BIOVIE INC

BioVie Inc. (the “Company” or “we” or “our”) is a clinical-stage company developing innovative drug therapies to treat chronic debilitating conditions including neurological and neuro-degenerative disorders and liver disease.

The Company acquired the biopharmaceutical assets of NeurMedix, Inc. (“NeurMedix”) a privately held clinical-stage pharmaceutical company and a related party in June 2021*.* The acquired assets included NE3107. NE3107 is an investigational, novel, orally administered small molecule that is thought to inhibit inflammation-driven insulin resistance and major pathological inflammatory cascades with a novel mechanism of action. There is emerging scientific consensus that both inflammation and insulin resistance may play fundamental roles in the development of Alzheimer’s disease (“AD”) and Parkinson’s disease (“PD”), and NE3107 could, if approved by U.S. Food and Drug Administration (“FDA”), represent an entirely new medical approach to treating these devastating conditions affecting an estimated 6 million Americans suffering from AD and 1 million Americans suffering from PD.

Neurodengenerative Disease Program

In neurodegenerative disease, the Company’s drug candidate NE3107 inhibits activation of inflammatory actions extracellular single-regulated kinase (“ERK”) and nuclear factor kappa-light-chain-enhancer of activated B cells (“NFκB”) (including interactions with tumor necrosis factor (“TNF”) signaling and other relevant inflammatory pathways) that lead to neuroinflammation and insulin resistance. NE3107 does not interfere with their homeostatic functions (e.g., insulin signaling and neuron growth and survival). Both inflammation and insulin resistance are drivers of AD and PD.

Alzheimer’s Disease (NCT05083260)

On November 29, 2023, the Company announced the analysis of its unblinded, topline efficacy data from its Phase 3 clinical trial (NCT04669028) of NE3107 in the treatment of mild to moderate AD. The study has co-primary endpoints looking at cognition using the Alzheimer’s Disease Assessment Scale-Cognitive Scale (ADAS-Cog 12) and function using the Clinical Dementia Rating-Sum of Boxes (CDR-SB). Patients were randomly assigned, 1:1 versus placebo, to receive sequentially 5 mg of NE3107 orally twice a day for 14 days, then 10 mg orally twice a day for 14 days, followed by 26 weeks of 20 mg orally twice daily.

Upon trial completion, as the Company began the process of unblinding the trial data, the Company found significant deviation from protocol and current good clinical practices (“cGCPs”) violations at 15 study sites (virtually all of which were from one geographic area). This highly unusual level of suspected improprieties led the Company to exclude all patients from these sites and to refer the sites to the FDA Office of Scientific Investigations (“OSI”) for further action. After the patient exclusions, 81 patients remained in the Modified Intent to Treat population, 57 of whom were in the Per-Protocol population which included those who completed the trial and were verified to take study drug from pharmacokinetic data.

The trial was originally designed to be 80% powered with 125 patients in each of the treatment and placebo arms. The unplanned exclusion of so many patients has left the trial underpowered for the primary endpoints. In the Per-Protocol population, which included those patients who completed the trial and who were further verified to have taken the study drug (based on pharmacokinetic data), an observed descriptive change from baseline appeared to suggest a slowing of cognitive loss; these same patients experienced an advantage in age deceleration vs. placebo as measured by DNA epigenetic change. Age deceleration is used by longevity researchers to measure the difference between the patient’s biological age, in this case as measured by the Horvath DNA methylation Skin Blood Clock, relative to the patient’s actual chronological age. This test was a non-primary/secondary endpoint, other-outcome measure, done via blood test collected at week 30 (end of study). Additional DNA methylation data continues to be collected and analyzed.

Parkinson’s Disease (NCT05083260)

The Phase 2 study of bezisterim (NE3107) for the treatment of PD (NCT05083260), completed in December 2022, was a double-blind, placebo-controlled, safety, tolerability, and pharmacokinetics study in PD participants treated with carbidopa/levodopa and bezisterim (NE3107). Forty-five patients with a defined L-dopa “off state” were randomized 1:1 to placebo: bezisterim (NE3107) 20 mg twice daily for 28 days. This trial was launched with two design objectives: 1) the primary objective was safety and a drug-drug interaction study as requested by the FDA to measure the potential for adverse interactions of bezisterim (NE3107) with carbidopa/ levodopa; and 2) the secondary objective was to determine if preclinical indications of promotoric activity and apparent enhancement of levodopa activity could be seen in humans. Both objectives were met.

