OFF Diary, and Non-Motor Symptom Scale. Topline results are expected for the NM201 study in December 2022.
Inflammation-driven insulin resistance is believed to be implicated in a broad range of serious diseases, including multiple myeloma and prostate cancer, and we plan to begin exploring these opportunities in the coming months using NE3107 or related compounds acquired in the NeurMedix asset purchase. NE3107 is patented in the United States, Australia, Canada, Europe and South Korea.
In liver disease, our Orphan Drug candidate BIV201 (continuous infusion terlipressin) is being developed as a future treatment option for patients suffering from ascites and other life-threatening complications of advanced liver cirrhosis caused by NASH, hepatitis, and alcoholism. The initial target for BIV201 therapy is refractory ascites. These patients suffer from frequent life-threatening complications, generate more than $5 billion in annual treatment costs, and have an estimated 50% mortality rate within 6 to 12 months. The US Food and Drug Administration (FDA) has not approved any drug to treat refractory ascites. A Phase 2a clinical trial of BIV201 was completed in 2019, and a multi-center, randomized 30-patient Phase 2b trial is currently underway. Top-line results from this trial are expected in mid-calendar year 2023.
The BIV201 development program was initiated by 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. Pursuant to the Agreement and Plan of Merger entered into on April 11, 2016, between our predecessor entities, 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.
-5-
| 2. | Liquidity |
The
Company’s operations are subject to a number of factors that can affect its operating results and financial conditions. Such
factors include, but are not limited to: the results of clinical testing and trial activities of the Company’s products, the
Company’s ability to obtain regulatory approval to market its products; competition from products manufactured and sold or
being developed by other companies; the price of, and demand for, Company products; the Company’s ability to negotiate
favorable licensing or other manufacturing and marketing agreements for its products; and the Company’s ability to raise
capital. The Company’s financial statements have been prepared assuming the Company will continue as a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of September 30,
2022, the Company had working capital of approximately $
The future viability of the Company is largely dependent upon its ability to raise additional capital to finance its operations. Management expects that future sources of funding may include sales of equity, obtaining loans, or other strategic transactions.
The duration and spread of the COVID-19 pandemic and the long-term impact of COVID-19 and its variants on the financial markets and the overall economy are highly uncertain and cannot be predicted at this time. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s ability to raise funds may be materially adversely affected. In addition, the COVID-19 pandemic has created a widespread labor shortage, including a shortage of medical professionals, and has impacted and may continue to impact the potential patient participation in our studies, which may adversely impact our ability to continue or complete our clinical trials in the planned timeline.
Although management continues to pursue the Company’s strategic plans, there is no assurance that the Company will be successful in obtaining sufficient financing on terms acceptable to the Company, if at all, to fund continuing operations. These circumstances raise substantial doubt on the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| 3. | Significant Accounting Policies |
Basis of Presentation – Interim Financial Information
These unaudited interim condensed financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United State of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”) for Interim Reporting. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed financial statements furnished reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. The condensed balance sheet at June 30, 2022 was derived from audited annual financial statements but does not contain all the footnote disclosures from the annual financial statements. These unaudited interim condensed financial statements should be read in conjunction with the Company’s audited financial statements for the fiscal years ended June 30, 2022 and 2021 in our Annual Report on Form 10-K filed with the SEC on September 27, 2022. For a summary of significant accounting policies, see the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022 and 2021, filed with the SEC on September 27, 2022.
Certain prior period amounts have been reclassified for consistency with the current period presentation.
-6-
Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through stock options, warrants, and convertible debentures. For the three months ended September 30, 2022 and 2021, such amounts were excluded from the diluted loss since their effect was considered anti-dilutive due to the net loss for the period.
The table below shows the number of outstanding stock options and warrants as of September 30, 2022 and 2021:
| Schedule of Dilutive securities were excluded from the computation of diluted loss per share | ||||||||
| September 30, 2022 | September 30, 2021 | |||||||
| Number of Shares | Number of Shares | |||||||
| Stock Options | ||||||||
| Warrants | ||||||||
| Total | ||||||||
Recent Accounting Pronouncements
The Company considers the applicability and impact of all Accounting Standards Updates (“ASU’s”). There were no recent ASUs that are expected to have a material impact on the Company’s balance sheets or statements of operations.
| 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.
The following is a summary of the intangible assets as of September 30, 2022 and June 30, 2022:
| Schedule of intangible assets | ||||||||
| September 30, 2022 | June 30, 2022 | |||||||
| Intellectual Property | $ | $ | ||||||
| Less Accumulated Amortization | ( | ) | ( | ) | ||||
| Intellectual Property, Net | $ | $ | ||||||
Amortization
expense was $
Estimated future amortization expense is as follows:
| Schedule of future amortization expense | ||||
| Year ending June 30, 2023 (Remaining nine months) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| $ |
-7-
| 5. | Related Party Transactions |
Equity Transactions with Acuitas
On July 15, 2022, the Company entered into a securities purchase agreement with Acuitas Group Holdings, LLC, (Acuitas), the company’s majority shareholder, pursuant to which Acuitas agreed to purchase from the Company, in a private placement (i) an aggregate of shares of the Company’s Class A common stock, par value $0.0001 per share at a price of $1.65 per share (“PIPE Shares”), and (ii) a warrant to purchase 7,272,728 shares of Common Stock (“Warrant Shares”), at an exercise price of $1.82, with a term of exercise of five years; (collectively, the “Securities”). The warrant has a down round feature that reduces the exercise price if the Company sells stock for lower price. On August 15, 2022, the Company received net proceeds of approximately $5.9 million net of costs of approximately $94,000 and entered into an amended and restated registration statement with Acuitas, which amended and restated that certain Registration Rights Agreement, dated as of June 10, 2021, by and between the Company and Acuitas (the “Existing Registration Rights Agreement”), to amend the definition of “Registrable Securities” in the Existing Registration Rights Agreement to include the PIPE Shares and the Warrant Shares as Registrable Securities thereunder.
Asset Acquisition with NeurMedix
On April 27, 2021, the Company entered into an Asset Purchase Agreement (“APA”) with NeurMedix and Acuitas, which are related party affiliates, pursuant to which the Company acquired certain assets from NeurMedix and assumed certain liabilities of NeurMedix, in exchange for consideration of cash and shares of common stock. The acquired assets include, among others, those related to certain drug candidates being developed by NeurMedix, including NE3107, a small molecule orally administered inhibitor of insulin resistance and the pathological inflammatory cascade, with a novel mechanism of action that has potential applications for treatment against Alzheimer’s Disease and Parkinson’s Disease. On June 10, 2021, and pursuant to the APA, the Company issued to Acuitas (as NeurMedix’s assignee) 8,361,308 shares of the Company’s common stock and made a cash payment of approximately $2.3 million. Since the transaction was between entities under common control, there were no fair value adjustments of the purchased assets, and the historical cost basis of the purchased assets was zero. The total consideration paid was expensed as in process research and development expense in the year ended June 30, 2021.
Subject to the terms and conditions of the Asset Purchase Agreement, following the closing, the Company may be obligated to deliver contingent stock consideration to NeurMedix (or its successor). Previously, the Company was obligated to deliver contingent stock consideration to NeurMedix (or its successor) consisting of shares of the Company’s common stock having an aggregate value of up to $3.0 billion, subject to the achievement of certain clinical, regulatory and commercial milestones related to the drug candidates to be acquired by the Company from NeurMedix, and subject to a cap limiting each issuance of shares if such issuance would result in the beneficial ownership of NeurMedix and its affiliates exceeding 89.9999% of the Company’s issued and outstanding common stock. Pursuant to Amendment No. 1 to the APA, dated May 9, 2021, the Company may now be obligated to deliver contingent stock consideration to NeurMedix (or its successor) consisting of up to 18 million shares of BioVie’s common stock, with 4.5 million shares issuable upon the achievement of each of the four milestones set forth in the APA, subject to a cap limiting the issuance of shares if such issuance would result in the beneficial ownership of NeurMedix and its affiliates exceeding 87.5% of the Company’s issued and outstanding common stock.
| 6. | Other Liabilities |
The
current portion of other liabilities at September 30, 2022 of $
| 7. | Notes Payable |
On
November 30, 2021, (the “Closing Date”) the Company entered into a Loan and Security Agreement and the Supplement to the
Loan and Security Agreement and Promissory Notes (together, the “Loan Agreement”) with Avenue Venture Opportunities Fund,
L.P. (“AVOPI” and Avenue Venture Opportunities Fund II, L.P. (“AVOPII”) together (“Avenue”) for growth
capital loans in an aggregate commitment amount of up to $20 million (the “Loan”). On the closing date, $15 million funded
(“Tranche 1”). The Loan had the additional capacity of up to $5 million available to the Company on or prior to September
15, 2022, subject to the Company’s achievement of certain milestones with respect to certain of its ongoing clinical trials which
were not achieved. The Loan bears interest at an annual rate equal to the greater of (a) the sum of
-8-
The Loan Agreement requires monthly interest-only payments during the first eighteen months of the term of the Loan,. Following the interest-only period, the Company will make equal monthly payments of principal, plus accrued interest, until the Loan’s maturity date when all remaining principal and accrued interest is due. If the Company prepays the Loan, it will be required to pay (a) a prepayment fee in an amount equal to 3.0% of the principal amount of the Loan that is prepaid during the interest-only period; and (b) a prepayment fee in an amount equal to 1.0% of the principal amount of the Loan that is prepaid after the interest-only period. At the Loan’s maturity date, or on the date of the prepayment of the Loan, a final payment equal to 4.25% of the sum of (a) the Loan commitment amount under Tranche 1.
The Loan Agreement includes a conversion option to convert up to $5.0 million of the principal amount of the Loan outstanding at the option of the Lenders, into shares of the Company’s Class A common stock at a conversion price of $6.98 per share.
On the Closing Date, the Company issued to the Lenders warrants to purchase 361,002 shares of Class A common stock of the Company (the “Warrants”) at an exercise price per share equal to $5.82, the stock purchase price. The warrants are exercisable until November 30, 2026, the expiration date.
