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BIOVIE INC.

Date Filed : Apr 30, 2019

S-11bivi-20190426_s1.htmFORM S-1

As filed with the U.S. Securitiesand Exchange Commission on April 30, 2019

Registration No. 333-                

 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM S-1

 

REGISTRATION STATEMENT UNDER THESECURITIES ACT OF 1933

 

BioVieInc.
(Exact Name of Registrant as Specified in its Charter)

 

Nevada   2834   46-2510769
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification No.)

 

11601 Wilshire Boulevard, Suite 1100,Los

Angeles, California 90025

(310) 444-4300
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

Terren S. Peizer

Chief Executive Officer

c/o BioVie Inc.

11601 Wilshire Boulevard, Suite 1100,

Los Angeles, California 90025

(310) 444-4300

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

 

Copies to:


Mitchell Nussbaum, Esq.

Norwood P. Beveridge, Jr., Esq.

Lili Taheri, Esq.

Loeb & Loeb LLP

345 Park Avenue

New York, NY 10154

Phone: (212) 407-4000

Fax: (212) 407-4990

 


Alan Annex, Esq.

Jason Simon, Esq.

Greenberg Traurig LLP

200 Park Avenue

New York, NY 10166

Phone: (212) 801-9200

Fax: (212) 801-6400

 

Approximate date of commencement ofproposed sale to public:
As soon as practicable after the effective date hereof.

 

Ifany of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415under the Securities Act of 1933, check the following box. 

 

Ifthis Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, checkthe following box and list the Securities Act registration statement number of the earlier effective registration statement forthe same offering. 

 

Ifthis Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box andlist the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

 

Ifthis Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box andlist the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

 

Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growthcompany. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reportingcompany” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer          Accelerated filer 
Non-accelerated filer          Smaller reporting company
            Emerging growth company

 

Ifan emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period forcomplying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.

 

 
 

CALCULATION OF REGISTRATION FEE

 

Title of each class of

securities to be registered

  Proposed maximum aggregate offering 
price(1)
    Amount of registration fee(2)  
Shares of Class A common stock, par value $0.0001 per share   $ 23,000,000     $ 2,787.60  
                 

  

(1) Includes shares of our Class A common stock that the underwriters have the option to purchase to cover over-allotments, if any. Pursuant to Rule 416 under the Securities Act of 1933, as amended (or the Securities Act), the securities being registered hereunder include such indeterminate number of additional shares of common stock as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions.

 

(2) Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price. Paid herewith.

 

The registrant hereby amends thisregistration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file afurther amendment which specifically states that this registration statement shall thereafter become effective in accordance withSection 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on suchdate as the Commission, acting pursuant to Section 8(a), may determine.

 

 
 
 
 

The information containedin this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statementfiled with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securitiesand it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS   SUBJECT TO COMPLETION   DATED APRIL 30, 2019

 

Shares

Class A Common Stock

 CzAwX4YXEAAAOf2 (1)

BioVieInc.

 

 

This is a firm commitment public offering of shares of ClassA common stock (“common stock”) of BioVie Inc. Prior to this offering, there has been a limited public marketfor our common stock on the OTCQB Marketplace under the ticker BIVI. We are selling up to            sharesof common stock. There are no selling shareholders in this offering.

 

On April 26, 2019, the last reportedsale price for our common stock as reported on the OTCQB Marketplace was $0.09 per share. We intend to apply to list ourcommon stock on The NASDAQ Capital Market under the symbol “BIVI”. No assurance can be given that our applicationwill be approved. 

 

We are an “emerging growthcompany” as defined under the federal securities laws and, as such, have elected to comply with certain reduced public companyreporting requirements.

 

Investing in our common stock is highly speculative andinvolves a high degree of risk. See “Risk Factors” beginning on page 6.

 

Neither the Securities and ExchangeCommission nor any state securities commission has approved or disapproved of these securities or determined if this prospectusis truthful or complete. Any representation to the contrary is a criminal offense.

 

    Per Share     Total  
Initial public offering price   $       $    
Underwriting discounts and commissions (1)   $       $    
Proceeds to us, before expenses   $       $    

 

(1) Underwriting discounts and commissions do not include a non-accountable expense allowance equal to 1.0% of the public offering price payable to the underwriters. We refer you to the “Underwriting” section of this prospectus beginning on page 52 for additional information regarding the underwriters’ compensation.

 

We have granted a 45-day option to therepresentative of the underwriters to purchase up to                        additionalshares of common stock solely to cover over-allotments, if any.

 

The underwriters expect to deliver theshares to purchasers on or about                        ,2019.

   

ThinkEquity

a division of Fordham Financial Management,Inc.

 

The date of this prospectus is                        ,2019 

 

 
 

Tableof Contents

 

  Page
Prospectus Summary 1
Risk Factors 6
Cautionary Note Regarding Forward-Looking Statements 22
Use of Proceeds 23
Dividend Policy 23
Capitalization 24
Dilution 25
Management’s Discussion and Analysis of Financial Condition and Results of Operations 26
Business 31
Management 38
Executive Compensation 44
Principal Stockholders 46
Certain Relationships and Related Party Transactions 48
Description of Capital Stock 49
Underwriting 52
Experts 61
Legal Matters 61
Where You Can Find More Information 61
Index to Financial Statements F-1

 

You should rely only on the informationcontained in this prospectus. We have not authorized any other person to provide you with information different from or in additionto that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely onit. We are not making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You shouldassume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus.Our business, financial condition, results of operations and prospects may have changed since that date.

 

In this prospectus, we rely on and referto information and statistics regarding our industry. We obtained this statistical, market and other industry data and forecastsfrom publicly available information. While we believe that the statistical data, market data and other industry data and forecastsare reliable, we have not independently verified the data.

 

As used in this prospectus, unless thecontext indicates or otherwise requires, “the Company,” “our Company,” “we,” “us,”and “our” refer to BioVie Inc., a Nevada corporation, and its consolidated subsidiaries.

 

i
 

ProspectusSummary

 

This summary highlights certain informationappearing elsewhere in this prospectus. Because it is only a summary, it does not contain all of the information that you shouldconsider before investing in shares of our common stock and it is qualified in its entirety by, and should be read in conjunctionwith, the more detailed information appearing elsewhere in this prospectus. Before you decide to invest in our common stock, youshould read the entire prospectus carefully, including “Risk Factors” beginning on page 6 and the financialstatements and related notes included in this prospectus.

 

A 1:[__] reverse stock split of ourcommon stock will be effected prior to the closing of this offering. 

 

This prospectus includes trademarks,service marks and trade names owned by us or other companies. All trademarks, service marks and trade names included in this prospectusare the property of their respective owners.

 

Our Company

 

We are a clinical-stage companypursuing the discovery, development, and commercialization of innovative drug therapies. We are currently focused on developingand commercializing BIV201 (continuous infusion terlipressin), a novel approach to the treatment of ascites due to chronic livercirrhosis. Our therapy BIV201 is based on a drug that is approved in about 40 countries to treat related complications of livercirrhosis (part of the same disease pathway as ascites), but not yet available in the United States. BIV201’s active agentis a potent vasoconstrictor and has shown efficacy for reducing portal hypertension in studies around the world. The goal is forBIV201 to interrupt the ascites disease pathway, thereby halting the cycle of accelerating fluid generation in ascites patients.

In April 2017, we entered intoa Cooperative Research and Development Agreement (“CRADA”) with the McGuire Research Institute Inc. in Richmond, VA,and began administering BIV201 to patients in September 2017. As of March 2019, all six of the planned patients had been treatedwith BIV201 therapy in this Phase 2a clinical trial and the results are being analyzed for presentation to the U.S. Food &Drug Administration (“FDA”) in the first half of 2019.

BIV201 (continuous infusion terlipressin)has the potential to improve the health of thousands of patients suffering from life-threatening complications of liver cirrhosisdue to hepatitis, NASH, and alcoholism. We have patented a method of treating a patient diagnosed with ascites due to liver cirrhosisby administering BIV201 (terlipressin) as a continuous infusion within specified doses over a specified duration. The FDA has grantedFast-Track status and Orphan Drug designation for the most common of these complications, ascites, which represents a significantunmet medical need. Patients with cirrhosis and ascites account for an estimated 116,000 U.S. hospital discharges annually, withfrequent early readmissions. Those requiring paracentesis (removal of ascites fluid) experience an average hospital stay lasting8 days incurring over $86,000 in medical costs (HCUP Nationwide Readmissions Database 2016). This translates into a totaladdressable ascites market size for BIV201 therapy exceeding $500 million based on Company estimates. The FDA has never approvedany drug specifically for treating ascites. BIV201 received Orphan Drug designation for hepatorenal syndrome (“HRS”)in November 2018.

The BIV201 development programbegan at LAT Pharma LLC. On April 11, 2016, we acquired LAT Pharma LLC and the rights to its BIV201 development program and currentlyown all development and marketing rights to BIV201. We and PharmaIN, Corp. (“PharmaIN”), LAT Pharma’s formerpartner focused on the development of new modified product candidates in the same therapeutic field but not including BIV201, hadagreed to pay royalties equal to less than 1% of future net sales of each company's ascites drug development programs, or if suchprogram is licensed to a third party, less than 5% of each company's net license revenues. On December 24, 2018, we returned ourpartial ownership rights to the PharmaIN modified terlipressin development program and simultaneously paid the remaining balancedue on a related debt. PharmaIN’s rights to our program remain unchanged. We have an issued U.S. Patent covering the useof BIV201 for the treatment of patients diagnosed with ascites due to liver cirrhosis in the outpatient setting using ambulatorypump infusion, and have corresponding patent applications pending in Japan, Europe, China and Hong Kong.

 -1-

Risks Associated with our Business

 

Our business and ability to executeour business strategy are subject to a number of risks of which you should be aware before you decide to buy our common stock.In particular, you should consider the following risks, which are discussed more fully in the section entitled “Risk Factors”in this prospectus:

 

  we are a development stage company with a limited operating history, making it difficult for you to evaluate our business and your investment; 

 

  Mallinckrodt Pharmaceuticals Ireland Limited (“Mallinckrodt”), a large pharmaceutical corporation, has filed an Inter Partes Review (“IPR”) in the USPTO regarding our U.S. patent No. 9,655,945;
     
  we have no products approved for commercial sale, have never generated any revenues and may never achieve revenues or profitability, which could cause us to cease operations;

 

  we will need to raise substantial additional capital in the future to fund our operations and we may be unable to raise such funds when needed and on acceptable terms; 

 

  we have limited experience in drug development and may not be able to successfully develop any drugs, which would cause us to cease operations; 

 

  we have no manufacturing experience, and the failure to comply with all applicable manufacturing regulations and requirements could have a materially adverse effect on our business;

 

  if we fail to maintain an effective system of internal controls, we may not be able to accurately report  financial results or detect fraud;
     
  we may be unable to obtain or protect intellectual property rights relating to our products, and we may be liable for infringing upon the intellectual property rights of others, which could have a materially adverse effect on our business;

 

  the biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition. We may be unable to compete with enterprises equipped with more substantial resources than us, which could cause us to curtail or cease operations; 

 

  there can be no assurance that our common stock will continue to be listed on Nasdaq or, if listed, that there will be liquidity in the trading market for our common stock; 

 

  certain stockholders who are also officers and directors may have significant control over our management; and

 

  we are subject to the periodic reporting requirements of the Exchange Act, which require us to incur audit fees and legal fees in connection with the preparation of such reports. These additional costs will negatively affect our ability to earn a profit.

 

Corporate Information

 

Our principal executive office is locatedat 11601 Wilshire Boulevard, Suite 1100, Los Angeles, California 90025, and our phone number (310) 444-4300.

 

Implications of Being an EmergingGrowth Company

 

We qualify as an “emerging growthcompany” as defined under the Securities Act, as amended. As a result, we are permitted to, and intend to continue to, relyon exemptions from certain disclosure requirements that are otherwise applicable to public companies. These provisions include,but are not limited to:

 

 -2-

  being permitted to present only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus; 

 

  not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (or the Sarbanes-Oxley Act); 

 

  reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and 

 

  exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

In addition, an emerging growth companycan take advantage of an extended transition period for complying with new or revised accounting standards. This provision allowsan emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to privatecompanies. We have elected to avail ourselves of this extended transition period. We will remain an emerging growth company untilJune 30, 2019.

 

 -3-

TheOffering 

 

Common stock offered by us                           Shares
     
Common stock to be outstanding after this offering                           shares (or                        shares if the underwriters exercise their over-allotment option in full).
     
Over-allotment option   We have granted the underwriters a 45-day option to purchase up to an additional            shares of our common stock at the initial public offering price to cover over-allotments, if any.
     
Use of proceeds   We intend to use the net proceeds of this offering primarily to fund clinical trials of our lead product candidate BIV201 and for working capital and other general corporate purposes.
     
Concentration of ownership   Upon completion of this offering, our executive officers and directors will beneficially own, in the aggregate, approximately            % of the outstanding shares of our common stock.
     
Proposed NASDAQ Capital Market symbol   “BIVI”
     
Risk Factors   Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 6 and the other information in this prospectus for a discussion of the factors you should consider carefully before you decide to invest in our common stock.
     
Lock-Up   We, each of our officers, directors, and all of our 5% or greater stockholders have agreed, subject to certain exceptions, not to sell, offer, agree to sell, contract to sell, hypothecate, pledge, grant any option to purchase, make any short sale of, or otherwise dispose of or hedge, directly or indirectly, any shares of our capital stock or any securities convertible into or exercisable or exchangeable for shares of capital stock, for a period of (i) six (6) months after the date of this prospectus in the case of our directors and officers and (ii) three (3) months after the date of this prospectus in the case of the Company and any other 5% or greater holder of our outstanding securities, without the prior written consent of the representative. See “Underwriting” for additional information.

 

All information in this prospectus assumesthe underwriters do not exercise their over-allotment option. The total number of shares of our common stock outstanding as ofMarch 31, 2019 was 316,453,673 and excludes 223,690,549 shares of common stock reserved for issuance pursuant to currently outstandingoptions and warrants.

 

 -4-

 

SummaryFinancial Information

 

The following tables present our summaryconsolidated financial and other data as of and for the periods indicated. The summary consolidated statements of operations datafor the fiscal years ended June 30, 2018 and June 30, 2017, and the summary consolidated balance sheet data as of June 30, 2018,are derived from our audited financial statements included elsewhere in this prospectus. The consolidated statement of operationsdata for the six months ended December 30, 2018 and 2017 and the summary consolidated balance sheet data as of December 30, 2018,are derived from our unaudited consolidated financial statements included elsewhere in this prospectus and have been prepared onthe same basis as the audited consolidated financial statements.

 

The summarized financial informationpresented below is derived from and should be read in conjunction with our audited consolidated financial statements includingthe notes to those financial statements, and our unaudited consolidated financial statements including the notes to those financialstatements, both of which are included elsewhere in this prospectus along with the section entitled “Management’s Discussionand Analysis of Financial Condition and Results of Operations.” Our historical results are not necessarily indicative ofour future results.

 

    For the fiscal year
ended June 30:
    For the six months
ended December 31:
 
    2018     2017     2018     2017  
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:                        
Revenue   $ -     $ -     $ -     $ -  
Operating expenses     2,372,166       1,553,614       992,298       1,157,039  
Loss from operations     (2,372,166 )     (1,553,614 )     (992,298 )     (1,157,039 )
Total other expense (income), net     40,956       (222,942 )     (51,917 )     8,544  
Net loss   $ (2,413,122 )   $ (1,330,672 )   $ (940,381 )   $ (1,165,523 )
                                 
Deemed dividend     (20,995 )     -       (48,659 )     -  
Net loss attributable to Company stockholders   $ (2,434,117 )   $ (1,330,672 )   $ (989,040 )   $ (1,165,523 )
Net loss per common share, basic and diluted   $ (0.03 )   $ (0.01 )   $ (0.00 )   $ (0.01 )
Weighted average shares outstanding, basic and diluted     95,758,079       89,391,302       312,182,118       94,078,045  

 

    June 30,
2018
    December 31,
2018
     
CONSOLIDATED BALANCE SHEETS DATA:                
Cash   $ 45,800     $ 1,630,483      
Total current assets     45,800       1,630,483      
Total assets     2,175,491       3,645,486      
Total current liabilities     1,238,374       104,836      
Total liabilities     2,064,292       104,836      
Total stockholders’ equity     111,199       3,540,650      

 

 -5-

RiskFactors

 

Any investment in our securitiesinvolves a high degree of risk. You should carefully consider the risks described below, which we believe represent certain ofthe material risks to our business, together with the information contained elsewhere in this prospectus, before you make a decisionto invest in our shares of common stock. Please note that the risks highlighted here are not the only ones that we may face. Forexample, additional risks presently unknown to us or that we currently consider immaterial or unlikely to occur could also impairour operations. If any of the following events occur or any additional risks presently unknown to us actually occur, our business,financial condition and operating results may be materially adversely affected. In that event, the trading price of our securitiescould decline and you could lose all or part of your investment.

 

Risks Relating to Our Business and Industry

 

We have no products approved for commercial sale, havenever generated any revenues and may never achieve revenues or profitability, which could cause us to cease operations.

 

We have no products approved for commercial sale and, todate, we have not generated any revenues. Our ability to generate revenue depends heavily on (a) successful development programand thereafter demonstration in human clinical trials that BIV201, our product candidate, is safe and effective; (b) our abilityto seek and obtain regulatory approvals, including, without limitation, with respect to the indications we are seeking; (c) successfulcommercialization of our product candidates; and (d) market acceptance of our products. There are no assurances that we will achieveany of the forgoing objectives. Furthermore, our product candidate is in the development stage, and we have not evaluated it infull human clinical trials. If we do not successfully develop and commercialize our product candidate we will not achieve revenuesor profitability in the foreseeable future, if at all. If we are unable to generate revenues or achieve profitability, we may beunable to continue our operations. 

 

We are a development stage company with a limited operatinghistory, making it difficult for you to evaluate our business and your investment. 

 

BioVie Inc. was incorporated on April 10, 2013. We are adevelopment stage biopharmaceutical company with a potential therapy that has not been fully evaluated in clinical trials, andour operations are subject to all of the risks inherent in the establishment of a new business enterprise, including but not limitedto the absence of an operating history, the lack of commercialized products, insufficient capital, expected substantial and continuallosses for the foreseeable future, limited experience in dealing with regulatory issues, the lack of manufacturing experience andlimited marketing experience, possible reliance on third parties for the development and commercialization of our proposed products,a competitive environment characterized by numerous, well-established and well capitalized competitors and reliance on key personnel.

 

Since inception, we have not established any revenues oroperations that shall provide financial stability in the long term, and there can be no assurance that we will realize our planson our projected timetable in order to reach sustainable or profitable operations.

 

Investors are subject to all the risks incident to the creationand development of a new business and each Investor should be prepared to withstand a complete loss of his, her or its investment.Furthermore, the accompanying financial statements have been prepared assuming that we will continue as a going concern. We havenot emerged from the development stage, and may be unable to raise further equity. These factors raise substantial doubt aboutits ability to continue as a going concern. The financial statements do not include any adjustments that might result from theoutcome of this uncertainty.

 

Because we are subject to these risks, you may have a difficulttime evaluating our business and your investment in our Company. Our ability to become profitable depends primarily on our abilityto develop drugs, to obtain approval for such drugs, and if approved, to successfully commercialize our drugs, our research anddevelopment (“R&D”) efforts, including the timing and cost of clinical trials; and our ability to enter into favorablealliances with third-parties who can provide substantial capabilities in clinical development, regulatory affairs, sales, marketingand distribution.

 

 -6-

Even if we successfully develop and market BIV201, we maynot generate sufficient or sustainable revenue to achieve or sustain profitability, which could cause us to cease operations andcause you to lose all of your investment.

 

Our U.S. patent claims covering BIV201 have been challengedby a large pharmaceutical corporation with significantly greater resources than us. There can be no assurance regarding our abilityto maintain patent protection for any potential products until such matters have been resolved before the Patent Trials and AppealsBoard.

 

On April 30, 2018, we received notice that Mallinckrodt hadpetitioned the U.S. Patent and Trademark Office (“USPTO”) to institute an Inter Partes Review of our U.S. Patent No.9,655,945 titled “Treatment of Ascites” (the “’945 patent”). Inter Partes Review is a trial proceedingconducted with the USPTO Patent Trial and Appeal Board (PTAB) to review the patentability of one or more claims of a patent. Suchreview is limited to grounds of novelty and obviousness on the basis of prior art consisting of patents and printed publications.

 

On August 15, 2018, we submitted a Preliminary Response tothe PTAB providing a rationale as to why, in our opinion, Mallinckrodt’s request to institute the IPR should not be granted.On November 14, 2018, the PTAB granted institution of the IPR challenge after determining that there was a reasonable likelihoodof success in proving that at least one of our 14 claims was unpatentable. On March 7, 2019, we submitted a Patent Owner’sResponse and a Patent Owner’s Contingent Motion to Amend our patent claims, and Declaration of Dr. Jaime Bosch, MD, PhD,our medical expert. We are actively defending the ‘945 patent and we are exploring the possibility of settlement with Mallinckrodt.However, there can be no assurance that a favorable outcome will result, or if settlement is reached that the PTAB will acceptit. Although the PTAB encourages settlement, in view of public-interest considerations, the PTAB may continue the proceeding toa final written decision even if the parties settle. If the IPR is not terminated due to settlement, the PTAB is statutorily requiredto issue its final written decision in this case before November 14, 2019 (within one year from the date of institution).

 

We cannot guarantee investors that we will be successfulin defending Mallinckrodt’s challenge against our patent. An unfavorable decision could reduce the scope of, or cancel, ourpatent rights, and allow third parties to commercialize our technology or products and compete directly with us, without paymentto us. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, itcould dissuade companies from collaborating with us to exploit our intellectual property or develop or commercialize current orfuture product candidates. Our ability to establish or maintain a technological or competitive advantage over our competitors and/ormarket entrants may be diminished because of these uncertainties. For these and other reasons, our intellectual property may notprovide us with any competitive advantage.

 

In addition, you should note that as of December 31, 2018,no adjustments or accruals have been reflected in our financial statements related to this matter.

 

If the FDA or comparable foreign regulatory authoritiesapprove generic versions of any of our products that receive marketing approval, or such authorities do not grant our productsappropriate periods of exclusivity before approving generic versions of our products, the sales of our products could be adverselyaffected.

 

Once a new drug application (“NDA”) is approved,the product covered thereby becomes a “reference listed drug” in the FDA’s publication, “Approved DrugProducts with Therapeutic Equivalence Evaluations,” commonly known as the Orange Book. Manufacturers may seek approval ofgeneric versions of reference listed drugs through submission of abbreviated new drug applications (“ANDAs”) in theUnited States. In support of an ANDA, a generic manufacturer need not conduct clinical trials. Rather, the applicant generallymust show that its product has the same active ingredient(s), dosage form, strength, route of administration and conditions ofuse or labeling as the reference listed drug and that the generic version is bioequivalent to the reference listed drug, meaningit is absorbed in the body at the same rate and to the same extent. Generic products may be significantly less costly to bringto market than the reference listed drug and companies that produce generic products are generally able to offer them at lowerprices. Thus, following the introduction of a generic drug, a significant percentage of the sales of any branded product or referencelisted drug is typically lost to the generic product.

 

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The FDA may not approve an ANDA for a generic product until anyapplicable period of non-patent exclusivity for the reference listed drug has expired. The United States Federal Food, Drug, andCosmetic Act (“FDCA”) provides a period of five years of non-patent exclusivity for a new drug containing a new chemicalentity (“NCE”). Specifically, in cases where such exclusivity has been granted, an ANDA may not be submitted to theFDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification that a patentcovering the reference listed drug is either invalid or will not be infringed by the generic product, in which case the applicantmay submit its application four years following approval of the reference listed drug.

 

While we believe that BIV201 contains activeingredients that would be treated as NCEs by the FDA and, therefore, if approved, should be afforded five years of data exclusivity,the FDA may disagree with that conclusion and may approve generic products after a period that is less than five years. If theFDA were to award NCE exclusivity to someone other than us, we believe that we would still be awarded three year “Other”exclusivity protection from generic competition, which is awarded when an application or supplement contains reports of new clinicalinvestigations (not bioavailability studies) conducted or sponsored by an applicant and essential for approval. Manufacturersmay seek to launch these generic products following the expiration of the applicable marketing exclusivity period, even if westill have patent protection for our product. If we do not maintain patent protection and data exclusivity for our product candidates,our business may be materially harmed.

 

Competition that our products may facefrom generic versions of our products could materially and adversely impact our future revenue, profitability and cash flows andsubstantially limit our ability to obtain a return on the investments we have made in those product candidates.

 

If we fail to obtain or maintainOrphan Drug exclusivity for BIV201, we will have to rely on our data and marketing exclusivity, if any, and on our intellectualproperty rights, which may reduce the length of time that we can prevent competitors from selling generic versions of BIV201.

We have obtainedOrphan Drug designation for BIV201 in the U.S. for the treatment of hepatorenal syndrome (received November 21, 2018) and treatmentof ascites due to all etiologies except cancer (received September 8, 2016). Under the Orphan Drug Act, the FDA may designate aproduct as an Orphan Drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient populationof fewer than 200,000 in the U.S. In the EU, Orphan Drug designation may be granted to drugs intended to treat, diagnose or preventa life-threatening or chronically debilitating disease having a prevalence of no more than five in 10,000 people in the EU. Thecompany that first obtains FDA approval for a designated Orphan Drug for the associated rare disease receives marketing exclusivityfor use of that drug for the stated condition for a period of seven years. Orphan Drug exclusive marketing rights may be lost underseveral circumstances, including a later determination by the FDA that the request for designation was materially defective orif the manufacturer is unable to assure sufficient quantity of the drug. Similar regulations are available in the EU with a ten-yearperiod of market exclusivity.

Even thoughBioVie has obtained Orphan Drug designation for its lead product candidate, and intends to seek other Orphan Drug designationsfor BIV201, and Orphan Drug designation for other product candidates, there is no assurance that BioVie will be the first to obtainmarketing approval for any particular rare indication. Further, even though BioVie has obtained Orphan Drug designation for itslead product candidate, or even if BioVie obtains Orphan Drug designation for other potential product candidates, such designationmay not effectively protect BioVie from competition because different drugs can be approved for the same condition and the samedrug can be approved for different conditions and potentially used off-label in the Orphan indication. Even after an Orphan Drugis approved, the FDA can subsequently approve the same drug for the same condition for several reasons, including, if the FDA concludesthat the later drug is safer or more effective or makes a major contribution to patient care. Orphan Drug designation neither shortensthe development time or regulatory review time of a drug, nor gives the drug any advantage in the regulatory review or approvalprocess.

 

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In addition,other companies have received Orphan Drug designations for terlipressin. Mallinckrodt Hospital Products IP Limited received OrphanDrug designation in 2004 for terlipressin for the treatment of Hepatorenal Syndrome and Ferring Pharmaceuticals Inc. received OrphanDrug designation in 1986 for terlipressin for the treatment of bleeding esophageal varices. If Mallinckrodt Hospital Products IPLimited receives FDA approval for terlipressin for the treatment of Hepatorenal Syndrome before we do, they may obtain a competitiveadvantage associated with being the first to market. Further, in connection with obtaining marketing approval for terlipressinfor the treatment of Hepatorenal Syndrome, Mallinckrodt Hospital Products IP Limited would also obtain Orphan Drug exclusivityfor terlipressin, that could prevent our approval for the same indication for seven years, although we could continue to pursueother indications for the drug.

If Ferring PharmaceuticalsInc. receives FDA approval for terlipressin for the treatment of bleeding esophageal varices, they would also obtain a competitiveadvantage associated with being the first to market. In connection with obtaining marketing approval for terlipressin for the treatmentof bleeding esophageal varices, Ferring Pharmaceuticals Inc. would also obtain Orphan Drug exclusivity for terlipressin, but wedo not believe that Orphan Drug exclusivity for Ferring Pharmaceuticals Inc.’s terlipressin product would have an adverseeffect on our ability to market BIV201, as the same drug would be approved for different indications under FDA rules, and we canmaintain Orphan Drug exclusivity for BIV201 for the different indication.

 

We will need to raise substantial additional capitalin the future to fund our operations and we may be unable to raise such funds when needed and on acceptable terms, which couldhave a materially adverse effect on our business.

 

Developing biopharmaceutical products, including conductingpre-clinical studies and clinical trials and establishing manufacturing capabilities, requires substantial funding. As of December31, 2018, we had cash and cash equivalents totaling $1.6 million. Additional financing will be required to fund the research anddevelopment of our product candidates. We have not generated any product revenues, and do not expect to generate any revenues until,and only if, we develop, and receive approval to sell our product candidates from the FDA and other regulatory authorities forour product candidates.

 

We may not have the resources to complete the developmentand commercialization of any of our proposed product candidates. We will require additional financing to further the clinical developmentof our product candidates. In the event that we cannot obtain the required financing, we will be unable to complete the developmentnecessary to file an NDA with the FDA for BIV201. This will delay research and development programs, preclinical studies and clinicaltrials, material characterization studies, regulatory processes, the establishment of our own laboratory or a search for thirdparty marketing partners to market our products for us, which could have a materially adverse effect on our business.

 

The amount of capital we may need will depend on many factors,including the progress, timing and scope of our research and development programs, the progress, timing and scope of our preclinicalstudies and clinical trials, the time and cost necessary to obtain regulatory approvals, the time and cost necessary to establishour own marketing capabilities or to seek marketing partners, the time and cost necessary to respond to technological and marketdevelopments, changes made or new developments in our existing collaborative, licensing and other commercial relationships, andnew collaborative, licensing and other commercial relationships that we may establish. 

 

Until we can generate a sufficient amount of product revenue,if ever, we expect to finance future cash needs, through public or private equity offerings, debt financings, or corporate collaborationand licensing arrangements. Additional funds may not be available when we need them on terms that are acceptable to us, or at all.If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our researchor development programs or our commercialization efforts. In addition, we could be forced to discontinue product development andreduce or forego attractive business opportunities. To the extent that we raise additional funds by issuing equity securities,our stockholders may experience additional significant dilution, and debt financing, if available, may involve restrictive covenants.To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquishsome rights to our technologies or our product candidates, or grant licenses on terms that may not be favorable to us. We may seekto access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need foradditional capital at that time.

 

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Our fixed expenses, such as rent and other contractual commitments,will likely increase in the future, as we may enter into leases for new facilities and capital equipment and/or enter into additionallicenses and collaborative agreements. Therefore, if we fail to raise substantial additional capital to fund these expenses, wecould be forced to cease operations, which could cause you to lose all of your investment.

 

We have limited experience in drug development andmay not be able to successfully develop any drugs, which would cause us to cease operations.

 

We have never successfully developed a new drug and broughtit to market. Our management and clinical teams have experience in drug development but they may not be able to successfully developany drugs. Our ability to achieve revenues and profitability in our business will depend on, among other things, our ability todevelop products internally or to obtain rights to them from others on favorable terms; complete laboratory testing and human studies;obtain and maintain necessary intellectual property rights to our products; successfully complete regulatory review to obtainrequisite governmental agency approvals; enter into arrangements with third parties to manufacture our products on our behalf;and enter into arrangements with third parties to provide sales and marketing functions. If we are unable to achieve theseobjectives we will be forced to cease operations and you will lose all of your investment.

 

Development of pharmaceutical products is a time-consumingprocess, subject to a number of factors, many of which are outside of our control. Consequently, if we are unsuccessful or failto timely develop new drugs, we could be forced to discontinue our operations.