Long COVID Program

In April 2024, the Company announced the grant of a clinical trial award of up to $13.1 million from the U.S. Department of Defense (“DOD”), awarded through the Peer Reviewed Medical Research Program (“PRMRP”) of the Congressionally Directed Medical Research Programs (“CDMRP”). The award can provide up to 2 years of non-dilutive funding for a Phase 2b clinical trial that will assess bezisterim (NE3107) for the treatment of neurological symptoms that are associated with long COVID. The Company anticipates the trial to commence by early 2025.

Long COVID is a condition in which symptoms of COVID-19, the acute respiratory disease caused by the SARS-CoV-2 virus, persist for an extended period of time, generally three months or more. The Centers for Disease Control recently reported that 6.8% of adults in the United States (more than 17 million individuals) currently or previously had long COVID. Symptoms, which include fatigue, cognitive dysfunction and sleep disturbances, are debilitating. The loss in quality of life and earnings and increased medical costs has an enormous economic impact estimated to be 3.7 trillion dollars. To date there are no therapies proven effective for treatment.

Chronic inflammation is one of the main hypotheses that researchers have proposed to explain the persistence of symptoms in long COVID. Specifically in individuals with “brain fog,” sustained systemic inflammation and persistent localized blood-brain-barrier (“BBB”) dysfunction are key physiological features. Bezisterim (NE3107) permeates the BBB and has been shown to modulate inflammation via the activation of NF-kB, thus representing a novel oral treatment targeting an underlying cause of long COVID symptoms.

Neuroinflammation, insulin resistance, and oxidative stress are common features in the major neurodegenerative diseases, including AD, PD, frontotemporal lobar dementia, and Amyotrophic lateral sclerosis. Bezisterim (NE3107) is an investigational oral small molecule, blood-brain permeable, compound with potential anti-inflammatory, insulin sensitizing, and ERK-binding properties that may allow it to selectively inhibit ERK-, NFκB- and TNF-stimulated inflammation. Bezisterim’s (NE3107) potential to inhibit neuroinflammation and insulin resistance forms the basis for the Company’s work testing the molecule in AD, PD, and long COVID patients. Bezisterim (NE3107) is patented in the United States, Australia, Canada, Europe and South Korea.

Liver Disease Program

In liver disease, our investigational drug candidate BIV201 (continuous infusion terlipressin), which has been granted both FDA Fast Track designation status and FDA Orphan Drug status, is being evaluated and discussed after receiving guidance from the FDA regarding the design of Phase 3 clinical testing of BIV201 for the treatment of ascites due to chronic liver cirrhosis. BIV201 is administered as a patent-pending liquid formulation.

In June 2021, the Company initiated a Phase 2 study (NCT04112199) designed to evaluate the efficacy of BIV201 (terlipressin, administered by continuous infusion for two 28-day treatment cycles) combined with standard-of-care (“SOC”), compared to SOC alone, for the treatment of refractory ascites. The primary endpoints of the study are the incidence of ascites-related complications and change in ascites fluid accumulation during treatment compared to a pre-treatment period.

In March 2023 the company announced enrollment was paused and that data from the first 15 patients treated with BIV201 plus SOC appeared to show at least a 30% reduction in ascites fluid during the 28 days after treatment initiation compared to the 28 days prior to treatment. The change in ascites volume was significantly different from those patients receiving SOC treatment. Patients who completed the treatment with BIV201 experienced a 53% reduction in ascites fluid, which was sustained (43% reduction) during the three months after treatment initiation as compared to the three-month pre-treatment period.

In June 2023, the Company requested and subsequently received guidance from the FDA regarding the design and endpoints for definitive clinical testing of BIV201 for the treatment of ascites due to chronic liver cirrhosis. The Company is currently finalizing protocol designs for the Phase 3 study of BIV201 for the treatment of ascites due to chronic liver cirrhosis.

While the active agent, terlipressin, is approved in the U.S. and in about 40 countries for related complications of advanced liver cirrhosis, treatment of ascites is not included in these authorizations. Patients with refractory ascites suffer from frequent life-threatening complications, generate more than $5 billion in annual treatment costs, and have an estimated 50% mortality rate within 6 to 12 months. The FDA has not approved any drug to treat refractory ascites.