The amount of the carrying value of the notes payable were determined
by allocating portions of the outstanding principal of the notes to the fair value of the warrants of approximately $
The following is a summary of the Notes Payable as of September 30, 2022 and June 30, 2022:
| Schedule of note payable | ||||||||
| September 30, 2022 | June 30, 2022 | |||||||
| Notes Payable | $ | $ | ||||||
| Less debt financing costs | ( | ) | ( | ) | ||||
| Less unearned discount | ( | ) | ( | ) | ||||
| Plus accretion of loan premium | ||||||||
| Notes Payable, net of financing costs, unearned premiums and discount | $ | $ | ||||||
Estimated future amortization expense and accretion of premium is as follows:
| Schedule of Estimated future amortization expense and accretion of premium | ||||||||||||
| Unearned Discount | Debt Financing Costs | Loan accretion Premium | ||||||||||
| Year ending June 30, 2023 (Remaining 9 months) | $ | $ | $ | |||||||||
| 2024 | ||||||||||||
| 2025 | ||||||||||||
| Total | $ | $ | $ | |||||||||
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| 8. | Fair Value Measurements |
At September 30, 2022 and June 30, 2022, the estimated fair value of derivative liabilities measured on a recurring basis are as follows:
| Schedule of derivative liabilities at fair value | ||||||||||||||||
| Fair Value Measurements at | ||||||||||||||||
| September 30, 2022 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Derivative liability - Warrants | $ | $ | $ | $ | ||||||||||||
| Derivative liability - Conversion option on notes payable | ||||||||||||||||
| Total derivatives | $ | $ | $ | $ | ||||||||||||
| Fair Value Measurements at | ||||||||||||||||
| June 30, 2022 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Derivative liability - Warrants | $ | $ | $ | $ | ||||||||||||
| Derivative liability - Conversion option on note payable | ||||||||||||||||
| Total derivatives | $ | $ | $ | $ | ||||||||||||
The following table presents the activity for liabilities measured at fair value using unobservable inputs for the three months ended September 30, 2022 and 2021:
| Fair value, liabilities measured on recurring basis | ||||||||
| Derivative liabilities - Warrants | Derivative liability - Conversion Option on Convertible Debenture | |||||||
| Balance at July 1, 2022 | $ | $ | ||||||
| Additions to level 3 liabilities | ||||||||
| Change in in fair value of level 3 liability | ||||||||
| Transfer in and/or out of Level 3 | ||||||||
| Balance at September 30, 2022 | $ | $ | ||||||
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| Derivative liabilities - Warrants | Derivative liability - Conversion Option on Convertible Debenture | |||||||
| Balance at July 1, 2021 | $ | $ | ||||||
| Additions to level 3 liabilities | ||||||||
| Change in fair value of level 3 liability | ||||||||
| Transfer in and/or out of Level 3 | ||||||||
| Balance at September 30, 2021 | $ | $ | ||||||
The fair values of derivative liabilities for the warrants and conversion option at September 30, 2022 in the accompanying balance sheet, were approximately $443,000 and approximately $507,000, respectively. The total change in the fair value of the derivative liabilities totaled approximately $567,000 for the three months ended September 30, 2022, and accordingly, was recorded in the accompanying statement of operations. The assumptions used in the Black Scholes model to value the derivative liabilities at September 30, 2022 included the closing stock price of $ per share, and for the warrants the exercise price of $, -year term, risk free rate of % and volatility of %. and for the embedded derivative liability of the conversion option, the conversion price of $; -year term, risk free rate of % and volatility of %.
Derivative liability – Warrants
The Company accounts for stock purchase warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreements. Under applicable accounting guidance, stock warrants that are precluded from being indexed to the Company’s own stock because of full-rachet and anti-dilution provisions or adjustments to the strike price due to an occurrence of a future event; are accounted as derivative financial instruments. The warrants issued on November 30, 2021 in connection with the Avenue loan financing were not considered to be indexed to the Company’s own stock, and accordingly, were recorded as a derivative liability at fair value in the accompany balance sheet at September 30, 2022.
The Black Scholes model was used to calculate the fair value of the warrant derivative to bifurcate the warrant derivative amount from the Avenue loan amount funded. The warrants are recorded at their fair values at the date of issuance and remeasured at September 30, 2022. The assumptions used for the fair value calculation at November 30, 2021 follows: the closing stock price of $ per share; the exercise price of $; year term; a risk free rate of % and volatility of %.
Embedded derivative liability – Conversion Option
The embedded derivative represents the optional conversion feature of up to $5.0 million of the outstanding Avenue note amounts meets the definition of a derivative and requires bifurcation from the loan amount.
The Black Scholes model was used to calculate the fair value of the embedded derivative to bifurcate the embedded derivative amount representing the conversion option from the Avenue loan amount funded. The assumption used for the fair value calculation at November 30, 2021 follows: the closing stock price of $ per share; the conversion price of $; year term; risk free rate of % and volatility of %.
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| 9. | Equity Transactions |
Stock Options
The following table summarizes the activity relating to the Company’s stock options for the three months ended September 30, 2022:
| Schedule of summarizes the activity relating to the Company’s stock options | ||||||||||||||||
| Options | Weighed- Average Exercise Price | Weighted Remaining Average Contractual Term | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at June 30, 2022 | ||||||||||||||||
| Granted | - | |||||||||||||||
| Options Expired | ( | ) | - | |||||||||||||
| Options Canceled | ( | ) | - | |||||||||||||
| Options Forfeited | - | |||||||||||||||
| Outstanding at September 30, 2022 | $ | $ | ||||||||||||||
| Exercisable at September 30, 2022 | $ | $ | ||||||||||||||
The fair value of each option grant on the date of grant is estimated using the Black-Scholes option. The pricing model reflects the following weighted-average assumptions for the three months ended September 30, 2021 and no stock options were issued for the three months ended September 30, 2022:
| Schedule of assumptions used | |||
| September 30, 2021 | |||
| Expected life of options (In years) | |||
| Expected volatility | % | ||
| Risk free interest rate | % | ||
| Dividend Yield | % | ||
Expected volatility is based on the historical volatilities of the daily closing price of the common stock of three comparable companies and the expected life of options is based on historical data with respect to employee exercise periods. The Company accounts for forfeitures as they are incurred.
The Company recorded stock option-based compensation expense of $ and $ for three-month periods ended September 30, 2022 and 2021, respectively.
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The following is a summary of stock options outstanding and exercisable by exercise price as of September 30, 2022:
| Schedule of summary of stock options outstanding and exercisable | ||||||||||||||
| Exercise Price | Outstanding | Weighted Average Contract Life | Exercisable | |||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
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| $ | ||||||||||||||
Issuance of common stock for cash
During
the 3 months ended September 30,2021, the Company issued of its Class A common stock at $ per share in connection with
its registered public offering of approximately $
On
August 31, 2022, the Company entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor
Fitzgerald & Co. and B. Riley Securities, Inc. (collectively, the “Agents”), pursuant to which the Company may issue
and sell from time-to-time shares of Company’s Class A common stock, par value $ per share, through the Agents, subject to
the terms and conditions of the Sales Agreement. As of September 30, 2022, the Company has issued shares under the Sales Agreement
for a total net proceeds of $
Issuance of Shares for Services
On
August 20, 2021, the Company awarded
On
June 21, 2022, the Company awarded
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Issuance of Stock Options
On August 20, 2021, the Company granted, under the 2019 Omnibus Plan, stock options to purchase shares of common stock to the executive management team. Twenty percent (20%) of the shares underlying the options awarded vested on the grant date, and the remaining 80% vest equally over a -year period, on the first, second, third, fourth and fifth anniversary of the grant date. The exercise price of the options is $ per share, the grant date fair value of the stock, and the options terminate on the earlier of the tenth anniversary of the grant date or the date as of which the options were fully exercised.
Pursuant to a former employee Separation Agreement, dated April 11, 2022, the Company modified a former employee’s stock option award granted on August 20, 2021 pursuant to the 2019 Omnibus Plan (“2021 Options Grant”). Pursuant to the terms of the Separation Agreement of the employee, effective on July 8, 2022, (“the Separation Date”), the Company accelerated the vesting of options to purchase 74,500 shares of common stock as deemed vested, (“Accelerated Options”) and after giving effect to the Accelerated Options, extended the exercise period of the total vested outstanding and unexercised options totaling 99,333 of the 2021 Options Grant as of July 8, 2022 to one year following the Separation Date. The unvested portion of the 2021 option grant of 24,834 was canceled. The modification were remeasured as of the July 8, 2022 and the incremental difference totaled $181,154, net credit; due to the original exercise price of $7.74 is greater than the stock price of $1.80 on the remeasurement date and accordingly was recognized on July 8, 2022.
Stock Warrants
The following table summarizes warrant activity during the three months ended September 30, 2022:
| Summary of warrants activity | ||||||||||||||||
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Life (Years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding and exercisable at June 30, 2022 | $ | $ | ||||||||||||||
| Granted | - | |||||||||||||||
| Expired | ( | ) | - | - | ||||||||||||
| Exercised | - | - | ||||||||||||||
| Outstanding and exercisable at September 30, 2022 | $ | $ | ||||||||||||||
Of the above warrants, 909 expire in the fiscal year ending June 30, 2023, 109,380 expire in the fiscal year ending June 30, 2025, 35,175 expire in the fiscal year ending June 30, 2026, and 7,633,730 expire in the fiscal year ending June 30, 2027.
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| 10. | Leases |
Office Lease
Effective November 1, 2021, the Company relocated its headquarters to Nevada. The Company paid an annual rent of $2,200 for the address at 680 W Nye Lane, Suite 201, Carson City Nevada 897603. The rental agreement is for a one year term.
On February 26, 2022, the Company’s San Diego office relocated to 5090 Shoreham Place, San Diego, CA 92122. The office lease term for 38 months, commenced on March 1, 2022. The monthly base rate of $4,175 begins June 1, 2022, with annual increases of three percent.