 

Our lead product candidate, BIV201, has been cleared by theFDA to undergo testing in a mid-stage (Phase 2a) clinical trial. Further development and extensive testing will be required todetermine its technical feasibility and commercial viability. Our success will depend on our ability to achieve scientific andtechnological advances and to translate such advances into reliable, commercially competitive drugs on a timely basis. Drugs thatwe may develop are not likely to be commercially available, at a minimum, for a few years, if ever. The proposed development schedulesfor our product candidates may be affected by a variety of factors, including technological difficulties, proprietary technologyof others, and changes in government regulation, many of which will not be within our control. Any delay in the development, introductionor marketing of our product candidates could result either in such drugs being marketed at a time when their cost and performancecharacteristics would not be competitive in the marketplace or in the shortening of their commercial lives. In light of the long-termnature of our projects and other risk factors described elsewhere in this document, we may not be able to successfully completethe development or marketing of any drugs which could cause us to cease operations. 

 

We may fail to successfully develop and commercialize ourproduct candidate(s) if it is found to be unsafe or ineffective in clinical trials; does not receive necessary approval from theFDA or foreign regulatory agencies; fails to conform to a changing standard of care for the disease it seeks to treat; or is lesseffective or more expensive than current or alternative treatment methods.

 

Drug development failure can occur at any stage of clinicaltrials and as a result of many factors, there can be no assurance that we or our collaborators will reach our anticipated clinicaltargets. Even if we or our collaborators complete our clinical trials, we do not know what the long-term effects of exposure toour product candidates will be. Furthermore, our product candidates may be used in combination with other treatments and therecan be no assurance that such use will not lead to unique safety issues. Failure to complete clinical trials or to prove that ourproduct candidates are safe and effective would have a material adverse effect on our ability to generate revenue and could requireus to reduce the scope of or discontinue our operations, which could cause you to lose all of your investment.

 

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We have no manufacturing experience, and the failureto comply with all applicable manufacturing regulations and requirements could have a materially adverse effect on our business. 

 

We have never manufactured products in the highly regulatedenvironment of pharmaceutical manufacturing, and our team has limited experience in the manufacture of drug therapies. There arenumerous regulations and requirements that must be maintained to obtain licensure and permitting required prior to the commencementof manufacturing, as well as additional requirements to continue manufacturing pharmaceutical products. We currently do not ownor lease facilities that could be used to manufacture any products that might be developed by us, and have contracted with an experiencedContract Manufacturing Organization (“CMO”) to perform the manufacturing of our new product candidate BIV201. In addition,we do not have the resources at this time to acquire or lease suitable facilities. If we or our CMO fail to comply with regulations,to obtain the necessary licenses and knowhow or to obtain the requisite financing in order to comply with all applicable regulationsand to own or lease the required facilities in order to manufacture our products, we could be forced to cease operations, whichwould cause you to lose all of your investment.

 

In addition, the FDA and other regulatory authorities requirethat product candidates and drug products be manufactured according to current good manufacturing practices (“cGMP”).Any failure by our third-party manufacturers to comply with cGMP could lead to a shortage of BIV201. In addition, such failurecould be the basis for action by the FDA to withdraw approval, if granted to us, and for other regulatory action, including seizure,injunction or other civil or criminal penalties.

 

BIV201 and any other product candidate that we develop maycompete with other products and product candidates for access to manufacturing facilities. There are a limited number of manufacturersthat operate under cGMP regulations and that are both capable of manufacturing for us and willing to do so. If we need to findanother source of drug substance or drug product for BIV201, we may not be able to identify, or reach agreement with, commercial-scalemanufacturers on commercially reasonably terms, or at all. If we are unable to do so, we will need to develop our own commercial-scalemanufacturing capabilities, which would: impact commercialization of BIV201 in the U.S. and other countries where it may be approved;require a capital investment by us that could be quite costly; and increase our operating expenses.

 

If our existing third-party manufacturers, or the third partiesthat we engage in the future to manufacture a product for commercial sale or for our clinical trials, should cease to continueto do so for any reason, we likely would experience significant delays in obtaining sufficient quantities of product for us tomeet commercial demand or to advance our clinical trials while we identify and qualify replacement suppliers. If for any reasonwe are unable to obtain adequate supplies of BIV201 or any other product candidate that we develop, or the drug substances usedto manufacture it, it will be more difficult for us to compete effectively, generate revenue, and further develop our products.In addition, if we are unable to assure a sufficient quantity of the drug for patients with rare diseases or conditions, we maylose any Orphan Drug exclusivity to which the product otherwise would be entitled.

 

We do not currently have the sales and marketing personnelnecessary to sell products, and the failure to hire and retain such staff could have a materially adverse effect on our business.

 

We are an early stage development company with limited resources.Even if we had products available for sale, which we currently do not, we have not secured sales and marketing staff at this earlystage of operations to sell products. We cannot generate sales without sales or marketing staff and must rely on officers to provideany sales or marketing services until such personnel are secured, if ever. If we fail to hire and retain the requisite expertisein order to market and sell our products or fail to raise sufficient capital in order to afford to pay such sales or marketingstaff, then we could be forced to cease operations and you could lose all of your investment.

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Even if we were to successfully develop approvabledrugs, we will not be able to sell these drugs if we or our third-party manufacturers fail to comply with manufacturing regulations,which could have a materially adverse effect on our business.

 

If we were to successfully develop approvable drugs, beforewe can begin selling these drugs, we must obtain regulatory approval of our manufacturing facility and process or the manufacturingfacility and process of the third party or parties with whom we may outsource our manufacturing activities. In addition, the manufactureof our products must comply with the FDA's current Good Manufacturing Practices regulations, commonly known as GMP regulations.The GMP regulations govern quality control and documentation policies and procedures. Our manufacturing facilities, if any in thefuture, and the manufacturing facilities of our third-party manufacturers will be continually subject to inspection by the FDAand other state, local and foreign regulatory authorities, before and after product approval. We cannot guarantee that we, or anypotential third-party manufacturer of our products, will be able to comply with the GMP regulations or other applicable manufacturingregulations. The failure to comply with all necessary regulations would have a materially adverse effect on our business and couldforce us to cease operations and you could lose all of your investment.

 

We must comply with significant and complex governmentregulations, compliance with which may delay or prevent the commercialization of our product candidates, which could have a materiallyadverse effect on our business. 

 

The R&D, manufacture and marketing of product candidatesare subject to regulation, primarily by the FDA in the United States and by comparable authorities in other countries. These nationalagencies and other federal, state, local and foreign entities regulate, among other things, R&D activities (including testingin animals and in humans) and the testing, manufacturing, handling, labeling, storage, record keeping, approval, advertising andpromotion of the product that we are developing. Noncompliance with applicable requirements can result in various adverse consequences,including approval delays or refusals to approve drug licenses or other applications, suspension or termination of clinical investigations,revocation of approvals previously granted, fines, criminal prosecution, recalls or seizures of products, injunctions against shippingdrugs and total or partial suspension of production and/or refusal to allow a company to enter into governmental supply contracts. 

 

The process of obtaining FDA approval has historically beencostly and time consuming. Current FDA requirements for a new human drug or biological product to be marketed in the United Statesinclude: (a) the successful conclusion of pre-clinical laboratory and animal tests, if appropriate, to gain preliminary informationon the product's safety; (b) filing with the FDA of an IND application to conduct human clinical trials for drugs or biologics;(c) the successful completion of adequate and well-controlled human clinical investigations to establish the safety and efficacyof the product for its recommended use; and (d) filing by a company and acceptance and approval by the FDA of a NDA for a drugproduct or a biological license application (BLA) for a biological product to allow commercial distribution of the drug or biologic.A delay in one or more of the procedural steps outlined above could be harmful to us in terms of getting our product candidatesthrough clinical testing and to market, which could have a materially adverse effect on our business.

 

The FDA reviews the results of the clinical trials and mayorder the temporary or permanent discontinuation of clinical trials at any time if it believes the product candidate exposes clinicalsubjects to an unacceptable health risk. Investigational drugs used in clinical studies must be produced in compliance with cGMPrules pursuant to FDA regulations. 

 

Sales outside the United States of products that we developwill also be subject to regulatory requirements governing human clinical trials and marketing for drugs and biological productsand devices. The requirements vary widely from country to country, but typically the registration and approval process takes severalyears and requires significant resources.

 

If we experience delays or discontinuations of our clinicaltrials by the FDA or comparable authorities in other countries, or if we fail to obtain registration or other approvals of ourproducts or devices then we could be forced to cease our operations and you will lose all of your investment.

  

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Even if we are successful in developing BIV201, our productcandidate, we have limited experience in conducting or supervising clinical trials that must be performed to obtain data to submitin concert with applications for approval by the FDA. The regulatory process to obtain approval for drugs for commercial sale involvesnumerous steps. Drugs are subjected to clinical trials that allow development of case studies to examine safety, efficacy, andother issues to ensure that sale of drugs meets the requirements set forth by various governmental agencies, including the FDA.In the event that our protocols do not meet standards set forth by the FDA, or that our data is not sufficient to allow such trialsto validate our drugs in the face of such examination, we might not be able to meet the requirements that allow our drugs to beapproved for sale which could have a materially adverse effect on our business.

 

We can provide no assurance that our product candidatewill obtain regulatory approval or that the results of clinical studies will be favorable. 

 

The business plan we have developed for the next twenty-fourmonths is to complete the Phase 2 clinical development program for our lead new product candidate BIV201, commence a pivotal Phase3 trial required for new drug approval, and to pursue other key milestones such as additional patent issuances and U.S. OrphanDrug designations. Due to our financial constraints, we may not have the resources necessary to complete our application. If theresults of our planned initial Phase 2a clinical trial are satisfactory to the FDA, we anticipate proceeding to a larger Phase2b clinical trials in the US. There is no guarantee the FDA will approve a Phase 2b trial, and even if they do our financial constraintsmay prevent us from undertaking clinical trials.

 

Confidentiality agreements with employees and othersmay not adequately prevent disclosure of trade secrets and other proprietary information and disclosure of our trade secrets orproprietary information could compromise any competitive advantage that we have, which could have a materially adverse effect onour business.

 

Our success depends, in part, on our ability to protect ourproprietary rights to the technologies used in our products. We depend heavily upon confidentiality agreements with our officers,employees, consultants and subcontractors to maintain the proprietary nature of our technology. These measures may not afford uscomplete or even sufficient protection, and may not afford an adequate remedy in the event of an unauthorized disclosure of confidentialinformation. If we fail to protect and/or maintain our intellectual property, third parties may be able to compete more effectivelyagainst us, we may lose our technological or competitive advantage, and/or we may incur substantial litigation costs in our attemptsto recover or restrict use of our intellectual property. In addition, others may independently develop technology similar to ours,otherwise avoiding the confidentiality agreements, or produce patents that would materially and adversely affect our business,prospects, financial condition and results of operations, in which event you could lose all of your investment. 

 

We may be unable to obtain or protect intellectualproperty rights relating to our products, 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 abilityto maintain the proprietary nature of our technologies. In 2017 the USPTO issued the ‘945 patent directed to a method oftreating a patient diagnosed with ascites due to liver cirrhosis by administering BIV201 (continuous infusion terlipressin) asa continuous infusion within specified doses over a specified duration. We cannot assure investors that we will continue to innovateand file new patent applications, or that if filed any future patent applications will result in granted patents with respect tothe technology owned by us or licensed to us. Further, we cannot predict how long it will take for such patents to issue, if atall. The patent position of pharmaceutical or biotechnology companies, including ours, is generally uncertain and involves complexlegal and factual considerations and, therefore, validity and enforceability cannot be predicted with certainty. Patents may bechallenged, deemed unenforceable, invalidated or circumvented. We will be able to protect our proprietary rights from unauthorizeduse by third parties only to the extent that our proprietary technologies, product candidates and any future products are coveredby valid and enforceable patents or are effectively maintained as trade secrets.

 

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Any patents we have obtained or do obtain may be challengedby re-examination or otherwise invalidated or eventually found unenforceable. Both the patent application process and the processof managing patent disputes can be time consuming and expensive. If we were to initiate legal proceedings against a third partyto enforce a patent related to one of our products or services, the defendant in such litigation could counterclaim that our patentis invalid and/or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity and/or unenforceabilityare commonplace, as are validity challenges by the defendant against the subject patent or other patents before the USPTO. Groundsfor 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 patenteligible subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecutionof the patent intentionally withheld material information from the USPTO, or made a misleading statement, during prosecution. Additionalgrounds for an unenforceability assertion include an allegation of misuse or anticompetitive use of patent rights, and an allegationof incorrect inventorship with deceptive intent. Third parties may also raise similar claims before the USPTO even outside thecontext of litigation. The outcome is unpredictable following legal assertions of invalidity and unenforceability. With respectto the validity question, for example, we cannot be certain that no invalidating prior art existed of which we and the patent examinerwere unaware during prosecution. These assertions may also be based on information known to us or the Patent Office. If a defendantor third party were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhapsall, of the claims of the challenged patent. Such a loss of patent protection would or could have a material adverse impact onour business.

 

The standards that the United States Patent and TrademarkOffice (and foreign countries) use to grant patents are not always applied predictably or uniformly and can change. There is alsono uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable in pharmaceutical or biotechnologypatents. Accordingly, we do not know the degree of future protection for our proprietary rights or the breadth of claims that willbe 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 developedby a competitor, our business and financial condition could be materially adversely affected. The laws of some foreign countriesdo not protect our proprietary rights to the same extent as the laws of the U.S., and we may encounter significant problems inprotecting our proprietary rights in these countries.

 

We do not believe that BIV201, the product candidate we arecurrently developing, infringes upon the rights of any third parties nor are they infringed upon by third parties. However, therecan be no assurance that our technology will not be found in the future to infringe upon the rights of others or be infringed uponby others. Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveriesin the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoverieswere made and patent applications were filed. Because patents can take many years to issue, there may be currently pending applicationsof 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 issuedpatent that our product infringes. In such a case, others may assert infringement claims against us, and should we be found toinfringe 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 toany damages we might have to pay, we may be required to obtain licenses from the holders of this intellectual property. We mayfail to obtain any of these licenses or intellectual property rights on commercially reasonable terms. Even if we are able to obtaina 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 doso, we may be unable to develop or commercialize the affected products, which could materially harm our business and the thirdparties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to oursales, an obligation on our part to pay royalties and/or other forms of compensation. Conversely, we may not always be able tosuccessfully pursue our claims against others that infringe upon our technology. Thus, the proprietary nature of our technologyor technology licensed by us may not provide adequate protection against competitors. 

 

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The pharmaceutical industry is characterized by extensivelitigation regarding patents and other intellectual property rights. Moreover, the cost to us of any litigation or other proceedingrelating to our patents and other intellectual property rights, even if resolved in our favor, could be substantial, and the litigationwould 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 operationsand you could lose all of your investment. 

 

We depend upon our management and their loss or unavailabilitycould put us at a competitive disadvantage which could have a material adverse effect on our business.

 

We currently depend upon the efforts and abilities of ourexecutive management team of Terren Peizer, our Chief Executive Officer, Jonathan Adams, our President and Chief Operating Officer,and Wendy Kim, our Chief Financial Officer and Corporate Secretary. Mr. Adams serves the Company full-time and Ms. Kim serves theCompany part-time. The loss or unavailability of the services of either of these individuals for any significant period of timecould have a material adverse effect on our business, prospects, financial condition and results of operations which may causeyou to lose all of your investment. We have not obtained, do not own, nor are we the beneficiary of key-person life insurance. 

 

We may not be able to attract and retain highly skilledpersonnel, which could have a materially adverse effect on our business.

 

Our ability to attract and retain highly skilled personnelis critical to our operations and expansion. We face competition for these types of personnel from other pharmaceutical companiesand more established organizations, many of which have significantly larger operations and greater financial, technical, humanand other resources than us. We may not be successful in attracting and retaining qualified personnel on a timely basis, on competitiveterms, or at all. If we are not successful in attracting and retaining these personnel, our business, prospects, financial conditionand results of operations will be materially and adversely affected.

 

The biotechnology and biopharmaceutical industriesare characterized by rapid technological developments and a high degree of competition. We may be unable to compete with enterprisesequipped with more substantial resources than us, which could cause us to curtail or cease operations.

 

The biotechnology and biopharmaceutical industries are characterizedby rapid technological developments and a high degree of competition based primarily on scientific and technological factors. Thesefactors include the availability of patent and other protection for technology and products, the ability to commercialize technologicaldevelopments and the ability to obtain government approval for testing, manufacturing and marketing.

 

We compete with biopharmaceutical firms in the United States,Europe and elsewhere, as well as a growing number of large pharmaceutical companies that are applying biotechnology to their operations.Many biopharmaceutical companies have focused their development efforts in the human therapeutics area. Many major pharmaceuticalcompanies have developed or acquired internal biotechnology capabilities or made commercial arrangements with other biopharmaceuticalcompanies. These companies, as well as academic institutions, government agencies and private research organizations, also competewith us in recruiting and retaining highly qualified scientific personnel and consultants. Our ability to compete successfullywith other companies in the pharmaceutical field will also depend to a considerable degree on the continuing availability of capitalto us. 

  

Although there are not currently any therapies approved bythe FDA specifically for the treatment of ascites due to liver cirrhosis, we still face significant competitive and market risk.Other companies, such as Mallinckrodt Inc., are developing therapies for severe complications of advanced liver cirrhosis, whichmay in the future be developed for the treatment of ascites, and these therapies could compete indirectly or directly with ourproduct candidate. There may be other competitive development programs of which we are unaware. Even if our product candidate isultimately approved by the FDA, there is no guarantee that once it is on the market doctors will adopt it in favor of current ascitestreatment procedures such as diuretics and paracentesis. These competitive and market risks could have a material adverse effecton our business, prospects, financial condition and results of operations which may cause you to lose all of your investment.

 

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Our competition will be determined in part by the potentialindications for which drugs are developed and ultimately approved by regulatory authorities. Additionally, the timing of the marketintroduction of some of our potential product candidate or of competitors' products may be an important competitive factor. Accordingly,the relative speed with which we can develop drugs, complete pre-clinical testing, clinical trials, approval processes and supplycommercial quantities to market are important competitive factors. We expect that competition among drugs approved for sale willbe based on various factors, including product efficacy, safety, reliability, availability, price and patent protection. 

 

The successful development of biopharmaceuticals is highlyuncertain. A variety of factors including, pre-clinical study results or regulatory approvals, could cause us to abandon the developmentof our product candidates.

 

Successful development of biopharmaceuticals is highlyuncertain and is dependent on numerous factors, many of which are beyond our control.

 

Products that appear promising in the early phases of developmentmay fail to reach the market for several reasons. Pre-clinical study results may show the product to be less effective than desired(e.g., the study failed to meet its primary objectives) or to have harmful or problematic side effects. Products may fail to receivethe necessary regulatory approvals or may be delayed in receiving such approvals. Among other things, such delays may be causedby slow enrollment in clinical studies, length of time to achieve study endpoints, additional time requirements for data analysisor a IND and later NDA, preparation, discussions with the FDA, an FDA request for additional pre-clinical or clinical data or unexpectedsafety or manufacturing issues; manufacturing costs, pricing or reimbursement issues, or other factors that make the productnot economical. Proprietary rights of others and their competing products and technologies may also prevent the product from beingcommercialized.

 

Success in pre-clinical and early clinical studies does notensure that large-scale clinical studies will be successful. Clinical results are frequently susceptible to varying interpretationsthat may delay, limit or prevent regulatory approvals. The length of time necessary to complete clinical studies and to submitan application for marketing approval for a final decision by a regulatory authority varies significantly from one product to thenext, and may be difficult to predict. There can be no assurance that any of our products will develop successfully, and the failureto develop our products will have a materially adverse effect on our business and will cause you to 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 theiraffiliates 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 shareholders will have any rights in these ventures or their income or profits. In particular, our executiveofficers or directors or their affiliates may have an economic interest in or other business relationship with partner companiesthat invest in us or are engaged in competing drug development. Our executive officers or directors may have conflicting fiduciaryduties to us and third parties. The terms of transactions with third parties may not be subject to arm's length negotiations andtherefore may be on terms less favorable to us than those that could be procured through arm's length negotiations. Although wehave established an audit committee comprised solely of independent directors to oversee transactions between us and our insiders,we do not have any formal policies in place to deal with such conflicting fiduciary duties should such a conflict arise.

 

 If we fail to maintain an effective system ofinternal controls, we may not be able to accurately report our financial results or detect fraud. Consequently, investors couldlose confidence in our financial reporting and this may decrease the trading price of our common stock.

 

We must maintain effective internal controls to provide reliablefinancial reports and detect fraud. We have concluded that our disclosure controls and procedures internal controls, as well asinternal controls over financial reporting, are ineffective. Failure to implement changes to our internal controls or any othersthat we identify as necessary to establish an effective system of internal controls could harm our operating results and causeinvestors to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect onthe trading price of our common stock.

 

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We may enter into employment agreements with our executiveofficers and compensation payable thereunder may not be based on arms-length negotiations.

 

Certain of our current executive officers also serve as directorsof our Board of Directors, and we have not yet formed an independent compensation committee to determine compensation and to approveemployment agreements. Therefore, compensation which may be paid by us to our management under current arrangements may not havebeen determined based on arms-length negotiations. We may grant stock options and other equity incentives to our executive officersand directors that are consistent with the nature of the pharmaceutical industry. Although we intend to establish a compensationcommittee in connection with this offering comprised of only independent directors, there can be no assurance made that the considerationwhich may be payable to management will reflect the true market value of services provided to us.

 

RISKS RELATING TO OUR COMMON STOCK

 

There is a risk of dilution of your percentage ownershipof common stock in the Company.

 

We have the right to raise additional capital or incur borrowingsfrom third parties to finance its business. We may also implement public or private mergers, business combinations, business acquisitionsand similar transactions pursuant to which it would issue substantial additional capital stock to outside parties, causing substantialdilution in the ownership of the Company by our existing stockholders. Our Board of Directors has the authority, without the consentof any of the stockholders, to cause us to issue more shares of common stock and/or preferred stock at such price and on such termsand conditions as are determined by the Board of Directors in its sole discretion. As of March 31, 2019, there were warrants outstandingto purchase an aggregate of 216,440,549 shares of common stock at exercise prices ranging from $0.015 to $0.60 per share. In addition,our controlling stockholder Acuitas Group, LLC (“Acuitas”) has the option under the terms of its original investmentto purchase up to an additional 200,000,000 shares of common stock at a price per share of $0.015, and associated warrants on thesame terms as the warrants purchased as part of such investment, within two weeks following the one year anniversary of such issuancein the event that we have not obtained $3 million of funding through various non-dilutive grants, less any federal or FDA grantfunding received by the Company. We may also be obligated under the terms of such original investment to issue a significant numberof shares of common stock to Acuitas in the event of certain adverse developments in the Mallinckrodt’s challenge againstour patent before the PTAB. The issuance of additional shares of capital stock by us will dilute your ownership percentage in theCompany and could impair our ability to raise capital in the future through the sale of equity securities.

 

Certain stockholders who are also officers and directorsof the Company may have significant control over our management.

 

Our directors and executive officers currently own an aggregate228,056,000 shares, which currently constitutes 72% of our issued and outstanding common stock. As a result, directors and executiveofficers may have a significant influence on our affairs and management, as well as on all matters requiring member approval, includingelecting and removing members of our Board of Directors, causing us to engage in transactions with affiliated entities, causingor restricting our sale or merger, and certain other matters. Our Chairman and Chief Executive Officer, Mr. Terren Peizer, maybe deemed to beneficially own the shares held by Acuitas, including shares beneficially owned pursuant to outstanding warrants.Such concentration of ownership and control could have the effect of delaying, deferring or preventing a change in control of useven when such a change of control would be in the best interests of our stockholders.

 

 -17-

There is not now, and there may never be, an active,liquid and orderly trading market for our common stock, which may make it difficult for you to sell your shares of our common stock.

 

There is not now, nor has therebeen since our inception, any significant volume of trading activity in our common stock or an active market for shares ofour common stock, and an active trading market for our shares may never develop or be sustained after this offering. As aresult, investors in our common stock must bear the economic risk of holding those shares for an indefinite period of time.Although our common stock is quoted on the OTCQB Marketplace, or OTCQB, over-the-counter quotation system, trading of ourcommon stock on such system has only recently commenced and continues to be extremely limited and sporadic and at very lowvolumes. Although we intend to apply to list our common stock on the NASDAQ Capital Market and expect that our common stockwill be listed on the NASDAQ Capital Market prior to the completion of this offering, an active trading market for our commonstock may never develop or be sustained. If an active market for our common stock does not develop, it may be difficult foryou to sell the shares you purchase in this offering without depressing the market price for the shares or at all. Further,an unestablished trading market for our common stock may also impair our ability to raise capital by selling additionalequity in the future, and may impair our ability to enter into strategic partnerships or acquire companies or products byusing shares of our common stock as consideration.

 

Our common stock is subject to the “penny stock”rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and mayreduce the value of an investment in our stock.

 

Under U.S. federal securities legislation, our common stockcurrently constitutes a “penny stock”. Penny stock is any equity security that has a market price of less than $5.00per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that abroker or dealer approve a potential investor’s account for transactions in penny stocks, and the broker or dealer receivefrom the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.In order to approve an investor’s account for transactions in penny stocks, the broker or dealer must obtain financial informationand investment experience objectives of the person, and make a reasonable determination that the transactions in penny stocks aresuitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluatingthe risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, adisclosure schedule prepared by the Securities and Exchange Commission (the “SEC”) relating to the penny stock market,which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination. Brokers may beless willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficultfor investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be madeabout the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payableto both the broker-dealer and the registered representative, current quotations for the securities and the rights and remediesavailable to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosingrecent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

We may, in the future, issue additional common stock,which would reduce investors’ percent of ownership and may dilute our share value.

 

As of March 31, 2019, our Articles of Incorporation authorizethe issuance of 800,000,000 shares of common stock. As of March 31, 2019, we had 316,453,673 shares of common stock outstanding.Accordingly, we may issue up to an additional 483,546,327 shares of common stock. The future issuance of common stock may resultin substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stockin the future on an arbitrary basis. The issuance of Common Stock for future services or acquisitions or other corporate actionsmay have the effect of diluting the value of the shares held by our investors, might have an adverse effect on any trading marketfor our common stock and could impair our ability to raise capital in the future through the sale of equity securities.

 

 -18-

We have a large number of restricted shares outstanding,a portion of which may be sold under Rule 144 which may reduce the market price of our shares.

 

Of the 316,453,673 shares of common stock issued and outstandingas of March 31, 2019, and assuming no warrants are exercised, 88,651,172 shares are held by non-affiliates and 228,056,000 areowned by affiliates of the Company, consisting of our officers and directors. The majority of our common stock, including all ofthe affiliates’ securities are deemed “restricted securities” within the meaning of Rule 144 as promulgated underthe Securities Act.

 

It is anticipated that all of the “restricted securities”will be eligible for resale under Rule 144. In general, under Rule 144, subject to the satisfaction of certain other conditions,a person, who is not an affiliate (and who has not been an affiliate for a period of at least three months immediately precedingthe sale) and who has beneficially owned restricted shares of our common stock for at least six months is permitted to sell suchshares without restriction, provided that there is sufficient public information about us as contemplated by Rule 144. An affiliatewho has beneficially owned restricted shares of our common stock for a period of at least one year may sell a number of sharesequal to one percent of our issued and outstanding common stock approximately every three months.

 

The respective holding periods for the shares issued to affiliatesand non-affiliates holding restricted securities commenced and were issued between May 17, 2013 and June 30, 2013. The possibilitythat substantial amounts of our common stock may be sold under Rule 144 into the public market may adversely affect prevailingmarket prices for the common stock and could impair our ability to raise capital in the future through the sale of equity securities.

 

In connection with our preparation of our annual financialstatements for the year ended June 30, 2018, we identified material weaknesses in our internal control over financial reporting.Any failure to maintain effective internal control over financial reporting could harm us.

 

Our management is responsible for establishing and maintainingadequate internal control over financial reporting. Internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordancewith U.S. generally accepted accounting principles (“GAAP”). During the preparation of our financial statements forboth 2017 and 2018, we identified material weaknesses in our internal control over financial reporting. Under standards establishedby the Public Company Accounting Oversight Board (“PCAOB”), a deficiency in internal control over financial reportingexists when the design or operation of a control does not allow management or personnel, in the normal course of performing theirassigned functions, to prevent or detect misstatements on a timely basis. The PCAOB defines a material weakness as a deficiency,or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility thata material misstatement of annual or interim financial statements will not be prevented, or detected and corrected, on a timelybasis.

 

In our Annual Report on Form 10-K for the year ended June30, 2018, we reported material weaknesses in our internal control over financial reporting. Our remediation efforts to date haveincluded hiring a Chief Financial Officer in October 2018 and the segregation of duties in certain controls, as well as the formalizationof certain controls and procedures. In addition, our Board of Directors has formed an audit committee consisting of three independentdirectors, which has appointed a chairman of the audit committee with experience in the preparation of financial statements inaccordance with U.S. generally accepted accounting principles.

 

We and our independent registered public accounting firmare not required to, and did not, perform an evaluation of our internal control over financial reporting as of December 31, 2018,in accordance with the provisions of Section 404 of the Sarbanes-Oxley Act. Accordingly, we cannot assure you that we have identifiedall, or that we will not in the future have additional, material weaknesses. Material weaknesses may still exist when we reporton the effectiveness of our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act afterthe completion of this offering.

 

 -19-

If we are unable to assert that our internal control overfinancial reporting is effective, or when required in the future, if our independent registered public accounting firm is unableto express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may loseconfidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affectedand we could become subject to litigation or investigations by the stock exchange on which our securities are listed, the SEC orother regulatory authorities, which could require additional financial and management resources.

 

The lack of public company experience of our managementteam could adversely impact our ability to comply with the reporting requirements of U.S. securities laws, which could have a materiallyadverse effect on our business.

 

Our officers have limited public company experience, whichcould impair our ability to comply with legal and regulatory requirements such as those imposed by Sarbanes-Oxley Act of 2002.Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Any suchdeficiencies, weaknesses or lack of compliance could have a materially adverse effect on our ability to comply with the reportingrequirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which is necessary to maintainour public company status. If we were to fail to fulfill those obligations, our ability to continue as a U.S. public company wouldbe in jeopardy in which event you could lose your entire investment in our Company.

 

 Commencing June 30, 2019, we will nolonger be an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growthcompanies will no longer apply.

 We currently are an “emerging growth company”,as defined in the JOBS Act. As June 30, 2019 represents the last day of the fifth fiscal year following our first sale of securitiespursuant to an effective registration statement, we will therefore no longer qualify for such status commencing June 30, 2019.Once we qualify as an “accelerated filer” not entitled to emerging growth company status, we would be subject to certaindisclosure requirements that are applicable to other public companies that have not been applicable to us as an emerging growthcompany. These requirements include, but are not limited to:

 

  being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes Oxley Act;
  being required to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or supplement to the auditor’s report providing additional information about the audit and the financial statements; and
  disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

 

We are considered a smaller reporting company and isexempt from certain disclosure requirements, which could make our stock less attractive to potential investors.

 

Rule 12b-2 of the Exchange Act defines a “smaller reportingcompany” as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parentthat is not a smaller reporting company and that:

 

  · Had a public float of less than $250 million as of the last business day of its most recently completed fiscal quarter, computed by multiplying the aggregate number of worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principle market for the common equity; or

 

  · In the case of an initial registration statement under the Securities Act or the Exchange Act for shares of its common equity, had a public float of less than $250 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares; or

 

  ·

In the case of an issuer who had annual revenue of less than $100 million during the most recently completed fiscal year for which audit financial statements are available, had a public float as calculated under paragraph (1) or (2) of this definition that was either zero or less than $700 million.

 

 

 -20-

As a “smaller reporting company” (in additionto and without regard to our status as an “emerging growth company”) we are not required and may not include a CompensationDiscussion and Analysis (“CD&A”) section in our proxy statements; we provide only 3 years of business developmentinformation; provide fewer years of selected data; and have other “scaled” disclosure requirements that are less comprehensivethan issuers that are not “smaller reporting companies” which could make our stock less attractive to potential investors,which could make it more difficult for you to sell your shares.

 

We have not held regular annual meetings of stockholdersin the past, and if we are required by the Nevada District Court to hold an annual meeting pursuant to Nevada Revised Statutes§78.345(1), it could result in the unanticipated expenditure of funds, time and other Company resources.