The BIV201 development program was initiated by LAT Pharma LLC. On April 11, 2016, the Company acquired LAT Pharma LLC and the rights to its BIV201 development program. The Company currently owns all development and marketing rights to this drug candidate. Pursuant to the Agreement and Plan of Merger entered into on April 11, 2016, between our predecessor entities, LAT Pharma LLC and NanoAntibiotics, Inc., BioVie is obligated to pay a low single digit royalty on net sales of BIV201 (continuous infusion terlipressin) to be shared among LAT Pharma Members, PharmaIn Corporation, and The Barrett Edge, Inc.

The Company’s operations are subject to a number of factors that can affect its operating results and financial conditions. Such factors include, but are not limited to: the results of clinical testing and trial activities of the Company’s products, the Company’s ability to obtain regulatory approval to market its products; competition from products manufactured and sold or being developed by other companies; the price of, and demand for, Company products; the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products; and the Company’s ability to raise capital. The Company’s financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of March 31, 2024, the Company had working capital of approximately $18.1 million, cash and cash equivalents of approximately $30.4 million, stockholders’ equity of approximately $18.9 million, and an accumulated deficit of approximately $329.3 million. The Company is in the pre-revenue stage and no revenues are expected in the foreseeable future. The Company’s future operations are dependent on the success of the Company’s ongoing development and commercialization efforts, as well as its ability to secure additional financing as needed. Although our cash balance is projected to sustain operations over the next nine months from the balance sheet date. Projected cash flows could be extended beyond that period of time, if further measures are taken to delay planned expenditures in our research protocols and slow the progress in the Company’s development and launch of next phase clinical programs, the Company’s current planned operations to meet certain goals and objectives.

The future viability of the Company is largely dependent upon its ability to raise additional capital to finance its operations. Management expects that future sources of funding may include sales of equity, obtaining loans, or other strategic transactions.

Although management continues to pursue the Company’s strategic plans, there is no assurance that the Company will be successful in obtaining sufficient financing on terms acceptable to the Company, if at all, to fund continuing operations. These circumstances raise substantial doubt on the Company’s ability to continue as a going concern. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis of Presentation – Interim Financial Information

These unaudited interim condensed financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United State of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”) for Interim Reporting. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed financial statements furnished reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. The condensed balance sheet at June 30, 2023 was derived from audited annual financial statements but does not contain all the footnote disclosures from the annual financial statements. These unaudited interim condensed financial statements should be read in conjunction with the Company’s audited financial statements for the fiscal years ended June 30, 2023 and 2022 in our Annual Report on Form 10-K filed with the SEC on August 16, 2023 (the “2023 Form 10-K”). A summary of significant accounting policies can also be found in those audited financial statements in the 2023 Form 10-K.

Net loss per Common Share

Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock, par value $0.0001 per share (“common stock”), outstanding during the period. Diluted net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through stock options, warrants, and restricted stock units. For the three and nine months ended March 31, 2024 and 2023, such amounts were excluded from the diluted loss since their effect was considered anti-dilutive due to the net loss for the periods.

The table below shows the number of outstanding stock options, warrants and restricted stock units as of March 31, 2024 and 2023:

Recent Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”). There have been no recent ASUs that are expected to have a material impact on the Company’s balance sheets or statements of operations and comprehensive loss since the 2023 Form 10-K.

*Cash and cash equivalents *

Cash and cash equivalents consisted of cash deposits and money market funds held at banks and funds held in brokerage accounts which included a U.S. treasury money market fund and U.S. Treasury Bills with original maturities of three months or less.

Investments in U.S. Treasury Bills

Investments in U.S. Treasury Bills with maturities greater than three months on the date of purchase, are accounted for as available for sale and are recorded at fair value. Unrealized gains were included in other comprehensive (loss) income in the accompanying condensed statements of operations and comprehensive loss. Upon the maturity and settlement of these investments, realized gains were recorded as a component of interest income on the accompanying condensed statement of operations and comprehensive loss.

Concentration of Credit Risk in the Financial Service Industry

As of March 31, 2024, the Company had cash deposited in certain financial institutions in excess of federally insured levels. The Company regularly monitors the financial stability of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents. However, in March and April 2023, certain U.S. government banking regulators took steps to intervene in the operations of certain financial institutions due to liquidity concerns, which caused general heightened uncertainties in financial markets. While these and other current events have not had a material direct impact on the Company’s operations, if further liquidity and financial stability concerns arise with respect to banks and financial institutions, either nationally or in specific regions, the Company’s ability to access cash or enter into new financing arrangements may be threatened, which could have a material adverse effect on its business, financial condition and results of operations.