The
operating lease cost recognized in in our statement of operations was approximately $
The following table provides balance sheet information related to leases as of September 30, 2022 and June 30, 2022:
| Schedule of balance sheet information related to leases | ||||||||
| September 30, 2022 | June 30, 2022 | |||||||
| Assets | ||||||||
| Operating lease, right-of-use asset, net | $ | $ | ||||||
| Liabilities | ||||||||
| Current portion of operating lease liabilities | $ | $ | ||||||
| Operating lease liabilities, net of current portion | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
At September 30, 2022, the future estimated minimum lease payments under non-cancelable operating leases are as follows:
| Schedule of future estimated minimum lease payments under non-cancelable operating leases | ||||
| Year ending June 30, 2023 (Remaining 9 months) | $ | |||
| 2024 | ||||
| 2025 | ||||
| Total minimum lease payments | ||||
| Less amount representing interest | ( | ) | ||
| Present value of future minimum lease payments | ||||
| Less current portion of operating lease liabilities | ( | ) | ||
| Operating lease liabilities, net of current portion | $ |
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The weighted average remaining lease term and discount rate as of September 30, 2022 and June 30, 2022 were as follows:
| Schedule of weighted average remaining lease term and discount rate | ||||||||
| September 30, 2022 | June 30, 2022 | |||||||
| Weighted average remaining lease term (Years) | ||||||||
| Operating leases | ||||||||
| Weighted average discount rate | ||||||||
| Operating leases | % | % | ||||||
| 11. | Commitments and Contingencies |
Royalty Agreements
Pursuant to the Agreement and Plan of Merger entered into on April 11, 2016, between our predecessor entities, 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.
| 12. | Employee Benefit Plan |
On August 1, 2021, the Company began sponsoring an employee benefit plan subject to Section 401(K) of the Internal Revenue Service Code (the “401K Plan”) pursuant to which, all employees meeting eligibility requirements are able to participate.
Subject
to certain limitations in the Internal Revenue Code, eligible employees are permitted to make contributions to the 401K Plan on a pre-tax
salary reduction basis and the Company will match 5% of the first 5% of an employee’s contributions to the 401K Plan. For the three
months ended September 30, 2022 and 2021, the Company made contributions of approximately $
| 13. | Subsequent Events |
On
November 4, 2022, the Company issued shares of common stock for net proceeds of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, and Section 27A of the Securities Act of 1933. Any statements contained in this report that are not statements of historical fact may be forward-looking statements. When we use the words “intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will” or the negative of these terms or other comparable terminology, we are identifying forward-looking statements. Forward-looking statements involve risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements. These factors among others, include our; research and development activities and, distributor channel; compliance with regulatory impositions requirements; and our capital needs Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Except as may be required by applicable law, we do not undertake or intend to update or revise our forward-looking statements, and we assume no obligation to update any forward-looking statements contained in this report as a result of new information or future events or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. You should carefully review and consider the various disclosures we make in this report and our other reports filed with the Securities and Exchange Commission (the “SEC”) that attempt to advise interested parties of the risks, uncertainties and other factors that may affect our business.
The following discussion of the Company’s financial condition and the results of operations should be read in conjunction with the Financial Statements and Notes thereto appearing elsewhere in this report.
Management’s Discussion
BioVie Inc. is a clinical-stage company developing innovative drug therapies to overcome unmet medical needs in chronic debilitating conditions.
In neurodegenerative disease, BioVie acquired the biopharmaceutical assets of NeurMedix, Inc., a related party privately held clinical-stage pharmaceutical company and related party affiliate, in June 2021. The acquired assets include NE3107, a potentially selective inhibitor of inflammatory ERK signaling that, based on animal studies, is believed to reduce neuroinflammation. NE3107 is a novel orally administered small molecule that is thought to inhibit inflammation-driven insulin resistance and major pathological inflammatory cascades with a novel mechanism of action. There is emerging scientific consensus that both inflammation and insulin resistance may play fundamental roles in the development of Alzheimer’s and Parkinson’s Disease, and NE3107 could, if approved, represent an entirely new medical approach to treating these devastating conditions affecting an estimated 6 million Americans suffering from Alzheimer’s and 1 million from Parkinson’s. The FDA has authorized a potentially pivotal Phase 3 randomized, double-blind, placebo-controlled, parallel group, multicenter study to evaluate NE3107 in subjects who have mild to moderate Alzheimer’s disease (NCT04669028). We initiated this trial on August 5, 2021 and are targeting primary completion in mid-calendar year 2023.
On January 20, 2022, the Company initiated a study by treating the first patient, in its Phase 2 study assessing NE3107’s safety and tolerability and potential pro-motoric impact in Parkinson’s disease patients. The NM201 study (NCT05083260) is a double-blind, placebo-controlled, safety, tolerability, and pharmacokinetics study in Parkinson’s Disease (PD). Participants will be treated with carbidopa/levodopa and NE3107 or placebo. Forty patients with a defined PD medication “off state” will be randomized 1:1 placebo to active NE3107 20 mg twice daily for 28 days. Safety assessments will look at standard measures of patient health and potential for drug-drug interactions affecting L-dopa pharmacokinetics and activity. Exploratory efficacy assessments will use the Motor Disease Society Unified Parkinson’s Disease Rating (MDS-UPDRS) parts 1-3, ON/OFF Diary, and Non-Motor Symptom Scale. Topline results are expected for the NM201 study in December 2022.
In liver disease, our Orphan Drug candidate BIV201 (continuous infusion terlipressin) is being developed as a future treatment option for patients suffering from ascites and other life-threatening complications of advanced liver cirrhosis caused by NASH, hepatitis, and alcoholism. The initial target for BIV201 therapy is refractory ascites. These patients suffer from frequent life-threatening complications, generate more than $5 billion in annual treatment costs, and have an estimated 50% mortality rate within 6 to 12 months. The US Food and Drug Administration (FDA) has not approved any drug to treat refractory ascites. A Phase 2a clinical trial of BIV201 was completed in 2019, and a multi-center, randomized 30-patient Phase 2b trial is currently underway. Top-line results from this trial are expected in mid-calendar year 2023.
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Comparison of the three months ended September 30, 2022 to the three months ended September 30, 2021
Net income (loss)
The net loss for the three months ended September 30, 2022 was approximately $10.4 million as compared $5.5 million for the three months ended September 30, 2021. The increase in net loss of approximately $4.9 million was primarily due to increased losses from operations of $3.3 million from increased activities in our clinical studies, increase in interest expense of $1.1 million from the notes payable financing obtained in November 2021 and a change in fair value of derivative liabilities of approximately $567,000.
Total operating expenses for the three months ended September 30, 2022 were approximately $8.8 million as compared to $5.5 million for the three months ended September 30, 2021. The net increase of approximately $3.3 million during the three months ended September 30, 2022 was primarily due to an increase in research and development expenses of approximately $3.7 million from the increased activities of our clinical studies; offset by decline selling general and administrative expenses of approximately $388,000.
Research and Development Expenses
Research and development expenses were approximately $6.8 million and $3.1 million for the three months ended September 30, 2022 and 2021, respectively. The net increase of approximately $3.7 million, consisted of an increase of approximately $4.1 million primarily attributed to the increased activities in our clinical studies offset by $446,000 from a net decrease in the clinical team’s compensation expense.
The Neuroscience NE3107 studies accounted for approximately $3.9 million of the net increase in research and development expenses as both studies were significantly more active during the three months ended September 30, 2022 over the three months ended September 30, 2021, as the Parkinson’s Phase 2 study initiated in January 2022, became fully enrolled and with the top-line data read expected in December 2022 and the Alzheimer Phase 3 study nears full enrollment. Our Orphan Drug candidates BIV201’s Phase 2b study initiated in June 2021 accounted for approximately $159,000 of the net increase for three months ended September 30, 2022.
The total increase in the clinical studies expenses of $4.1 million was offset by a net decline in clinical team’s total compensation expense of approximately $446,000. The net decline in the clinical team’s compensation consisted of an increase of approximately $1.1 million in the clinical team’s compensation from expansion of the clinical team, offset by $1.6 million representing declines in stock compensation expense of approximately $578,000 from stock options awarded and the retention compensation of $1.0 million accrued in the three months ended September 30, 2021.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were approximately $2.0 million and $2.4 million for the three months ended September 30, 2021 and 2020, respectively. The net decrease of approximately $388,000 was primarily attributed to decline in compensation expense of approximately $641,000, representing a decline stock-based compensation expense of approximately $828,000 representing restricted stock units and stock options awarded to the executive management team in the three months ended September 30, 2021 and increase of approximately $187,000 related to increase in staff from two to four and annual salary increases. The remaining net increase of approximately $239,000 was attributed to increased expenses related to being listed on a national exchange including listing fees and investor relations and advisory $197,000, increase in directors stock compensation of approximately $162,000 stock options awarded and other net increases totaling approximately $54,000 representing insurance and office and website development expenses offset by a decline in other legal and professional fees of approximately $174,000.
Other Income and Expense
Other expense, net was $1.6 million for the three months ended September 30, 2022 compared nearly nil for the three months ended September 30, 2021. Interest expense of $1.1 million recognized during the three months ended September 30, 2022 was attributed to the $15 million debt financing obtained in November 2021 and the change in fair value of the related derivative liabilities recognized for the three months ended September 30, 2022 was approximately $567,000.
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Capital Resources and Liquidity
As of September 30, 2022, the Company had working capital of approximately $17.5 million, cash of approximately $21.2 million, stockholders’ equity of approximately $6.0 million, and an accumulated deficit of approximately $261.4 million. In addition, the Company has not generated any revenues and no revenues are expected in the foreseeable future. The Company’s future operations are dependent on the success of the Company’s ongoing development and commercialization efforts, as well as its ability to secure additional financing as needed.
The future viability of the Company is largely dependent upon its ability to raise additional capital to finance its operations. Management expects that future sources of funding may include sales of equity, obtaining loans, or other strategic transactions.
The duration and spread of the COVID-19 pandemic and the long-term impact of COVID-19 and its variants on the financial markets and the overall economy are highly uncertain and cannot be predicted at this time. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s ability to raise funds may be materially adversely affected. In addition, the COVID-19 pandemic has created a widespread labor shortage, including a shortage of medical professionals, and has impacted and may continue to impact the potential patient participation in our studies, which may adversely impact our ability to continue or complete our clinical trials in the planned timeline.