 

Section 1 of Article II of our bylaws provides that an annualmeeting of stockholders shall be held each year on a date and at a time designated by our Board of Directors. Section 78.345(1)of the Nevada Revised Statutes provides that if there is a failure to hold the annual meeting for a period of 18 months after thelast election of directors, stockholders owning at least 15% of the voting power of the outstanding common stock may apply to theNevada district court to order the election of directors.

 

We have not held regular annual meetings of stockholdersin the past because a substantial majority of our stock is owned by a small number of stockholders, making it easy to obtain writtenconsent in lieu of a meeting when necessary. In light of our historical liquidity constraints, handling matters by written consenthas allowed us to save on financial and administrative resources required to prepare for and hold such annual meetings. Additionally,we have applied to list our common stock on The Nasdaq Capital Market (“Nasdaq”) and expect that our common stock willbe listed on Nasdaq prior to the completion of this offering. Pursuant to Nasdaq’s corporate governance requirements, wewill be obligated to hold regular annual meetings of stockholders in the future, and it is currently contemplated that the we willhold such meetings beginning in 2020.

 

To our knowledge, no stockholder or director has requestedour management to hold such an annual meeting and no stockholder or director has applied to the Nevada district court seeking anorder directing us to hold a meeting of stockholders. However, if one or more stockholders or directors were to apply to the Nevadadistrict court seeking such an order, and if the Nevada district court were to order an annual meeting before we were preparedto hold one, the preparation for the annual meeting of stockholders and the meeting itself could result in the unanticipated expenditureof funds, time, and other Company resources.

 

We are subject to the periodic reporting requirementsof the Exchange Act, which require us to incur audit fees and legal fees in connection with the preparation of such reports. Theseadditional costs will negatively affect our ability to earn a profit.

 

We are required to file periodic reports with the SEC pursuantto the Exchange Act and the rules and regulations thereunder. In order to comply with such requirements, our independent registeredauditors have to review our financial statements on a quarterly basis and audit our financial statements on an annual basis.Moreover, our legal counsel has to review and assist in the preparation of such reports. Factors such as the number and type oftransactions that we engage in and the complexity of our reports cannot accurately be determined at this time and may have a majornegative effect on the cost and amount of time to be spent by our auditors and attorneys. However, the incurrence of such costsis an expense to our operations and thus has a negative effect on our ability to meet our overhead requirements and earn a profit.

 

We qualify as a smaller reporting company, and so long aswe remain a smaller reporting company, we benefit from almost all of the same exemptions and exclusions as an emerging growth company.When we cease to be an emerging growth company as a result of a lapse of the five-year period, but continue to be a smaller reportingcompany, we will continue to be subject to those exemptions available to emerging growth companies until such time as we are nolonger a smaller reporting company.

 

Because we do not intend to pay any cash dividendson our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.

 

We intend to retain any future earnings to finance the developmentand expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unlesswe pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. There is no assurancethat stockholders will be able to sell shares when desired.

 

 -21-

CautionaryNote Regarding Forward-Looking Statements 

 

This prospectus contains “forward-lookingstatements” within the meaning of the federal securities laws, and that involve significant risks and uncertainties. We intendthe forward-looking statements to be covered by the safe harbor for forward-looking statements in these sections. Words such as“may,” “should,” “could,” “would,” “predicts,” “potential,”“continue,” “expects,” “anticipates,” “future,” “intends,” “plans,”“believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-lookingstatements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurateindications of when such performance or results will be achieved. Forward-looking statements are based on information we have whenthose statements are made or management’s good faith belief as of that time with respect to future events, and are subjectto significant risks and uncertainties that could cause actual performance or results to differ materially from those expressedin or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limitedto:

 

- our limited operatinghistory and experience in developing and manufacturing drugs;

- none of our productsare approved for commercial sale;

- our substantialcapital needs;

- product developmentrisks;

- we do not havesales and marketing personnel;

- regulatory, competitiveand contractual risks;

- risks relatedto our intellectual property rights;

- the absence ofliquidity in our common stock;

- the risk of substantialdilution from future issuances of our equity securities; and

- the other risksset forth herein under the caption “Risk Factors.”

 

The foregoing does not represent anexhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are facedwith. Forward-looking statements necessarily involve risks and uncertainties, and our actual results could differ materially fromthose anticipated in the forward-looking statements due to a number of factors, including those set forth above under “RiskFactors” and elsewhere in this prospectus. The factors set forth above under “Risk Factors” and other cautionarystatements made in this prospectus should be read and understood as being applicable to all related forward-looking statementswherever they appear in this prospectus. The forward-looking statements contained in this prospectus represent our judgment asof the date of this prospectus. We caution readers not to place undue reliance on such statements. Except as required by law, weundertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes availableor other events occur in the future. All subsequent written and oral forward-looking statements attributable to us or persons actingon our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this prospectus.

 

 -22-

Useof Proceeds

 

We estimate that the net proceeds fromthe sale of the shares of common stock we are offering will be approximately $        million. If the underwritersfully exercise the over-allotment option, the net proceeds of the shares we sell will be approximately $          million.“Net proceeds” is what we expect to receive after deducting the underwriting discount and commission and estimatedoffering expenses payable by us.

 

We intend to use the net proceeds ofthis offering primarily to fund clinical trials of BIV201 and for working capital and other general corporate purposes. The amountsthat we actually spend for any specific purpose may vary significantly, and will depend on a number of factors including, but notlimited to, the pace of progress of our research and development, market conditions, and our ability to qualify vendors. In addition,we may use a portion of any net proceeds to acquire complementary compounds; however, we do not have plans for any acquisitionsat this time. We will have significant discretion in the use of any net proceeds. Investors will be relying on the judgment ofour management regarding the application of the proceeds of any sale of our common stock.

 

DividendPolicy

 

We have never declared or paid any cashdividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future. The payment of dividends,if any, in the future is within the discretion of our Board of Directors and will depend on our earnings, capital requirementsand financial condition and other relevant facts. We currently intend to retain all future earnings, if any, to finance the developmentand growth of our business.

 

 -23-

Capitalization

 

The following table sets forth our cashand capitalization as of December 31, 2018:

 

  on an actual basis;

 

  on an as adjusted basis to give effect to the sale of shares of our common stock in this offering, assuming an initial public offering price of $        per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

You should read the information in thistable together with our financial statements and accompanying notes and “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” appearing elsewhere in this prospectus.

 

   As of December 31, 2018
   Actual  As
Adjusted
Cash  $1,630,483     
Stockholders’ equity          
Common stock, $0.0001 par value per share, 800,000,000 shares authorized; 315,053,673 and          shares issued and outstanding actual and as adjusted, respectively   31,505      
Additional paid in capital   9,267,311      
Accumulated deficit   (5,758,166)     
Total stockholders’ equity   3,645,486      
           

 

 -24-

Dilution

 

If you purchase shares of our commonstock in this offering, your interest will be diluted immediately to the extent of the difference between the assumed public offeringprice of $        per share and the as adjusted net tangible book value per share of our common stock immediatelyupon the consummation of this offering.

 

The historical net tangible book valueof our common stock as of December 31, 2018 was $1.5 million, or $0.005 per share. Historical net tangible book value per shareof our common stock represents our total tangible assets (total assets less intangible assets) less total liabilities divided bythe number of shares of common stock outstanding as of that date.

  

Net tangible book value dilution pershare to new investors represents the difference between the amount per share paid by purchasers in this offering and the as adjustednet tangible book value per share of common stock immediately after completion of this offering. After giving effect to our saleof         shares of common stock in this offering at an assumed public offering price of $        per share, and after deducting underwriters’ commissions and estimated offering expenses, our as adjusted net tangible bookvalue as of December 31, 2018 would have been $        million, or $        per share. This representsan immediate increase in net tangible book value of $        per share to existing stockholders and an immediatedilution in net tangible book value of $         per share to purchasers of shares in this offering, as illustratedin the following table:

 

Assumed public offering price per share           $           
Net tangible book value per share as of December 31, 2018   $                   
Increase in net tangible book value per share attributable to new investors   $                   
Adjusted net tangible book value per share as of December 31, 2018, after giving effect to the offering   $                   
Dilution per share to new investors in the offering           $           

 

If the underwriters exercise their optionin full to purchase          additional shares of common stock in this offering at the assumed offering price of $        per share of common stock, the pro forma net tangible book value per share after this offering would be $         per share, the increasein the pro forma net tangible book value per share to existing stockholders would be $         per share and the dilution to new investorspurchasing securities in this offering would be $        per share.

  

The number of shares of common stock to be outstanding afterthis offering is based on 315,053,673 shares of common stock outstanding as of December 31, 2018, which does not include:

 

          shares of common stock issuable upon the exercise of outstanding stock options as of December 31, 2018, at a weighted average exercise price of $         per share; and

 

           shares of common stock issuable upon the exercise of outstanding warrants as of December 31, 2018, at a weighted average exercise price of $         per share.

 

To the extent that outstanding exercisable options or warrantsare exercised, you may experience further dilution. If all outstanding exercisable options and warrants with exercise prices below$                 per share (the last reportedsale price for our common stock as reported on the OTCQB on               ,2019) were exercised, our pro forma as adjusted net tangible book value as of December 31, 2018 (calculated on the basis of theassumptions set forth above) would have been approximately $                 million,or approximately $                  per share,causing immediate dilution of $                 per share to new investors purchasing shares in this offering.

 

In addition, we may choose to raise additional capital dueto market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operatingplans. To the extent that we raise additional capital by issuing equity securities or convertible debt, your ownership will befurther diluted.

 

 -25-

Management’sDiscussion and Analysis of Financial Condition and Results of Operations

 

 The following discussion of the Company’sfinancial condition and the results of operations should be read in conjunction with the Financial Statements and Notes theretoappearing elsewhere in this prospectus.

Overview

 

We are a clinical stage biotechnologycompany engaged in the discovery, development and commercialization of therapies targeting life-threatening complications of livercirrhosis. Our initial disease target is ascites, a serious medical condition affecting about 100,000 Americans and many timesmore worldwide. Our therapeutic product candidate BIV201 is based on a drug that is approved in about 40 countries to treat relatedcomplications of liver cirrhosis (part of the same disease pathway as ascites), but not yet available in the US. The active agentin BIV201, terlipressin, is a potent vasoconstrictor which is in use for various medical conditions around the world. The goalis for BIV201 to interrupt the ascites disease pathway, thereby halting the cycle of accelerating fluid generation in ascites patients.

 

BioVie accomplished the following keymilestones during the twelve months ended March 31, 2019:

 

-   In July 2018, we completed an equity investment with Acuitas and other investors that provided gross proceeds of $3.2 million to BioVie.

 

-   In November 2018, the Company announced that BIV201 had been granted an Orphan Drug designation for hepatorenal syndrome.

 

-   In February 2019, we completed patient enrollment in our mid-stage (Phase 2a) clinical trial of BIV201 for the treatment of refractory ascites.

 

Comparison of the six months endedDecember 31, 2018 to the six months ended December 31, 2017

 

Total operating expenses for the sixmonths ended December 31, 2018 were $992,000 compared to $1,157,000 for the six months ended December 31, 2017.  Thenet decrease of $165,000 was primarily due to a $337,000 reduction in selling, general and administrative expenses due to the issuanceof common stock in 2017 as compensation for professionals, offset by the increase in research and development expenses of $172,000as the Company resumed its clinical trial program and hired two full time employees in November 2018.

 

Research and Development Expenses

 

Research and development expenses were$401,000 for the six months ended December 31, 2018, an increase of $172,000, from $229,000 for the six months ended December 31,2018. The increase was primarily attributed to continued analytical research and associated regulatory and clinical trial programplanning and the Phase 2a clinical trial activities which began in July 2018.

 

Selling, General and AdministrativeExpenses

 

Selling, general and administrativeexpenses were $477,000 for the six months ended December 31, 2018, a decline of $337,000, from $814,000 for the six months endedDecember 31, 2017. In 2017, the Company paid for professional fees related to financial and strategic advisory services withcommon stock.

 

Comparison of the Year Ended June30, 2018 to the Year Ended June 30, 2017

 

Total operating expenses for the fiscalyear ended June 30, 2018 were $2,372,166, compared to $1,553,614 for the fiscal year ended June 30, 2017. The netincrease of $818,552 was primarily due to the increase in professional fees of $827,773 attributed to strategic and financial advisoryservices offset by fluctuations in research and development, payroll expenses and selling, general and administrative expensesdiscussed below.

 

 -26-

Research and Development

 

Research and development expenses were$370,853 for the fiscal year ended June 30, 2018, a decrease of $95,501, compared to $466,354 for the fiscal year ended June 30,2017. The research and development expenses were primarily due to the expenses incurred for clinical development activities.

 

Selling, General and Administrative

 

Selling, general and administrativeexpenses were $129,270 for the fiscal year ended June 30, 2018, an increase of $60,148, compared to $69,122 for the fiscal yearended June 30, 2017. The increase in selling, general and administrative expenses was primarily due to travel and conference expenses associatedwith financing activities. 

 

Professional Fees

 

Professional fees were $1,331,142 forthe fiscal year ended June 30, 2018, an increase of $827,773 compared to $503,369 for the fiscal year ended June 30, 2017. Theincrease in professional fees related to a large expense for financial and strategic advisory services paid in common stock.

 

Payroll Expenses

 

Payroll expenses were $311,525 for thefiscal year ended June 30, 2018, an increase of $26,133 compared to $285,392 for the fiscal year ended June 30, 2017. Payroll expenseswere related to accrued salary for the Chief Operating Officer, Jonathan Adams. The payroll expenses for fiscal year ended June30, 2018 included a $30,547 adjustment made for fiscal year ended June 30, 2017. The adjustment was due to a correction made tothe valuation of Stock Options issued to the Chief Operating Officer.

 

Capital Resources and Liquidity

 

The Company completed a capital raiseof $3.2 million in July 2018 which enabled the Company to resume and further develop its products. As of December 31, 2018, theCompany had $1.6 million of cash to complete its Phase 2 clinical trials of the BIV201 therapy and initiate the next Phase 2b clinicaltrials. As further discussed below, the Company is pursuing various options to raise further financing to continue the testingand development of its product. If the Company is not successful in raising additional funds it may reduce its monthly spend andpotentially delay the implementation of the larger scale Phase 2b clinical trial until sufficient funding is secured.

 

As of December 31, 2018, the Companyhad an accumulated deficit of $5.8 million and as a development stage enterprise, the Company expects substantial losses in futureperiods.

 

InJuly 2018, we completed a capital raise from Acuitas and other purchasers and received gross proceeds of $3.2 million and we haveresumed clinical development of BIV201. The Acuitas investment agreement also stipulated that if the clinical development of BIV201continues, Acuitas may invest an additional $3 million to fund operations in year two, unless we raise such amount in federal orFDA grant funding.

Wecannot assure you that our product candidate will be developed, work, or receive regulatory approval; that we will ever earn revenuessufficient to support our operations or that we will ever be profitable. Furthermore, since we have no committed source of financing,we cannot assure you that we will be able to raise money as and when we need it to continue our operations. If we cannot raisefunds as and when we need them, we may be required to severely curtail, or even to cease, our operations.

Managementintends to attempt to secure additional required funding primarily through additional equity or debt financings. We may also seekto secure required funding through sales or out-licensing of intellectual property assets, seeking partnerships with other pharmaceuticalcompanies or third parties to co-develop and fund research and development efforts, or similar transactions. However, there canbe no assurance that we will be able to obtain required funding. If we are unsuccessful in securing funding from any of thesesources, we will defer, reduce or eliminate certain planned expenditures in our research protocols. If we do not have sufficientfunds to continue operations, we could be required to seek bankruptcy protection or other alternatives that could result in ourstockholders losing some or all of their investment in us.

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These circumstances raise substantialdoubt on our ability to continue as a going concern. Our financial statements appearing elsewhere in this prospectus do not includeany adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilitiesthat might result from this uncertainty.

 

Off-Balance Sheet Arrangements

 

The Company has no off-balance sheetarrangements 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 arrangementto which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guaranteecontract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entityor similar arrangement that serves as credit, liquidity or market risk support for such assets. 

 

Critical Accounting Policies andEstimates

 

Basis of Presentation

 

The preparation of financial statementsin conformity with accounting principles generally accepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual resultscould differ from those estimates.

 

Use of Estimates

 

The preparation of financial statementsin conformity with accounting principles generally accepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual resultscould differ from those estimates. 

 

Cash

 

Cash is maintained at financial institutionsand, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances.All of the Company’s cash balances were fully insured at December 31, 2018. 

 

Financial Instruments

 

The Company’s financial instrumentsinclude cash, accounts payable, related party loans and a demand promissory note. The carrying amounts of cash and accounts payableapproximate their fair value, due to the short-term nature of these items.

 

Long-Term Notes Payable

 

The Company’s long-term notespayable at June 30, 2017 include accrued payroll to officers and accrued payments to third party consultants.

 

Research and Development

 

Research and development costs are chargedto operations when incurred and are included in operating expenses.

 

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Income Taxes

 

Deferred income tax assets and liabilitiesarise from temporary differences associated with differences between the financial statements and tax basis of assets and liabilities,as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets andliabilities are classified as current or non-current, depending on the classification of the assets or liabilities to which theyrelate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or non-current dependingon the periods in which the temporary differences are expected to reverse. 

 

The Company follows the provisions ofFASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10), January 1, 2007. The Company has not recognizeda liability as a result of the implementation of ASC 740-10. A reconciliation of the beginning and ending amount of unrecognizedtax benefits has not been provided since there are no unrecognized benefits at December 31, 2018 and since the date of adoption.The Company has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. If there were anunrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expenseand penalties in operating expenses. 

 

Earnings (Loss) per Share

 

Basic earnings per share are computedby dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings percommon share are computed by dividing net income by the weighted average number of shares of common stock outstanding and dilutiveoptions outstanding during the year. For the years ended June 30, 2017 and 2018 and for the six months ended December 31, 2018,all outstanding options have been excluded from the calculation of the diluted net loss per share since their effect was anti-dilutive.

 

Stock-based Compensation

 

The Company has accounted for stock-basedcompensation under the provisions of FASB ASC 718 – “Stock Compensation” which requires the use of the fair-valuebased method to determine compensation for all arrangements under which employees and others receive shares of stock or equityinstruments (stock options and common stock purchase warrants). For employee awards, the fair value of each stock option awardis estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expecteddividends, expected term, and the risk-free interest rate. For non-employees, the fair value of each stock option award is estimatedon the measurement date using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends,expected term, and the risk-free interest rate. For non-employees, the Company utilizes the graded vesting attribution method underwhich the entity treats each separately vesting portion (tranche) as a separate award and recognizes compensation cost for eachtranche over its separate vesting schedule. Expected volatilities are based on historical volatility of peer companies and otherfactors estimated over the expected term of the stock options. For employee awards, the expected term of options granted is derivedusing the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contractterm. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expectedterm.

 

Goodwill

 

Goodwill is recorded when the purchaseprice paid for an acquisition exceeds the fair value of net identified tangible and intangible assets acquired. The Company performsan annual impairment test of goodwill and further periodic tests to the extent indicators of impairment develop between annualimpairment tests. The Company’s impairment review process compares the fair value of the reporting unit to its carrying value,including the goodwill related to the reporting unit. To determine the fair value of the reporting unit, the Company may use variousapproaches including an asset or cost approach, market approach or income approach or any combination thereof. These approachesmay require the Company to make certain estimates and assumptions including future cash flows, revenue and expenses. These estimatesand assumptions are reviewed each time the Company tests goodwill for impairment and are typically developed as part of the Company’sroutine business planning and forecasting process. While the Company believes its estimates and assumptions are reasonable, variationsfrom those estimates could produce materially different results.

 

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Impairment of Long-Lived Assets

 

Long-lived assets, including intangibleassets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset maynot be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an assetto estimated undiscounted future cash flows expected to be generated by the asset. 

 

If the carrying amount of an asset exceedsits undiscounted estimated future cash flows, an impairment review is performed. An impairment charge is recognized in the amountby which the carrying amount of the asset exceeds the fair value of the asset. Generally, fair value is determined using valuationtechniques such as expected discounted cash flows or appraisals, as appropriate. Assets to be disposed of would be separately presentedin the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciatedor amortized. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriateasset and liability sections of the balance sheet.

 

New Accounting Pronouncements

 

For a description of recent accountingstandards, including the expected dates of adoption and estimated effects, if any, on our financial statements, see “Note3: Significant Accounting Polices: Recent Accounting Standards” in the financial statements appearing elsewhere in this prospectus.


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BUSINESS

 

We are a clinical-stage companypursuing the discovery, development, and commercialization of innovative drug therapies. We are currently focused on developingand commercializing BIV201, a novel approach to the treatment of ascites due to chronic liver cirrhosis. Our therapy BIV201 isbased on a drug that is approved in about 40 countries to treat related complications of liver cirrhosis (part of the same diseasepathway as ascites), but not yet available in the United States and has never been approved in the United States. BIV201’sactive agent is a potent vasoconstrictor and has shown efficacy for reducing portal hypertension in studies around the world. Thegoal is for BIV201 to interrupt the ascites disease pathway, thereby halting the cycle of accelerating fluid generation in ascitespatients.

In April 2017, we entered intoa CRADA with the McGuire Research Institute Inc. in Richmond, VA, and began administering BIV201 to patients in September 2017. Asof March 2019, all six of the planned patients had been treated with BIV201 therapy in this Phase 2a clinical trial and the resultsare being analyzed for presentation to the FDA in the first half of 2019.

BIV201 has the potential to improvethe health of thousands of patients suffering from life-threatening complications of liver cirrhosis due to hepatitis, NASH, andalcoholism. It is covered by an issued U.S. patent, has FDA Fast-Track status and we have obtained Orphan Drug designation forit in the U.S. for the treatment of hepatorenal syndrome (received November 21, 2018) and treatment of ascites due to all etiologiesexcept cancer (received September 8, 2016). Orphan Drug designation for the most common of these complications, ascites, whichrepresents a significant unmet medical need. The FDA has never approved any drug specifically for treating ascites. BIV201 alsohas an Orphan Drug designation for HRS.

The BIV201 development programbegan at LAT Pharma LLC. On April 11, 2016, we acquired LAT Pharma LLC and the rights to its BIV201 development program and currentlyown all development and marketing rights to the product candidate. We and PharmaIN, LAT Pharma’s former partner focused onthe development of new modified product candidates in the same therapeutic field but not including BIV201, have agreed to pay royaltiesequal to less than 1% of future net sales of each company's ascites drug development programs, or if such program is licensed toa third party, less than 5% of each company's net license revenues. On December 24, 2018, we returned our partial ownership rightsto the PharmaIN modified terlipressin development program and simultaneously paid the remaining balance due on a related debt.PharmaIN’s rights to our program remain unchanged. We have an issued U.S. patent covering the use of BIV201 for the treatmentof patients diagnosed with ascites due to liver cirrhosis in the outpatient setting using ambulatory pump infusion, and have correspondingpatent applications pending in the U.S., Japan, Europe, China and Hong Kong.

About Ascites and Liver Cirrhosis

 

About 600,000 Americans and millionsworldwide suffer from liver cirrhosis. Cirrhosis is the 12th leading cause of death due to disease in the US, killing more than30,000 people each year. The condition results primarily from hepatitis, alcoholism, and fatty liver disease linked to obesity.Ascites is a common complication of advanced liver cirrhosis, involving kidney dysfunction and the accumulation of large amountsof fluid in the abdominal cavity.

 

The Need for an Ascites Therapy

 

With no medications approved bythe FDA specifically for treating ascites, an estimated 40% of patients die within two years of diagnosis. Certain drugs approvedfor other uses such as diuretics may provide initial relief, but patients may fail to respond to treatment as ascites worsens.This represents a critical unmet medical need. U.S. treatment costs for liver cirrhosis, including ascites and other complications,are estimated at more than $4 billion annually.

 

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The Ascites Development Pathway

Mostexperts agree that ascites develops through a sequence of events illustrated by the above diagram. High blood pressure in the veinthat supplies blood to the liver, called “portal hypertension,” occurs as increasing liver damage (fibrosis) impedesblood flow through the liver. This causes vasodilation and blood pooling in the central or “splanchnic” regionof the body and low blood volume in the arteries. The decrease in effective blood volume activates a signaling pathway (“neurohormonalsystems”) which tells the kidneys to retain large amounts of salt and water in an effort to increase blood volume. Ultimatelythe retention of excess sodium and water leads to the formation of ascites as these substances “weep” from the liverand lymph system and collect in the patient’s abdomen.

 

The BIV201 Mechanism of Action

 

BIV201 is being developed by BioViewith the goal of alleviating the portal hypertension and correcting splanchnic vasodilation, thereby increasing effective bloodvolume and reducing the signals to the kidneys to retain excess salt and water. If successful, BIV201 could halt thecycle of accelerating fluid generation in ascites patients and reduce the need for the frequent and painful paracentesis proceduresmany of these patients currently require.

 

Future Possible BIV201 Indications

 

Based on investigative studiesaround the world of the active agent in BIV201, terlipressin, our new product candidate may have potential future applicationsin other life-threatening conditions due to liver cirrhosis, such as those listed below. Securing marketing approvals forany of these new uses will require well-controlled clinical trials to satisfy the FDA and/or other countries’ regulatoryrequirements, none of which have commenced at this time. We may be unable to, or chose not to, pursue the development BIV201 forthese indications.

 

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  · Bleeding Esophageal Varices (BEV): The bursting of blood vessels lining the esophagus due to high blood pressure (“portal hypertension”) in the vein which supplies blood to the liver resulting as a result of advanced liver cirrhosis. This situation requires emergency treatment to avoid blood loss and death.
  · Hepatorenal syndrome (HRS): As their disease progresses, liver cirrhosis patients’ kidneys may begin to fail, and this deadly condition may set in. It often occurs once a patient no longer responds to (off-label) drugs used to control ascites. The second stage is called “type 1 HRS” and requires hospitalization as multiple organ failure and death may occur. We obtained Orphan Drug designation for BIV201 in the U.S. for the treatment of hepatorenal syndrome on November 21, 2018.

Efflux Pump Antibiotics Program

 

Prior to the Merger of Lat PharmaLLC and NanoAntibiotics Inc. in April 2016, we were exclusively developing novel nanotechnology anti-infective drugs to combatmulti-drug resistant bacteria. We are at an early stage of discovery and development of broad spectrum antibiotics for gram-negativeand gram-positive bacterial infections. Developing this technology in-house is resource-intensive with respect to time, personneland capital necessary for scientific discovery. For further development of our nanoantibiotic technology we will need to find andlicense additional nanotechnology to complete our planned products. Presently this program is inactive as we are focusing our effortson BIV201.

 

Intellectual Property

 

BioVie relies on a combinationof patent, trade secret, other intellectual property laws (such as FDA data exclusivity), nondisclosure agreements, and other measuresto protect our proposed products. We require our employees, consultants, and advisors to execute confidentiality agreements andto agree to disclose and assign to us all inventions conceived during the workday, using our property, or which relate to our business.Despite any measures taken to protect our intellectual property, unauthorized parties may attempt to copy aspects of our productsor to obtain and use information that we regard as proprietary. In May 2017 we announced the issuance of a U.S. patent 9,655,945directed to a method of treating a patient diagnosed with ascites due to liver cirrhosis by administering BIV201 as a continuousinfusion within specified doses over a specified duration. As discussed above, this patent has been challenged by Mallinckrodtin an IPR proceeding before the PTAB. In July 2017 we announced filing an application for similar patent coverage in Japan, andsubsequently filed for patent protection in Europe, China and Hong Kong. BioVie has secured Orphan Drug designations 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). We have applied for an additional Orphan Drug designation which could be granted in 2019.

 

Government Regulation

 

Government authorities in theUnited States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research,development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising,distribution, post-approval monitoring and reporting, marketing and export and import of products such as those we are developing.Any pharmaceutical candidate that we develop must be approved by the FDA before it may be legally marketed in the United Statesand by the appropriate foreign regulatory agency before it may be legally marketed in foreign countries.

 

United States Drug DevelopmentProcess

 

In the United States, the FDAregulates drugs under the Federal Food, Drug and Cosmetic Act, or FDCA, and implementing regulations. Drugs are also subject toother federal, state and local statutes and regulations. Biologics are subject to regulation by the FDA under the FDCA, the PublicHealth Service Act, or the PHSA, and related regulations, and other federal, state and local statutes and regulations. Biologicalproducts include, among other things, viruses, therapeutic serums, vaccines and most protein products. The process of obtainingregulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulationsrequire the expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirementsat any time during the product development process, approval process or after approval, may subject an applicant to administrativeor judicial sanctions. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, a clinicalhold, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions,fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcementaction could have a material adverse effect on us.

 

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The process required by the FDAbefore a drug or biological product may be marketed in the United States generally involves the following:

 

Completion of preclinical laboratory tests, animal studies and formulationstudies according to Good Laboratory Practices or other applicable regulations;
Submission to the FDA of an Investigational New Drug Application,or an IND, which must become effective before human clinical trials may begin;
Performance of adequate and well-controlled human clinical trialsaccording to the FDA's current good clinical practices, or GCPs, to establish the safety and efficacy of the proposed drug or biologicfor its intended use;
Submission to the FDA of a New Drug Application, or an NDA, for anew drug product, or a Biologics License Application, or a BLA, for a new biological product;
Satisfactory completion of an FDA inspection of the manufacturingfacility or facilities where the drug or biologic is to be produced to assess compliance with the FDA's current good manufacturingpractice standards, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug's or biologic'sidentity, strength, quality and purity;
Potential FDA audit of the nonclinical and clinical trial sites thatgenerated the data in support of the NDA or BLA; and
FDA review and approval of the NDA or BLA.

The lengthy process of seekingrequired approvals and the continuing need for compliance with applicable statutes and regulations require the expenditure of substantialresources. There can be no certainty that approvals will be granted.

 

Clinical trials involve the administrationof the drug or biological candidate to healthy volunteers or patients having the disease being studied under the supervision ofqualified investigators, generally physicians not employed by or under the trial sponsor's control. Clinical trials are conductedunder protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusioncriteria, and the parameters to be used to monitor subject safety. Each protocol must be submitted to the FDA as part of the IND.Clinical trials must be conducted in accordance with the FDA's good clinical practices requirements. Further, each clinical trialmust be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which theclinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considerssuch items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relationto anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject orhis or her legal representative and must monitor the clinical trial until it is completed.

 

Human clinical trials prior toapproval are typically conducted in three sequential Phases that may overlap or be combined:

 

Phase 1.  The drug or biologic is initially introduced into healthy humansubjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. In the case of some productsfor severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthyvolunteers, the initial human testing is often conducted in patients having the specific disease.
Phase 2.  The drug or biologic is evaluated in a limited patient populationto identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeteddiseases and to determine dosage tolerance, optimal dosage and dosing schedule for patients having the specific disease.
Phase 3.  Clinical trials are undertaken to further evaluate dosage, clinicalefficacy and safety in an expanded patient population at geographically dispersed clinical trial sites. These clinical trials,which usually involve more subjects than earlier trials, are intended to establish the overall risk/benefit ratio of the productand provide an adequate basis for product labeling. Generally, at least two adequate and well-controlled Phase 3 clinical trials are required by the FDAfor approval of an NDA or BLA.

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Post-approval studies, or Phase 4clinical trials, may be conducted after initial marketing approval. These studies are used to gain additional experience from thetreatment of patients in the intended therapeutic indication and may be required by the FDA as part of the approval process.

 

Progress reports detailing theresults of the clinical trials must be submitted at least annually to the FDA and written IND safety reports must be submittedto the FDA by the investigators for serious and unexpected adverse events or any finding from tests in laboratory animals thatsuggests a significant risk for human subjects. Phase 1, Phase 2 and Phase 3 clinical trials may not be completedsuccessfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinicaltrial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptablehealth risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial isnot being conducted in accordance with the IRB's requirements or if the drug or biologic has been associated with unexpected seriousharm to patients.