Fair value measurement of assets and liabilities

We determine the fair values of our financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 – Inputs are unobservable inputs based on our assumptions.

The Company’s financial instruments include cash, accounts payable, the carrying value of the operating lease liabilities, notes payable and other derivative liabilities (see Note 9). The carrying amounts of cash and accounts payable approximate their fair value, due to the short-term nature of these items. The carrying amounts of notes payable and operating lease liabilities approximate their fair values since they bear interest at rates which approximate market rates for similar debt instruments.

The following is a summary of the U.S. Treasury Bills held at June 30, 2023:

During the fiscal year ended June 30, 2023, the Company purchased a total of approximately $46 million of U.S. Treasury Bills. All outstanding investments in U.S. Treasury Bills available for sale held at June 30, 2023 matured during the three months ended September 30, 2023 and were settled, resulting in a realized gain of $223,865 recorded as a component of interest income on the accompanying condensed statement of operations and comprehensive loss.

The Company’s intangible assets consist of intellectual property acquired from LAT Pharma and are amortized over their estimated useful lives.

The following is a summary of the Company’s intangible assets:

Amortization expense was $57,344 in each of the three-month periods ended March 31, 2024 and 2023. Amortization expense was $172,033 in each of the nine-month periods ended March 31, 2024 and 2023. The Company amortizes intellectual property over the expected, original useful lives of 10 years.

Estimated future amortization expense is as follows:

Equity Transactions with Acuitas

On July 15, 2022, the Company entered into a securities purchase agreement with Acuitas Group Holdings, LLC (“Acuitas”), the Company’s majority stockholder, pursuant to which Acuitas agreed to purchase from the Company, in a private placement, (i) an aggregate of 3,636,364 shares of the Company’s Common Stock, at a price of $1.65 per share (the “PIPE Shares”), and (ii) a warrant to purchase 7,272,728 shares of Common Stock (“PIPE Warrant Shares”), at an exercise price of $1.82, with a term of exercise of five years. The warrant’s down round feature reduced the exercise price of the warrant to $1.00 per share on March 6, 2024 in connection with the offering further described in Note 10 as the Company sold stock at a price lower than the initial exercise price of the warrant. The Company calculated the difference in fair value of the warrants between the stated exercise price and the reduced exercise price and recorded $886,423 as a deemed dividend. The fair value of the warrants were estimated using the Black Scholes Method with the following inputs, the stock price of $1.07, exercise price of $1.82 and $1.00, remaining term 3.4 years, risk free rate of 4.4% and volatility of 95.0%.

On August 15, 2022, the Company received net proceeds of approximately $5.9 million, net of costs of approximately $94,000, and entered into an amended and restated registration agreement with Acuitas, which amended and restated that certain registration rights agreement, dated as of June 10, 2021, by and between the Company and Acuitas (the “Existing Registration Rights Agreement”), to amend the definition of “Registrable Securities” in the Existing Registration Rights Agreement to include the PIPE Shares and the PIPE Warrant Shares as Registrable Securities thereunder.

The current portion of other liabilities at June 30, 2023 was approximately $48,000 and represented the remaining balance of a retention bonus payable for arrangements with certain employees, which was paid in July 2023.

On November 30, 2021 (the “Closing Date”), the Company entered into a Loan and Security Agreement and the Supplement to the Loan and Security Agreement and Promissory Notes (together, the “Loan Agreement”) with Avenue Venture Opportunities Fund, L.P. (“AVOPI”) and Avenue Venture Opportunities Fund II, L.P. (“AVOPII,” and together with AVOPI, “Avenue”) for growth capital loans in an aggregate commitment amount of up to $20 million (the “Loan”). On the Closing Date, $15 million of the Loan was funded (“Tranche 1”). The Loan provided for an additional $5 million to be available to the Company on or prior to September 15, 2022, subject to the Company’s achievement of certain milestones with respect to certain of its ongoing clinical trials, which were not achieved. The Loan bears interest at an annual rate equal to the greater of (a) the sum of 7.00% plus the prime rate as reported in The Wall Street Journal and (b) 10.75%. The prime rate at March 31, 2024 was 8.50%. The Loan is secured by a lien upon and security interest in all of the Company’s assets, including intellectual property, subject to agreed exceptions. The maturity date of the Loan is December 1, 2024.