Although management continues to pursue the Company’s strategic plans, there is no assurance that the Company will be successful in obtaining sufficient financing on terms acceptable to the Company, if at all, to fund continuing operations. These circumstances raise substantial doubt on the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
Critical Accounting Policies and Estimates
For the three-month period ended September 30, 2022, there were no significant changes to the Company’s critical accounting policies as identified in the Annual Report Form 10-K for the fiscal year ended June 30, 2022.
New Accounting Pronouncements
The Company considered the applicability and impact of recent accounting pronouncements and determined those to be either not applicable or expected to have minimal impact on our balance sheets or statement of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures
We maintain “disclosure controls and procedures.” Such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Office and Chief Financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgement in evaluating the cost-benefit relationship of possible disclosure and procedures. The design of and disclosure controls and procedures also are based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15f and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
To our knowledge, neither the Company nor any of its officers or directors is a party to any material legal proceeding or litigation and such persons know of no material legal proceeding or contemplated or threatened litigation. There are no judgments against us or our officers or directors. None of our officers or directors has been convicted of a felony or misdemeanor relating to securities or performance in corporate office.
Item 1A. Risk Factors
Except as described below, there have been no material changes to the Risk Factors previously disclosed in our Form 10-K. The risks described in our Form 10-K and below are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.
Risks Relating to Our Business and Industry
If the FDA or comparable foreign regulatory authorities approve generic versions of any of our product candidates that receive marketing approval, or such authorities do not grant our products sufficient, or any, periods of exclusivity before approving generic versions of our products, the sales of our products could be adversely affected.
Once a new drug application (“NDA”) is approved, the product covered thereby becomes a “reference listed drug” or RLD, in the FDA’s publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” commonly known as the Orange Book. Other manufacturers may seek approval of generic versions of reference listed drugs through submission of abbreviated new drug applications (“ANDAs”) in the United States. In support of an ANDA, a generic manufacturer need not conduct clinical trials. Rather, the applicant generally must show that its product has the same active ingredient(s), dosage form, strength, route of administration and conditions of use or labeling as the reference listed drug and that the generic version is bioequivalent to the reference listed drug, meaning it is absorbed in the body at the same rate and to the same extent as the RLD. Generic products may be significantly less costly to bring to market than the reference listed drug and companies that produce generic products are generally able to offer them at lower prices. Moreover, generic versions of RLDs are often automatically substituted for the RLD by pharmacies when dispensing a prescription written for the RLD. Thus, following the introduction of a generic drug, a significant percentage of the sales of any branded product or reference listed drug is typically lost to the generic product.
The FDA may not approve an ANDA for a generic product until any applicable period of non-patent exclusivity for the RLD has expired. The U.S. federal Food, Drug, and Cosmetic Act (“FDCA”) provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity (“NCE”). An NCE is an active ingredient that has not previously been approved by FDA alone or in combination with other substances. Specifically, in cases where such exclusivity has been granted, an ANDA may not be submitted to the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV Certification that a patent covering the reference listed drug is either invalid or will not be infringed by the generic product, in which case the applicant may submit its application four years following approval of the reference listed drug. If an ANDA is submitted to FDA with a Paragraph IV Certification, the generic applicant must also provide a Paragraph IV Notification to the holder of the NDA for the RLD and to the owner of the listed patent(s) being challenged by the ANDA applicant, providing a detailed written statement of the basis for the ANDA applicant’s position that the relevant patent(s) is invalid or would not be infringed. If the patent owner brings a patent infringement lawsuit against the ANDA applicant within 45 days of the Paragraph IV Notification, FDA approval of the ANDA will be automatically stayed for 30 months, or until 7-1/2 years after the NDA approval if the generic application was filed between 4 years and 5 years after the NDA approval. Any such stay will be terminated earlier if the court rules that the patent is invalid or would not be infringed.
Competition that our products may face from generic versions of our products could materially and adversely impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in those product candidates.
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If we fail to obtain or maintain Orphan Drug exclusivity for BIV201, we will have to rely on other potential marketing exclusivity, and on our intellectual property rights, which may reduce the length of time that we can prevent competitors from selling generic versions of BIV201.
We have obtained Orphan Drug Designation for BIV201 (terlipressin) in the U.S. for the treatment of hepatorenal syndrome (received November 21, 2018) and treatment of ascites due to all etiologies except cancer (received September 8, 2016). Under the Orphan Drug Act, the FDA may designate a product as an Orphan Drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S. In the EU, Orphan Drug designation may be granted to drugs intended to treat, diagnose or prevent a life-threatening or chronically debilitating disease having a prevalence of no more than five in 10,000 people in the EU, and which meet other specified criteria. The company that first obtains FDA approval for a designated Orphan Drug for the associated rare disease may receive a seven-year period of marketing exclusivity during which time FDA may not approve another application for the same drug for the same orphan disease or condition. Orphan Drug Exclusivity does not prevent FDA approval of another application for the same drug for a different disease or condition, or of an application for a different drug for the same rare disease or condition. Orphan Drug exclusive marketing rights may be lost under several circumstances, including a later determination by the FDA that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug. Similar regulations are available in the EU with a ten-year period of market exclusivity.
Even though BioVie has obtained two Orphan Drug Designations for its lead product candidate, terlipressin, for treatment of ascites and for treatment of HRS, and may seek other Orphan Drug Designations for BIV201, and Orphan Drug Designation for other product candidates, there is no assurance that BioVie will be the first to obtain marketing approval for any particular rare indication. Further, even though BioVie has obtained Orphan Drug Designations for its lead product candidate, or even if BioVie obtains Orphan Drug Designation for other potential product candidates, such designation may not effectively protect BioVie from competition because different drugs can be approved for the same condition and the same drug can be approved for different conditions and potentially used off-label in the Orphan indication. Even after an Orphan Drug is approved, the FDA can subsequently approve another competing drug with the same active ingredient for the same condition for several reasons, including, if the FDA concludes that the later drug is clinically superior due to being safer or more effective or because it makes a major contribution to patient care. Orphan Drug Designation neither shortens the development time or regulatory review time of a drug, nor gives the drug any advantage in the regulatory review or approval process.
In fact, Mallinckrodt recently received an NDA approval for its terlipressin product for the hepatorenal syndrome (“HRS”) indication in September 2022, which is the same indication for which we had received an Orphan Designation. FDA granted Mallinckrodt and its approved drug a new chemical entity exclusivity. Similarly, if another company with an Orphan Drug designation for the same drug as ours for the same proposed disease or condition receives FDA approval and orphan drug exclusivity before our product is approved, approval of our drug(s) for the orphan indication may be blocked for seven years by the other company’s orphan drug exclusivity and they may obtain a competitive advantage even after the exclusivity period expires associated with being the first to market.
We may face business disruption and related risks if there is another surge ofCOVID-19 or if there is another pandemic caused by other bacteria or viruses, which could have a material adverse effect on our business plan.
Health emergencies or pandemics, whether from COVID-19 or other viruses or bacteria, may lead to regional quarantines, business shutdowns, labor shortages, disruptions to supply chains, and overall economic instability, which could materially and adversely affect the clinical trials, supply chain, financial condition and financial performance of our company. The duration and spread of a pandemic and its long-term impact on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s ability to raise funds may be materially adversely affected. In addition, such health emergencies or pandemics may create a widespread labor shortage, including a shortage of medical professionals, and may impact potential patient participation in our studies which may adversely impact our ability to continue or complete our clinical trials in the planned timeline.
We can provide no assurance that our product candidates will obtain regulatory approval or that the results of clinical studies will be favorable.
The business plan we have developed through June 2024 for the liver disease program is to complete the Phase 2b clinical development program for our lead new product candidate BIV201 for treatment of ascites, conduct a single pivotal Phase 3 trial of BIV201 for ascites, and to pursue other key milestones such as additional patent issuances. For NE3107, we have commenced a potentially pivotal 18-month Phase 3 trial in Alzheimer’s disease, commenced a Phase 2 study of NE3017 in Parkinson’s disease. Due to our financial constraints, we do not have the resources necessary to complete all of these clinical studies. Subject to FDA guidance, we plan to commence additional Phase 2 and potentially Phase 3 clinical trials upon receipt of a successful capital raise. There is no guarantee the FDA will approve the commencement of a Phase 3 trial for BIV201, and even if it does, our financial constraints may prevent us from undertaking clinical trials.
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We may be unable to obtain or protect intellectual property rights relating to our product candidates, and we may be liable for infringing upon the intellectual property rights of others, which could have a materially adverse effect on our business.
Our ability to compete effectively will depend on our ability to maintain the proprietary nature of our technologies. We cannot assure investors that we will continue to innovate and file new patent applications, or that if filed any future patent applications will result in granted patents with respect to the technology owned by us or licensed to us. Further, we cannot predict how long it will take for such patents to issue, if at all. The patent position of pharmaceutical or biotechnology companies, including ours, is generally uncertain and involves complex legal and factual considerations and, therefore, validity and enforceability cannot be predicted with certainty. Patents may be challenged, deemed unenforceable, invalidated or circumvented.
BioVie has also filed a PCT (“Patent Cooperation Treaty”) application covering our novel liquid formulations of terlipressin (international patent application PCT/US2020/034269 published as WO2020/237170) and we are seeking patent protection in the United States, Europe, China, Japan and eight other jurisdictions. As of August 22, 2022, we have fifteen (15) issued U.S. patents, one (1) pending U.S. patent application, one (1) pending PCT application and six (6) issued foreign patents directed to protecting NE3107 and related compounds and methods of making and using thereof. However, there can be no assurance that our pending patent applications will result in issued patents, or that any issued patent claims from pending or future patent applications will be sufficiently broad to protect BIV201, NE3107, or any other product candidates or to provide us with competitive advantages.