 

Concurrent with clinical trials,companies usually complete additional animal studies and develop additional information about the chemistry and physical characteristicsof the drug or biologic as well as finalize a process for manufacturing the product in commercial quantities in accordance withcGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug or biologicalcandidate and, among other things, must include methods for testing the identity, strength, quality and purity of the final drugor biologic. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstratethat the drug or biological candidate does not undergo unacceptable deterioration over its shelf life.

 

U.S. Review and ApprovalProcesses

 

The results of product development,preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on thechemistry of the drug or biologic, proposed labeling and other relevant information are submitted to the FDA as part of an NDAor BLA requesting approval to market the product. The submission of an NDA or BLA is subject to the payment of substantial userfees; a waiver of such fees may be obtained under certain limited circumstances.

 

The FDA reviews all NDAs and BLAssubmitted before it accepts them for filing and may request additional information rather than accepting an NDA or BLA for filing.Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA or BLA.

 

After the NDA or BLA submissionis accepted for filing, the FDA reviews the NDA to determine, among other things, whether the proposed product is safe and effectivefor its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product'sidentity, strength, quality and purity. The FDA reviews a BLA to determine, among other things, whether the product is safe, pureand potent and the facility in which it is manufactured, processed, packaged or held meets standards designed to assure the product'scontinued safety, purity and potency. In addition to its own review, the FDA may refer applications for novel drug or biologicalproducts or drug or biological products which present difficult questions of safety or efficacy to an advisory committee, typicallya panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application shouldbe approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers suchrecommendations carefully when making decisions. During the approval process, the FDA also will determine whether a risk evaluationand mitigation strategy, or REMS, is necessary to assure the safe use of the drug or biologic. If the FDA concludes that a REMSis needed, the sponsor of the NDA or BLA must submit a proposed REMS; the FDA will not approve the NDA or BLA without a REMS, ifrequired.

 

Before approving an NDA or BLA,the FDA will inspect the facilities at which the product is to be manufactured. The FDA will not approve the product unless itdetermines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistentproduction of the product within required specifications. Additionally, before approving an NDA or BLA, the FDA will typicallyinspect one or more clinical sites to assure compliance with cGMP. If the FDA determines the application, manufacturing processor manufacturing facilities are not acceptable it will outline the deficiencies in the submission and often will request additionaltesting or information.

 

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The NDA or BLA review and approvalprocess is lengthy and difficult and the FDA may refuse to approve an NDA or BLA if the applicable regulatory criteria are notsatisfied or may require additional clinical data or other data and information. Even if such data and information is submitted,the FDA may ultimately decide that the NDA or BLA does not satisfy the criteria for approval. Data obtained from clinical trialsare not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval.The FDA will issue a "complete response" letter if the agency decides not to approve the NDA or BLA. The complete responseletter usually describes all of the specific deficiencies in the NDA or BLA identified by the FDA. The deficiencies identifiedmay be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally,the complete response letter may include recommended actions that the applicant might take to place the application in a conditionfor approval. If a complete response letter is issued, the applicant may either resubmit the NDA or BLA, addressing all of thedeficiencies identified in the letter, or withdraw the application.

 

If a product receives regulatoryapproval, the approval may be limited to specific diseases and dosages or the indications for use may otherwise be limited, whichcould restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautionsbe included in the product labeling. In addition, the FDA may require Phase 4 testing which involves clinical trials designedto further assess a product's safety and effectiveness and may require testing and surveillance programs to monitor the safetyof approved products that have been commercialized.

 

Orphan Drug Designation

 

Under the Orphan Drug Act, theFDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, which is generallya disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in theUnited States and for which there is no reasonable expectation that the cost of developing and making a drug or biological productavailable in the United States for this type of disease or condition will be recovered from sales of the product. Orphan productdesignation must be requested before submitting an NDA or BLA. After the FDA grants orphan product designation, the identity ofthe therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan product designation does not conveyany advantage in or shorten the duration of the regulatory review and approval process.

 

If a product that has Orphan designationsubsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitledto orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug or biologicalproduct for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority tothe product with orphan exclusivity. Competitors, however, may receive approval of different products for the indication for whichthe Orphan product has exclusivity or obtain approval for the same product but for a different indication for which the Orphanproduct has exclusivity. Orphan product exclusivity also could block the approval of one of our products for seven years if a competitorobtains approval of the same drug or biological product as defined by the FDA or if our drug or biological candidate is determinedto be contained within the competitor's product for the same indication or disease. If a drug or biological product designatedas an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphanproduct exclusivity. Orphan Drug status in the European Union has similar but not identical benefits in the European Union.

 

Expedited Development andReview Programs

 

The FDA has a Fast Track programthat is intended to expedite or facilitate the process for reviewing new drug and biological products that meet certain criteria.Specifically, new drug and biological products are eligible for Fast Track designation if they are intended to treat a seriousor life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designationapplies to the combination of the product and the specific indication for which it is being studied. Unique to a Fast Track product,the FDA may consider for review sections of the NDA or BLA on a rolling basis before the complete application is submitted, if(i) the sponsor provides a schedule for the submission of the sections of the NDA or BLA, (ii) the FDA agrees to accept sectionsof the NDA or BLA and determines that the schedule is acceptable, and (iii) the sponsor pays any required user fees upon submissionof the first section of the NDA or BLA.

 

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Any product submitted to theFDA for marketing approval, including those submitted to a Fast Track program, may also be eligible for other types of FDAprograms intended to expedite development and review, such as priority review and accelerated approval. Any product iseligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternativetherapy exists or a significant improvement in the treatment, diagnosis or prevention of a disease compared with marketedproducts. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug orbiological product designated for priority review in an effort to facilitate the review. Additionally, a product may beeligible for accelerated approval. Drug or biological products studied for their safety and effectiveness in treating seriousor life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receiveaccelerated approval, which means that they may be approved on the basis of adequate and well-controlled clinical studiesestablishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit,or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity. As a condition ofapproval, the FDA generally requires that a sponsor of a drug or biological product receiving accelerated approval performadequate and well-controlled post-marketing clinical studies to establish safety and efficacy for the approvedindication. Failure to conduct such studies or conducting such studies that do not establish the required safety and efficacymay result in revocation of the original approval. In addition, the FDA currently requires as a condition for acceleratedapproval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch orsubsequent marketing of the product. Fast Track designation, priority review and accelerated approval do not change thestandards for approval but may expedite the development or approval process.

 

Post-Approval Requirements

 

Any drug or biological productsfor which we receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keepingrequirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy informationon an annual basis or as required more frequently for specific events, product sampling and distribution requirements, complyingwith certain electronic records and signature requirements and complying with FDA promotion and advertising requirements, whichinclude, among others, standards for direct-to-consumer advertising, prohibitions against promoting drugs and biologics for usesor in patient populations that are not described in the drug's or biologic's approved labeling (known as "off-label use"),rules for conducting industry-sponsored scientific and educational activities, and promotional activities involving the internet.Failure to comply with FDA requirements can have negative consequences, including the immediate discontinuation of noncomplyingmaterials, adverse publicity, enforcement letters from the FDA, mandated corrective advertising or communications with doctors,and civil or criminal penalties. Although physicians may prescribe legally available drugs and biologics for off-label uses, manufacturersmay not market or promote such off-label uses.

 

We will need to rely on thirdparties for the production of our product candidates. Manufacturers of our product candidates are required to comply with applicableFDA manufacturing requirements contained in the FDA's cGMP regulations. cGMP regulations require among other things, quality controland quality assurance as well as the corresponding maintenance of comprehensive records and documentation. Drug and biologic manufacturersand other entities involved in the manufacture and distribution of approved drugs and biologics are also required to register theirestablishments and list any products made there with the FDA and comply with related requirements in certain states, and are subjectto periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly,manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.Discovery of problems with a product after approval may result in serious and extensive restrictions on a product, manufacturer,or holder of an approved NDA or BLA, including suspension of a product until the FDA is assured that quality standards can be met,continuing oversight of manufacturing by the FDA under a "consent decree," which frequently includes the imposition ofcosts and continuing inspections over a period of many years, and possible withdrawal of the product from the market. In addition,changes to the manufacturing process generally require prior FDA approval before being implemented and other types of changes tothe approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review andapproval.

 

The FDA also may require post-marketingtesting, known as Phase 4 testing, risk minimization action plans and surveillance to monitor the effects of an approved productor place conditions on an approval that could otherwise restrict the distribution or use of the product.

 

Employees

 

Our business is managed byour officers. Our Chairman and Chief Executive Officer, Terren Peizer began devoting part-time efforts to the Company’sactivities in July 2018. Our President and Chief Operating Officer, Jonathan Adams, began devoting full-time efforts to theCompany on July 1, 2017. Our Chief Financial Officer and Corporate Secretary, Wendy Kim, devotes part-time efforts to theCompany’s activities. Our Chief Scientific Officer began devoting full-time efforts and our Chief Medical Officer begandevoting part-time efforts to the Company in November 2018 and previously were each consultants to the Company. We also relyon a team of highly experienced scientific, medical, and regulatory consultants to conduct its product developmentactivities.

 

 -37-

Management

 

Directors and Officers

 

The following table sets forth certaininformation regarding our Board of Directors, our executive officers, and some of our key employees, as of the date of this prospectus.

 

Name   Age   Position
Terren Peizer     59     Chairman & Chief Executive Officer
Jonathan Adams     56     President & Chief Operating Officer
Joanne Wendy Kim     64     Chief Financial Officer and Corporate Secretary
Patrick Yeramian, MD     60     Chief Medical Officer
Penelope Markham, PhD     53     Chief Scientific Officer
Jim Lang     54     Independent Director
Cuong Do     52     Independent Director
Hari Kumar     63     Independent Director
Michael Sherman     59     Independent Director
Mina Sooch     51     Independent Director

 

According to our Bylaws, the directorsshall be elected at the annual meeting of the stockholders and each director shall be elected to serve until his successor shallbe elected and shall qualify. A director need not be a stockholder. Directors shall not receive any stated salary for their servicesas directors or as members of committees, but by resolution of the Board of Directors a fixed fee and expenses of attendance maybe allowed for attendance at each meeting. The Bylaws shall not be construed to preclude any director from serving the Companyin any other capacity as an officer, agent or otherwise, and receiving compensation therefor.

 

There are no familial relationshipsamong any of our directors or officers. Mr. Terren Peizer, Chairman of the Board of Directors and Chief Executive Officer, is alsothe founder of Catasys, Inc. a U.S. reporting company listed on Nasdaq on whose board Mr. Sherman also serves. Additionally, JimLang currently serves as a director at OptimizeRX, a U.S. reporting company that is listed on the Nasdaq stock exchange. None ofour other directors or officers is or has been a Director or has held any form of directorship in any other U.S. reporting companies.None of our directors or officers has been affiliated with any Company that has filed for bankruptcy within the last five years.We are not aware of any proceedings to which any of our officers or directors, or any associate of any such officer or director,is a party that are adverse to the Company. We are also not aware of any material interest of any of our officers or directorsthat is adverse to our own interests.

 

Information

 

Mr. Terren Peizer, Chairman of the Boardof Directors and Chief Executive Officer, is an entrepreneur, investor, and financier with a particular interest in healthcare,having founded and successfully commercialized several healthcare companies. Mr. Peizer is the founder of Catasys, Inc., a leaderin behavioral and mental health management services, having served as the Company’s Chairman of the Board of Directors andCEO since the Company’s inception in 2003. Mr. Peizer also is the Founder, Chairman and CEO and majority shareholder of NeurMedix,Inc., a biotechnology Company with a focus on inflammatory, neurological and neuro-degenerative diseases. Mr. Peizer is Chairmanof Acuitas Group Holdings, LLC, his personal holding company that owns his portfolio Company interests. Through Acuitas, he ownsCrede Capital Group, LLC, an industry leader in investing in micro and small capitalization public equities, having invested over$1.2 billion directly into portfolio companies. Previously he was Chairman of Cray, Inc., the leading supercomputing Company, andheld senior executive positions at various publicly-traded growth companies and with the investment banking firms Goldman Sachs,First Boston, and Drexel Burnham Lambert. He received his B.S.E. in finance from The Wharton School of Finance and Commerce.

 

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Mr. Jonathan Adams has served as theCompany’s Chief Executive Officer and Chief Financial Officer from the time acquired LAT Pharma LLC on April 11, 2016 untilJuly 2018. In July 2018, he began serving as the Company’s President and Chief Operating Officer. He founded LAT Pharma LLCand served as its Chief Executive Officer prior to its acquisition. Mr. Adams is a co-inventor of the Company's patent coveringthe use of terlipressin to treat ascites patients. He has over 29 years of biopharmaceutical industry experience, including corporatefinance, company acquisitions and licensing deals, marketing and sales support. At Searle Pharmaceuticals he was a member of theglobal launch team for Celebrex, and he has worked on launching numerous new drugs and medical devices. Mr. Adams earned a BS atCornell University and an MBA at the Tuck School at Dartmouth.

 

Joanne Wendy Kim has served as the Company’sChief Financial Officer since October 2018. Ms. Kim previously served as CFO for several companies throughout her career, mostrecently with Landmark Education Enterprises, and she has provided interim CFO services to various organizations through GroupJWK from 2016 to 2018. In her various roles, Ms. Kim oversaw corporate finance and operational groups, closed eight acquisitions,secured bank financings, developed and implemented new business strategies, managed risk and implemented new financial policiesand procedures. As a CPA, Ms. Kim provided accounting, SEC filing review and other business consultative services to clients servingas a Director at BDO USA, LLP’s National Office SEC Department in 2008-2016 and as a Senior Manager at KPMG in earlier partof her career. She brings more than 30 years of accounting experience to this position. Ms. Kim earned her BBA in accounting andfinance at California State University, Long Beach.

 

Dr. Yeramian has served as the Company’sChief Medical Officer since November 2018. Dr. Yeramian has over 25 years of experience in the pharmaceutical industry. He hassupervised the clinical development of new drugs, biopharmaceuticals, cellular therapy agents, and vaccines as well as having helda prominent role in the approval of several new drug (metronidazole – Flagyl MR ®), biological (interferon alpha –Multiferon®, nafarelin – Synarel®) and device (Inerpan®) applications in the U.S. in the EC and the grantingof over 20 successful INDs and IMPDs. Dr Yeramian was the Medical Director of the Vaccine and Gene Therapy Institute, Florida fromOctober 2011 to February 2015 and a consulting Medical Director for Tapimmune Inc. from February 2015 to January 2017 and KantumDiagnostics from March 2017 to March 2019. Dr. Yeramian currently serves as the Medical Director of Amylyx Inc. (since March 2019)and as the General Manager of DLx Therpeutics LLC (since January 2018). Previously he served as Chief Medical Officer at Viragen,Inc. where he was responsible for development of global clinical and regulatory strategies and for implementation of clinical programsworldwide. Earlier Dr. Yeramian also served as Director of clinical research at GD Searle where he supervised the clinical programsfor antibiotics, antivirals, sepsis/thrombosis, and cancer vaccines. Dr. Yeramian holds a Medical Degree from the University ofParis together with a Master of Clinical Science in experimental oncology and a Graduate Degree in molecular virology. He alsoearned a Master of Business Administration from Rutgers University. He completed his medical residency in oncology at the Saint-LouisHospital in Paris.

 

Dr. Markham has served as the Company’sChief Scientific Officer since November 2018. She was previously our Chief Scientist. Dr. Markham served as a Technical Consultantat LAT Pharma for 7 years prior to our acquisition of LAT Pharma. She has spent 15 years in immunology, infectious disease, bacteriologyand drug discovery research. Dr. Markham was a co-founder and Research Director for Influx, Inc. involved in antibiotic drug discovery.She has been a member of NIH grant review panels and consulted for several pharmaceutical companies in a variety of therapeuticareas including Orphan Drug development. Dr. Markham has more than 20 publications in peer-reviewed journals and three patents.She holds a BS in Biochemistry from the University College Cork, Ireland, a Masters from Strathclyde University, Scotland, anda PhD from Rush University, Chicago.

 

Mr. Cuong Do has been President, GlobalStrategy Group, at Samsung since February 2015. Mr. Do helps to set the strategic direction for Samsung Group’s diverse businessportfolio. He was previously the Chief Strategy Officer for Merck from October 2011 to March 2014, Tyco Electronics, and Lenovo.Mr. Do is a former senior partner at McKinsey & Company, where he spent 17 years and helped build the healthcare, high techand corporate finance practices. He holds a BA from Dartmouth College, and an MBA from the Tuck School of Business at Dartmouth.

 

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Mr. Jim Lang is currently CEO of WaterStreet Capital’s and JLL Partner’s Global Life Sciences Services Platform. He formerly served as the CEO of DecisionResources Group (DRG), which he transformed into a leading healthcare data and analytics firm. Prior to that, Jim was CEO of IHSCambridge Energy Research Associates (IHS CERA), a recognized leader in energy industry subscription information products, andformerly the President of Strategic Decisions Group (SDG), a leading global strategy consultancy. Mr. Lang holds a BS summa cumlaude in electrical and computer engineering from the University of New Hampshire and an MBA with Distinction from the Tuck Schoolof Business. Jim Lang currently also serves as a Director at OptimizeRX, a Nasdaq listed Company.

 

Hari Kumar, PhD held positions of increasingresponsibility at Roche Pharma culminating in serving as Global Business Development Director, and in 2007 assumed the role ofChief Business Officer for Amira Pharmaceuticals. He led the sale of Amira to Bristol-Myers Squibb in 2011 for $475 million. Hethen served as Chief Executive Officer (CEO) for Panmira Pharmaceuticals LLC, which is developing anti-inflammatory compounds,and in 2013 became CEO for Adheron Therapeutics, which Roche Pharma acquired in 2015 for $580 million. Dr. Kumar earned a PhD inimmunology in 1984.

 

Mina Sooch, is a successful entrepreneur,executive, and venture capitalist in the life sciences sector. From 2014 to 2017, she served as President, CEO, and board memberof Gemphire Therapeutics, advancing its product candidate through multiple clinical trials, raising nearly $60 million in funding,and taking the Company public. Prior to Gemphire, she co-founded and served as CEO of ProNAi, an oncology Company, where she raisedover $70 million from venture capital investors. Prior to her CEO roles, she spent over a decade in life sciences venture capitalas a Founder of Apjohn Ventures with several portfolio companies developing treatments for kidney and liver diseases. Mina receivedan MBA from Harvard Business School and holds a BS from Wayne State University.

 

Michael Sherman JD retired from hisposition as a Managing Director at Barclays Plc in 2018, where he had worked since 2008. Previously he was a Managing Directorat Lehman Brothers, Inc. He has worked in investment banking for 30 years. Mr. Sherman has significant experience in healthcarefinance, most recently assisting on a $450 million convertible transaction for Neurocrine Biosciences. He has worked on successfulfinancial transactions for Teva Pharmaceutical Industries, Amgen Inc., Cubist Pharmaceuticals, Merck & Co., and Cardinal Health,among other companies. After graduating from the University of Pennsylvania, Michael Sherman received his JD, cum laude, from theHarvard Law School.

 

Terren Peizer’s qualificationsto serve on our Board of Directors are primarily based on his experience as an entrepreneur, investor, and financier with a particularinterest in healthcare, having founded and successfully commercialized several healthcare companies. Mr. Peizer is the founderof Catasys, Inc., a leader in behavioral and mental health management services, having served as the Company’s Chairman ofthe Board of Directors and CEO since the Company’s inception in 2003. Mr. Peizer also is the Founder, Chairman and CEO andmajority shareholder of NeurMedix, Inc., a biotechnology Company with a focus on inflammatory, neurological and neuro-degenerativediseases. Mr. Peizer is Chairman of Acuitas Group Holdings, LLC, his personal holding Company that owns his portfolio Company interests.Through Acuitas, he owns Crede Capital Group, LLC, an industry leader in investing in micro and small capitalization public equities,having invested over $1.2 billion directly into portfolio companies.

 

Jonathan Adams’s qualificationsto serve on our Board of Directors are primarily based on his founding of LAT Pharma LLC and his over 26 years of biopharmaceuticalindustry experience. As Chief Executive of LAT Pharma LLC, Mr. Adams was a key contributor to inventing the BIV201 product candidate.He also helped to secure an Orphan Drug designation for a terlipressin analogue (a prior product candidate which is no longer indevelopment). Mr. Adams's biopharmaceutical experience includes work in corporate finance, company acquisitions and licensing deals,marketing and sales support.

 

Wendy Kim’s qualifications toserve as our Chief Financial Officer are primarily based on her 35 years of accounting experience and having served as CFO forseveral companies and the provision of interim CFO services, accounting and business consultative services to various organizationsthrough Group JWK, BDO USA, LLP and KPMG.

 

 -40-

Dr. Yeramian’squalifications to serve as our Chief Medical Officer are primarily based on his extensive experience in the pharmaceuticalindustry, including the supervision of the clinical development of new drugs, biopharmaceuticals, cellular therapy agents,and vaccines as well as having held a prominent role in the approval of several new drugs and having been Chief MedicalOfficer responsible for development of global clinical and regulatory strategies and for implementation of clinical programsworldwide at Viragen.

 

Dr. Markham’s qualifications toserve as our Scientific Officer are primarily based on her years of experience with LAT Pharma, as well as having been a memberof NIH grant review panels and consulted for several pharmaceutical companies in a variety of therapeutic areas including OrphanDrug development.

 

Cuong Do’s qualifications to serveon our Board of Directors are primarily based on his decades of experience as an executive in the pharma, biotech, and other hightechnology industries. He was previously the Chief Strategy Officer for Merck, a leading U.S. pharmaceuticals Company, Tyco Electronics,and Lenovo. Mr. Do is a former senior partner at McKinsey & Company, where he spent 17 years and helped build the healthcare,high tech and corporate finance practices.

 

Jim Lang’s qualifications to serveon our Board of Directors are primarily based on his decades of experience as a strategy consultant, broad industry expertise,and senior-level management experience running several healthcare and information technology companies. This includes his experienceas CEO of Decision Resources Group, CEO of IHS Cambridge Energy Research Associates (IHS CERA), and President of Strategic DecisionsGroup (SDG), a leading global strategy consultancy.

 

Hari Kumar’s qualifications toserve on our Board of Directors are primarily based on his decades of biopharma industry experience including serving as the chiefexecutive officer at multiple companies, extensive technical and business knowledge, and outstanding track record for deliveringvalue to investors. He led the sale of Amira to Bristol-Myers Squibb in 2011 for $475 million, and as CEO for Adheron Therapeutics,he led the sale of this Company to Roche Pharma for $580 million in 2015.

 

Mina Sooch’s qualifications toserve on our Board of Directors are primarily based on her decades of biopharma industry experience including as a successful entrepreneur,executive, and venture capitalist in the life sciences sector. She has served as President, CEO, and a Board member for multiplebiopharma companies. Prior to her CEO roles, she spent over a decade in life sciences venture capital with several portfolio companiesdeveloping treatments for kidney and liver diseases.

 

Michael Sherman’s qualifications to serve on our Boardof Directors are primarily based on his decades of finance industry experience including as a Managing Director at Barclays Plcand as a Managing Director at Lehman Brothers, Inc. He has worked in investment banking for 30 years. Mr. Sherman has significantexperience in healthcare finance including having worked on successful financial transactions for several pharmaceutical and healthcarefocused companies.

 

Committees ofthe Board of Directors

 

Upon the effective date of the registration statement ofwhich this prospectus forms a part, our Board of Directors will have three standing committees: an audit committee, a compensationcommittee and a nominating and corporate governance committee. Both our audit committee and our compensation committee will becomposed solely of independent directors. Subject to phase-in rules, the rules of Nasdaq and Rule 10A-3 of the Exchange Act requirethat the audit committee of a listed company be comprised solely of independent directors, and the rules of Nasdaq require thatthe compensation committee and the nominating and corporate governance committee of a listed company be comprised solely of independentdirectors. Each committee will operate under a charter approved by our Board of Directors and will have the composition and responsibilitiesdescribed below. The charter of each committee will be available on our website following the closing of this offering

 

AUDIT COMMITTEE

 

We have established an audit committee of the Board of Directors.The members of our audit committee are Michael Sherman, Jim Lang and Mina Sooch, each of which is an independent director withinthe meaning of the Nasdaq rules. Mr. Sherman serves as chairman of the audit committee.

 

 -41-

We will adopt an audit committee charter, which will detailthe principal functions of the audit committee, including:

 

·        assisting board oversight of (1) the integrityof our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent auditor’s qualificationsand independence, and (4) the performance of our internal audit function and independent auditors; the appointment, compensation,retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accountingfirm engaged by us;

 

·        pre-approving all audit and non-audit servicesto be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approvalpolicies and procedures; reviewing and discussing with the independent auditors all relationships the auditors have with us inorder to evaluate their continued independence;

 

·        setting clear policies for audit partner rotationin compliance with applicable laws and regulations;

 

·        obtaining and reviewing a report, at least annually,from the independent auditors describing (1) the independent auditor’s internal quality-control procedures and (2) any materialissues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigationby governmental or professional authorities, within the preceding five years respecting one or more independent audits carriedout by the firm and any steps taken to deal with such issues;

 

·        meeting to review and discuss our annual auditedfinancial statements and quarterly financial statements with management and the independent auditor, including reviewing our specificdisclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; reviewingand approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by theSEC prior to us entering into such transaction; and

 

·        reviewing with management, the independent auditors,and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulatorsor government agencies and any employee complaints or published reports that raise material issues regarding our financial statementsor accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting StandardsBoard, the SEC or other regulatory authorities. 

 

COMPENSATION COMMITTEE

 

Upon the effectiveness of the registration statement of whichthis prospectus forms a part, we will establish a compensation committee of the Board of Directors. The initial members of ourCompensation Committee will be         ,          and         .          will serve as chairman of the compensationcommittee.

 

We will adopt a compensation committee charter, whichwill detail the principal functions of the compensation committee, including:

·        reviewing and approving on an annual basis thecorporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’sperformance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief ExecutiveOfficer based on such evaluation;

·        reviewing and making recommendations to our Boardof Directors with respect to the compensation, and any incentive-compensation and equity-based plans that are subject to boardapproval of all of our other officers;

·        reviewing our executive compensation policiesand plans;

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·        implementing and administering our incentive compensationequity-based remuneration plans; assisting management in complying with our proxy statement and annual report disclosure requirements;

·        approving all special perquisites, special cashpayments and other special compensation and benefit arrangements for our officers and employees;

·        producing a report on executive compensation tobe included in our annual proxy statement; and reviewing, evaluating and recommending changes, if appropriate, to the remunerationfor directors.

The charter will also provide that the compensationcommittee may, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or otheradviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However,before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensationcommittee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.

Nominatingand Corporate Governance Committee

 

Upon the effectiveness of the registration statement of whichthis prospectus forms a part, we will establish a nominating and corporate governance committee of the Board of Directors. Theinitial members of our nominating and corporate governance will be          and         .          will serveas chair of the nominating and corporate governance committee.

 

We will adopt a nominating and corporate governance committeecharter, which will detail the purpose and responsibilities of the nominating and corporate governance committee, including:

 

·        identifying, screening and reviewing individualsqualified to serve as directors, consistent with criteria approved by the Board of Directors, and recommending to the Board ofDirectors candidates for nomination for election at the annual meeting of stockholders or to fill vacancies on the Board of Directors;

·        developing and recommending to the Board of Directorsand overseeing implementation of our corporate governance guidelines;

·        coordinating and overseeing the annual self-evaluationof the Board of Directors, its committees, individual directors and management in the governance of the company; and

·        reviewing on a regular basis our overall corporategovernance and recommending improvements as and when necessary.

·        The charter will also provide that the nominatingand corporate governance committee may, in its sole discretion, retain or obtain the advice of, and terminate, any search firmto be used to identify director candidates, and will be directly responsible for approving the search firm’s fees and otherretention terms.

We have not formally established any specific, minimum qualificationsthat must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees fordirector, the Board of Directors considers educational background, diversity of professional experience, knowledge of our business,integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.Prior to our initial business combination, holders of our public shares will not have the right to recommend director candidatesfor nomination to our Board of Directors.

 

Compensation Committee Interlocks and Insider Participation

 

None of our officers currently serves, or in the past yearhas served, as a member of the compensation committee of any entity that has one or more officers serving on our Board of Directors.

 

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CODE OF ETHICS

 

We have adopted a code of ethics meeting the requirementsof Section 406 of the Sarbanes-Oxley Act of 2002. We believe our code of ethics is reasonably designed to deter wrongdoing andpromote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; complywith applicable laws; ensure prompt internal reporting of violations; and provide accountability for adherence to the provisionsof the code of ethic. Our code of ethics is available on our website.

 

EXECUTIVE COMPENSATION

 

We did not pay any compensation to any of our executive officersprior to the start of our fiscal year ending June 30, 2019; however, we did accrue salary for our Chief Executive Officer in accordancewith his related employment agreements for all periods subsequent to their effective dates.

 

Summary Compensation Table

 

   Annual Compensation
                      
Name and Principal Position  Year  Salary  Bonus  Stock Awards  Option Awards(1)  All Other Compensation  Total
Jonathan Adams   2018   $250,000   $—     $—     $30,978    —     $280,978 
Chief Executive   2017   $250,000    —      —     $65,939    —     $315,939 
Officer and Chief Financial Officer, Treasurer and Corporate Secretary(2)                                   

 

(1)       The aggregategrant date fair value of such awards were computed in accordance with Financial Accounting Standards Board ASC Topic 718, StockCompensation (ASC Topic 718), and do not take into account estimated forfeitures related to service-based vesting conditions, ifany. The valuation assumptions used in calculating these values are discussed in Note 8 of the Notes to Consolidated FinancialStatements appearing elsewhere herein. These amounts do not represent actual amounts paid or to be realized. Amounts shown arenot necessarily indicative of values to be achieved, which may be more or less than the amounts shown as awards may subject totime-based vesting.

 

(2)       Subsequent tothe end of the fiscal year for which information is disclosed in this table, Mr. Adams became President and Chief Operating Officer.

 

Employment Agreement

 

On April 11, 2016, we entered into an employment agreementwith Mr. Adams, pursuant to which Mr. Adams is entitled to receive $250,000 as annual salary. The agreement was effective beginningApril 11, 2016 and as amended to date, currently expires on July 2, 2019. In the event Mr. Adams’s employment is terminatedwithout “Good Cause” (as defined therein), Mr. Adams will be entitled to receive his base salary for the remainderof the term of the agreement, subject to the provision of a mutual release of all claims against the Company.

 

On July 9,2018, Mr. Adams, ourPresident and Chief Operating Officer, entered into an Accord and Debt Satisfaction Agreement with us, pursuant to which heagreed to release us from all liabilities (including the original contract dated March 23, 2017 to defer payment of hisaccrued salary, the promissory note issued by us to defer payment of accrued salary and subsequent unpaid salary), for anaggregate amount of $534,722, and received a cash payment of $25,694 in satisfaction. The gain of $509,028 on the settlementof debt was reflected as additional paid in capital.

 

 -44-

Option/SAR Grants

 

In connection with his employment agreement, on April 11,2016 Mr. Adams received options to acquire 3 million shares exercisable at $0.06 per share, the closing price on that date. Theseoptions vested and became exercisable as follows: (i) 1 million shares on April 11, 2017, (ii) 1 million shares on April 11, 2018,and (iii) 1 million shares on April 11, 2019.

 

Between November 16, 2016 and May 19, 2017, we issued optionsto acquire 1 million shares exercisable at an average price of $0.24 per share to consultants and members of our Board of Directorsfor services provided to us.

 

Long-Term Incentive Plans and Awards

 

Other than the options granted as described above, we donot currently have any long-term incentive plans that provide compensation intended to serve as incentive for performance. Sinceprior to these grants, no individual grants or agreements regarding future payouts under non-stock price-based plans had been madeto any executive officer or any director or any employee or consultant since our inception, no future payouts under non-stock price-basedplans or agreements had been granted or entered into or exercised by our officer or director or employees or consultants.