The Loan Agreement required monthly interest-only payments during the first eighteen months of the term of the Loan. Following the interest-only period, on July 1, 2023, the Company pays equal monthly payments of principal, plus accrued interest, until the Loan’s maturity date when all remaining principal and accrued interest is due. If the Company prepays the Loan, it will be required to pay (a) a prepayment fee in an amount equal to 3.0% of the principal amount of the Loan that is prepaid during the interest-only period; and (b) a prepayment fee in an amount equal to 1.0% of the principal amount of the Loan that is prepaid after the interest-only period. At the Loan’s maturity date, or on the date of the prepayment of the Loan, the Company will be obligated to pay a final payment equal to 4.25% of the Loan commitment amount, the sum of Tranche 1 and Tranche 2.

The Loan Agreement includes a conversion option to convert up to $5.0 million of the principal amount of the Loan outstanding at the option of Avenue, into shares of the Company’s Common Stock at a conversion price of $6.98 per share.

On the Closing Date, the Company issued to Avenue warrants to purchase 361,002 shares of Common Stock of the Company (the “Avenue Warrants”) at an exercise price per share equal to $5.82. The Avenue Warrants are exercisable until November 30, 2026.

The amount of the carrying value of the notes payable was determined by allocating portions of the outstanding principal of the notes; approximately $1.4 million to the fair value of the Avenue Warrants and approximately $2.2 million to the fair value of the embedded conversion option. Accordingly, the total amount of unearned discount of approximately $3.6 million, the total direct financing cost of approximately $390,000 and premium of $850,000 being recognized on an effective interest method over the term of the Loan. The adjusted effective interest rate is 25%.

The total interest expense of approximately $629,000 and $1.1 million for the three months ended March 31, 2024 and 2023, respectively, was recognized in the accompanying condensed statements of operations and comprehensive loss. Interest expense for the three months ended March 31, 2024 and 2023 included the interest payments totaling approximately $327,000 and $547,000, the amortization of financing costs of approximately $24,000 and $43,000, unearned discount of approximately $222,000 and $400,000 and the accretion of loan premium of approximately $52,000 and $93,000, respectively. The total interest expense of approximately $2.5 million and $3.2 million for the nine months ended March 31, 2024 and 2023, respectively, was recognized in the accompanying condensed statements of operations and comprehensive loss. Interest expense for the nine months ended March 31, 2024 and 2023 included interest payments totaling approximately $1.3 million and $1.5 million, the amortization of financing costs of approximately $92,000 and $128,000, unearned discount of approximately $867,000 and $1.2 million and the accretion of loan premium of approximately $201,000 and $329,000, respectively.

As of March 31, 2024, the remaining principal balance of $7.5 million under the Loan is payable in 9 monthly equal installments. For the three and nine months ended March 31, 2024, the Company paid back $2.5 million and $7.5 million respectively, of the original loan of $15 million.

The following is a summary of the Notes Payable as of March 31, 2024 and June 30, 2023:

Current portion of Notes Payable

Non-current portion of Notes Payable

Estimated future amortization expense and accretion of premium and discount is as follows:

At March 31, 2024 and June 30, 2023, the estimated fair value of derivative liabilities measured on a recurring basis are as follows:

The following table presents the activity for liabilities measured at fair value using unobservable inputs for the nine months ended March 31, 2024:

The following table presents the activity for liabilities measured at fair value using unobservable inputs for the nine months ended March 31, 2023:

The fair values of derivative liabilities for the Avenue Warrants and the conversion option of the Note at March 31, 2024 in the accompanying condensed balance sheet, were approximately $21,000 and approximately zero, respectively. The total change in the fair value of the derivative liabilities totaled approximately $109,000 and $1.8 million for the three and nine months ended March 31, 2024, respectively; and accordingly, was recorded in the accompanying condensed statement of operations and comprehensive loss. The assumptions used in the Black Scholes model to value the derivative liabilities at March 31, 2024 included the closing stock price of $0.53 per share; for the Avenue Warrants, the exercise price of $5.82, remaining term 2.7 years, risk free rate of 4.5% and volatility of 93.0%; and for the embedded derivative liability of the conversion option, the conversion price of $6.98; remaining term 0.67 years, risk free rate of 5.3% and volatility of 104.0%.