Any patents we do obtain may be challenged by re-examination or otherwise invalidated or eventually found unenforceable. Both the patent application process and the process of managing patent disputes can be time consuming and expensive. If we were to initiate legal proceedings against a third party to enforce a patent related to one of our products, the defendant in such litigation could counterclaim that our patent is invalid and/or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity and/or unenforceability are commonplace, as are validity challenges by the defendant against the subject patent or other patents before the United States Patent and Trademark Office (the “USPTO”). Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement, failure to meet the written description requirement, indefiniteness, and/or failure to claim patent eligible subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent intentionally withheld material information from the USPTO, or made a misleading statement, during prosecution. Additional grounds for an unenforceability assertion include an allegation of misuse or anticompetitive use of patent rights, and an allegation of incorrect inventorship with deceptive intent. Third parties may also raise similar claims before the USPTO even outside the context of litigation. The outcome is unpredictable following legal assertions of invalidity and unenforceability. With respect to the validity question, for example, we cannot be certain that no invalidating prior art existed of which we and the patent examiner were unaware during prosecution. These assertions may also be based on information known to us or the Patent Office. If a defendant or third party were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the claims of the challenged patent. Such a loss of patent protection would or could have a material adverse impact on our business.
The standards that the United States Patent and Trademark Office (and foreign countries) use to grant patents are not always applied predictably or uniformly and can change. There is also no uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable in pharmaceutical or biotechnology patents. Accordingly, we do not know the degree of future protection for our proprietary rights or the breadth of claims that will be allowed in any patents issued to us or to others.
Further, we rely on a combination of trade secrets, know-how, technology and nondisclosure, and other contractual agreements and technical measures to protect our rights in the technology. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our business and financial condition could be materially adversely affected. The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the U.S., and we may encounter significant problems in protecting our proprietary rights in these countries.
We do not believe that either BIV201 or NE3107, the product candidates we are currently developing, infringe upon the rights of any third parties nor are they infringed upon by third parties. However, there can be no assurance that our technology will not be found in the future to infringe upon the rights of others or be infringed upon by others. Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our products or product candidates infringe. For example, pending applications may exist that provide support or can be amended to provide support for a claim that results in an issued patent that our product infringes. In such a case, others may assert infringement claims against us, and should we be found to infringe upon their patents, or otherwise impermissibly utilize their intellectual property, we might be forced to pay damages, potentially including treble damages, if we are found to have willfully infringed on such parties’ patent rights. In addition to any damages we might have to pay, we may be required to obtain licenses from the holders of this intellectual property. We may fail to obtain any of these licenses or intellectual property rights on commercially reasonable terms. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to develop or commercialize the affected products, which could materially harm our business and the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation. Conversely, we may not always be able to successfully pursue our claims against others that infringe upon our technology. Thus, the proprietary nature of our technology or technology licensed by us may not provide adequate protection against competitors.
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The pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Moreover, the cost to us of any litigation or other proceeding relating to our patents and other intellectual property rights, even if resolved in our favor, could be substantial, and the litigation would divert our management’s efforts. We may not have sufficient resources to bring any such action to a successful conclusion. Uncertainties resulting from the initiation and continuation of any litigation could limit our ability to continue our operations and you could lose all of your investment.
There may be conflicts of interest among our officers, directors and stockholders.
Certain of our executive officers and directors and their affiliates are engaged in other activities and have interests in other entities on their own behalf or on behalf of other persons. Neither we nor any of our stockholders will have any rights in these ventures or their income or profits. In particular, our executive officers or directors or their affiliates may have an economic interest in or other business relationship with partner companies that invest in us or are engaged in competing drug development. Our executive officers or directors may have conflicting fiduciary duties to us and third parties. The terms of transactions with third parties may not be subject to arm’s length negotiations and therefore may be on terms less favorable to us than those that could be procured through arm’s length negotiations.
Risks Relating To Our Common Stock
You may experience future dilution as a result of future equity offerings or if we issue shares subject to options, warrants, stock awards or other arrangements.
In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock, including under the Controlled Equity Offering Sales Agreement (the “Sales Agreement”), dated as of August 31, 2022, by and among the Company, Cantor Fitzgerald & Co. and B. Riley Securities, Inc. (collectively, the “Agents”), pursuant to which the Company may issue and sell from time to time shares of common stock through the Agents. We may sell shares or other securities in any other offering at a price per share that is less than the current market price of our securities, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The sale of additional shares of common stock or other securities convertible into or exchangeable for our common stock would dilute all of our stockholders, and if such sales of convertible securities into or exchangeable into our common stock occur at a deemed issuance price that is lower than the current exercise price of our outstanding warrants sold to Acuitas Group Holdings, LLC (“Acuitas”) in August 2022, the exercise price for those warrants would adjust downward to the deemed issuance price pursuant to price adjustment protection contained within those warrants.
In addition, as of November 3, 2022, there were warrants outstanding to purchase an aggregate of 7,778,285 shares of common stock at exercise prices ranging from $1.82 to $12.50 per share and 3,345,530 shares issuable upon exercise of outstanding options at exercise prices ranging from $1.69 to $42.09 per share. Our Loan Agreement entered into on November 30, 2021 contains a conversion feature whereby at the option of lender, up to $5 million of the outstanding loan amount maybe converted to shares of common stock at a conversion price of $6.98 per share. We may grant additional options, warrants or stock awards. To the extent such shares are issued, the interest of holders of our common stock will be diluted.
Moreover, we are obligated to issue shares of common stock upon achievement of certain clinical, regulatory and commercial milestones with respect to certain of our drug candidates (i.e., NE3107, NE3291, NE3413, and NE3789) pursuant to the asset purchase agreement, dated April 27, 2021, by and among the Company, NeurMedix, Inc. and Acuitas, as amended on May 9, 2021 (the “Asset Purchase Agreement”). The achievement of these milestones could result in the issuance of up to 18 million shares of our common stock, further diluting the interest of holders of our common stock.
Certain stockholders who are also officers and directors of the Company may have significant control over our management.
As of November 3, 2022, our directors and executive officers currently own an aggregate shares of our common stock, which currently constitutes 76.7% of our issued and outstanding common stock. As a result, directors and executive officers may have a significant influence on our affairs and management, as well as on all matters requiring member approval, including electing and removing members of our board of directors, causing us to engage in transactions with affiliated entities, causing or restricting our sale or merger, and certain other matters. Our Chairman, Mr. Terren Peizer, may be deemed to beneficially own the shares held by Acuitas. Such concentration of ownership and control could have the effect of delaying, deferring or preventing a change in control of us even when such a change of control would be in the best interests of our stockholders.
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There is a limited trading market for our common stock, which could make it difficult to liquidate an investment in our common stock, in a timely manner.
Our common stock is currently traded on the Nasdaq Capital Market. Because there is a limited public market for our common stock, investors may not be able to liquidate their investment whenever desired. We cannot assure that there will be an active trading market for our common stock and the lack of an active public trading market could mean that investors may be exposed to increased risk. In addition, if we failed to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect its liquidity.
We may, in the future, issue additional common stock, which would reduce investors’ percent of ownership and may dilute our share value.
As of November 3, 2022 our Articles of Incorporation, as amended, authorize the issuance of 800,000,000 shares of common stock, and we had 30,532,830 shares of common stock outstanding. Accordingly, we may issue up to an additional 769,467,170 shares of common stock. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. We may value any common stock in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, might have an adverse effect on any trading market for our common stock and could impair our ability to raise capital in the future through the sale of equity securities.
Item 2. Unregistered sales of equity securities
Other than equity securities issued in transactions disclosed on our Current Report on Form 8-K/A filed with the SEC on July 18, 2022, there were no unregistered sales of equity securities during the period.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
On August 15, 2022, in connection with the consummation of the Private Placement, the Company entered into an amended and restated registration statement with Acuitas, which amended and restated that certain Registration Rights Agreement, dated as of June 10, 2021, by and between the Company and Acuitas (the “Existing Registration Rights Agreement”), to amend the definition of “Registrable Securities” in the Existing Registration Rights Agreement to include the PIPE Shares and the Warrant Shares as Registrable Securities thereunder.
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Item 6. Exhibits
(a) Exhibit index
| * | Filed herewith. |
| ** | Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filings of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BioVie Inc.,
| Signature | Titles | Date | ||
| /s/ Cuong V Do | ||||
| Cuong V Do | Chairman and Chief Executive Officer (Principal Executive Officer) | November 4, 2022 | ||
| /s/ Joanne Wendy Kim | ||||
| Joanne Wendy Kim | Chief Financial Officer (Principal Financial and Accounting Officer) | November 4, 2022 |
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Exhibit 10.2
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of August 15, 2022 by and between BioVie Inc., a Nevada corporation (the “Company”), and Acuitas Group Holdings, LLC, a California limited liability company (“Acuitas”). The Company and Acuitas are sometimes collectively referred to herein as the “Parties” and each is sometimes referred to herein as a “Party.”
WHEREAS, the Company and Acuitas are parties to that certain Registration Rights Agreement, dated as of June 10, 2021 (the “Prior Agreement”) that was entered into in connection with the transactions (the “Transactions”) contemplated by the Asset Purchase Agreement, dated as of April 27, 2021 (the “Asset Purchase Agreement”), by and among the Company, NeurMedix, Inc., a Delaware corporation (“NeurMedix”), and Acuitas;
WHEREAS, on July 15, 2022, the Company and Acquitas entered into that certain Securities Purchase Agreement (the “Securities Purchase Agreement”), pursuant to which the parties agreed to enter into this Agreement at the closing of the transactions contemplated by the Securities Purchase Agreement;
WHEREAS, pursuant to Section 3.11 of the Prior Agreement, an amendment to the Prior Agreement may only be made by means of a written amendment signed by the Company and Acuitas; and
WHEREAS, the parties desire to amend and restate the Prior Agreement in its entirety and enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each party hereto, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in and for purposes of this Agreement, the following terms have the following meanings:
“Affiliate” means, with respect to any specified Person, any Person that, directly or indirectly through one or more entities, controls or is controlled by, or is under common control with, such specified Person. As used herein, “controls”, “control” and “controlled” means the possession, direct or indirect, of the power to direct the management and policies of a Person, whether through the ownership of the voting interests of such Person, through contract or otherwise. For purposes of this Agreement, none of NeurMedix, NeurMedix, LLC or Acuitas shall be considered “Affiliates” of the Company.