 

2019 Omnibus Equity Incentive Plan

 

On April [ ], 2019, our Board of Directors and our stockholdersapproved and adopted the BioVie Inc. 2019 Omnibus Equity Incentive Plan (the “2019 Plan”), subject to complying withthe notification requirements of Regulation 14C of the Exchange Act. The 2019 Plan allows us, under the direction of our Boardof Directors or a committee thereof, to make grants of stock options, restricted and unrestricted stock and other stock-based awardsto employees, including our executive officers, consultants and directors. The 2019 Plan allows for the issuance of up to 31,645,367shares of common stock pursuant to new awards granted under the 2019 Plan. This description is qualified in its entirety byreference to the actual terms of the 2019 Plan, a copy of which is attached as Appendix D to our Preliminary Information Statementon Schedule 14C, filed with the SEC on April 26, 2019.

 

Compensation of Directors

 

There are no arrangements pursuant to which our directorsare or will be compensated in the future for any services provided to the Company, except that each director shall receivestock options and common share grants as remuneration for their service in lieu of cash compensation.  For the fiscalyear ended June 30, 2018, each director received 100,000 stock options on the one-year anniversary of his or her service tothe Company with an exercise price equal to the closing stock price on the day of the option grant. The total value of theoptions granted to directors for the fiscal year ended June 30, 2018 was $50,482 based on the Black-Scholes option valuemethod. Each director also receives a stock grant of 200,000 common shares for every year of service. On January 2, 2018, ourdirectors received a combined grant of 1.4 million shares of common stock with a face value of $210,000 based on theclosing stock price of $0.15 on the grant date.

 

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PrincipalStockholders

 

Based solely upon information made availableto us, the following table sets forth information as of March 31, 2019 regarding the beneficial ownership of our common stock by:

 

  each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock; 
     
  each of our named executive officers and directors; and 
     
  all our executive officers and directors as a group.

 

The percentage ownership informationshown in the table is based upon 316,453,673 shares of common stock outstanding as of March 31, 2019.

 

Beneficial ownership is determined inaccordance with the rules of the SEC and includes voting or investment power with respect to the securities. Except as otherwiseindicated, each person or entity named in the table has sole voting and investment power with respect to all shares of our capitalshown as beneficially owned, subject to applicable community property laws.

 

In computing the number and percentageof shares beneficially owned by a person as of a particular date, shares that may be acquired by such person (for example, uponthe exercise of options or warrants) within 60 days of such date are counted as outstanding, while these shares are not countedas outstanding for computing the percentage ownership of any other person.

 

The address of each holder listed below,except as otherwise indicated, is c/o BioVie Inc., 11601 Wilshire Boulevard, Suite 1100, Los Angeles, California 90025.

Name and Address of Beneficial Owner Number of Common Shares of Beneficial Ownership (1) Percentage of Beneficial Ownership
Terren Peizer(2)   401,033,333     77.5 %
Jonathan Adams(3)   11,781,702     3.7 %
Joanne Wendy Kim(4)   100,000     *  
Patrick Yeramian, MD(4)   300,000     *  
Penolope Markham, PhD(5)   1,636,410     *  
Cuong Do(6)   21,037888     6.5 %
James Lang(7)   3,578,788     1.1 %
Hari Kumar(8)   940,909      
Michael Sherman(9)   4,285,472     3.90 %
Mina Sooch(10)   1,070,455     *  
All directors and executive officers as a group (ten persons):   445,764,957     82.5 %

_________________________________

*Less than 1%

 

(1)Beneficial ownership is determined in accordance with the rules ofthe SEC and generally includes voting or investment power with respect to securities. In accordance with SEC rules, shares of commonstock issuable upon the exercise of options or warrants which are currently exercisable or which become exercisable within 60 daysfollowing the date of the information in this table are deemed to be beneficially owned by, and outstanding with respect to, theholder of such option or warrant, however none of the persons listed hereinabove has the right to acquire beneficial ownershipin any other shares of the Company. Subject to community property laws where applicable, to our knowledge, each person listed isbelieved to have sole voting and investment power with respect to all shares of common stock owned by such person.

 

 -46-

(2)Includes warrants to purchase 200,833,333 shares of common stockwhich are exercisable in the next 60 days. All shares and warrants are held of record by Acuitas Group Holdings, LLC, a limitedliability company 100% owned by Terren S. Peizer, and as to which, Mr. Peizer may be deemed to beneficially own or control. Mr.Peizer disclaims beneficial ownership of any such securities.

 

(3)Includes warrants to purchase 1,022,227 shares of common stock andoptions to purchase 3,000,000 shares of common stock, all of which are exercisable within the next 60 days. Common stock beneficiallyowned by Mr. Adams includes 140,000 and 150,000 shares of common stock held of record by Mr. Adams, as custodian for Elliott P.Adams and Jeremy P. Adams, respectively; and 365,454 shares of common stock held of record by Elliott P. Adams. Each of ElliottP. Adams and Jeremy P. Adams are family members of Mr. Adams and, as a result, Mr. Adams may be deemed to beneficially own sharesheld by (or for the benefit of) such family members.

 

(4)Represents options to purchase shares of common stock exercisablein the next 60 days.

 

(5)Includes options to purchase 100,000 shares of common stock exercisablein the next 60 days.

 

(6)Includes warrants to purchase 8,833,267 shares of common stock andoptions to purchase 300,000 shares of common stock, all of which are exercisable within the next 60 days. All shares of commonstock, warrants and options are held of record by Do & Rickles Investments, LLC, a limited liability company 100% owned byCuong Do and his wife, and as such, Mr. Do may be deemed to beneficially own or control.

 

(7)Includes warrants to purchase 2,348,485 shares of common stock andoptions to purchase 300,000 shares of common stock, all of which are exercisable in the next 60 days.

 

(8)Includes warrants to purchase 113,636 shares of common stock andoptions to purchase 100,000 shares of common stock , which are exercisable within the next 60 days

 

(9)Includes warrants to purchase 1,700,690 shares of common stock andoptions to purchase 200,000 shares of common stock, all of which are exercisable within the next 60 days. Common stock held byMichael Sherman includes 1,666,600 shares of the common stock held of record by Sherman Children's Trust Brian Krisber, Trustee.All shares of common stock, warrants and options are deemed to be beneficially owned or controlled by Michael Sherman.

 

(10)Includes warrants to purchase 56,819 shares of common stock and optionsto purchase 200,000 shares of common stock, all of which are exercisable in the next 60 days.

 

 -47-

CertainRelationships and Related Party Transactions

 

During the period commencing July 1,2015 and through the date of this prospectus, we have not engaged in any transactions with any officer, director or holder of morethan 5% of our common stock, except as follows:

 

Purchase of Preferred Stock

 

On July 3, 2018, we entered intoa Securities Purchase Agreement (the “Purchase Agreement”) with Acuitas Group Holdings, LLC(“Acuitas”) and certain other purchasers identified in the Purchase Agreement (together with Acuitas, the“Purchasers”) pursuant to which (i) the Purchasers agreed to purchase an aggregate of 2,133,332 shares of the ourSeries A Convertible Preferred Stock (the “Preferred Stock”) at a price per share of $1.50 per share of PreferredStock (the “Initial Sale”) and (ii) we agreed to issue warrants (the “Warrants”) to purchase213,333,200 shares of common stock, each subject to the terms and conditions set forth in the Purchase Agreement, for anaggregate consideration of $3.2 million. We received $160,000 of the $3.2 million in April and May 2018 as prepaid equity.Acuitas also received an additional 833,333 Warrants in connection with the payoff of a note issued by us in favor ofAcuitas. The Initial Sale and issuance of the Warrants occurred on July 3, 2018. In addition, Acuitas has the option topurchase up to an additional 200,000,000 shares of common stock at a price per share of $0.015, and warrants on the sameterms as the Warrants, within two weeks following the one year anniversary of the closing of the Initial Sale (the“Subsequent Sale”) in the event that we have not obtained $3,000,000 of funding through various non-dilutivegrants prior to the one year anniversary of the closing of the Initial Sale, less any federal or FDA grant funding receivedby the Company. Acuitas is controlled by our Chairman and Chief Executive Officer, Terren Peizer and the Purchasers includedJonathan Adams, James Lang, Cuang Do and Michael Sherman, who are members of our Board of Directors.

 

Each share of Preferred Stock automatically converted into100 shares of common stock upon the filing with the Secretary of State of the State of Nevada of a Certificate of Amendment toour Articles of Incorporation (the “Amendment”) on August 13, 2018 that increased the number of authorized shares ofcommon stock to 800,000,000. The Amendment was approved by the written consent of the holders of more than a majority of our issuedand outstanding common stock on July 3, 2018 and was filed with the Secretary of State of the State of Nevada 20 calendar daysfollowing the distribution of our Definitive Information Statement on Schedule 14 that was filed with the SEC on July 13, 2018.

 

The purchase price of the Preferred Stock in the InitialSale, the exercise price of the Warrants, and the price per share of common stock in the Subsequent Sale is subject to adjustment.In the event that Mallinckrodt Pharmaceuticals Ireland Limited prevails in any proceeding which results in the useful life of ourcurrent intellectual property rights being reduced by more than 75 percent, then the price per share of common stock, the associatedconversion ratio of the Preferred Stock, and the exercise price of the Warrants shall be retroactively adjusted to 50 percent ofthe then-effective price per share of common stock under the Purchase Agreement (for example, if the then-effective price per shareof common stock is $0.015, then following such event, the price per share will be $0.0075). In this case, we may be required toissue additional shares of common stock, but in no event will we be required to pay cash, to reflect such lower price per share.

 

The Purchase Agreement contained customary representationsand warranties. In connection with the disclosure schedule associated with the representations and warranties, we also disclosedcustomary information, including the following: (i) the existence of the Mallinckrodt petition before the U.S. Patent Trial andAppeal Board, (ii) our capitalization, (iii) our obligation to pay a low single digit royalty on the net sales of BIV201 (continuousinfusion terlipressin) to be shared among LAT Pharma LLC members, PharmaIN Corporation and The Barrett Edge, Inc. pursuant to theAgreement and Plan of Merger, dated April 11, 2016, by and between LAT Pharma LLC and us, (iv) our obligation to pay a low singledigit royalty on net sales of all terlipressin products covered by specified patents up to a maximum of $200,000 per year pursuantto the Technology Transfer Agreement, dated July 25, 2016, by and between us and the University of Padova (Italy), and (v) certainrecent issuances of common stock by us.

 

Issuance of Shares in Settlement of Debt

 

During the six months ended December 31, 2018, we settled$1,475,765 of debt including $1,313,765 owed to related parties, by issuing 975,361 shares of common stock with a fair value of$1,150,135. See Notes 5 and 6 to the financial statements appearing elsewhere in this prospectus.

 

 -48-

Descriptionof Capital Stock

 

The following description of our capital stock and provisionsof our Articles of Incorporation, bylaws and the Nevada corporations law are summaries and are qualified in their entirety by referenceto our Articles of Incorporation and our bylaws. We have filed copies of these documents with the SEC as exhibits to the RegistrationStatement of which this prospectus forms a part. Pursuant to our Articles of Incorporation, as amended, our authorized capitalstock consists of 800,000,000 shares of Class A common stock, par value of $0.0001 per share (which we refer to as our common stock),and 10,000,000 shares of preferred stock, par value $0.001 per share, to be designated from time to time by our Board of Directors.

 

Common Stock

 

We are authorized to issue up to 300,000,000 shares of ClassA common stock, par value $0.0001 per share. Each outstanding share of common stock entitles the holder thereof to one vote pershare on all matters. Our bylaws provide that elections for directors shall be by a plurality of votes. Stockholders do not havepreemptive rights to purchase shares in any future issuance of our common stock. Upon our liquidation, dissolution or winding up,and after payment of creditors and preferred stockholders, if any, our assets will be divided pro-rata on a share-for-share basisamong the holders of the shares of common stock.

 

The holders of shares of our common stock are entitled todividends out of funds legally available when and as declared by our Board of Directors. Our Board of Directors has never declareda dividend and does not anticipate declaring a dividend in the foreseeable future.

 

All of the issued and outstanding shares of our common stockare duly authorized, validly issued, fully paid and non-assessable. To the extent that additional shares of our common stock areissued, the relative interests of existing stockholders will be diluted.

 

As of March 31, 2019, there were 316,453,673 shares of ourcommon stock outstanding.

 

Preferred Stock

 

We are authorized to issue up to 10,000,000 shares of preferredstock, par value $0.001 per share, in one or more classes or series within a class as may be determined by our Board of Directors,who may establish, from time to time, the number of shares to be included in each class or series, may fix the designation, powers,preferences and rights of the shares of each such class or series and any qualifications, limitations or restrictions thereof.Any preferred stock so issued by the Board of Directors may rank senior to the common stock with respect to the payment of dividendsor amounts upon liquidation, dissolution or winding up of us, or both. Moreover, under certain circumstances, the issuance of preferredstock or the existence of the unissued preferred stock might tend to discourage or render more difficult a merger or other changeof control.

 

As of March 31, 2019, there were no shares of our preferredstock outstanding.

 

Anti-Takeover Effects of Our Articles of Incorporationand Bylaws

 

Our Articles of Incorporation and bylaws contain certainprovisions that may have anti-takeover effects, making it more difficult for or preventing a third party from acquiring controlof us or changing our Board of Directors and management. According to our Articles of Incorporation and bylaws, neither the holdersof our common stock nor the holders of any preferred stock we may issue in the future have cumulative voting rights in the electionof our directors. The combination of the present ownership by a few stockholders of a significant portion of our issued and outstandingcommon stock and lack of cumulative voting makes it more difficult for other stockholders to replace our Board of Directors orfor a third party to obtain control of us by replacing our Board of Directors.

 

 -49-

Anti-Takeover Effects of Nevada Law

 

Business Combinations

 

The “business combination” provisions of Sections78.411 to 78.444, inclusive, of the Nevada Revised Statutes, or NRS, generally prohibit a Nevada corporation with at least 200stockholders from engaging in various “combination” transactions with any interested stockholder for a period of twoyears after the date of the transaction in which the person became an interested stockholder, unless the transaction is approvedby the board of directors prior to the date the interested stockholder obtained such status or the combination is approved by theboard of directors and thereafter is approved at a meeting of the stockholders by the affirmative vote of stockholders representingat least 60% of the outstanding voting power held by disinterested stockholders, and extends beyond the expiration of the two-yearperiod, unless:

 

  • the combination was approved by the board of directors priorto the person becoming an interested stockholder or the transaction by which the person first became an interested stockholderwas approved by the board of directors before the person became an interested stockholder or the combination is later approvedby a majority of the voting power held by disinterested stockholders; or
  • if the consideration to be paid by the interested stockholderis at least equal to the highest of: (a) the highest price per share paid by the interested stockholder within the two years immediatelypreceding the date of the announcement of the combination or in the transaction in which it became an interested stockholder, whicheveris higher, (b) the market value per share of common stock on the date of announcement of the combination and the date the interestedstockholder acquired the shares, whichever is higher, or (c) for holders of preferred stock, the highest liquidation value of thepreferred stock, if it is higher.

A “combination” is generally defined to includemergers or consolidations or any sale, lease exchange, mortgage, pledge, transfer, or other disposition, in one transaction ora series of transactions, with an “interested stockholder” having: (a) an aggregate market value equal to 5% or moreof the aggregate market value of the assets of the corporation, (b) an aggregate market value equal to 5% or more of the aggregatemarket value of all outstanding shares of the corporation, (c) 10% or more of the earning power or net income of the corporation,and (d) certain other transactions with an interested stockholder or an affiliate or associate of an interested stockholder.

 

In general, an “interested stockholder” is aperson who, together with affiliates and associates, owns (or within two years, did own) 10% or more of a corporation’s votingstock. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourageattempts to acquire our Company even though such a transaction may offer our stockholders the opportunity to sell their stock ata price above the prevailing market price.

 

Control Share Acquisitions

 

The “control share” provisions of Sections 78.378to 78.3793, inclusive, of the NRS apply to “issuing corporations” that are Nevada corporations with at least 200 stockholders,including at least 100 stockholders of record who are Nevada residents, and that conduct business directly or indirectly in Nevada.The control share statute prohibits an acquirer, under certain circumstances, from voting its shares of a target corporation’sstock after crossing certain ownership threshold percentages, unless the acquirer obtains approval of the target corporation’sdisinterested stockholders. The statute specifies three thresholds: one-fifth or more but less than one-third, one-third but lessthan a majority, and a majority or more, of the outstanding voting power. Generally, once an acquirer crosses one of the abovethresholds, those shares in an offer or acquisition and acquired within 90 days thereof become “control shares” andsuch control shares are deprived of the right to vote until disinterested stockholders restore the right. These provisions alsoprovide that if control shares are accorded full voting rights and the acquiring person has acquired a majority or more of allvoting power, all other stockholders who do not vote in favor of authorizing voting rights to the control shares are entitled todemand payment for the fair value of their shares in accordance with statutory procedures established for dissenters’ rights.

 

 -50-

A corporation may elect to not be governed by, or “optout” of, the control share provisions by making an election in its articles of incorporation or bylaws, provided that theopt-out election must be in place on the 10th day following the date an acquiring person has acquired a controlling interest, thatis, crossing any of the three thresholds described above. We have not opted out of the control share statutes, and will be subjectto these statutes if we are an “issuing corporation” as defined in such statutes.

 

The effect of the Nevada control share statutes is that theacquiring person, and those acting in association with the acquiring person, will obtain only such voting rights in the controlshares as are conferred by a resolution of the stockholders at an annual or special meeting. The Nevada control share law, if applicable,could have the effect of discouraging takeovers of our Company.

 

Trading Market

 

Prior to this offering, there has been a limited publicmarket for our common stock on the OTCQB Marketplace under the ticker “BIVI.” We intend to apply to list ourcommon stock on The NASDAQ Capital Market under the symbol “BIVI”. No assurance can be given that our applicationwill be approved.

 

Transfer Agent and Registrar

 

Our independent stock transfer agent is West Coast StockTransfer, Inc., located at 721 N. Vulcan Ave., Suite 205, Encinitas, California 92024. Their phone number is (619) 664-4780.

 

Disclosure of Commission Positionon Indemnification for Securities Act Liabilities

 

Insofar as indemnification for liabilitiesarising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoingprovisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed inthe Securities Act and is, therefore, unenforceable.

 

 -51-

Underwriting 

 

ThinkEquity, a division of Fordham FinancialManagement, Inc., is acting as the representative of the underwriters of the offering. We have entered into an underwriting agreementdated         , 2019 with the representative. Subject to the terms and conditions of the underwriting agreement, we have agreed tosell to each underwriter named below, and each underwriter named below has severally agreed to purchase, at the public offeringprice less the underwriting discounts set forth on the cover page of this prospectus, the number of shares of common stock at theinitial public offering price, less the underwriting discounts and commissions, as set forth on the cover page of this prospectus,the number of shares of common stock listed next to its name in the following table:

 

Underwriter   Number of Shares  
ThinkEquity, a division of Fordham Financial Management, Inc.        
         
Total        

 

The underwriters are committed to purchaseall the shares of common stock offered by the Company, other than those covered by the over-allotment option to purchase additionalshares of common stock described below. The obligations of the underwriters may be terminated upon the occurrence of certain eventsspecified in the underwriting agreement. Furthermore, the underwriting agreement provides that the obligations of the underwritersto pay for and accept delivery of the shares offered by us in this prospectus are subject to various representations and warrantiesand other customary conditions specified in the underwriting agreement, such as receipt by the underwriters of officers’certificates and legal opinions.

 

We have agreed to indemnify the underwritersagainst specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters maybe required to make in respect thereof.

 

The underwriters are offering the sharesof common stock subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters bytheir counsel and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancelor modify offers to the public and to reject orders in whole or in part.

 

We have granted the underwriters anover-allotment option. This option, which is exercisable for up to 45 days after the date of this prospectus, permits the underwritersto purchase up to an aggregate of additional shares of common stock (equal to 15% of the total number of shares of common stocksold in this offering) at the public offering price per share, less underwriting discounts and commissions, solely to cover over-allotments,if any. If the underwriters exercise this option in whole or in part, then the underwriters will be severally committed, subjectto the conditions described in the underwriting agreement, to purchase the additional shares of common stock in proportion to theirrespective commitments set forth in the prior table.

 

Discounts, Commissions and Reimbursement

 

The representative has advised us thatthe underwriters propose to offer the shares of common stock to the public at the initial public offering price per share set forthon the cover page of this prospectus. The underwriters may offer shares to securities dealers at that price less a concession ofnot more than $            per share of which up to $            pershare may be reallowed to other dealers. After the initial offering to the public, the public offering price and other sellingterms may be changed by the representative.

 

 -52-

The following table summarizes the underwritingdiscounts and commissions and proceeds, before expenses, to us assuming both no exercise and full exercise by the underwritersof their over-allotment option:

 

          Total  
    Per Share     Without Option     With Option  
Public offering price   $       $       $    
Underwriting discounts and commissions (7%)   $       $       $    
Non-accountable expense allowance (1%) (1)   $       $       $    
Proceeds, before expenses, to us   $       $       $    

 

 

(1) The non-accountable expense allowance of 1% is not payable with respect to shares sold upon exercise of the underwriters’ over-allotment option.

  

We have paid an expense deposit of $35,000to (or on behalf of) the representative, which will be applied against the actual out-of-pocket accountable expenses that willbe paid by us to the underwriters in connection with this offering, and will be reimbursed to us to the extent not incurred.

 

In addition, we have also agreed topay the following expenses of the underwriters relating to the offering: (a) all fees, expenses and disbursements relating to backgroundchecks of our officers and directors in an amount not to exceed $15,000 in the aggregate; (b) all filing fees and communicationexpenses associated with the review of this offering by FINRA; (c) all fees, expenses and disbursements relating to the registration,qualification or exemption of securities offered under the securities laws of foreign jurisdictions designated by the underwriter,including the reasonable fees and expenses of the underwriter’s blue sky counsel up to $5,000 if the offering is commencedon The Nasdaq Global Market, Nasdaq Global Select Market or NYSE or $15,000 if the offering is commenced on the NYSE American,The Nasdaq Capital Market or OTCQB; (d) $29,500 for the underwriters’ use of Ipreo’s book-building, prospectus trackingand compliance software for this offering; (e) the costs associated with bound volumes of the public offering materials as wellas commemorative mementos and lucite tombstones, (f) the fees and expenses of the representatives’ legal counsel incurredin connection with this offering in an amount up to $75,000; and (g) up to $20,000 of the representative’s actual accountableroad show expenses for the offering.

 

We estimate the expenses of this offeringpayable by us, not including underwriting discounts and commissions, will be approximately $            .

 

Representative Warrants

 

Upon the closing of this offering, wehave agreed to issue to the representative warrants, or the Representative’s Warrants, to purchase a number of shares ofcommon stock equal to 5% of the total number of shares sold in this public offering. The Representative’s Warrants will beexercisable at a per share exercise price equal to 125% of the public offering price per share of common stock sold in this offering.The Representative’s Warrants are exercisable at any time and from time to time, in whole or in part, during the four yearperiod commencing one year from the effective date of the registration statement related to this offering. The Representative’sWarrants also provide for one demand registration right of the shares underlying the Representative’s Warrants, and unlimited“piggyback” registration rights with respect to the registration of the shares of common stock underlying the Representative’sWarrants and customary antidilution provisions. The demand registration right provided will not be greater than five years fromthe effective date of the registration statement related to this offering in compliance with FINRA Rule 5110(f)(2)(G). The piggybackregistration right provided will not be greater than seven years from the effective date of the registration statement relatedto this offering in compliance with FINRA Rule 5110(f)(2)(G).

 

 -53-

The Representative’sWarrants and the shares of common stock underlying the Representative’s Warrants have been deemed compensation by theFinancial Industry Regulatory Authority, or FINRA, and are therefore subject to a 180-day lock-up pursuant toRule 5110(g)(1) of FINRA. The representative, or permitted assignees under such rule, may not sell, transfer, assign,pledge, or hypothecate the Representative’s Warrants or the securities underlying the Representative’s Warrants,nor will the representative engage in any hedging, short sale, derivative, put, or call transaction that would result in theeffective economic disposition of the Representative’s Warrants or the underlying shares for a period of 180 daysfrom the effective date of the registration statement. Additionally, the Representative’s Warrants may not be soldtransferred, assigned, pledged or hypothecated for a 180-day period following the effective date of the registrationstatement except to any underwriter and selected dealer participating in the offering and their bona fide officers orpartners. The Representative’s Warrants will provide for adjustment in the number and price of theRepresentative’s Warrants and the shares of common stock underlying such Representative’s Warrants in theevent of recapitalization, merger, stock split or other structural transaction, or a future financing undertaken by us.

 

Right of First Refusal

 

Until         , 2020, twelve (12) monthsfrom the effective date of the registration statement of which this prospectus is a part, the representative shall have an irrevocableright of first refusal to act as sole investment banker, sole book-runner and/or sole placement agent, at the representative solediscretion, for each and every future public and private equity and debt offerings for the Company, or any successor to or anysubsidiary of the Company, including all equity linked financings, on terms customary to the representative. The representativeshall have the sole right to determine whether or not any other broker-dealer shall have the right to participate in any such offeringand the economic terms of any such participation. The representative will not have more than one opportunity to waive or terminatethe right of first refusal in consideration of any payment or fee.

 

Discretionary Accounts

 

The underwriters do not intend to confirmsales of the securities offered hereby to any accounts over which they have discretionary authority.

 

Lock-Up Agreements

 

The Company, each of its directors andofficers and 5% or greater holders of the Company’s outstanding shares of common stock as of the date of this prospectus,have agreed for a period of (i) six months after the date of this prospectus in the case of directors and officers and (ii) threemonths after the date of this prospectus in the case of the Company and the 5% or greater holders of the Company’s outstandingcommon stock, without the prior written consent of the representative, not to directly or indirectly:

 

  issue (in the case of us), offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of any shares of common stock or other capital stock or any securities convertible into or exercisable or exchangeable for our common stock or other capital stock; or

 

  in the case of the Company, file or cause the filing of any registration statement under the Securities Act with respect to any shares of common stock or other capital stock or any securities convertible into or exercisable or exchangeable for our common stock or other capital stock; or

 

  complete any offering of debt securities of the Company, other than entering into a line of credit, term loan arrangement or other debt instrument with a traditional bank; or

 

  enter into any swap or other agreement, arrangement, hedge or transaction that transfers to another, in whole or in part, directly or indirectly, any of the economic consequences of ownership of our common stock or other capital stock or any securities convertible into or exercisable or exchangeable for our common stock or other capital stock, whether any transaction described in any of the foregoing bullet points is to be settled by delivery of our common stock or other capital stock, other securities, in cash or otherwise, or publicly announce an intention to do any of the foregoing.

 

 -54-

Electronic Offer, Sale and Distributionof Securities

 

A prospectus in electronic format maybe made available on the websites maintained by one or more of the underwriters or selling group members. The representative mayagree to allocate a number of securities to underwriters and selling group members for sale to its online brokerage account holders.Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions onthe same basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not partof, nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, hasnot been approved or endorsed by us, and should not be relied upon by investors.

 

Stabilization

 

In connection with this offering, theunderwriters may engage in stabilizing transactions, over-allotment transactions, syndicate-covering transactions, penalty bidsand purchases to cover positions created by short sales.

 

Stabilizing transactions permit bidsto purchase shares so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventingor retarding a decline in the market price of the shares while the offering is in progress.

 

Over-allotment transactions involvesales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase. This createsa syndicate short position which may be either a covered short position or a naked short position. In a covered short position,the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotmentoption. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option.The underwriters may close out any short position by exercising their over-allotment option and/or purchasing shares in the openmarket.

 

Syndicate covering transactions involvepurchases of shares in the open market after the distribution has been completed in order to cover syndicate short positions. Indetermining the source of shares to close out the short position, the underwriters will consider, among other things, the priceof shares available for purchase in the open market as compared with the price at which they may purchase shares through exerciseof the over-allotment option. If the underwriters sell more shares than could be covered by exercise of the over-allotment optionand, therefore, have a naked short position, the position can be closed out only by buying shares in the open market. A naked shortposition is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure onthe price of the shares in the open market that could adversely affect investors who purchase in the offering.

 

Penalty bids permit the representativeto reclaim a selling concession from a syndicate member when the shares originally sold by that syndicate member are purchasedin stabilizing or syndicate covering transactions to cover syndicate short positions.

 

These stabilizing transactions, syndicatecovering transactions and penalty bids may have the effect of raising or maintaining the market price of our shares of common stockor preventing or retarding a decline in the market price of our shares of common stock. As a result, the price of our common stockin the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwritersmake any representation or prediction as to the effect that the transactions described above may have on the price of our commonstock. These transactions may be effected in the over-the-counter market or otherwise and, if commenced, may be discontinuedat any time.

 

Other Relationships

 

Certain of the underwriters and theiraffiliates may in the future provide various investment banking, commercial banking and other financial services for us and ouraffiliates for which they may in the future receive customary fees.

 

 -55-

Offer restrictions outside the UnitedStates

 

Other than in the United States, noaction has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectusin any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered orsold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offerand sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result incompliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comesare advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus.This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectusin any jurisdiction in which such an offer or a solicitation is unlawful.

 

Australia

 

This prospectus is not a disclosuredocument under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities and InvestmentsCommission and does not purport to include the information required of a disclosure document under Chapter 6D of the AustralianCorporations Act. Accordingly, (i) the offer of the securities under this prospectus is only made to persons to whom it islawful to offer the securities without disclosure under Chapter 6D of the Australian Corporations Act under one or more exemptionsset out in section 708 of the Australian Corporations Act, (ii) this prospectus is made available in Australia only to thosepersons as set forth in clause (i) above, and (iii) the offeree must be sent a notice stating in substance that by acceptingthis offer, the offeree represents that the offeree is such a person as set forth in clause (i) above, and, unless permittedunder the Australian Corporations Act, agrees not to sell or offer for sale within Australia any of the securities sold to theofferee within 12 months after its transfer to the offeree under this prospectus.

 

China

 

The information in this document doesnot constitute a public offer of the securities, whether by way of sale or subscription, in the People’s Republic of China(excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan).The securities may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to“qualified domestic institutional investors.”

 

European Economic Area—Belgium,Germany, Luxembourg and Netherlands

 

The information in this document hasbeen prepared on the basis that all offers of securities will be made pursuant to an exemption under the Directive 2003/71/EC (“ProspectusDirective”), as implemented in Member States of the European Economic Area (each, a “Relevant Member State”),from the requirement to produce a prospectus for offers of securities.

 

An offer to the public of securitieshas not been made, and may not be made, in a Relevant Member State except pursuant to one of the following exemptions under theProspectus Directive as implemented in that Relevant Member State:

 

  to legal entities that are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

 

  to any legal entity that has two or more of (i) an average of at least 250 employees during its last fiscal year; (ii) a total balance sheet of more than €43,000,000 (as shown on its last annual unconsolidated or consolidated financial statements) and (iii) an annual net turnover of more than €50,000,000 (as shown on its last annual unconsolidated or consolidated financial statements);

 

  to fewer than 100 natural or legal persons (other than qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive) subject to obtaining the prior consent of the Company or any underwriter for any such offer; or

 

  in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall result in a requirement for the publication by the Company of a prospectus pursuant to Article 3 of the Prospectus Directive.

 

 -56-

France

 

This document is not being distributedin the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaningof Article L.411-1 of the French Monetary and Financial Code (Code Monétaire et Financier) and Articles 211-1 etseq. of the General Regulation of the French Autorité des marchés financiers (“AMF”). The securitieshave not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France.

 

This document and any other offeringmaterial relating to the securities have not been, and will not be, submitted to the AMF for approval in France and, accordingly,may not be distributed or caused to distributed, directly or indirectly, to the public in France.