Derivative liability – Avenue Warrants

The Company accounts for stock purchase warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreements. Under applicable accounting guidance, stock warrants that are precluded from being indexed to the Company’s own stock because of full-rachet and anti-dilution provisions or adjustments to the strike price due to an occurrence of a future event are accounted for as derivative financial instruments. The Avenue Warrants were not considered to be indexed to the Company’s own stock, and accordingly, were recorded as a derivative liability at fair value in the accompanying condensed balance sheets at March 31, 2024 and June 30, 2023.

The Black Scholes model was used to calculate the fair value of the warrant derivative to bifurcate the warrant derivative amount from the Avenue Loan amount funded. The Avenue Warrants are recorded at their fair values at the date of issuance and remeasured at March 31, 2024 and June 30, 2023.

Embedded derivative liability – Conversion Option

The embedded derivative liability represents the optional conversion feature of up to $5.0 million of the outstanding Loan, which meets the definition of a derivative and requires bifurcation from the loan amount.

The Black Scholes model was used to calculate the fair value of the embedded derivative to bifurcate the embedded derivative amount representing the conversion option from the Avenue Loan amount funded.

Financial assets

As of March 31, 2024, investments in U.S. Treasury Bills were valued through use of quoted prices and are classified as Level 1.

The following table presents information about our assets that are measured at fair value on a recurring basis.

Issuance of common stock for cash

On August 31, 2022, the Company entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. and B. Riley Securities, Inc. (collectively, the “Agents”), pursuant to which the Company may issue and sell from time-to-time shares of the Company’s common stock through the Agents, subject to the terms and conditions of the Sales Agreement. On April 6, 2023, the Company and B. Riley Securities, Inc. mutually agreed to terminate B. Riley Securities, Inc.’s role as a sales agent under the Sales Agreement. During the three months ended March 31, 2024, the Company sold 4,384 shares of common stock under the Sales Agreement for total net proceeds of approximately $6,500 after 3% commissions and expenses of approximately $201. During the nine months ended March 31, 2024, the Company sold 3,337,487 shares of common stock under the Sales Agreement for total net proceeds of $9.3 million after 3% commissions and expenses of approximately $377,000.

During the three months ended March 31, 2023, the Company sold 1,515,078 shares of common stock under the Sales Agreement for total net proceeds of $9.8 million after 3% commissions and expenses of approximately $339,000. During the nine months ended March 31, 2023, the Company sold 7,372,691 shares of common stock under the Sales Agreement for total net proceeds of $48.2 million after 3% commissions and expenses of approximately $1.9 million.

On March 6, 2024, the Company closed a best efforts public offering (the “Offering”) of 15,000,000 shares (the “Shares”) of its common stock, par value $0.0001 per share (the “Common Stock”), pre-funded warrants (the “Pre-funded Warrants”) to purchase 6,000,000 shares of Common Stock, and warrants to purchase up to 10,500,000 shares of Common Stock (the “Common Warrants”) at a combined public offering price of $1.00 per Share, or Pre-funded Warrant, and the associated Common Warrant. The Common Warrants have an exercise price of $1.50 per share and are immediately exercisable upon issuance for a period of five years following the date of issuance. The gross proceeds to the Company from the Offering were approximately $21.0 million, before deducting placement agent fees and offering expenses of approximately $2.5 million. Additionally, upon closing the Company issued the placement agent warrants (“Placement Agent’s warrants”) to purchase 1,050,000 shares of Common Stock exercisable at a per share price of $1.25, which was equal to 125% of the public offering price per share. The Placement Agent’s Warrants are exercisable during a five-year period commencing 180 days from March 6, 2024.

Stock Options

The following table summarizes the activity relating to the Company’s stock options for the nine months ended March 31, 2024:

The fair value of each option grant on the date of grant is estimated using the Black-Scholes option pricing model. The pricing model reflects the following weighted-average assumptions for the nine months ended March 31, 2024 and 2023:

The total stock based compensation expense from stock options for the three-months ended March 31, 2024 and 2023 was of $690,921 and $888,998, respectively and for nine-months ended March 31, 2024 and 2023 was of $2,118,649 and $3,480,425, respectively.