“Agreement” has the meaning given to such term in the preamble to this Agreement.
“Asset Purchase Agreement” has the meaning given to such term in the recitals of this Agreement.
“Commission” has the meaning given to such term in Section 1.2.
“Common Stock” means the Class A common stock of the Company, par value $0.0001 per share.
“Company” has the meaning given to such term in the preamble to this Agreement.
“Effectiveness Period” has the meaning given to such term in Section 2.1.
“Equity Security” has the meaning ascribed to such term in Rule 405 under the Securities Act, and in any event includes any security having the attendant right to vote for directors or similar representatives.
“Exchange Act” has the meaning given to such term in Section 2.8(a).
“Holdback Period” has the meaning given to such term in Section 2.11.
“Holder” means Acuitas or, following the assignment of Acuitas’ rights and obligations under this Agreement pursuant to Section 2.10, Acuitas’ successor or assign hereunder.
“Included Registrable Securities” has the meaning given to such term in Section 2.3(a).
“Losses” has the meaning given to such term in Section 2.8(a).
“Managing Underwriter(s)” means, with respect to any Underwritten Offering, the book-running lead manager(s) of such Underwritten Offering.
“Notice” has the meaning given to such term in Section 2.1.
“Person” means any natural person, corporation, general partnership, limited partnership, limited liability company, limited liability partnership, proprietorship, trust, union, association, court, tribunal, agency, government, department, commission, self-regulatory organization, arbitrator, board, bureau, instrumentality, governmental authority or other entity, enterprise, authority or business organization.
“Registrable Securities” means (i) the shares of Common Stock issued or issuable pursuant to the Asset Purchase Agreement and (ii) the Shares and the Warrant Shares (as each such term is defined in the Securities Purchase Agreement) issued or issuable pursuant to the terms of the Securities Purchase Agreement and the Warrants (as such term is defined in the Securities Purchase Agreement).
“Registration Expenses” means all expenses (other than Selling Expenses) incident to the Company’s performance under or compliance with this Agreement to effect the registration of Registrable Securities on a Registration Statement pursuant to Section 2.1 and/or in connection with an Underwritten Offering pursuant to Section 2.2(a) or Section 2.3(a), and the disposition of such Registrable Securities, including, without limitation, all registration, filing, securities exchange listing and securities exchange fees, all registration, filing, qualification and other fees and expenses of complying with securities or blue sky laws, fees of the Financial Industry Regulatory Authority, fees of transfer agents and registrars, all word processing, duplicating and printing expenses, expenses incurred in connection with any road show, any transfer taxes and the fees and disbursements of counsel and independent public accountants for the Company, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance.
“Registration Statement” has the meaning given to such term in Section 2.1.
“Securities Act” has the meaning given to such term in Section 1.2.
“Selling Expenses” means all underwriting fees, discounts and selling commissions applicable to the sale of Registrable Securities.
“Shelf Registration Statement” has the meaning given to such term in Section 2.1.
“Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act.
“Transaction” has the meaning given to such term in the recitals of this Agreement.
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“Underwritten Offering” means an offering (including an offering pursuant to a Registration Statement) in which Registrable Securities are sold to an underwriter on a firm commitment basis for reoffering to the public or an offering that is a “bought deal” with one or more investment banks.
“Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.
Section 1. 2 Registrable Securities. Any Registrable Security will cease to be a Registrable Security (a) at the time a Registration Statement covering such Registrable Security has been declared effective by the Securities and Exchange Commission (the “Commission”), or otherwise has become effective, and such Registrable Security has been sold or disposed of pursuant to such Registration Statement; (b) at the time such Registrable Security has been disposed of pursuant to Rule 144 (or any similar provision then in effect under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “Securities Act”)); (c) if such Registrable Security is held by the Company; or (d) at the time such Registrable Security has been sold in a private transaction in which the Holder’s rights under this Agreement are not assigned to the recipient of such securities.
ARTICLE II
REGISTRATION RIGHTS
Section 2.1 Demand Registration. Upon the written request (a “Notice”) by the Holder, the Company shall file with the Commission, as soon as reasonably practicable, but in no event more than 30 days following the receipt of the Notice, a registration statement (each, a “Registration Statement”) under the Securities Act providing for the resale of the Registrable Securities (which may, at the option of the Holder, be a registration statement under the Securities Act that provides for the resale of the Registrable Securities pursuant to Rule 415 from time to time by the Holder (a “Shelf Registration Statement”)). The Company shall use its commercially reasonable efforts to cause each Registration Statement to be declared effective by the Commission as soon as reasonably practicable after the initial filing of the Registration Statement. Any Registration Statement shall provide for the resale pursuant to any method or combination of methods legally available to, and requested by, the Holder. To the extent the initial Registration Statement is not made on Form S-3, the Company shall, upon becoming eligible to file a registration statement on Form S-3, prepare and file a new Registration Statement on Form S-3 to replace the initial Registration Statement and use its best efforts to cause such subsequent Registration Statement to be declared effective by the Commission as soon as reasonably practicable thereafter. The Company shall use its commercially reasonable efforts to cause each Registration Statement filed pursuant to this Section 2.1 to be continuously effective, supplemented and amended to the extent necessary to ensure that it is available for the resale of all Registrable Securities by the Holder until all Registrable Securities covered by such Registration Statement have ceased to be Registrable Securities (the “Effectiveness Period”). Each Registration Statement when effective (and the documents incorporated therein by reference) shall comply as to form in all material respects with all applicable requirements of the Securities Act and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Holder shall be limited to two demand registrations under this Section 2.1 in any twelve-month period (provided, however, that there shall be no limit on the number of Shelf Registration Statements that may be required by the Holder hereunder), and the Company shall not be obligated to file more than one Registration Statement within 120 days after the effective date of any Registration Statement filed by the Company; provided, further, that no demand registration under this Section 2.1 shall be deemed to have occurred for purposes of this sentence if the Registration Statement relating thereto (a) does not become effective within 180 days of the date first filed with the Commission, (b) is not maintained effective for the Effectiveness Period required under this Section 2.1 or (c) the offering of the Registrable Securities pursuant to such Registration Statement is subject to a stop order, injunction, or similar order or requirement of the Commission during such period.
Section 2.2 Underwritten Offerings.
(a) Request for Underwritten Offering. Subject to Section 2.2(b), in the event that the Holder elects to dispose of Registrable Securities pursuant to an Underwritten Offering, the Company shall, upon written request by the Holder, retain underwriters in order to permit the Holder to effect such sale through an Underwritten Offering. The obligation of the Company to retain underwriters shall include entering into an underwriting agreement in customary form with the Managing Underwriter(s), which shall include, among other provisions, indemnities to the effect and to the extent provided in Section 2.8 and taking all reasonable actions as are requested by the Managing Underwriter(s) to expedite or facilitate the disposition of such Registrable Securities. The Company shall, upon request of the Holder, cause its management to participate in a roadshow or similar marketing effort on behalf of the Holder.
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(b) Limitation on Underwritten Offerings. In no event shall the Company be required under Section 2.2(a) to participate in more than three Underwritten Offerings requested by the Holder in any twelve-month period.
(c) General Procedures. In connection with any Underwritten Offering under this Agreement, the Holder shall be entitled, subject to the Company’s consent (which is not to be unreasonably withheld, conditioned or delayed), to select the Managing Underwriter(s). In connection with any Underwritten Offering under this Agreement, the Holder and the Company shall be obligated to enter into an underwriting agreement that contains such representations and warranties, covenants, indemnities and other rights and obligations as are customary in underwriting agreements for firm commitment offerings of securities. The Holder may not participate in such Underwritten Offering unless the Holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement. The Holder may, at its option, require that (i) any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters also be made to and for the Holder’s benefit and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also be conditions precedent to the Holder’s obligations, and (ii) the Company deliver such documents and certificates as may be reasonably requested by the Holder, its counsel or the Managing Underwriter(s) to evidence the continued validity of the representations and warranties made by the Company pursuant to this Section 2.2(c) and to evidence compliance with any customary conditions contained in such underwriting agreement. If the Holder disapproves of the terms of an underwriting, the Holder may elect to withdraw from the Underwritten Offering by notice to the Company and the Managing Underwriter(s); provided, however, that such withdrawal must be made at a time prior to the time of pricing of such Underwritten Offering. No such withdrawal shall affect the Company’s obligation to pay Registration Expenses.
Section 2.3 Piggyback Rights.
(a) Participation. If the Company proposes to file (i) a registration statement or (ii) a prospectus supplement to an effective shelf registration statement and the Holder may be included in the offering to which such prospectus supplement relates without the filing of a post-effective amendment to such shelf registration statement, in each case, for the sale of Common Stock in an Underwritten Offering for its own account and/or another Person, then as soon as practicable following the engagement of counsel by the Company to prepare the documents to be used in connection with such Underwritten Offering, the Company shall give prompt notice (including notification by electronic mail) of such proposed Underwritten Offering to the Holder and such notice shall offer the Holder the opportunity to include in such Underwritten Offering such number of Registrable Securities (the “Included Registrable Securities”) as the Holder may request in writing. Subject to Section 2.3(b), the Company shall include in such Underwritten Offering all included Registrable Securities with respect to which the Company has received requests within five (5) Business Days (or one (1) Business Day in connection with a “bought deal” or an “overnight” Underwritten Offering) after the Company’s notice has been delivered in accordance with Section 3.1. If no written request for inclusion from the Holder is received within the specified time, the Holder shall have no further right to participate in such Underwritten Offering. If, at any time after giving written notice of its intention to undertake an Underwritten Offering and prior to the closing of such Underwritten Offering, the Company shall determine for any reason not to undertake or to delay such Underwritten Offering, the Company may, at its election, give written notice of such determination to the Holder and, (x) in the case of a determination not to undertake such Underwritten Offering, shall be relieved of its obligation to sell any Included Registrable Securities in connection with such terminated Underwritten Offering and (y) in the case of a determination to delay such Underwritten Offering, shall be permitted to delay offering any Included Registrable Securities for the same period as the delay in the Underwritten Offering. The Holder shall have the right to withdraw the Holder’s request for inclusion of the Holder’s Registrable Securities in such Underwritten Offering by giving written notice to the Company of such withdrawal at or prior to the time of pricing of such Underwritten Offering.