 

Such offers, sales anddistributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) actingfor their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3, D.744-1,D.754-1 ;and D.764-1 of the French Monetary and Financial Code and any implementing regulation and/or (ii) a restrictednumber of non-qualified investors (cercle restreint d’investisseurs) acting for their own account, as defined in and inaccordance with Articles L.411-2-II-2° and D.411-4, D.744-1, D.754-1; and D.764-1 of the French Monetary and FinancialCode and any implementing regulation.

 

Pursuant to Article 211-3 ofthe General Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly or indirectly)to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 ofthe French Monetary and Financial Code.

 

Ireland

 

The information in this document doesnot constitute a prospectus under any Irish laws or regulations and this document has not been filed with or approved by any Irishregulatory authority as the information has not been prepared in the context of a public offering of securities in Ireland withinthe meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus Regulations”). The securitieshave not been offered or sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a publicoffering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations and (ii) fewerthan 100 natural or legal persons who are not qualified investors.

 

Israel

 

The securities offered by this prospectushave not been approved or disapproved by the Israeli Securities Authority (the ISA), or ISA, nor have such securities been registeredfor sale in Israel. The shares may not be offered or sold, directly or indirectly, to the public in Israel, absent the publicationof a prospectus. The ISA has not issued permits, approvals or licenses in connection with the offering or publishing the prospectus;nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as tothe quality of the securities being offered. Any resale in Israel, directly or indirectly, to the public of the securities offeredby this prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securitieslaws and regulations.

 

Italy

 

The offering of the securities in theRepublic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le Societ—$$—Agae la Borsa, “CONSOB” pursuant to the Italian securities legislation and, accordingly, no offering material relatingto the securities may be distributed in Italy and such securities may not be offered or sold in Italy in a public offer withinthe meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998 (“Decree No. 58”), otherthan:

 

  to Italian qualified investors, as defined in Article 100 of Decree no.58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999 (“Regulation no. 1197l”) as amended (“Qualified Investors”); and

 

 -57-

  in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended.

 

Any offer, sale or delivery of the securitiesor distribution of any offer document relating to the securities in Italy (excluding placements where a Qualified Investor solicitsan offer from the issuer) under the paragraphs above must be:

 

  made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable laws; and

 

  in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws.

  

Any subsequent distribution of the securitiesin Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 andthe Regulation No. 11971 as amended, unless an exception from those rules applies. Failure to comply with such rules may resultin the sale of such securities being declared null and void and in the liability of the entity transferring the securities forany damages suffered by the investors.

 

Japan

 

The securities have not been and willnot be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948),as amended (the “FIEL”) pursuant to an exemption from the registration requirements applicable to a private placementof securities to Qualified Institutional Investors (as defined in and in accordance with Article 2, paragraph 3 of the FIEL andthe regulations promulgated thereunder). Accordingly, the securities may not be offered or sold, directly or indirectly, in Japanor to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified Institutional Investorwho acquires securities may not resell them to any person in Japan that is not a Qualified Institutional Investor, and acquisitionby any such person of securities is conditional upon the execution of an agreement to that effect.

 

Portugal

 

This document is not being distributedin the context of a public offer of financial securities (oferta pública de valores mobiliários) in Portugal, withinthe meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários). The securities havenot been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document andany other offering material relating to the securities have not been, and will not be, submitted to the Portuguese Securities MarketCommission (Comissăo do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributedor caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed notto qualify as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of securities in Portugalare limited to persons who are “qualified investors” (as defined in the Portuguese Securities Code). Only such investorsmay receive this document and they may not distribute it or the information contained in it to any other person.

 

Sweden

 

This document has not been, and willnot be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this documentmay not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances that are deemednot to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiellainstrument). Any offering of securities in Sweden is limited to persons who are “qualified investors” (as defined inthe Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute it or the informationcontained in it to any other person.

 

 -58-

Switzerland

 

The securities may not be publicly offeredin Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulatedtrading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectusesunder art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neitherthis document nor any other offering material relating to the securities may be publicly distributed or otherwise made publiclyavailable in Switzerland.

 

Neither this document nor any otheroffering material relating to the securities have been or will be filed with or approved by any Swiss regulatory authority. Inparticular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial MarketSupervisory Authority (FINMA).

 

This document is personal to the recipientonly and not for general circulation in Switzerland.

 

United Arab Emirates

 

Neither this document nor the securitieshave been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates or any other governmentalauthority in the United Arab Emirates, nor has the Company received authorization or licensing from the Central Bank of the UnitedArab Emirates or any other governmental authority in the United Arab Emirates to market or sell the securities within the UnitedArab Emirates. This document does not constitute and may not be used for the purpose of an offer or invitation. No services relatingto the securities, including the receipt of applications and/or the allotment or redemption of such shares, may be rendered withinthe United Arab Emirates by the Company.

 

No offer or invitation to subscribefor securities is valid or permitted in the Dubai International Financial Centre.

  

United Kingdom

 

Neither the information in this documentnor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the UnitedKingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (“FSMA”)has been published or is intended to be published in respect of the securities. This document is issued on a confidential basisto “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the securities maynot be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except incircumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not bedistributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other personin the United Kingdom.

 

Any invitation or inducement to engagein investment activity (within the meaning of section 21 of FSMA) received in connection with the issue or sale of the securitieshas only been communicated or caused to be communicated and will only be communicated or caused to be communicated in the UnitedKingdom in circumstances in which section 21(1) of FSMA does not apply to the Company.

 

In the United Kingdom, this documentis being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investmentsfalling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order2005 (“FPO”), (ii) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worthcompanies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together“relevant persons”). The investments to which this document relates are available only to, and any invitation, offeror agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not actor rely on this document or any of its contents.

 

 -59-

Canada

 

The securities may be sold in Canadaonly to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 ProspectusExemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 RegistrationRequirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemptionfrom, or in a transaction not subject to, the prospectus requirements of applicable securities laws. Securities legislation incertain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (includingany amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by thepurchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchasershould refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particularsof these rights or consult with a legal advisor. Pursuant to section 3A.3 of National Instrument 33-105 UnderwritingConflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI33-105 regardingunderwriter conflicts of interest in connection with this offering.

 

 -60-

Experts

 

The audited financial statements ofBioVie Inc. included in this prospectus and elsewhere in the registration statement have been so included in reliance upon thereports of D. Brooks and Associates CPA’s, P.A., independent registered public accountants, upon the authority of said firmas experts in accounting and auditing.

 

LegalMatters

 

Loeb & Loeb LLP, Los Angeles, California,will pass upon the validity of the securities offered hereby. Certain matters are being passed on for the underwriters by, GreenbergTraurig LLP New York, New York.

 

WhereYou Can Find More Information 

 

We have filed with the SEC a registrationstatement on Form S-1 under the Securities Act with respect to the shares of our common stock offered by this prospectus.This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in theregistration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulationsof the SEC. For further information with respect to us and our common stock, we refer you to the registration statement, includingthe exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents ofany contract or any other document is not necessarily complete. If a contract or document has been filed as an exhibit to the registrationstatement, please see the copy of the contract or document that has been filed. Each statement is this prospectus relating to acontract or document filed as an exhibit is qualified in all respects by the filed exhibit. The SEC maintains an Internet websitethat contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. Theaddress of that website is www.sec.gov.

 

We are subject to the information andreporting requirements of the Securities Exchange Act of 1934, as amended, and, in accordance with this law, file periodic reports,proxy statements and other information with the SEC. These periodic reports, proxy statements and other information are availableon the website of the SEC referred to above.

 

 -61-

Index to Financial Statements

Contents

         
Report of Independent Registered Public Accounting Firm F-2
Financial Statements for the years ended June 30, 2018 and 2017 F-3
Unaudited financial statements for the six months ended December 31, 2018 and 2017 F-23

 

F-1

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of BioVie, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of BioVie,Inc. (the Company) as of June 30, 2018 and 2017, and the related statements of operations, stockholders’ equity, and cashflows for each of the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion,the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2018 and2017, and the results of its operations and its cash flows for each of the two years ended June 30, 2018 and 2017, in conformitywith accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility ofthe Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based onour audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicablerules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standardsof the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engagedto perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understandingof internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’sinternal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess therisks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respondto those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, aswell as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basisfor our opinion.

 

D. Brooks and Associates CPA’s, P.A.

We have served as the Company’s auditor since 2017.

Palm Beach Gardens, Florida

October 4, 2018

F-2

BioVie Inc.

Balance Sheets

 

   June 30,  June 30,
   2018  2017
ASSETS      
       
CURRENT ASSETS:      
Cash  $45,800   $5,140 
Total Current Assets   45,800    5,140 
           
OTHER  ASSETS:          
Intangible Assets (Net of Amortization)   1,783,980    2,013,357 
Goodwill   345,711    345,711 
Total Other Assets   2,129,691    2,359,068 
           
TOTAL ASSETS  $2,175,491   $2,364,209 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
CURRENT LIABILITIES:          
Accounts Payable and accrued expenses  $884,207   $470,973 
Related Party Loan   —      35,000 
Accrued Payroll   354,167    125,000 
Total Current Liabilities   1,238,374    630,973 
           
LONG-TERM LIABILITIES:          
Demand Promissory Note   250,000    —   
Notes Payable, Related Parties   575,918    575,918 
 Total Long-Term Liabilities   825,918    575,918 
           
TOTAL LIABILITIES   2,064,292    1,206,891 
           
STOCKHOLDERS' EQUITY          
Preferred stock; $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding   —      —   
Common stock, $0.0001 par value; 300,000,000 shares authorized; 98,503,199 and 91,925,000 shares issued and outstanding, respectively   9,850    9,192 
Additional paid in capital   4,870,475    3,483,134 
Accumulated deficit   (4,769,126)   (2,335,009)
Total Stockholders' Equity   111,199    1,157,317 
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $2,175,491   $2,364,209 

 

The accompanying notes are an integral part of thefinancial statements.

 

F-3

BioVie Inc.

Statements of Operations

 

   For the Twelve Months  For the Twelve Months
   Ended  Ended
   June 30,  June 30,
   2018  2017
       
REVENUE  $—     $—   
           
OPERATING EXPENSES:          
Amortization   229,377    229,377 
Research and development expenses   370,853    466,354 
Payroll expenses   311,525    285,392 
Professional fees   1,331,142    503,369 
Selling, general and administrative expenses   129,270    69,122 
TOTAL OPERATING EXPENSES   2,372,166    1,553,614 
           
LOSS FROM OPERATIONS   (2,372,166)   (1,553,614)
           
OTHER EXPENSE (INCOME):          
Other Income   —      (222,928)
Interest expense   40,960    —   
Interest income   (4)   (14)
TOTAL OTHER EXPENSE (INCOME), NET   40,956    (222,942)
           
NET LOSS  $(2,413,122)  $(1,330,672)
           
Deemed dividend   (20,995)   —   
           
NET LOSS ATTRIBUTABLE TO COMPANY STOCKHOLDERS   (2,434,117)   —   
           
NET LOSS PER COMMON SHARE, BASIC AND DILUTED  $(0.03)  $(0.01)
           
WEIGHTED AVERAGE NUMBER OF          
COMMON  SHARES OUTSTANDING, BASIC AND DILUTED   95,758,079    89,391,302 

 

The accompanying notes are anintegral part of the financial statements.

 

F-4

BioVie Inc.

Statement of Changes in Stockholders’Equity

For the Years Ended June 30, 2018and 2017

 

   Common  Common  Additional     Total
   Stock  Stock  Paid in  Accumulated  Stockholders'
   Shares  Amount  Capital  Deficit  Deficit
                
Balance, June 30, 2016   87,160,001   $8,716   $2,911,560   $(1,004,337)  $1,915,939 
                          
Issuance of shares and warrants for cash   4,764,999    477    479,523    —      479,999 
                          
Options vested   —      —      92,051    —      92,051 
                          
Net loss   —      —      —      (1,330,672)   (1,330,672)
                          
Balance, June 30, 2017   91,925,000    9,193    3,483,134    (2,335,009)   1,157,317 
                          
Issuance of shares and warrants for cash   1,729,699    172    444,827    —      444,999 
                          
Issuance of shares for services   4,748,500    475    642,375    —      642,850 
                          
Options vested   —      —      238,165    —      238,165 
                          
Exercise of options for cash   100,000    10    1,990    —      2,000 
                          
Issuance of warrants for services   —      —      12,469    —      12,469 
                          
Issuance of warrants with debt   —      —      26,519    —      26,519 
                          
Deemed dividends for ratchet adjustment to warrants   —      —      20,995    (20,995)   —   
                          
Net loss   —      —      —      (2,413,122)   (2,413,122)
                          
Balance, June 30, 2018   98,503,199   $9,850   $4,870,474   $(4,769,126)  $111,197 

 

The accompanying notes are an integral part of thefinancial statements.

 

F-5

BioVie Inc.

Statements of Cash Flows

 

   For the Twelve Months  For the Twelve Months
   Ended  Ended
   Ended June 30,  Ended June 30,
   2018  2017
       
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss  $(2,413,122)  $(1,330,672)
Adjustments to reconcile net loss to net cash to cash used in operating activities:          
Amortization of intangible assets   229,377    229,377 
Amortization of debt discount   26,519    —   
Share based compensation expense   893,484    92,052 
Changes in operating assets and liabilities          
Decrease in prepaid expenses   —      6,982 
Increase in:          
Accounts payable   413,234    350,674 
Accrued payroll   229,167    27,972 
Net cash used in operating activities   (621,341)   (623,615)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Repayment of loan   (35,000)   —   
Proceeds from related party   —      25,000 
Proceeds from demand promissory note   250,000    —   
Proceeds from issuance of common stock and warrants   344,999    479,999 
Proceeds from exercise of options   2,000    —   
Proceeds from issuance of warrants   100,000    —   
Net cash provided by financing activities   661,999    504,999 
           
Net Increase (decrease) in cash   40,658    (118,616)
           
Cash, beginning of period   5,140    123,757 
           
Cash, end of period  $45,800   $5,140 
           
SUPPLEMENTAL CASH FLOW INFORMATION:          
Non-cash Investing and Financing Activities:          
   Issuance of warrants with debt  $26,519    —   

 

The accompanying notes are an integral part of thefinancial statements.

 

F-6

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018 and2017

 

1. Background Information

 

BioVie Inc. (the “Company”) is a clinical-stagecompany pursuing the discovery, development, and commercialization of innovative drug therapies. The Company is currently focusedon developing and commercializing BIV201, a novel approach to the treatment of ascites due to chronic liver cirrhosis. In March2017, the Company received notification from the US Food and Drug Administration (FDA) that it could initiate a Phase 2a US clinicaltrial. In April the Company signed a Cooperative Research and Development Agreement (CRADA) with the McGuire Research Institute/VAin Richmond, VA, and began dosing patients with BIV201 in September 2017. As of June 2018, three patients had been treatedwith BIV201 therapy in this ongoing Phase 2a clinical trial.

BIV201 has the potential to improve the health of thousandsof patients suffering from life-threatening complications of liver cirrhosis due to hepatitis, nonalcoholic steatohepatitis (NASH),and alcoholism. It has FDA Fast-Track status and Orphan Drug designation for the most common of these complications, ascites, whichrepresents a significant unmet medical need. The FDA has never approved any drug specifically for treating ascites.

The BIV201 development program began at LAT Pharma LLC.On April 11, 2016, the Company acquired LAT Pharma LLC and the rights to its BIV201 development program. The Company currentlyowns all development and marketing rights to its drug candidate. The Company and PharmaIN, Corp. (“PharmaIN”), LATPharma’s former partner focused on the development of new modified drug candidates in the same therapeutic field but notincluding BIV201, agreed to pay royalties equal to less than 1% of future net sales of each company's ascites drug developmentprograms, or if such program is licensed to a third party, less than 5% of each company's net license revenues. The Company’srelationship with PharmaIN could advance into a collaboration or be terminated. The Company has an issued US Patent covering theuse of BIV201 for the treatment of ascites patients in the outpatient setting using ambulatory pump infusion, and has filed patentapplications for its drug candidate in Japan, and Europe, and China.

The Company’s activities are subject to significantrisks and uncertainties including failure to secure additional funding to properly execute the Company’s business plan.

2. Liquidity

 

We believe that our existing cash and cash equivalents,including the amounts received after the end of the fiscal year, will be sufficient to meet our operating and capital requirementsfor at least 12 months from the date of this report.

On July 3, 2018, the Company, entered into a SecuritiesPurchase Agreement (the “Purchase Agreement”) with Acuitas Group Holdings, LLC (“Acuitas”) and certainother purchasers identified in the Purchase Agreement (together with Acuitas, the “Purchasers”) pursuant to which (i)the Purchasers agreed to purchase an aggregate of 2,133,332 shares of the Company’s newly created Series A Convertible PreferredStock (the “Preferred Stock”) at a price per share of $1.50 per share of Preferred Stock (the “Initial Sale”)and (ii) the Company will issue associated warrants (the “Warrants”) to purchase 213,333,200 shares of the Company’sClass A Common Stock (the “Common Stock”), each subject to the terms and conditions set forth in the Purchase Agreement,for an aggregate consideration of $3.2 million.

F-7

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018 and2017

 

3. Significant Accounting Policies

 

Basis of Presentation

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of America requires management to make estimates and assumptionsthat affect the reported amounts and disclosure of contingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Use of Estimates

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differfrom those estimates.  

Cash

Cash is maintained at financial institutions and, attimes, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. Allof the Company’s cash balances were fully insured at June 30, 2018. 

Financial Instruments

The Company’s financial instruments include cash,accounts payable, related party loans and a demand promissory note. The carrying amounts of cash and accounts payable approximatetheir fair value, due to the short-term nature of these items. 

Long-Term Notes Payable

The Company’s long-term notes payable include accruedpayroll to officers and accrued payments to third party consultants.

Research and Development

Research and development costs are charged to operationswhen incurred and are included in operating expenses. The Company expensed $370,853 and $466,354 for research and development forthe years ended June 30, 2018 and 2017, respectively.

Income Taxes

Deferred income tax assets and liabilities arise fromtemporary differences associated with differences between the financial statements and tax basis of assets and liabilities, asmeasured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets and liabilitiesare classified as current or non-current, depending on the classification of the assets or liabilities to which they relate. Deferredtax assets and liabilities not related to an asset or liability are classified as current or non-current depending on the periodsin which the temporary differences are expected to reverse. 

F-8

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018 and2017

 

3. Significant Accounting Policies (continued)

 

The Company follows the provisions of FASB ASC 740-10“Uncertainty in Income Taxes” (ASC 740-10), January 1, 2007. The Company has not recognized a liability as aresult of the implementation of ASC 740-10. A reconciliation of the beginning and ending amount of unrecognized tax benefits hasnot been provided since there are no unrecognized benefits at June 30, 2018 and since the date of adoption. The Company has notrecognized interest expense or penalties as a result of the implementation of ASC 740-10. If there were an unrecognized tax benefit,the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operatingexpenses.  The Company’s tax returns for the years ended June 30, 2015, 2016, 2017 and 2018 remain open to examinationby taxing authorities.

Earnings (Loss) per Share

Basic earnings per share are computed by dividing netincome by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common shareare computed by dividing net income by the weighted average number of shares of common stock outstanding and dilutive options outstandingduring the year. For the years ended June 30, 2017 and 2018 all outstanding options have been excluded from the calculation ofthe diluted net loss per share since their effect was anti-dilutive.

The following potentially dilutive securities were excludedfrom the computation of diluted loss per share for the years ended June 30, 2017 and 2018:

   2017  2018
   Number of Shares (Thousands)  Number of Shares (Thousands)
Stock Options   4,000    5,150 
Warrants   6,174    4,774 
Total   10,174    9,924 

 

Stock-based Compensation

The Company has accounted for stock-based compensationunder the provisions of FASB ASC 718 – “Stock Compensation” which requires the use of the fair-value based methodto determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (stockoptions and common stock purchase warrants). For employee awards, the fair value of each stock option award is estimated on thedate of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expectedterm, and the risk-free interest rate. For non-employees, the fair value of each stock option award is estimated on the measurementdate using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term,and the risk-free interest rate. For non-employees, the Company utilizes the graded vesting attribution method under which theentity treats each separately vesting portion (tranche) as a separate award and recognizes compensation cost for each tranche overits separate vesting schedule. Expected volatilities are based on historical volatility of peer companies and other factors estimatedover the expected term of the stock options. For employee awards, the expected term of options granted is derived using the “simplifiedmethod” which computes expected term as the average of the sum of the vesting term plus the contract term. The risk-freerate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term.

F-9

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018 and2017

 

3. Significant Accounting Policies (continued)

 

Goodwill

Goodwill is recorded when the purchase price paid foran acquisition exceeds the fair value of net identified tangible and intangible assets acquired. The Company performs an annualimpairment test of goodwill and further periodic tests to the extent indicators of impairment develop between annual impairmenttests. The Company’s impairment review process compares the fair value of the reporting unit to its carrying value, includingthe goodwill related to the reporting unit. To determine the fair value of the reporting unit, the Company may use various approachesincluding an asset or cost approach, market approach or income approach or any combination thereof. These approaches may requirethe Company to make certain estimates and assumptions including future cash flows, revenue and expenses. These estimates and assumptionsare reviewed each time the Company tests goodwill for impairment and are typically developed as part of the Company’s routinebusiness planning and forecasting process. While the Company believes its estimates and assumptions are reasonable, variationsfrom those estimates could produce materially different results. The Company did not recognize any goodwill impairments for theyears ended June 30th, 2017 and June 30th, 2018.

 Impairment of Long-Lived Assets

Long-lived assets, including intangible assets, are reviewedfor impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscountedfuture cash flows expected to be generated by the asset. 

If the carrying amount of an asset exceeds its undiscountedestimated future cash flows, an impairment review is performed. An impairment charge is recognized in the amount by which the carryingamount of the asset exceeds the fair value of the asset. Generally, fair value is determined using valuation techniques such asexpected discounted cash flows or appraisals, as appropriate. Assets to be disposed of would be separately presented in the balancesheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated or amortized.The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate assetand liability sections of the balance sheet.

Recent accounting pronouncements

The Company has reviewed recent accounting pronouncementsissued by the FASB (including its EITF), the AICPA, and the SEC and did not or are not believed by management to have a materialimpact on the Company’s financial statements.

F-10

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018 and2017

 

4. Intangible Assets

 

The company’s intangible assets consist of intellectualproperty acquired from LAT Pharma, Inc., and are amortized over their estimated useful lives as indicated below. The followingis a summary of the intangible assets as of June 30, 2018 and 2017.

   June 30, 2018  June 30, 2017
Intangible Assets subject to Amortization  $2,293,770   $2,293,770 
Accumulated Amortization   509,790    280,413 
Intangible Assets (Net of Amortization)  $1,783,980   $2,013,357 

 Future expected Amortization of intangible assetsis as follows:

Year Ending June 30,   
 2019   $229,377 
 2020    229,377 
 2021    229,377 
 2022    229,377 
 2023    229,377 
 Thereafter    637,095 
     $1,783,980 

 

5. Demand Note

 

On May 21, 2018, the Company received $250,000 in exchangefor a promissory note from Acuitas Group Holding LLC. The promissory note carries 10% interest per year and has a maturity dateof 10 business days of demand by Payee. The promissory note also has a provision that in the event of a superseding equity financingtransaction, the Payor will receive 50% warrant coverage on same terms as if the superseding transactions occurs. On July 3, 2018,the Company entered into an equity financing transaction which resulted in Acuitas Group Holding LLC., receiving 833,333 warrantsthat expire on July 3rd 2024 with an exercise price of 1.8 cents per share. The Company valued the warrants at $29,666using the Black Scholes Model and the following assumptions were used: volatility – 169%; Term – 6 years; Risk FreeRate – 2.96%; dividend rate – 0.00%. Based on their relative fair value, the Company allocated $26,519 of the proceedsto the warrants, which was recorded as additional interest expense for the year ended June 30, 2018. As the promissory note wasconverted into common stock subsequent to June 30, 2018, the balance as of June 30, 2018 is classified as long term on the accompanyingbalance sheet.

F-11

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018 and2017

 

6. Related Party Transactions

 

Notes Payable

LAT Pharma was given a zero-interest bearing loan bythe Company’s CEO, Jonathan Adams in the amount of $5,000 in August 2015 and $5,000 in November 2015.  The total of$10,000 was outstanding when the Company merged with LAT Pharma. On June 16th, 2017, the Company was given an additional$25,000 zero-interest bearing loan by Jonathan Adams.  During the quarter ended December 31, 2017, the Company repaid the$35,000 outstanding balance of the loan. During the quarter ended March 31, 2018, the Company was given an additional $25,000 zero-interestbearing loan by Jonathan Adams. During the quarter ended June 30, 2018, the Company repaid the $25,000 outstanding balance of theloan. The outstanding balance of the loan was $35,000 as of June 30, 2017 and zero as of June 30, 2018.

On March 23, 2017, Barrett Ehrlich agreed to defer thepayment of his consulting fee debt of $173,333 until December 31, 2019, through the issuance of a Promissory note.  Thepromissory note does not carry any interest charge as long as the amount is paid in full before December 31, 2019.  Theconsulting fee debt has thereby been reclassified from a current liability to a long-term liability on the balance sheet. Anyportion of the balance due under the note that remains unpaid after December 31, 2019 will accrue interest at a rateof 5% per annum until paid in full.

On March 23, 2017, Elliot Ehrlich agreed to forgive 50%of his salary debt of $444,056.  The adjusted salary debt is $222,028.13.  Elliot Ehrlich also agreed to defer the paymentof his salary debt of $222,028 until December 31, 2019, through the issuance of a Promissory note.  The promissory notedoes not carry any interest charge as long as the amount is paid in full before December 31, 2019.  The salary debt hasthereby been reclassified from a current liability to a long-term liability on the balance sheet and the salary debt forgiven hasbeen reflected on the income statement as other income. Any portion of the balance due under the note that remains unpaidafter December 31, 2019 will accrue interest at a rate of 5% per annum until paid in full.

On March 23, 2017, Jonathan Adams agreed to defer thepayment of his salary debt of $180,555 until December 31, 2019, through the issuance of a Promissory note.  The promissorynote does not carry any interest charge as long as the amount is paid in full before December 31, 2019.  The salary debthas thereby been reclassified from a current liability to a long-term liability on the balance sheet. Any portion of the balancedue under the note that remains unpaid after December 31, 2019 will accrue interest at a rate of 5% per annum until paidin full.

The outstanding balance of the long-term note payablewas $575,917 as of June 30, 2017 and $575,917 as of June 30, 2018.

Sale of Common Stock and Warrants

In January 2018, the Company sold an aggregate of 333,333shares of common stock and warrants to purchase 333,333 shares of common stock to a member of its board of directors for aggregategross proceeds of $50,000. The purchase price for the common stock and warrants was $0.15 per share. The warrants are exercisableat an exercise price of $0.15 at any time from date of issuance until 7 years from the date of issuance.

Common Stock issued for Services

In January 2018, the Company issued 1,400,000 sharesof common stock as compensation for the Board of Directors. The shares were valued at $0.15 per share which was the trading priceon date of issuance, and the value of the compensation was $210,000.

F-12

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018 and2017

 

7. Commitments and Contingencies

 

Office Lease 

On January 1, 2014, the Company executed a lease agreementwith Cummings Properties for the Company’s office of 270 square feet at 100 Cummings Center, Suite 247-C, Beverly, MA 01915.The lease is for a term of five years from January 1, 2014 to December 30, 2018 and requires monthly payments of $379. The Companynotified the lessor that it will terminate the lease on December 30, 2018. 

Employment Agreements 

On April 11, 2016, the Company entered into employmentagreement with CEO Jonathan Adams. The Company’s agreement provides for a three-year term with minimum annual base salaryof $250,000 per year.

Challenge to US Patent

On April 30, 2018, the Company received notice that MallinckrodtPharmaceuticals Ireland Limited had petitioned the US Patent and Trademark Office (USPTO) to institute an Inter Partes Review ofBioVie’s US Patent No. 9,655,945 titled “Treatment of Ascites” (the ‘945 patent).

Inter Partes Review is a trial proceeding conducted withthe USPTO Patent Trial and Appeal Board (PTAB) to review the patentability of one or more claims of a patent. Such review is limitedto grounds of novelty and obviousness on the basis of prior art consisting of patents and printed publications. Although a petitionfor Inter Partes Review has been filed, grant of the petition by the PTAB is required for the proceeding to be instituted.

On August 15, 2018, BioVie submitted a Preliminary Responseto the PTAB providing a rationale as to why, in the Company’s opinion, Mallinckrodt’s request to institute the IPRshould not be granted. If he IPR is allowed to proceed, BioVie will seek to defend the ‘945 patent and/or pursue a favorablesettlement. As of June 30, 2018, no adjustments or accruals are reflected as the Company is unable to determine a likely outcomeat this time.

Royalty Agreements

Pursuant to the Agreement and Plan of Merger enteredinto on April 11, 2016 between LAT Pharma LLC and NanoAntibiotics, Inc., BioVie is obligated to pay a low single digit royaltyon net sales of BIV201 (continuous infusion terlipressin) to be shared among LAT Pharma Members, PharmaIn Corporation; and TheBarrett Edge, Inc.

Pursuant to the Technology Transfer Agreement enteredinto on July 25, 2016 between BioVie and the University of Padova (Italy), BioVie is obligated to pay a low single digit royaltyon net sales of all terlipressin products covered by US patent no. 9,655,645 and any future foreign issuances capped at significantlyless than $500,000 per year.

The Company and PharmaIN, Corporation, LAT Pharma’sformer partner focused on the development of new modified drug candidates in the same therapeutic field but not including BIV201,agreed to pay royalties equal to less than 1% of future net sales of each company's ascites drug development programs, or if suchprogram is licensed to a third party, less than 5% of each company's net license revenues. The Company’s relationship withPharmaIN could advance into a collaboration or be terminated. The Company has an issued US Patent covering the use of BIV201 forthe treatment of ascites patients in the outpatient setting using ambulatory pump infusion, and has filed patent applications forits drug candidate in Japan, and Europe, and China.

F-13

 

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018and 2017

 

8. Stockholders’ Equity

 

Stock Options

During the year ended June 30, 2017 and 2018, the Companyissued stock options to consultants and board of directors for services provided to the Company.

The following is a summary of stock option activity forthe years ended June 30, 2017 and 2018.

   Shares (Thousands)  Weighted-Average Exercise Price  Weighted Remaining Average Contractual Term
Options      
Outstanding at July 1, 2016   3,000   $0.06    6.5 
Granted   1,000   $0.24    4.0 
Outstanding at June 30, 2017   4,000   $0.10    5.9 
Granted   1,250   $0.15    5.0 
Options Exercised   (100)  $0.02    —   
Outstanding at June 30, 2018   5,150   $0.12    5.8 
Exercisable at June 30, 2018   4,150   $0.13    4.8 

The following is a summary of stock options outstandingand exercisable by exercise price as of June 30, 2018.

Exercise Price  Outstanding  Weighted Average Contract Life  Exercisable
$0.06    3,100,000    6.5    2,100,000 
$0.10    500,000    4.8    500,000 
$0.20    200,000    4.5    200,000 
$0.21    550,000    4.1    550,000 
$0.22    100,000    4.0    100,000 
$0.23    200,000    4.4    200,000 
$0.25    500,000    3.6    500,000 
 Total    5,150,000         4,150,000 

 

F-14

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018and 2017

 

8. Stockholders’ Equity (continued)

 

The fair value of options granted during the year endedJune 30, 2018 was estimated using the Black Scholes Method and the following assumptions: volatility - 124.7% to 143.46%; Term– 5 years; Risk Free Rate – 2.45% to 2.61%; dividend rate – 0.00%. The fair value of options granted during theyear ended June 30, 2017 was estimated using the Black Scholes Method and the following assumptions: volatility – 136.8%to 143.1%; Term – 4 years; Risk Free Rate – 0.53% to 1.4%; dividend rate – 0.00%.