Issuance and modification of restricted stock units and options:

On November 23, 2022, the Company issued equity awards for the board of directors’ annual compensation. Four directors received restricted stock units (“RSUs”) to purchase a total of 155,636 shares of common stock at the grant date fair value of $6.12 per share, a total cost of $952,492 was recognized as stock compensation in the three months ended December 31, 2022. Three directors received stock options to purchase 195,000 shares of common stock at an exercise price of $6.12 per share. The total stock compensation cost of these stock options of $791,700 was recognized as stock compensation in the three months ended December 31, 2022. The equity awards vest quarterly over the annual service period from November 9, 2023 to the next annual shareholders’ meeting. While the agreements contain certain contractual vesting terms, there are circumstances where the vesting can be accelerated that is not within the Company’s control and as a result, for accounting purposes, the awards are assumed to have been fully vested on the grant date, accordingly, the Company recognized the total compensation cost of $1,744,192 on November 23, 2022.

On November 9, 2023, the Company issued equity awards for the board of directors’ annual compensation. Four directors received restricted stock units (“RSUs”) to purchase a total of 182,696 shares of common stock at the grant date fair value of $3.01 per share, a total cost of $137,479 and $215,383 was recognized as stock compensation in the three and nine months ended March 31, 2024, respectively. Two directors received stock options to purchase 183,250 shares of common stock at an exercise price of $3.01 per share. The total stock compensation cost related to these stock options of $83,837 and $118,303 was recognized in the three months and nine ended March 31, 2024 and 2023, respectively. The equity awards vest quarterly over the annual service period from November 9, 2023, on February 9, 2024, May 9, 2024, August 9, 2024 and earlier of November 9, 2024 or the next annual shareholders’ meeting.

In December 2023, the Company terminated five employees and as part of their severance agreement modified their equity awards that had been granted pursuant to the 2019 Omnibus Plan. The modifications included the acceleration of certain tranche vesting of stock option awards to purchase a total of 56,233 shares of common stock (“Accelerated Options”), effective on the December Separation Date, as defined in severance agreement (“Separation Date”); and extended the expiration date for one year from the Separation Date for both the Accelerated Options and any vested and unexercised stock options held by the terminated employees as of the Separation Date. Accordingly, the Company remeasured the modified awards based on the stock price of $1.54 per share at the close on the Separation Date and a one-year life. The net adjustment for both stock option modifications was a net credit of $127,199 and was recognized as adjustment to stock compensation expense for the three months ended December 31, 2023.

The modification also included the acceleration of an additional tranche vesting of 10,302 Restricted Stock Units, (“RSUs”) as of the Separation date. The modified RSUs were remeasured based on the stock price of $1.54 per share at close on the Separation Date and totaled $15,865, representing an additional in stock-based compensation for the three months ended December 31, 2023. The Company canceled 171,556 unvested stock options and 10,303 unvested RSUs.

The following table summarizes vesting of restricted stock units:

The total stock-based compensation expense from restricted stock units for the three-months ended March 31, 2024 and 2023 was of $336,376 and $17,537, respectively, and for the nine-months ended March 31, 2024 and 2023 was $1,020,383 and $1,589,527, respectively.

There were 45,675 RSU that vested on February 9, 2024 and the related shares of common stock were issued and delivered by March 31, 2024. There were 101,833 RSUs that vested on the second anniversary date of RSUs that were awarded on November 23, 2022 and 25,880 shares of common stock were withheld for federal income tax withholdings; and delivered on February 15, 2024.

Issuance of Stock Options under the 2019 Omnibus Plan.

On October 3, 2023, the Company granted stock options to purchase 211,167 shares of Common Stock to new hire employees.20% of the shares underlying the options awarded vest on the one-year anniversary of the grant date, and the remaining 80% will vest in equal monthly installments over 48 months each month thereafter. The exercise price of the options is $3.41 per share and the options terminate on the earlier of the tenth grant date anniversary or the date of which the options are fully exercised.

Stock Warrants

The following table summarizes warrant activity during the nine months ended March 31, 2024:

Of the above warrants, 101,380 expire in the fiscal year ending June 30, 2025, 35,175 expire in the fiscal year ending June 30, 2026, 7,633,730 expire in the fiscal year ending June 30, 2027 and 11,550,000 expire in the fiscal year ending June 30, 2029.