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(b) Priority of Registration. If the Managing Underwriter(s) of any proposed Underwritten Offering advises the Company in writing that in its reasonable view the total amount of Registrable Securities that the Holder and any other Persons intend to include in such offering exceeds the number that can be sold in such offering without being likely to have an adverse effect in any material respect on the price, timing or distribution of the Common Stock offered or the market for the Common Stock, then the total number of shares of Common Stock to be included in such Underwritten Offering shall be reduced to such number of shares of Common Stock that such Managing Underwriter(s) advises the Company can be sold without having such adverse effect, with such number to be allocated (i) first, to the Company, unless the Holder initiates the Underwritten Offering, in which case it shall be first allocated to the Holder, and (ii) second, to the Holder (or to the Company, if the Holder initiates the Underwritten Offering).
Section 2.4 Delay Rights. If the Company’s board of directors determines that that the filing of a Registration Statement with respect to Registrable Securities pursuant to Section 2.1 would be materially detrimental to the Company and its shareholders because such registration would (a) materially interfere with a significant acquisition, reorganization, financing or other similar transaction involving the Company, (b) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential or (c) render the Company unable to comply with applicable securities laws, then the Company shall have the right to postpone compliance with its obligations under this Article II with respect to such Registration Statement for a period of not more than three months, provided, that such right pursuant to this Section 2.4 may not be utilized more than twice in any twelve-month period; and provided, further, that the Company shall at all times use its reasonable best efforts to cause any Registration Statement required under Section 2.1 to be filed as soon as possible. The Company shall promptly give the Holder written notice of any postponement made in accordance with this Section 2.4.
Section 2.5 Sale Procedures. In connection with its obligations under this Article II, the Company will, as expeditiously as reasonably practicable:
(a) prepare and file with the Commission such amendments and supplements to each Registration Statement and the prospectus used in connection therewith as may be necessary to keep each Registration Statement effective for the Effectiveness Period and as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Registration Statement;
(b) if a prospectus supplement will be used in connection with the marketing of an Underwritten Offering and the Managing Underwriter(s) notifies the Company in writing that, in the sole judgment of such Managing Underwriter(s), inclusion of detailed information in such prospectus supplement is of material importance to the success of the Underwritten Offering of such Registrable Securities, use its commercially reasonable efforts to include such information in such prospectus supplement;
(c) furnish to the Holder (i) as far in advance as reasonably practicable before filing a Registration Statement or any supplement or amendment thereto, upon request, copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits and each document incorporated by reference therein to the extent then required by the rules and regulations of the Commission), and provide the Holder the opportunity to object to any information pertaining to the Holder and its plan of distribution that is contained therein and make the corrections reasonably requested by the Holder with respect to such information prior to filing a Registration Statement or supplement or amendment thereto, and (ii) such number of copies of such Registration Statement and the prospectus included therein and any supplements and amendments thereto as such Persons may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities covered by such Registration Statement;
(d) if applicable, use its commercially reasonable efforts to register or qualify the Registrable Securities covered by a Registration Statement under the securities or blue sky laws of such jurisdictions as the Holder or, in the case of an Underwritten Offering, the Managing Underwriter(s), shall reasonably request; provided, however, that the Company will not be required to qualify generally to transact business in any jurisdiction where it is not then required to so qualify or to take any action that would subject it to general service of process in any jurisdiction where it is not then so subject;
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(e) promptly notify the Holder and each underwriter, at any time when a prospectus is required to be delivered under the Securities Act, of (i) the filing of a Registration Statement or any prospectus or prospectus supplement to be used in connection therewith, or any amendment or supplement thereto, and, with respect to such Registration Statement or any post-effective amendment thereto, when the same has become effective; and (ii) any written comments from the Commission with respect to any filing referred to in clause (i) and any written request by the Commission for amendments or supplements to a Registration Statement or any prospectus or prospectus supplement thereto;
(f) immediately notify the Holder and each underwriter, at any time when a prospectus is required to be delivered under the Securities Act, of (i) the happening of any event as a result of which the prospectus or prospectus supplement contained in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading (in the case of the prospectus contained therein, in the light of the circumstances under which a statement is made); (ii) the issuance or threat of issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement, or the initiation of any proceedings for that purpose; or (iii) the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. Following the provision of such notice, the Company agrees to, as promptly as practicable, amend or supplement the prospectus or prospectus supplement or take other appropriate action so that the prospectus or prospectus supplement does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading in the light of the circumstances then existing and to take such other commercially reasonable action as is necessary to remove a stop order, suspension, threat thereof or proceedings related thereto;
(g) upon request and subject to appropriate confidentiality obligations, furnish to the Holder copies of any and all transmittal letters or other correspondence with the Commission or any other governmental agency or self-regulatory body or other body having jurisdiction (including any domestic or foreign securities exchange) relating to any offering of Registrable Securities;
(h) in the case of an Underwritten Offering, furnish upon request, (i) an opinion of counsel for the Company dated the date of the closing under the underwriting agreement and (ii) a “cold comfort” letter, dated the pricing date of such Underwritten Offering (to the extent available) and a letter of like kind dated the date of the closing under the underwriting agreement, in each case, signed by the independent public accountants who have certified the Company’s financial statements included or incorporated by reference into the applicable registration statement, and each such opinion and “cold comfort” letter shall be in customary form and covering substantially the same matters with respect to such registration statement (and the prospectus and any prospectus supplement included therein) as have been customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to the underwriters in Underwritten Offerings of securities by the Company or its predecessors and such other matters as such underwriters and the Holder may reasonably request;
(i) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;
(j) make available to the appropriate representatives of the Managing Underwriter(s) and the Holder access to such information and Company personnel as is reasonable and customary to enable such parties to establish a due diligence defense under the Securities Act;
(k) cause all Registrable Securities registered pursuant to this Agreement to be listed on each securities exchange or nationally recognized quotation system on which similar securities issued by the Company are then listed;
(l) use its commercially reasonable efforts to cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Holder to consummate the disposition of the Registrable Securities;
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(m) provide a transfer agent and registrar for all Registrable Securities covered by a Registration Statement not later than the effective date of such registration statement; and
(n) enter into customary agreements and take such other actions as are reasonably requested by the Holder or the underwriters, if any, in order to expedite or facilitate the disposition of the Registrable Securities.
Except to the extent required by applicable law, the Company shall not file any Registration Statement with respect to any Registrable Securities, or any prospectus used in connection therewith, and shall not file or make any amendment to any such Registration Statement or any amendment of or supplement to any such prospectus, that refers to the Holder covered thereby by name, or otherwise identifies the Holder as the holder of any securities of the Company, without the consent of the Holder, such consent not to be unreasonably withheld, conditioned or delayed, unless and to the extent such disclosure is required by law or regulation, in which case the Company shall provide written notice to the Holder no less than two (2) Business Days prior to the filing of such Registration Statement or any amendment to any such Registration Statement or any prospectus used in connection therewith or any amendment of or supplement to any such Prospectus.
The Holder, upon receipt of notice from the Company of the happening of any event of the kind described in subsection (f) of this Section 2.5, shall forthwith discontinue disposition of the Registrable Securities by means of a prospectus or prospectus supplement until the Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by subsection (f) of this Section 2.5 or until it is advised in writing by the Company that the use of the prospectus may be resumed, and has received copies of any additional or supplemental filings incorporated by reference in the prospectus.
Section 2.6 Cooperation by Holder. The Company shall have no obligation to include in a Registration Statement, or in an Underwritten Offering pursuant to Section 2.2(a), Registrable Securities of the Holder, if the Holder has failed to timely furnish such information that, in the opinion of counsel to the Company, is reasonably required in order for the registration statement or prospectus supplement, as applicable, to comply with the Securities Act.
Section 2.7 Expenses.
(a) The Company will pay all reasonable Registration Expenses, including in the case of an Underwritten Offering, regardless of whether any sale is made in such Underwritten Offering. The Holder shall pay all Selling Expenses in connection with any sale of its Registrable Securities hereunder
(b) In connection with each Underwritten Offering, the Company shall reimburse the Holder for the reasonable fees and disbursements of one counsel chosen by the Holder and reasonable disbursements of each additional counsel reasonably retained by the Holder for the purpose of rendering a legal opinion to the underwriter(s) on behalf of the Holder in connection with any Underwritten Offering.
Section 2.8 Indemnification.
(a) By the Company. In the event of a registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless the Holder, its directors, officers, employees and agents, and each Person, if any, who controls the Holder within the meaning of the Securities Act and the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”), and its directors, officers, employees or agents, against any losses, claims, damages, expenses or liabilities (including reasonable attorneys’ fees and expenses) (collectively, “Losses”), joint or several, to which the Holder, director, officer, employee, agent or controlling Person thereof may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact (in the case of any prospectus or any Written Testing-the-Waters Communication, in the light of the circumstances under which such statement is made) contained in any Written Testing-the-Waters Communication, a Registration Statement, any preliminary prospectus or prospectus supplement, free writing prospectus or final prospectus or prospectus supplement contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus or any Written Testing-the-Waters Communication, in the light of the circumstances under which they were made) not misleading, and will reimburse the Holder, its directors, officers, employees and agents, and each such controlling Person, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Loss or actions or proceedings as such expenses are incurred; provided, however, that the Company will not be liable in any such case if and to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by the Holder, its directors, officers, employees and agents or such controlling Person in writing specifically for use in any Written Testing-the-Waters Communication, a Registration Statement, any preliminary prospectus or prospectus supplement, free writing prospectus or final prospectus or prospectus supplement contained therein, or any amendment or supplement thereto, as applicable. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Holder or any such directors, officers, employees agents or controlling Person, and shall survive the transfer of such securities by the Holder.