The compensation expense for the year ended June 30,2018 includes $30,978 related to the stock options described above and an adjustment for year ended June 30, 2017 of $30,547. Theadjustment was due to a correction made to the valuation of Stock Options issued to the Chief Operating Officer. The legal andprofessional expenses for the year ended June 30, 2018 includes $176,641 related to the stock options described above. The Companyexpects to recognize $11,486 of future expenses related to the vesting of stock options through April 11, 2019.

The compensation expense for the year ended June 30,2017 includes $35,392 related to the stock options described above. The legal and professional expenses for the year ended June30, 2017 includes $56,660 related to the stock options described above.

Extension of Maturity

In November 2017, the Company extended the maturity dateof stock options to acquire 800,000 shares at exercise prices ranging from $0.21 to $0.25 issued to the board of directors betweenNovember 2016 and December 2016 by 3 years. The Company recorded an incremental expense of $79,491 based on the increase in fairvalue of the options.

Offerings of Common Stock and Warrants

Issuance of Shares for Cash

In September 2016, the Company sold and issued an aggregateof 49,999 shares of common stock in a private placement transaction for aggregate gross proceeds of approximately $5,000. The purchaseprice for the common stock was $0.10 per share.

In October 2016, the Company sold and issued an aggregateof 225,000 shares of common stock and warrants to purchase 112,500 shares of common stock in a private placement transaction foraggregate gross proceeds of approximately $45,000. The purchase price for the common stock and warrants was $0.20 per share. Thewarrants are exercisable at an exercise price of $0.50 at any time from date of issuance until 5 years from the date of issuance.

In November 2016, the Company sold and issued an aggregateof 250,000 shares of common stock and warrants to purchase 125,000 shares of common stock in a private placement transaction foraggregate gross proceeds of approximately $50,000. The purchase price for the common stock and warrants was $0.20 per share. Thewarrants are exercisable at an exercise price of $0.50 at any time from date of issuance until 5 years from the date of issuance.

In December 2016, the Company sold and issued an aggregateof 100,000 shares of common stock and warrants to purchase 50,000 shares of common stock in a private placement transaction foraggregate gross proceeds of approximately $20,000. The purchase price for the common stock and warrants was $0.20 per share. Thewarrants are exercisable at an exercise price of $0.50 at any time from date of issuance until 5 years from the date of issuance.

F-15

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018and 2017

 

8. Stockholders’ Equity (continued)

 

In January 2017, the Company, entered into a commonstock purchase agreement (the “Purchase Agreement”) with Aspire Capital Fund, LLC, an Illinois limited liability company(“Aspire Capital”) which provides that, on the terms and subject to the conditions and limitations set forth therein,Aspire Capital is committed to purchase up to an aggregate of $12.0 million of shares of the Company’s common stock overthe 30-month term of the Purchase Agreement (“Aspire Equity Line”). On execution of the Purchase Agreement, the Companyagreed to sell to Aspire Capital 1,000,000 shares of common stock and warrants to purchase 500,000 shares of common stock for proceedsof $200,000. The Warrant Shares will each have a five-year term and will be exercisable at $0.50 per share. Concurrently with enteringinto the Purchase Agreement, the Company also entered into a registration rights agreement with Aspire Capital (the “RegistrationRights Agreement”), in which the Company agreed to file one or more registration statements, as permissible and necessaryto register under the Securities Act of 1933, as amended (the “Securities Act”), registering the sale of the sharesof the Company’s common stock that have been and may be issued to Aspire Capital under the Purchase Agreement.

Under the Purchase agreement, after the Securities andExchange Commission (the “SEC”) has declared effective the registration statement referred to above, on any tradingday selected by the Company, the Company has the right, in its sole discretion, to present Aspire Capital with a purchase notice(each, a “Purchase Notice”), directing Aspire Capital (as principal) to purchase up to 100,000 shares of the Company’scommon stock per business day, up to $12.0 million of the Company’s common stock in the aggregate at a per share price (the“Purchase Price”) equal to the lesser of:

  • the lowest sale price of the Company’s common stockon the purchase date; or
  • the arithmetic average of the three (3) lowest closing saleprices for the Company’s common stock during the twelve (12) consecutive trading days ending on the trading day immediatelypreceding the purchase date.

In addition, on any date on which the Company submitsa Purchase Notice to Aspire Capital in an amount equal to 100,000 shares and the closing sale price of our stock is equal to orgreater than $0.30 per share, the Company also has the right, in its sole discretion, to present Aspire Capital with a volume-weightedaverage price purchase notice (each, a “VWAP Purchase Notice”) directing Aspire Capital to purchase an amount of stockequal to up to 30% of the aggregate shares of the Company’s common stock traded on its principal market on the next tradingday (the “VWAP Purchase Date”), subject to a maximum number of shares the Company may determine. The purchase priceper share pursuant to such VWAP Purchase Notice is generally 95% of the volume-weighted average price for the Company’s commonstock traded on its principal market on the VWAP Purchase Date.

The Purchase Price will be adjusted for any reorganization,recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the period(s) used to compute thePurchase Price. The Company may deliver multiple Purchase Notices and VWAP Purchase Notices to Aspire Capital from time to timeduring the term of the Purchase Agreement, so long as the most recent purchase has been completed.

F-16

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018 and2017

 

8. Stockholders’ Equity (continued)

 

The Purchase Agreement provides that the Company andAspire Capital shall not affect any sales under the Purchase Agreement on any purchase date where the closing sale price of theCompany’s common stock is less than $0.10. There are no trading volume requirements or restrictions under the Purchase Agreement,and the Company will control the timing and amount of sales of the Company’s common stock to Aspire Capital. Aspire Capitalhas no right to require any sales by the Company but is obligated to make purchases from the Company as directed by the Companyin accordance with the Purchase Agreement. There are no limitations on use of proceeds, financial or business covenants, restrictionson future funding, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. Inconsideration for entering into the Purchase Agreement, concurrently with the execution of the Purchase Agreement, the Companyissued to Aspire Capital 2,400,000 shares of the Company’s common stock (the “Commitment Shares”). The PurchaseAgreement may be terminated by the Company at any time, at its discretion, without any cost to the Company. Aspire Capital hasagreed that neither it nor any of its agents, representatives and affiliates shall engage in any direct or indirect short-sellingor hedging of the Company’s common stock during any time prior to the termination of the Purchase Agreement. Any proceedsthat the Company receives under the Purchase Agreement are expected to be used for working capital and general corporate purposes.

In March 2017, the Company sold and issued an aggregateof 500,000 shares of common stock and warrants to purchase 250,000 shares of common stock in a private placement transaction foraggregate gross proceeds of approximately $100,000. The purchase price for the common stock and warrants was $0.20 per share. Thewarrants are exercisable at an exercise price of $0.50 at any time from date of issuance until 5 years from the date of issuance.

In May 2017, the Company sold and issued an aggregateof 240,000 shares of common stock and warrants to purchase 120,000 shares of common stock in a private placement transaction foraggregate gross proceeds of approximately $60,000. The purchase price for the common stock and warrants was $0.25 per share. Thewarrants are exercisable at an exercise price of $0.60 at any time from date of issuance until 5 years from the date of issuance.In August 2017, the Company issued an aggregate of 32,727 shares of common stock and 16,364 warrants to compensate these investorswho purchased common stock at a $0.25 share price in a Series C offering prior to a reduction in the offering price to $0.22 pershare.

In July 2017 and August 2017, the Company sold and issuedan aggregate of 886,364 shares of common stock and warrants to purchase 443,182 shares of common stock in a private placement transactionfor aggregate gross proceeds of approximately $195,000. The purchase price for the common stock and warrants was $0.22 per share.The warrants are exercisable at an exercise price of $0.60 at any time from date of issuance until 5 years from the date of issuance.

Between July 2017 and September 2017, the Company soldan aggregate of 250,000 shares of common stock in transactions under the Aspire Equity Line for aggregate gross proceeds of $50,000.The average purchase price for the common stock was $0.20 per share.

In October 2017, the Company sold and issued an aggregateof 159,091 shares of common stock and warrants to purchase 79,545 shares of common stock in a private placement transaction foraggregate gross proceeds of approximately $35,000. The purchase price for the common stock and warrants was $0.22 per share. Thewarrants are exercisable at an exercise price of $0.60 at any time from date of issuance until 5 years from the date of issuance.

F-17

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018 and2017

 

8. Stockholders’ Equity (continued)

 

In November 2017, the Company also sold and issued anaggregate of 68,182 shares of common stock and warrants to purchase 34,091 shares of common stock in a private placement transactionfor aggregate gross proceeds of approximately $15,000. The purchase price for the common stock and warrants was $0.22 per share.The warrants are exercisable at an exercise price of $0.60 at any time from date of issuance until 5 years from the date of issuance.

In January 2018, the Company sold an aggregate of 333,333shares of common stock and warrants to purchase 333,333 shares of common stock to a member of its board of directors for aggregategross proceeds of $50,000. The purchase price for the common stock and warrants was $0.15 per share. The warrants are exercisableat an exercise price of $0.15 at any time from date of issuance until 7 years from the date of issuance.

In June 2018, 100,000 shares of stock options were exercisedfor $2,000.

Issuance of Shares for Services

In August 2017, the Company issued 1,500,000 shares ofcommon stock to Aspire Capital in exchange for services. The shares were valued at $0.22 per share which was the trading priceon date of issuance, and the value of the services were $330,000.

In November 2017, the Company issued 150,000 shares ofcommon in exchange for services. The shares were valued at $0.23 per share which was the trading price on date of issuance, andthe value of the services were $34,500.

In January 2018, The Company issued 30,000 shares ofcommon stock in exchange for services. The shares were valued at $0.13 per share which was the trading price on date of issuance,and the value of the services were $3,900.

In January 2018, the Company issued 1,400,000 sharesof common stock as compensation for the Board of Directors. The shares were valued at $0.15 per share which was the trading priceon date of issuance, and the value of the compensation was $210,000.

In February 2018, the Company issued 600,000 shares ofcommon stock in exchange for services. The shares were valued at $0.0475 per share which was the trading price on date of issuance,and the value of the services were $28,500.

In April 2018, the Company issued 300,000 shares of commonin exchange for services. The shares were valued at $0.045 per share, and the value of the services were $13,500. In April 2018,the Company issued 150,000 shares of common in exchange for services. The shares were valued at $0.024 per share which was thetrading price on date of issuance, and the value of the services were $3,600.

In May 2018, the Company issued 250,000 shares of commonin exchange for services. The shares were valued at $0.018 per share which was the trading price on date of issuance, and the valueof the services were $4,500.

In May 2018, the Company issued 68,500 shares of commonin exchange for services. The shares were valued at $0.10 per share which was the trading price on date of issuance, and the valueof the services were $6,850.

In June 2018, the Company issued 300,000 shares of commonin exchange for services. The shares were valued at $0.025 per share which was the trading price on date of issuance, and the valueof the services were $7,500.

F-18

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018 and2017

 

8. Stockholders’ Equity (continued)

 

Issuance of Warrants for Cash

In December 2017, the Company issued warrants to purchase2,500,000 shares of common stock in a private placement transaction for aggregate gross proceeds of $100,000. The purchase pricefor the warrants were $0.04 per warrant. The warrants are exercisable at an exercise price of $0.20 at any time from date of issuanceuntil 7 years from the date of issuance.

Issuance of Warrants for Services

In January 2018, the Company issued warrants to purchase105,000 shares of common stock in exchange for services. The warrants are exercisable at an exercise price of $0.15 any time fromthe date of issuance until 7 years from the date of issuance. The warrants were valued at $9,444. The fair value of the warrantsgranted was estimated using the Black Scholes Method and the following assumptions: volatility – 166.7%; Term – 7 years;Risk Free Rate – 2.48%; dividend rate – 0.00%

In February 2018, the Company issued warrants to purchase105,000 shares of common stock in a termination agreement. The warrants are exercisable at an exercise price of $0.15 any timefrom the date of issuance until 7 years from the date of issuance. The warrants were valued at $3,025. The fair value of the warrantsgranted was estimated using the Black Scholes Method and the following assumptions: volatility – 166.7%; Term – 7 years;Risk Free Rate – 2.81%; dividend rate – 0.00%

Warrant Price Adjustment

In December 2017, the Company issued warrants to purchase2,500,000 shares of common stock in a private placement transaction for aggregate gross proceeds of $100,000. The warrants wereexercisable at an exercise price of $0.20 at any time from date of issuance until 7 years from the date of issuance. The warrantshave a down round feature that reduces the exercise price if the Company sells stock for a lower price. In January 2018, the Companysold shares at $0.15, which therefore triggered the reduction in the strike price. The Company calculated the difference in fairvalue of the warrants between the stated exercise price and the reduced exercise price and recorded $20,995 as a deemed dividend.The fair value of the warrants granted was estimated using the Black Scholes Method and the following assumptions: volatility –164.7%; Term – 7 years; Risk Free Rate – 2.47%; dividend rate – 0.00%.

The following table summarizes the warrants that havebeen issued:

      Weighted Average  Weighted Average
   Number of Shares  Exercise Price  Remaining Life (Years)
 Outstanding at June 30, 2016    5,000,000   $0.50    —   
 Granted    1,173,864   $0.51    3.5 
 Outstanding at June 30, 2017    6,173,864   $0.50    0.7 
 Granted    3,600,151   $0.22    6.1 
 Expired    (5,000,000)  $0.50    —   
 Outstanding at June 30, 2018    4,774,015   $0.29    5.5 

 

F-19

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018 and2017

 

8. Stockholders’ Equity (continued)

 

The following table summarizes the warrants by price:

Weighted Average     Weighted Average
Exercise Price  Number of Shares  Remaining Life (Years)
$0.15    3,043,333    6.4 
$0.50    1,037,501    3.5 
$0.60    693,181    4.1 
      4,774,015    5.5 

 

9.  Income Taxes

 

Deferred income taxes reflect the net tax effects oftemporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts usedfor income tax purposes. At June 30, 2018, the Company has a Net Operating Loss (“NOL”) carryforward of approximately$1,800,000. The NOL expires during the years 2032 to 2037. Realization of any portion of the $832,186 of net deferred tax assetsat June 30, 2018 is not considered more likely than not by management; accordingly, a valuation allowance has been establishedfor the full amount. The valuation allowance as of June 30, 2018 was $832,186. The change in the valuation allowance during theyear ended June 30, 2018 amounted to $357,231. The Company does not have any uncertain tax positions or events leading to uncertaintyin a tax position. The Company’s 2015, 2016 and 2017 Corporate Income Tax Returns are subject to Internal Revenue Serviceexamination.

On December 22, 2017, the Tax Cuts and Jobs Act (the“Act”) was signed into law. The Act decreases the U.S. corporate federal income tax rate from a maximum of 35% to aflat 21% effective January 1, 2018. The Act also includes a number of other provisions including, among others, the eliminationof net operating loss carrybacks and limitations on the use of future losses, the repeal of the Alternative Minimum Tax regimeand the repeal of the domestic production activities deduction. These provisions are not expected to have a material effect onthe Corporation.

Given the significant complexity of the Act and anticipatedadditional implementation guidance from the Internal Revenue Service, further implications of the Act may be identified in futureperiods.

Significant components of the Company’s deferredtax assets are as follows:

   June 30, 2018  June 30, 2017
Deferred tax assets:      
Tax loss carryforward  $555,064   $446,071 
Intangible assets   19,277    3,735 
Stock based compensation   257,845    25,149 
Valuation Allowance   (832,186)   (474,955)
Net deferred tax assets  $—     $—   

 

F-20

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018 and2017

 

9.  Income Taxes (continued)

 

Since management of the Company believes that it is morelikely than not that the net deferred tax assets will not provide future benefit, the Company has established a 100 percent valuationallowance on the net deferred tax assets as of June 30, 2018.  

Reconciliation of the differences between income taxbenefit computed at the federal and state statutory tax rates and the provision for income tax benefit for the years ended June30, 2018 and 2017 is as follows:

   2018  2017
Income tax expense (benefit) at federal statutory rate   34%   34%
State taxes, net of federal benefit   5%   5%
Change in valuation allowance   (39)%   (39)%
    —      —   
10.  Subsequent Events

 

On July 3, 2018, BioVie Inc., the Company, entered intoa Securities Purchase Agreement (the “Purchase Agreement”) with Acuitas Group Holdings, LLC (“Acuitas”)and certain other purchasers identified in the Purchase Agreement (together with Acuitas, the “Purchasers”) pursuantto which (i) the Purchasers agreed to purchase an aggregate of 2,133,332 shares of the Company’s newly created Series A ConvertiblePreferred Stock (the “Preferred Stock”) at a price per share of $1.50 per share of Preferred Stock (the “InitialSale”) and (ii) the Company will issue associated warrants (the “Warrants”) to purchase 213,333,200 shares ofthe Company’s Class A Common Stock (the “Common Stock”), each subject to the terms and conditions set forth inthe Purchase Agreement, for an aggregate consideration of $3.2 million. Acuitas also received an additional 833,333 Warrants inconnection with the payoff of a note issued by the Company in favor of Acuitas. The Initial Sale and issuance of the Warrants occurredon July 3, 2018. In addition, Acuitas has the option to purchase up to an additional 200,000,000 shares of Common Stock at a priceper share of $0.015, and associated warrants on the same terms as the Warrants, within two weeks following the one year anniversaryof the closing of the Initial Sale (the “Subsequent Sale”) in the event that the Company has not obtained $3,000,000of funding through various non-dilutive grants prior to the one year anniversary of the closing of the Initial Sale.

Each share of Preferred Stock automatically convertedinto 100 shares of Common Stock upon the filing with the Secretary of State of the State of Nevada of a Certificate of Amendmentto the Company’s Articles of Incorporation (the “Amendment”) on August 13, 2018 that increased the number ofauthorized shares of Common Stock to 800,000,000. The Amendment was approved by the written consent of the holders of more thana majority of the Company’s issued and outstanding Common Stock on July 3, 2018, and was filed with the Secretary of Stateof the State of Nevada 20 calendar days following the distribution of the Company’s Definitive Information to be filed withthe Securities and Exchange Commission.

See the heading “Series A Convertible PreferredStock” below for additional information related to the Preferred Stock. The purchase price of the Preferred Stock inthe Initial Sale, the exercise price of the Warrants, and the Common Stock in the Subsequent Sale is subject to adjustment.First, in the event that the volume weighted average price of the Common Stock during the five-trading day period followingJuly 3, 2018 is less than $0.015 per share, the price per share of Common Stock, the associated conversion ratio of thePreferred Stock, and the exercise price of the Warrants shall be retroactively adjusted to reflect such lower price. Second,in the event that Mallinckrodt Pharmaceuticals Ireland Limited prevails in any proceeding which results in the useful life ofthe Company’s current intellectual property rights being reduced by more than 75 percent, then the price per share ofCommon Stock, the associated conversion ratio of the Preferred Stock, and the exercise price of the Warrants shall beretroactively adjusted to 50 percent of the then-effective price per share of Common Stock under the Purchase Agreement (forexample, if the then-effective price per share of Common Stock is $0.015, then following such event, the price per share willbe $0.0075). In each case, the Company may be required to issue additional shares of Common Stock, but in no event will theCompany be required to pay cash, to reflect such lower price per share.

F-21

BioVie Inc.

Notes to Financial Statements

For the Years Ended June 30, 2018 and2017

 

10.  Subsequent Events (continued)

 

The Purchase Agreement contained customary representationsand warranties. In connection with the disclosure schedule associated with the representations and warranties, the Company alsodisclosed customary information, including the following: (i) the existence of the Mallinckrodt Pharmaceuticals Ireland Limitedpetition before the US Patent Trial and Appeal Board, (ii) the current capitalization of the Company, (iii) the Company’sobligation to pay a royalty on the net sales of BIV201 (continuous infusion terlipressin) in the amount of five percent to be allocatedfour percent to LAT Pharma LLC members, 0.4 percent to PharmaIn Corporation and 0.6 percent to The Barrett Edge, Inc. pursuantto the Agreement and Plan of Merger, dated April 11, 2016, by and between LAT Pharma LLC and the Company, (iv) the Company’sobligation to pay a royalty of five percent on net sales of all terlipressin products covered by specified patents up to a maximumof $200,000 per year pursuant to the Technology Transfer Agreement, dated July 25, 2016, by and between the Company and the Universityof Padova (Italy), and (v) certain recent issuances of Common Stock by the Company.

Pursuant to the Purchase Agreement, Terren Peizer, theChairman of Acuitas, was appointed as a member of the Company’s Board of Directors (the “Board”) and as the ChiefExecutive Officer of the Company, effective July 3, 2018. The issuance of the Preferred Stock, the Warrants and the underlyingcommon stock under the Purchase Agreement is exempt from registration under the Securities Act of 1933, as amended (the “SecuritiesAct”), pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) ofthe Securities Act.

On July 9, 2018, Elliot Ehrlich entered into an Accordand Debt Satisfaction Agreement with the Company in which he agreed to release the Company from all liabilities including the originalcontract to defer payment of his accrued salary dated March 23, 2017 totaling the amount of $222,028.13 and received the settledsum of $22,203 and 222,028 common shares in satisfaction. This settlement reduced the Company’s debt by $222,028.13.

On July 9, 2018, Jonathan Adams entered into an Accordand Debt Satisfaction Agreement with the Company in which he agreed to release the Company from all liabilities including the originalcontract to defer payment of his accrued salary dated March 23, 2017 and subsequent unpaid salary, totaling the amount of $513,889,and received the settled sum of $25,694 in satisfaction. This settlement reduced the Company’s debt by $513,889.

On July 19, 2018, Geis-Hides Consulting LLC entered intoan Accord and Debt Satisfaction Agreement with the Company in which the consulting firm agreed to release the Company from allliabilities arising from the Original Contract and Debt Repayment Plan dated December 15, 2013 totaling $130,000 and received thesettled sum of $65,000 and 260,000 common shares in satisfaction. This settlement reduced the Company’s debt by $130,000.

As a result of the conversion of the Series A PreferredStock in July 2018, the exercise of warrants to purchase 2,500,000 shares of common stock was reduced from $0.15 per share to $0.015per share. On August 4, 2018, the Company issued 2,241,913 shares of common stock pursuant to a cash less exercise of warrantsto purchase 2,500,000 shares at an exercise price of $0.015 per share.

On August 8, 2018, Barrett Ehrlich on behalf of The BarrettEdge Inc. (“Barrett”) entered into an Accord and Debt Satisfaction Agreement with the Company in which Barrett agreedto release the Company from all liabilities including the original contract to defer payment of Barrett’s accrued salarydated March 23, 2017, loan to the Company for $14,000, and subsequent unpaid consulting fees, totaling $493,333, and received thesettled sum of $131,333 and 493,333 common shares in satisfaction. This settlement reduced the Company’s debt by $507,333.

F-22

Biovie Inc.

Condensed Balance Sheet

 

   December 31,  June 30,
   2018  2018*
ASSETS  (Unaudited)   
       
CURRENT ASSETS:          
Cash  $1,630,483   $45,800 
Total Current Assets   1,630,483    45,800 
           
OTHER  ASSETS:          
Intangible Assets, Net   1,669,292    1,783,980 
Goodwill   345,711    345,711 
Total Other Assets   2,015,003    2,129,691 
           
TOTAL ASSETS  $3,645,486   $2,175,491 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
CURRENT LIABILITIES:          
Accounts Payable and accrued expenses  $104,836   $884,207 
Accrued Payroll   —      354,167 
Total Current Liabilities   104,836    1,238,374 
           
LONG-TERM LIABILITIES:          
Demand Promissory Note   —      250,000 
Notes Payable, Related Parties   —      575,918 
 Total Long-Term Liabilities   —      825,918 
           
TOTAL LIABILITIES   104,836    2,064,292 
           
Commitments and contingencies (Note 7)   —      —   
           
STOCKHOLDERS' EQUITY          
           
Preferred stock; $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding   —      —   
Common stock, $0.0001 par value; 800,000,000 and 300,000,000 shares authorized at December 31, 2018 and June 30, 2018, respectively; 315,053,673 and 98,503,199 shares issued and outstanding at December 31, 2018 and June 30, 2018, respectively   31,505    9,850 
Additional paid in capital   9,267,311    4,870,475 
Accumulated deficit   (5,758,166)   (4,769,126)
Total Stockholders' Equity   3,540,650    111,199 
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $3,645,486   $2,175,491 

*Derived from audited balance sheet as of June 30, 2018

See accompanying notes to unauditedcondensed financial statements

F-23

Biovie Inc.

Condensed Statements of Operations

(Unaudited)

 

   Six Months  Six Months
   Ended  Ended
   December 31,  December 31,
   2018  2017
       
REVENUE  $—     $—   
           
OPERATING EXPENSES:          
Amortization   114,689    114,689 
Research and development expenses   400,540    228,695 
Selling, general and administrative expenses   477,069    813,655 
TOTAL OPERATING EXPENSES   992,297    1,157,039 
           
LOSS FROM OPERATIONS   (992,298)   (1,157,039)
           
OTHER EXPENSE (INCOME):          
Other income   (51,400)   —   
Interest expense   271    8,485 
Interest income   (788)   (1)
TOTAL OTHER EXPENSE (INCOME), NET   (51,917)   8,544 
           
           
NET LOSS  $(940,381)  $(1,165,523)
           
Deemed dividend related to ratchet adjustment   48,659    —   
           
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS  $(989,040)  $(1,165,523)
           
NET LOSS PER SHARE BASIC AND DILUTED  $(0.00)  $(0.01)
           
WEIGHTED AVERAGE NUMBER OF          
COMMON  SHARES OUTSTANDING BASIC AND DILUTED   312,182,118    94,078,045 

 

See accompanying notes to unauditedcondensed financial statements

F-24

Biovie Inc.

Condensed Statements of Cash Flows

(Unaudited)

 

   Six Months Ended  Six Months Ended
   December 31 2018  December 31 2017
CASH FLOWS FROM OPERATING ACTIVITIES:     
Net loss  $(940,381)  $(1,165,523)
Adjustments to reconcile net loss to net cash to cash used in operating activities:          
Services paid with common stock   —      364,500 
Amortization of intangible assets   114,689    114,689 
Stock based compensation expense   19,697    39,773 
Gain on settlement of debt   51,400      
Changes in operating assets and liabilities          
(Decrease)/Increase in:          
Accounts payable   (456,422)   158,245 
Accrued payroll   —      125,000 
Net cash used in operating activities   (1,211,017)   (363,316)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Repayment of debt   (244,300)   (35,000)
Proceeds from issuance of preferred shares   3,040,000    —   
Proceeds from issuance of common stock and warrants   —      395,000 
Net cash provided by financing activities   2,795,700    360,000 
           
Net increase in cash   1,584,684    (3,316)
           
Cash, beginning of period   45,800    5,140 
           
Cash, end of period  $1,630,483   $1,824 
           
SUPPLEMENTAL CASH FLOW INFORMATION:          
  Cash paid for interest  $—     $—   
  Cash paid for taxes  $—     $—   
           
SCHEDULE OF NON-CASH FINANCING ACTIVITIES:          
   Conversion of preferred shares to common stock  $3,200,000   $—   
   Settlement of debt by issuance of common stock  $1,150,135   $—   
   Cashless exercise of warrants  $224   $—   
   Deemed dividends for ratchet adjustments to warrants  $48,659   $—   

 

See accompanying notes to unauditedcondensed financial statements

F-25

Biovie Inc.

Condensed Statements of Stockholders’Equity

(Unaudited)

 

   Preferred  Preferred  Common  Common  Additional     Total
   Stock  Stock  Stock  Stock  Paid in  Accumulated  Stockholders'
   Shares  Amount  Shares  Amount  Capital  Deficit  Equity
Balance, June 30, 2017   —     $—      91,925,000   $9,193   $3,483,134   $(2,335,009)  $1,157,318 
                                    
Issuance of shares in a private placement   —      —      1,169,091    117    244,883    —      245,000 
                                    
Issuance of shares for services   —      —      1,500,000    150    329,850    —      330,000 
                                    
Stock option compensation   —      —      —      —      12,752    —      12,752 
                                    
Net loss   —      —      —      —      —      (662,841)   (662,841)
                                    
Balance, September 30, 2017 (Unaudited)   —      —      94,594,091    9,460    4,070,619    (2,997,850)   1,082,229 
                                    
Issuance of shares in a private placement   —      —      227,273    23    49,977    —      50,000 
                                    
Issuance of shares for services   —      —      150,000    15    34,485    —      34,500 
                                    
Issuance of warrants in a private placement   —      —      —      —      100,000    —      100,000 
                                    
Stock option compensation   —      —      —      —      27,021    —      27,021 
                                    
Net loss   —      —      —      —      —      (502,682)   (502,682)
                                    
Balance, December 31, 2017 (Unaudited)   —     $—      94,971,364   $9,498   $4,282,102   $(3,500,532)  $791,068 
                                    
Balance, June 30, 2018   —     $—      98,503,199   $9,850   $4,870,475   $(4,769,126)  $111,199 
                                    
Issuance of preferred stock in a private placement   2,133,332    3,200,000    —      —      3,200,000    —      3,200,000 
                                    
Conversion of preferred stock to common stock   (2,133,332)   (3,200,000)   213,333,200    21,333    (21,333)   —      —   
                                    
Issuance of shares in exchange for debt settlement   —      —      975,361    98    1,150,037    —      1,150,135 
                                    
Stock option compensation   —      —      —      —      3,412    —      3,412 
                                    
Cashless exercise of warrants   —      —      2,241,913    224    (224)   —      —   
                                    
Deemed dividends for ratchet adjustment to warrants   —      —      —      —      48,659    (48,659)   —   
                                    
Net loss   —      —      —      —      —      (439,871)   (439,871)
                                    
Balance, September 30, 2018 (Unaudited)   —     $—      315,053,673   $31,505   $9,251,026   $(5,257,656)  $4,024,875 
                                    
Stock option compensation   —      —      —      —      16,285    —      16,285 
                                    
Net loss   —      —      —      —      —      (500,510)   (500,510)
                                    
Balance, December 31, 2018 (Unaudited)   —     $—      315,053,673   $31,505   $9,267,311   $(5,758,166)  $3,540,650 

 

See accompanying notes to unauditedcondensed financial statements

F-26

BIOVIE INC.

Notes to Condensed Financial Statements

For the Six Months Ended December31, 2018 and 2017

(unaudited)

 

 1. Background Information

 

BioVie Inc. (the “Company”) is a clinical-stagecompany pursuing the discovery, development, and commercialization of innovative drug therapies. The Company is currently focusedon developing and commercializing BIV201, a novel approach to the treatment of ascites due to chronic liver cirrhosis. In April2017, the Company signed a Cooperative Research and Development Agreement (CRADA) with the McGuire Research Institute Inc. in Richmond,VA, and began dosing patients with BIV201 in September 2017. As of January 2019, all six of the planned patients had beentreated with BIV201 therapy or enrolled in this ongoing Phase 2a clinical trial.

BIV201 has the potential to improve the health of thousandsof patients suffering from life-threatening complications of liver cirrhosis due to hepatitis, nonalcoholic steatohepatitis (NASH),and alcoholism. It has FDA Fast-Track status and Orphan Drug designation for the most common of these complications, ascites, whichrepresents a significant unmet medical need. The FDA has never approved any drug specifically for treating ascites. The Companyhas issued a US Patent covering the use of BIV201 for the treatment of ascites patients in the outpatient setting using ambulatorypump infusion, and has filed patent applications for its drug candidate in Japan, and Europe, Hong Kong, and China.

The BIV201 development program began at LAT Pharma LLC.On April 11, 2016, the Company acquired LAT Pharma LLC and the rights to its BIV201 development program. The Company currentlyowns all development and marketing rights to its drug candidate. The Company and PharmaIN, Corp. (“PharmaIN”), LATPharma’s former partner focused on the development of new modified drug candidates in the same therapeutic field but notincluding BIV201, had agreed to pay royalties equal to less than 1% of future net sales of each company's ascites drug developmentprograms, or if such program is licensed to a third party, less than 5% of each company's net license revenues. On December 24,2018, the Company returned its partial ownership rights to the PharmaIN modified terlipressin development program and simultaneouslypaid the remaining balance due on a related debt. PharmaIN, Corp. rights to our program remain unchanged.