On March 6, 2024, the Company issued 11,550,000 warrants at a weighted average exercise price of $1.48 as part of the Offering (see Note 10).

Office Lease

The Company pays an annual rent of $2,200 for its headquarters at 680 W Nye Lane, Suite 201, Carson City Nevada 89703. The rental agreement was for a one-year term and commenced on October 1, 2022 and has been subsequently renewed for another year at the same rate.

The Company’s San Diego office lease at 5090 Shoreham Place Suite 212, San Diego, CA 92122 which commenced on March 1, 2022, was for a term of 38 months with a base rate of $4,300, and annual increases of three percent. In February 2024, the Company amended the lease agreement which allowed the Company to vacate the then current space and move to a larger space at Suite 206. The current monthly base rate for the new office space is $9,685, with an annual increase of four percent. The term for the new office lease is 60 months and commenced on February 12, 2024. The lease that was in place for the 5090 Shoreham Place Suite 212 office was effectively extinguished upon the commencement of the new office space lease on February 12, 2024, resulting in the write off of the corresponding remaining right-of-use asset and operating lease liability of $56,909 and $62,124, respectively, and a gain to selling, general and administrative expenses of $5,215 for the three months ending March 31, 2024.

Total operating lease expense for the three months ended March 31, 2024 and 2023 of approximately $20,000 and $13,000, respectively; and for the nine months ended March 31, 2024 and 2023, of approximately $46,000 and $37,000 respectively were included in the accompanying condensed statements of operations and comprehensive loss as a component of selling, general and administrative expenses.

The right-of-use asset, net and current and non-current portion of the operating lease liabilities included in the accompany condensed balance sheets are as follows:

At March 31, 2024, the future estimated minimum lease payments under non-cancelable operating leases are as follows:

Total cash paid for amounts included in the measurement of operating lease liabilities for the three months ended March 31, 2024 and 2023, were $23,670 and $12,650, respectively, and for the nine months ended March 31, 2024 and 2023 were $49,470 and $37,700, respectively.

The weighted average remaining lease term and discount rate as of March 31, 2024 and June 30, 2023 were as follows:

Royalty Agreements

Pursuant to the Agreement and Plan of Merger entered into on April 11, 2016, by and between our predecessor entities, LAT Pharma and NanoAntibiotics, Inc., the Company is obligated to pay a low single digit royalty on net sales of BIV201 (continuous infusion terlipressin) to be shared by the members of LAT Pharma Members, PharmaIn Corporation, and The Barrett Edge, Inc.

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

Shareholder class action complaint

On January 19, 2024, a purported shareholder class action complaint, captionedEric Olmstead v. BioVie Inc. et al., No. 3:24-cv-00035, was filed in the U.S. District Court for the District of Nevada, naming the Company and certain of its officers and/or directors as defendants. On April 15, 2024 the court ordered the motion to consolidate the six pending motions, appointed the lead plaintiff and approved selection of the lead counsel, now captioned Olmstead v. BioVie Inc., et al., Case 3:24-cv-0035 LRH-CSD and Way v. BioVie Inc., et al., Case No. 2:24-cv-00361-LRH-CSD. The lawsuit alleges that the Company made material misrepresentations and/or omissions of material fact relating to the Company’s business, operations, compliance, and prospects, including information related to the study and trial of bezisterim (NE3107), in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The class action is on behalf of purchasers of the Company’s securities during the period from August 5, 2021 through November 29, 2023 and seeks unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including attorney’s fees.

The Company believes the lawsuit is without merit and intends to defend the case vigorously. At this early stage of the proceedings, the Company is unable to make any prediction regarding the outcome of the litigation. No adjustment or accruals have been reflected in the accompanying condensed financial statements.

On August 1, 2021, the Company began sponsoring an employee benefit plan subject to Section 401(K) of the Internal Revenue Service Code (the “401K Plan”) pursuant to which, all employees meeting eligibility requirements are able to participate.

Subject to certain limitations in the Internal Revenue Code, eligible employees are permitted to make contributions to the 401K Plan on a pre-tax salary reduction basis and the Company will match 5% of the first 5% of an employee’s contributions to the 401K Plan., The Company made contributions for the three months ended March 31, 2024 and 2023 of approximately $53,915 and $16,000, respectively; and for the nine months ended March 31, 2024 and 2023 of approximately $105,000 and $80,100, respectively.