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(b) By the Holder. The Holder agrees to indemnify and hold harmless the Company, its directors, officers, employees and agents and each Person, if any, who controls the Company within the meaning of the Securities Act or of the Exchange Act, and its directors, officers, employees and agents, to the same extent as the foregoing indemnity from the Company to the Holder, but only with respect to information regarding the Holder furnished in writing by or on behalf of the Holder expressly for inclusion in any Written Testing-the-Waters Communication, a Registration Statement, any preliminary prospectus or prospectus supplement, free writing prospectus or final prospectus or prospectus supplement contained therein, or any amendment or supplement thereof.
(c) Notice. Promptly after receipt by the indemnified party hereunder of notice of the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission to so notify the indemnifying party shall not relieve the indemnifying party from any liability that it may have to any indemnified party. In any action brought against any indemnified party, the indemnified party shall notify the indemnifying party of the commencement thereof. The indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to the indemnified party and, after notice from the indemnifying party to the indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to the indemnified party under this Section 2.8 for any legal expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that, (i) if the indemnifying party has failed to assume the defense or employ counsel reasonably acceptable to the indemnified party or (ii) if the defendants in any such action include both the indemnified party and the indemnifying party and counsel to the indemnified party shall have concluded that there may be reasonable defenses available to the indemnified party that are different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, then the indemnified party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other reasonable expenses related to such participation to be reimbursed by the indemnifying party as incurred. Notwithstanding any other provision of this Agreement, no indemnified party shall settle any action brought against it with respect to which it is entitled to indemnification hereunder without the consent of the indemnifying party, unless the settlement thereof imposes no liability or obligation on, and includes a complete and unconditional release from all liability of, the indemnifying party.
(d) Contribution. If the indemnification provided for in this Section 2.8 is held by a court or government agency of competent jurisdiction to be unavailable to the indemnified party or is insufficient to hold them harmless in respect of any Losses, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of the indemnifying party on the one hand and the indemnified party on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact has been made by, or relates to, information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to herein. The amount paid by the indemnified party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such indemnified party in connection with investigating or defending any Loss that is the subject of this paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who is not guilty of fraudulent misrepresentation.
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(e) Other Indemnification. The provisions of this Section 2.8 shall be in addition to any other rights to indemnification or contribution that an indemnified party may have pursuant to law, equity, contract or otherwise.
Section 2.9 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its commercially reasonable efforts to:
(a) make and keep public information regarding the Company available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times from and after the date hereof;
(b) file with the Commission in a timely manner all reports and other documents required of the Company under the Exchange Act at all times from and after the date hereof; and
(c) so long as the Holder owns any Registrable Securities, unless otherwise available via the Commission’s EDGAR system, furnish to the Holder forthwith upon request a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as the Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing the Holder to sell any such securities without registration.
Section 2.10 Transfer or Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities granted to the Holder by the Company under this Article II may be transferred or assigned by the Holder to one or more transferee(s) or assignee(s) of such Registrable Securities; provided, however, that (a) unless such transferee or assignee is an Affiliate of Acuitas, each such transferee or assignee holds Registrable Securities representing at least five percent (5%) of the then-outstanding Registrable Securities (subject to adjustment pursuant to Section 3.4), (b) the Company is given written notice prior to any said transfer or assignment, stating the name and address of each such transferee and identifying the Registrable Securities with respect to which such registration rights are being transferred or assigned, and (c) each such transferee agrees to be bound by this Agreement.
Section 2.11 Restrictions on Public Sale by the Holder of Registrable Securities. In connection with an Underwritten Offering, if requested by the Managing Underwriter(s), the Holder agrees to enter into a customary letter agreement with such underwriters providing that the Holder will not effect any public sale or distribution of the Registrable Securities during the 90 calendar day period beginning on the date of a prospectus or prospectus supplement filed by the Company with the Commission with respect to the pricing of such Underwritten Offering (the “Holdback Period”), provided that (i) the duration of the foregoing restrictions shall be no longer than the duration of the shortest restriction generally imposed by the underwriters on the Company or the officers, directors or any other stockholder of the Company on whom a restriction is imposed and (ii) the restrictions set forth in this Section 2.11 shall not apply to any Registrable Securities that are included in such Underwritten Offering by the Holder. If any registration pursuant to Section 2.1 shall be in connection with any Underwritten Offering, during the Holdback Period, the Company will not effect any public sale or distribution of any shares of Common Stock (or any securities convertible into or exchangeable or exercisable for shares of Common Stock) (other than a registration statement (x) on Form S 4, Form S 8 or any successor forms thereto or (y) filed solely in connection with an exchange offer or any employee benefit or dividend reinvestment plan) for its own account.
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ARTICLE III
MISCELLANEOUS
Section 3.1 Communications. All notices and other communications provided for or permitted hereunder shall be made in writing by facsimile, electronic mail, courier service or personal delivery:
| (a) | If to the Company: |
BioVie Inc.
2120 Colorado Avenue, Suite 230
Santa Monica, CA 90404
Attention: Corporate Secretary
| (b) | If to the Holder: |
Acuitas Group Holdings, LLC
2120 Colorado Avenue, Suite 230
Santa Monica, CA 90404
Attention: Chairman
All such notices and communications shall be deemed to have been received at the time delivered by hand, if personally delivered; when receipt acknowledged, if sent via facsimile or sent via electronic mail; and when actually received, if sent by courier service or any other means.
Section 3.2 Successor and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the Parties, including subsequent holders of Registrable Securities to the extent permitted herein.
Section 3.3 Assignment of Rights. All or any portion of the rights and obligations of the Holder under this Agreement may be transferred or assigned by the Holder in accordance with Section 2.10 hereof.
Section 3.4 Recapitalization, Exchanges, Etc. Affecting the Registrable Securities. The provisions of this Agreement shall apply to the full extent set forth herein with respect to any and all securities of the Company, its subsidiaries, or any successor or assign of the Company or its subsidiaries (whether by merger, consolidation, sale of assets or otherwise) that may be issued in respect of, in exchange for or in substitution of, the Registrable Securities, and shall be appropriately adjusted for combinations, splits, recapitalizations, pro rata distributions and the like occurring after the date of this Agreement.
Section 3.5 Specific Performance. Damages in the event of a breach of this Agreement by a party hereto may be difficult, if not impossible, to ascertain, and it is therefore agreed that each party, in addition to and without limiting any other remedy or right it may have, will have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the parties hereto hereby waives any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude any such party from pursuing any other rights and remedies at law or in equity that such party may have.
Section 3.6 Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all Parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument. The delivery of an executed counterpart copy of this Agreement by facsimile or electronic transmission in PDF format shall be deemed to be the equivalent of delivery of the originally executed copy thereof.
Section 3.7 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
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Section 3.8 Governing Law. The laws of the State of Delaware shall govern this Agreement.
Section 3.9 Severability of Provisions. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting or impairing the validity or enforceability of such provision in any other jurisdiction.
Section 3.10 Scope of Agreement. This Agreement is intended by the Parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the Parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the rights granted by the Company set forth herein. This Agreement supersedes all prior agreements and understandings between the Parties with respect to such subject matter.
Section 3.11 Amendment. This Agreement may be amended only by means of a written amendment signed by the Company and the Holder or any subsequent holder of a majority of the then-outstanding Registrable Securities.
Section 3.12 Termination. This Agreement shall terminate at such time as there are no Registrable Securities outstanding.
Section 3.13 No Presumption. If any claim is made by a party relating to any conflict, omission, or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a particular party or its counsel.
Section 3.14 Aggregation of Registrable Securities. All Registrable Securities held or acquired by Persons who are Affiliates of one another shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.
Section 3.15 Obligations Limited to Parties to Agreement. Each of the parties hereto covenants, agrees and acknowledges that no Person other than the Company and the Holder shall have any obligation hereunder and that, notwithstanding that the Holder may be a corporation, partnership or limited liability company, no recourse under this Agreement or under any documents or instruments delivered in connection herewith or therewith shall be had against any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of the Holder or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of the Holder or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, as such, for any obligations of the Holder under this Agreement or any documents or instruments delivered in connection herewith or therewith or for any claim based on, in respect of or by reason of such obligation or its creation, except in each case for any assignee of the Holder hereunder.
Section 3.16 Interpretation. All references to “Articles” and “Sections” shall be deemed to be references to Articles and Sections of this Agreement, unless otherwise specified. All references to instruments, documents, contracts and agreements are references to such instruments, documents, contracts and agreements as the same may be amended, supplemented and otherwise modified from time to time, unless otherwise specified. The word “including” shall mean “including but not limited to.” Whenever any determination, consent or approval is to be made or given by the Holder under this Agreement, such action shall be in the Holder’s sole discretion unless otherwise specified.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the date first above written.
| ACUITAS GROUP HOLDINGS, LLC | ||
| By: | ||
| Name: | Terren S. Peizer | |
| Title: | Chairman | |
| BIOVIE INC. | ||
| By: | ||
| Name: | Cuong V. Do | |
| Title: | President and CEO | |
[Signature Page to Registration Rights Agreement]
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Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
AND RULE 13-A14 OF THE EXCHANGE ACT OF 1934
CERTIFICATION
| I, Cuong V Do, certify that: | ||
| 1. | I have reviewed this quarterly report on Form 10-Q of BioVie Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have: | |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
Date: November 4, 2022
| /s/ Cuong V Do | ||||||||
Cuong V Do Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
AND RULE 13-A14 OF THE EXCHANGE ACT OF 1934
CERTIFICATION
| I, Joanne Wendy Kim, certify that: | ||
| 1. | I have reviewed this quarterly report on Form 10-Q of BioVie Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have: | |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |
Date: November 4, 2022
| /s/ Joanne Wendy Kim | ||||||||
|
Joanne Wendy Kim Chief Financial Officer |
Exhibit 32.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S. C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of BioVie Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Cuong V Do, Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, that, to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 4, 2022
| /s/ Cuong V Do | ||||||||
|
Cuong V Do Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S. C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of BioVie Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joanne Wendy Kim, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, that, to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 4, 2022
| /s/ Joanne Wendy Kim | |||||||||
|
Joanne Wendy Kim Chief Financial Officer |