The Company’s activities are subject to significantrisks and uncertainties including failure to secure additional funding to properly execute the Company’s business plan.

2. Liquidity and Going Concern

The Company’s operations are subject to a numberof factors that can affect its operating results and financial conditions. Such factors include, but are not limited to: the resultsof clinical testing and trial activities of the Company’s products, the Company’s ability to obtain regulatory approvalto market its products, competition from products manufactured and sold or being developed by other companies, the price of, anddemand for, Company products, the Company’s ability to negotiate favorable licensing or other manufacturing and marketingagreements for its products, and the Company’s ability to raise capital. The Company’s financial statements have beenprepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfactionof liabilities in the normal course of business. The Company has experienced losses since inception and has an accumulated deficitof approximately $5.8 million at December 31, 2018. In addition, the Company has not generated any revenues and no revenues areanticipated in the foreseeable future. The Company’s future operations are dependent on the success of the Company’songoing development and commercialization efforts, as well as continuing to secure additional financing.

In July 2018, the Company completed a capital raise fromAcuitas Group Holding, LLC (“Acuitas”) and other purchasers and received net proceeds of $3.2 million and has resumedto further clinical development of BIV201. The Acuitas investment agreement also stipulated that if the clinical development ofBIV201 continues, Acuitas may invest an additional $3 million to fund operations in year two, less any federal or FDA grant fundingreceived by the Company.

F-27

BIOVIE INC.

Notes to Condensed Financial Statements

For the Six Months Ended December31, 2018 and 2017

(unaudited)

 

2. Liquidity and Going Concern (continued)

The future viability of the Company is largely dependentupon its ability to raise additional capital to finance its operations. Management expects that future sources of funding may includesales of equity, obtaining loans, or other strategic transactions. Although management continues to pursue these plans, there isno assurance that the Company will be successful in obtaining sufficient financing on terms acceptable to the Company to fund continuingoperations, if at all. 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

The accompanying unaudited interim financial statementsand 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 RegulationS-X of the Securities Exchange Commission for Interim Reporting. Accordingly, they do not include all of the information and footnotesrequired by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments(consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentationof 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, 2018 was derived from audited annual financial statements but does not contain all thefootnote disclosures from the annual financial statements. The accompanying financial statements and information included underthe heading: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should beread in conjunction with our Company’s audited financial statements and related notes included in our Company’s Form10-K for the year ended June 30, 2018 filed with the SEC on October 5, 2018.

For a summary of significant accounting policies, seethe Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018 filed with the SEC on October 5, 2018.

Net Loss per Common Share

Basic net loss per common share is computed by dividingthe net loss before deemed dividend by the weighted average number of shares of common stock outstanding during the period. Dilutednet loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstandingand potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from commonshares issuable through stock options, warrants, convertible preferred stock and convertible debentures. Due to the net loss forthe period, such amounts were excluded from the diluted loss since their effect was considered anti-dilutive.

F-28

BIOVIE INC.

Notes to Condensed Financial Statements

For the Six Months Ended December31, 2018 and 2017

(unaudited)

 

3. Significant Accounting Policies (continued)

The table below shows the number of outstanding stockoptions and warrants as of December 31, 2018 and June 30, 2018:

   December 31, 2018  June 30, 2018
   Number of Shares  Number of Shares
Stock Options   5,550,000    5,150,000 
Warrants   216,440,548    4,774,015 
Total   221,990,548    9,924,015 

Recent accounting pronouncements

The Company considers the applicability and impact ofall Accounting Standard Updates (“ASU’s”). ASU’s not discussed below were assessed and determined to beeither not applicable or expected to have minimal impact on our balance sheets or statement of operations.

In June 2018, the FASB issued ASU 2018-07, “Compensation– Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Accounting”. This guidance aligns the accountingfor share-based payment transactions with non-employees to accounting for share-based payment transactions with employees. Companiesare required to record a cumulative-effect adjustment (net of tax) to retained earnings as of the beginning of the fiscal yearof the adoption. Upon transition, non-employee awards are required to be measured at fair value as of the adoption date. This standardwill be effective for fiscal years beginning December 15, 2018, including interim periods within those fiscal years. Early adoptionis permitted. The Company is currently evaluating the impact of this ASU on the financial statements.

4. Intellectual Property

Intellectual property, stated at cost, less accumulatedamortization consists of the following:

   December 31, 2018  June 30, 2018
Intellectual Property  $2,293,770   $2,293,770 
Accumulated Amortization   624,478    509,790 
Intellectual Property, Net  $1,669,292   $1,783,980 

Amortization expense for the three- and six-month periodsended December 31, 2018 was $57,344 and $114,689, respectively, and for the three- and six-month periods ended December 30, 2017was $57,344 and $114,689, respectively. Estimated future amortization expense is as follows:

 Year ending June 2019 (remaining six months)   $114,689 
 2020    229,377 
 2021    229,377 
 2022    229,377 
 2023    229,377 
 Thereafter    637,095 
     $1,669,292 

 

F-29

BIOVIE INC.

Notes to Condensed Financial Statements

For the Six Months Ended December31, 2018 and 2017

(unaudited)

 

5. Renegotiated Debt

On July 19, 2018, Geis-Hides Consulting LLC entered intoan Accord and Debt Satisfaction Agreement with the Company in which the consulting firm agreed to release the Company from allliabilities arising from the Original Contract and Debt Repayment Plan dated December 15, 2013 totaling $132,000 and received cashof $65,000 and 260,000 common shares in satisfaction. The common shares were valued at the market price on the date of settlementat $0.06 per common share. The gain of $51,400 on the settlement of debt was reflected on the Statements of Operations as “otherincome” for the six month period ended December 31, 2018.

6. Related Party Transactions

On July 9, 2018, Jonathan Adams (COO) entered into anAccord and Debt Satisfaction Agreement with the Company in which he agreed to release the Company from all liabilities includingthe original contract to defer payment of his accrued salary dated March 23, 2017, the promissory note issued by the Company todefer payment of accrued salary; and subsequent unpaid salary, totaling the amount of $534,722, and received cash of $25,694 insatisfaction. The gain of $509,028 on the settlement of debt was reflected in the additional paid in capital.

On August 8, 2018, Barrett Ehrlich (Independent contractor,related party to Elliot Ehrlich and shareholder) on behalf of The Barrett Edge Inc. (“Barrett”) entered into an Accordand Debt Satisfaction Agreement with the Company in which Barrett agreed to release the Company from all liabilities includingthe original contract to defer payment of accrued consulting fees dated March 23, 2017, the promissory note issued by the Companyto defer payment of accrued consulting fees; loan to the Company for $14,000, and subsequent unpaid consulting fees, totaling $543,014,and received cash of $131,333 and 493,333 common shares in satisfaction. The common shares were valued at the market price on thedate of settlement at $0.13 per common share. The gain of $361,548 on the settlement of debt was reflected in the additional paidin capital.

On July 9, 2018, Elliot Ehrlich (former CEO and shareholder)entered into an Accord and Debt Satisfaction Agreement with the Company in which he agreed to release the Company from all liabilitiesincluding the original contract to defer payment of accrued salary dated March 23, 2017, totaling the amount of $222,028 the promissorynote issued by the Company to defer payment of accrued salary; and received cash of $22,203 and 222,028 common shares in satisfaction.The common shares were valued at the market price on the date of settlement at $0.06 per common share. The gain of $186,503 onthe settlement of debt was reflected in the additional paid in capital.

7. Commitments and Contingencies

Office Lease 

On October 1, 2018, the Company executed a lease agreementwith Acuitas Group Holdings, LLC (related party) for the Company’s office at 11601 Wilshire Blvd Ste 1100, Los Angeles, CA90025. The lease is a month-to-month lease that may be cancelled upon 30 days’ written notice and requires monthly paymentsof $1,000.

Challenge to US Patent

On April 30, 2018, the Company received notice that MallinckrodtPharmaceuticals Ireland Limited had petitioned the US Patent and Trademark Office (USPTO) to institute an Inter Partes Review ofBioVie’s US Patent No. 9,655,945 titled “Treatment of Ascites” (the ‘945 patent). Inter Partes Review isa trial proceeding conducted with the USPTO Patent Trial and Appeal Board (PTAB) to review the patentability of one or more claimsof a patent. Such review is limited to grounds of novelty and obviousness on the basis of prior art consisting of patents and printedpublications.

F-30

BIOVIE INC.

Notes to Condensed Financial Statements

For the Six Months Ended December31, 2018 and 2017

(unaudited)

 

7. Commitments and Contingencies (continued)

On August 15, 2018, BioVie submitted a Preliminary Responseto the PTAB providing a rationale as to why, in the Company’s opinion, Mallinckrodt’s request to institute the IPRshould not be granted. On November 14, 2018, the PTAB granted institution of the IPR challenge after determining that there wasa reasonable likelihood of success in proving that at least one of the Company’s 14 claims was unpatentable. BioVie willseek to defend the ‘945 patent and/or pursue a favorable settlement. As of December 31, 2018, no adjustments or accrualsare reflected as the Company is unable to determine a likely outcome at this time.

Royalty Agreements

Pursuant to the Agreement and Plan of Merger enteredinto on April 11, 2016 between LAT Pharma LLC and NanoAntibiotics, Inc., BioVie is obligated to pay a low single digit royaltyon net sales of BIV201 (continuous infusion terlipressin) to be shared among LAT Pharma Members, PharmaIn Corporation; and TheBarrett Edge, Inc.

The Company and PharmaIN Corporation, LAT Pharma’sformer partner focused on the development of new modified drug candidates in the same therapeutic field but not including BIV201,had agreed to pay royalties equal to less than 1% of future net sales of each company's ascites drug development programs, or ifsuch program is licensed to a third party, less than 5% of each company's net license revenues. On December 24, 2018, the Companyreturned its partial ownership rights to the PharmaIN modified terlipressin development program and simultaneously paid the remainingbalance due on a related debt. PharmaIN, Corp. rights to our program remain unchanged.

Pursuant to the Technology Transfer Agreement enteredinto on July 25, 2016 between BioVie and the University of Padova (Italy), BioVie is obligated to pay a low single digit royaltyon net sales of all terlipressin products covered by US patent no. 9,655,645 and any future foreign issuances capped at a maximumof $200,000 per year.

8. Equity Transactions

Stock Options

The following table summarizes the activity relatingto the Company’s stock options for the six months ended December 31, 2018:

   Options  Weighted-Average Exercise Price  Weighted Remaining Average Contractual Term  Aggregate Intrinsic Value
Outstanding at June 30, 2018   5,150,000   $0.12    5.8   $—   
Granted   400,000   $0.06    4.6   $—   
Options Exercised   —     $—      —     $—   
Outstanding at December 31, 2018   5,550,000   $0.11    5.7   $—   
Exercisable at December 31, 2018   4,550,000   $0.11    5.7   $—   

 

F-31

BIOVIE INC.

Notes to Condensed Financial Statements

For the Six Months Ended December31, 2018 and 2017

(unaudited)

 

8. Equity Transactions (continued)

The fair value of each option grant on the date of grantis estimated using the Black-Scholes Option – Pricing model reflecting the following weighted-average assumptions:

   December 31,
   2018  2017
Expected life of options (In years)   5    2 
Expected volatility   67.91%   69.66%
Risk ree interest rate   2.98%   1.59%
Dividend Yield   0%   0%

 

Expected volatility is based on the historical volatilitiesof three comparable companies of the daily closing price of their respective common stick and the expected life of options is basedon historical data with respect to employee exercise periods. The Company accounts for forfeitures as they are incurred.

The Company recorded stock-based compensation expenseof $16,285 and $19,697 for the three-and six-month periods ended December 31, 2018, respectively, and $27,021 and $39,773 for thethree-and six-month periods ended December 31, 2017, respectively.

The fair value of options vested during the six-monthperiod ended December 31, 2018 and 2017, was $6,823 and $16,854 respectively.

As of December 31, 2018, there was approximately $4,966of unrecognized compensation cost related to non-vested options granted which is expected to be recognized over a weighted-averageperiod of 4 months.

The following is a summary of stock options outstandingand exercisable by exercise price as of December 31, 2018:

      Weighted Average   
Exercise Price  Outstanding  Contract Life  Exercisable
$0.05    300,000    4.8    300,000 
$0.06    3,100,000    7.2    2,100,000 
$0.07    100,000    4.8    100,000 
$0.10    500,000    4.1    500,000 
$0.20    200,000    3.8    200,000 
$0.21    550,000    3.3    550,000 
$0.22    100,000    3.2    100,000 
$0.23    200,000    3.6    200,000 
$0.25    500,000    2.9    500,000 
 Total    5,550,000         4,550,000 

 

F-32

BIOVIE INC.

Notes to Condensed Financial Statements

For the Six Months Ended December31, 2018 and 2017

(unaudited)

 

8. Equity Transactions (continued)

Offerings of Common Stock and Warrants

Issuance of Shares for Cash

On July 3, 2018, BioVie Inc., the Company, entered intoa Securities Purchase Agreement (the “Purchase Agreement”) with Acuitas Group Holdings, LLC (“Acuitas”)and certain other purchasers identified in the Purchase Agreement (together with Acuitas, the “Purchasers”) pursuantto which (i) the Purchasers agreed to purchase an aggregate of 2,133,332 shares of the Company’s newly created Series A ConvertiblePreferred Stock (the “Preferred Stock”) at a price per share of $1.50 per share of Preferred Stock (the “InitialSale”) and (ii) the Company will issue associated warrants (the “Warrants”) to purchase 213,333,200 shares ofthe Company’s Class A Common Stock (the “Common Stock”), each subject to the terms and conditions set forth inthe Purchase Agreement, for an aggregate consideration of $3.2 million. The Company received $160,000 of the $3.2 million in Apriland May 2018 as prepaid equity. Acuitas also received an additional 833,333 Warrants in connection with the payoff of a note issuedby the Company in favor of Acuitas. The Initial Sale and issuance of the Warrants occurred on July 3, 2018. In addition, Acuitashas the option to purchase up to an additional 200,000,000 shares of Common Stock at a price per share of $0.015, and associatedwarrants on the same terms as the Warrants, within two weeks following the one year anniversary of the closing of the Initial Sale(the “Subsequent Sale”) in the event that the Company has not obtained $3,000,000 of funding through various non-dilutivegrants prior to the one year anniversary of the closing of the Initial Sale.

Each share of Preferred Stock automatically convertedinto 100 shares of Common Stock upon the filing with the Secretary of State of the State of Nevada of a Certificate of Amendmentto the Company’s Articles of Incorporation (the “Amendment”) on August 13, 2018 that increased the number ofauthorized shares of Common Stock to 800,000,000. The Amendment was approved by the written consent of the holders of more thana majority of the Company’s issued and outstanding Common Stock on July 3, 2018 and was filed with the Secretary of Stateof the State of Nevada 20 calendar days following the distribution of the Company’s Definitive Information that was filedwith the Securities and Exchange Commission.

The purchase price of the Preferred Stock in the InitialSale, the exercise price of the Warrants, and the Common Stock in the Subsequent Sale is subject to adjustment. In the event thatMallinckrodt Pharmaceuticals Ireland Limited prevails in any proceeding which results in the useful life of the Company’scurrent intellectual property rights being reduced by more than 75 percent, then the price per share of Common Stock, the associatedconversion ratio of the Preferred Stock, and the exercise price of the Warrants shall be retroactively adjusted to 50 percent ofthe then-effective price per share of Common Stock under the Purchase Agreement (for example, if the then-effective price per shareof Common Stock is $0.015, then following such event, the price per share will be $0.0075). In this case, the Company may be requiredto issue additional shares of Common Stock, but in no event will the Company be required to pay cash, to reflect such lower priceper share.

The Purchase Agreement contained customary representationsand warranties. In connection with the disclosure schedule associated with the representations and warranties, the Company alsodisclosed customary information, including the following: (i) the existence of the Mallinckrodt Pharmaceuticals Ireland Limitedpetition before the US Patent Trial and Appeal Board, (ii) the current capitalization of the Company, (iii) the Company’sobligation to pay a low single digit royalty on the net sales of BIV201 (continuous infusion terlipressin) to be shared among LATPharma LLC members, PharmaIN Corporation and The Barrett Edge, Inc. pursuant to the Agreement and Plan of Merger, dated April 11,2016, by and between LAT Pharma LLC and the Company, (iv) the Company’s obligation to pay a low single digit royalty on netsales of all terlipressin products covered by specified patents up to a maximum of $200,000 per year pursuant to the TechnologyTransfer Agreement, dated July 25, 2016, by and between the Company and the University of Padova (Italy),and (v) certain recent issuances of Common Stock by the Company.

F-33

BIOVIE INC.

Notes to Condensed Financial Statements

For the Six Months Ended December31, 2018 and 2017

(unaudited)

 

8. Equity Transactions (continued)

Pursuant to the Purchase Agreement, Terren Peizer, theChairman of Acuitas, was appointed as a member of the Company’s Board of Directors (the “Board”) and as the ChiefExecutive Officer of the Company, effective July 3, 2018. The issuance of the Preferred Stock, the Warrants and the underlyingcommon stock under the Purchase Agreement is exempt from registration under the Securities Act of 1933, as amended (the “SecuritiesAct”), pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) ofthe Securities Act.

Issuance of Shares in Settlement of Debt

During the six months ended December 31, 2018, the Companysettled $1,475,765 of debt including $1,313,765 owed to related parties, by issuing 975,361 shares of common stock with a fairvalue of $1,150,135. See notes 5 and 6.

Issuance of Stock Options

On October 1, 2018, the Company issued stock optionsto purchase 100,000 shares of common stock to the Chief Financial Officer as part of her compensation. The stock options were issuedand are exercisable at an exercise price of $0.07 at any time from date of issuance and expire in 5 years from the date of issuance.

On October 13, 2018, the Company issued stock optionsto purchase 100,000 shares of common stock as part of their annual board of director compensation. The stock options were issuedand are exercisable at $0.05 at any time from date of issuance and expire in 5 years from the date of issuance.

On October 27, 2018, the Company issued stock optionsto purchase 100,000 shares of common stock as part of their annual board of director compensation. The stock options were issuedand are exercisable at $0.05 at any time from date of issuance and expire in 5 years from the date of issuance

On November 10, 2018, the Company issued stock optionsto purchase 100,000 shares of common stock as part of their annual board of director compensation. The stock options are exercisableat an exercise price of $0.05 at any time from date of issuance and expire in 5 years from the date of issuance.

Cashless exercise of warrant

On August 4, 2018, the Company issued 2,241,913 sharesof common stock pursuant to a cash less exercise of warrants to purchase 2,500,000 shares at an exercise price of $0.015 per share.As a result of the conversion of the Series A Preferred Stock in July 2018, the exercise of warrants to purchase 2,500,000 sharesof common stock was reduced from $0.15 per share to $0.015 per share.

Warrant Price Adjustment

In December 2017, the Company issued warrants topurchase 2,500,000 shares of common stock in a private placement transaction for aggregate gross proceeds of $100,000. Thewarrants were exercisable at an exercise price of $0.20 at any time from date of issuance until 7 years from the date ofissuance. The warrants have a down round feature that reduces the exercise price if the Company sells stock for a lowerprice. In January 2018, the Company sold shares at $0.15, which therefore triggered the reduction in the strike price. TheCompany calculated the difference in fair value of the warrants between the stated exercise price and the reduced exerciseprice and recorded $20,995 as a deemed dividend. In July 2018, the Company sold shares at $0.015, which therefore triggeredthe reduction in the strike price. The Company calculated the difference in fair value of the warrants between the statedexercise price and the reduced exercise price and recorded $44,889 as a deemed dividend. The fair value of the warrantsgranted was estimated using the Black Scholes Method.

F-34

BIOVIE INC.

Notes to Condensed Financial Statements

For the Six Months Ended December31, 2018 and 2017

(unaudited)

 

8. Equity Transactions (continued)

In January 2018, the Company issued warrants to purchase210,000 shares of common stock in exchange for banking services which was recognized at fair value. The warrants were exercisableat an exercise price of $0.15 at any time from date of issuance until 7 years from the date of issuance. The warrants have a downround feature that reduces the exercise price if the Company sells stock for a lower price. In July 2018, the Company sold sharesat $0.015, which therefore triggered the reduction in the strike price. The Company calculated the difference in fair value ofthe warrants between the stated exercise price and the reduced exercise price and recorded $3,770 as a deemed dividend. The fairvalue of the warrants granted was estimated using the Black Scholes Method.

The following table summarizes the warrants that havebeen issued:

   Number of  Weighted Average  Weighted Average Remaining  Aggregate Intrinsic
   Shares  Exercise Price  Life (Years)  Value
Outstanding at June 30, 2018   4,774,015   $0.29    5.0   $—   
Granted   214,166,533   $0.02    5.5   $2,141,665 
Expired   —     $—      —     $—   
Exercised   (2,500,000)  $0.02    —     $—   
Outstanding and exercisable at December 31, 2018   216,440,548   $0.02    5.5   $2,141,665 

 

Of the above warrants, 1,173,864 expire in fiscal yearending June 30, 2022, 556,818 expire in fiscal year ending June 30, 2023, and 214,709,866 expire in fiscal year ending June 30,2025.

9. Subsequent Event

On January 15, 2019, the Company issued 1,400,000 sharesof common stock as part of the annual board of director compensation. The share price on date of issuance was $0.035 per share.

On January 19, 2019, the Company issued stock optionsto purchase 100,000 shares of common stock to each of five key employees or consultants and two company directors as part of hisor her annual compensation, for an aggregate total of 700,000 stock options. The stock options are exercisable at an exercise priceof $0.025 at any time from date of issuance until 5 years from the date of issuance.

F-35

       Shares of Common Stock

 

 

CzAwX4YXEAAAOf2 (1)

 

 

 

 

BioVie Inc.

 

 

 

 

 

 
PROSPECTUS
 

 

ThinkEquity

a division of Fordham Financial Management,Inc.

          

 

   , 2019

Throughand including             , 2019 (the 25thday after the date of this offering), all dealers effecting transactions in these securities, whetheror not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligationto deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

 
 

PART II – INFORMATION NOT REQUIREDIN PROSPECTUS

 

Item 13. Other Expenses of Issuance and Distribution

 

The following table sets forth the expensesin connection with this registration statement. All of such expenses are estimates, other than the filing fees payable to the Securitiesand Exchange Commission and to FINRA.

 

    Amount
to be paid
 
SEC registration fee   $ 2,787.60  
FINRA filing fee   $ 3,950.00  
The NASDAQ Capital Market initial listing fee   $   *
Transfer agent and registrar fees   $   *
Accounting fees and expenses   $   *
Legal fees and expenses   $   *
Printing expenses   $   *
Total   $   *

 

  * To be completed by amendment

 

Item 14. Indemnification of Directors and Officers

 

We are a Nevada corporation and generally governed by theNevada Private Corporations Code, Title 78 of the Nevada Revised Statutes, or NRS.

 

Section 78.138 of the NRS provides that, unless the corporation’sarticles of incorporation provide otherwise, a director or officer will not be individually liable unless it is proven that (i)the director’s or officer’s acts or omissions constituted a breach of his or her fiduciary duties, and (ii) such breachinvolved intentional misconduct, fraud or a knowing violation of the law.

 

Section 78.7502 of the NRS permits a Nevada corporation toindemnify its directors and officers against expenses, judgments, fines, and amounts paid in settlement actually and reasonablyincurred in connection with a threatened, pending, or completed action, suit, or proceeding, except an action by or on behalf ofthe corporation, if the officer or director (i) is not liable pursuant to NRS 78.138, or (ii) acted in good faith and in a mannerthe officer or director reasonably believed to be in or not opposed to the best interests of the corporation and, if a criminalaction or proceeding, had no reasonable cause to believe the conduct of the officer or director was unlawful. Section 78.7502 ofthe NRS also requires a corporation to indemnify its officers and directors if they have been successful on the merits or otherwisein defense of any claim, issue, or matter resulting from their service as a director or officer.

 

Section 78.751 of the NRS permits a Nevada corporation toindemnify its officers and directors against expenses incurred by them in defending a civil or criminal action, suit, or proceedingas they are incurred and in advance of final disposition thereof, upon determination by the stockholders, the disinterested boardmembers, or by independent legal counsel. Section 78.751 of NRS requires a corporation to advance expenses as incurred upon receiptof an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competentjurisdiction that such officer or director is not entitled to be indemnified by the corporation if so provided in the corporation’sarticles of incorporation, bylaws, or other agreement. Section 78.751 of the NRS further permits the corporation to grant its directorsand officers additional rights of indemnification under its articles of incorporation, bylaws or other agreement.

 

II-1

Section 78.752 of the NRS provides that a Nevada corporationmay purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer,employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee oragent of another company, partnership, joint venture, trust or other enterprise, for any liability asserted against him and liabilityand expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whetheror not the corporation has the authority to indemnify him against such liability and expenses.

 

Our Articles of Incorporation and bylaws implement the indemnificationand insurance provisions permitted by Chapter 78 of the NRS by providing that:

 

· We shall indemnify our directors and officers to the fullest extent permitted by the NRS against expense, liability and loss reasonably incurred or suffered by them in connection with their service as an officer or director; and

 

  · We may purchase and maintain insurance, or make other financial arrangements, on behalf of any person who holds or who has held a position as a director, officer, or representative against liability, cost, payment, or expense incurred by such person.

 

At the present time, there is no pending litigation or proceedinginvolving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We arenot aware of any threatened litigation or proceeding which may result in a claim for such indemnification.

 

Item 15. Recent Sales of Unregistered Securities

 

The Company has not sold any within the past three yearswhich were not registered under the Securities Act except as follows:

 

Acuitas Group Transaction

 

On July 3, 2018, the registrant, entered into a SecuritiesPurchase Agreement (the “Purchase Agreement”) with Acuitas Group Holdings, LLC (“Acuitas”) and certainother purchasers identified in the Purchase Agreement (together with Acuitas, the “Purchasers”) pursuant to which (i)the Purchasers agreed to purchase an aggregate of 2,133,332 shares of the Company’s newly created Series A Convertible PreferredStock (the “Preferred Stock”) at a price per share of $1.50 per share of Preferred Stock (the “Initial Sale”)and (ii) the registrant agreed to issue associated warrants (the “Warrants”) to purchase 213,333,200 shares of theregistrant’s Class A Common Stock (the “Common Stock”), each subject to the terms and conditions set forth inthe Purchase Agreement, for an aggregate consideration of $3.2 million. The registrant received $160,000 of the $3.2 million inApril and May 2018 as prepaid equity. Acuitas also received an additional 833,333 Warrants in connection with the payoff of a noteissued by the registrant in favor of Acuitas. The Initial Sale and issuance of the Warrants occurred on July 3, 2018. In addition,Acuitas has the option to purchase up to an additional 200,000,000 shares of Common Stock at a price per share of $0.015, and associatedwarrants on the same terms as the Warrants, within two weeks following the one year anniversary of the closing of the Initial Sale(the “Subsequent Sale”) in the event that the registrant has not obtained $3,000,000 of funding through various non-dilutivegrants prior to the one year anniversary of the closing of the Initial Sale, less any federal or FDA grant funding received bythe Company.

 

Each share of Preferred Stock automatically converted into100 shares of Common Stock upon the filing with the Secretary of State of the State of Nevada of a Certificate of Amendment tothe registrant’s Articles of Incorporation (the “Amendment”) on August 13, 2018 that increased the number ofauthorized shares of Common Stock to 800,000,000. The Amendment was approved by the written consent of the holders of more thana majority of the registrant’s issued and outstanding Common Stock on July 3, 2018 and was filed with the Secretary of Stateof the State of Nevada 20 calendar days following the distribution of the registrant’s Definitive Information that was filedwith the Securities and Exchange Commission.

 

II-2

The purchase price of the Preferred Stock in the InitialSale, the exercise price of the Warrants, and the Common Stock in the Subsequent Sale is subject to adjustment. In the event thatMallinckrodt Pharmaceuticals Ireland Limited prevails in any proceeding which results in the useful life of the registrant’scurrent intellectual property rights being reduced by more than 75 percent, then the price per share of Common Stock, the associatedconversion ratio of the Preferred Stock, and the exercise price of the Warrants shall be retroactively adjusted to 50 percent ofthe then-effective price per share of Common Stock under the Purchase Agreement (for example, if the then-effective price per shareof Common Stock is $0.015, then following such event, the price per share will be $0.0075). In this case, the registrant may berequired to issue additional shares of Common Stock, but in no event will the registrant be required to pay cash, to reflect suchlower price per share.

 

The issuance of the Preferred Stock, the Warrants and theunderlying common stock under the Purchase Agreement is exempt from registration under the Securities Act of 1933, as amended (the“Securities Act”), pursuant to the exemption for transactions by an issuer not involving any public offering underSection 4(a)(2) of the Securities Act.

 

Aspire Capital Transaction

 

On January 4, 2017, the registrant entered into a CommonStock Purchase Agreement, or the Purchase Agreement, with Aspire Capital Fund, LLC, an Illinois limited liability company, or AspireCapital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital iscommitted to purchase up to an aggregate of $12.0 million of shares of the registrant’s common stock (the “PurchaseShares”) over the 30-month term of the Purchase Agreement.

 

Upon execution of the Purchase Agreement, the registrantissued 2,400,000 shares of its common stock to Aspire Capital in consideration for entering into the Purchase Agreement, and soldan additional 1,000,000 shares and warrants relating to 500,000 shares for aggregate proceeds of $200,000. The Purchase Sharesmay be sold by the registrant to Aspire Capital on any business day the registrant selects in two ways: (1) through a regularpurchase of up to 100,000 shares at a known price based on the market price of our common stock prior to the time of each sale,and (2) through a VWAP purchase on the terms and conditions set forth in the Purchase Agreement.

 

The issuance of the 2,400,000 Commitment Shares, 1,000,000Initial Purchase Shares and all other shares of common stock that may be issued from time to time to Aspire Capital under the PurchaseAgreement is exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuantto the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act.

 

Aspire Capital Transaction

 

In the second quarter of the registrant’s fiscal yearending June 30, 2017, the registrant sold 575,000 shares to a number of accredited investors for $0.20 per share, for aggregategross proceeds of $115,000. The registrant also issued warrants to purchase 287,500 shares to such investors, which warrants expirefive years following issuance and are exercisable for $0.50 per share. Mr. James Lang, who joined the registrant’s Boardof Directors on December 7, 2016, purchased 250,000 shares and received warrants to purchase 125,000 shares on November 11, 2016.

 

The issuance of the shares and warrants to the accreditedinvestors was exempt from registration under the Securities Act pursuant to Rule 506(b) of Regulation D under the Securities Act.

 

II-3

Item 16. Exhibits

 

The following is a list of exhibits filed as a part of thisregistration statement:

 

Exhibit
Number
  Description of Document
1.1   Form of Underwriting Agreement.*
2.1   Agreement and Plan of Merger, dated April 11, 2016, among the Company, LAT Acquisition Corp and LAT Pharma, LLC (incorporated by reference to Exhibit 2.1 the Company’s Current Report on Form 8-K filed on April 15, 2016).
3.1   Articles of Incorporation of the Company as filed with the Secretary of State of Nevada (incorporated by reference to Exhibit 3.1 to the Company’s registration statement on Form S-1 filed on August 15, 2013, File No. 333-190635).
3.2   Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on July 22, 2016).
3.3   Certificate of Amendment to Articles of Incorporation (incorporated by reference to Appendix A to the Company’s Information Statement on Schedule 14C filed on July 13, 2018).
3.4   Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred STock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on July 3, 2018).
3.5   Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s registration statement on Form S-1 filed on August 15, 2013, File No. 333-190635).
4.1   Specimen Certificate representing shares of Class A Common Stock. 
4.2   Form of Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on July 3, 2018).
4.2