UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES
EXCHANGE ACT 1934.
For the quarterly
period ended December 31, 2014
Commission
File Number: 333-148471
NANOVIRICIDES,
INC.
(Exact name
of Company as specified in its charter)
NEVADA |
|
76-0674577 |
(State or other jurisdiction |
|
(IRS Employer Identification
No.) |
of incorporation or organization) |
|
|
135 Wood
Street, Suite 205
West Haven,
Connecticut 06516
(Address of
principal executive offices and zip code)
(203) 937-6137
(Company’s
telephone number, including area code)
Indicate by check mark whether the
Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x No
¨
Indicate by check mark whether the
Company has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the Company was required to submit and post such files). Yes x
No ¨
Indicate by check mark whether the
Company is a larger accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer |
¨ |
Accelerated filer |
¨ |
Non-accelerated filer |
x |
Smaller reporting company |
¨ |
Indicate by check mark whether the
Company is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No
x
The number of shares outstanding
of the Company’s Common Stock as of February 24, 2015 was approximately: 56,564,190
NanoViricides,
Inc.
FORM 10-Q
INDEX
Nanoviricides,
Inc.
Balance
Sheets
| |
December 31,
2014 | | |
June 30, 2014 | |
| |
(Unaudited) | | |
As Restated | |
| |
| | |
| |
ASSETS | |
| | |
| |
CURRENT ASSETS: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 35,258,618 | | |
$ | 36,696,892 | |
Prepaid expenses | |
| 235,110 | | |
| 108,089 | |
Other current assets | |
| - | | |
| 150,000 | |
| |
| | | |
| | |
Total Current Assets | |
| 35,493,728 | | |
| 36,954,981 | |
| |
| | | |
| | |
PROPERTY AND EQUIPMENT | |
| | | |
| | |
Property and equipment | |
| 12,050,068 | | |
| 6,736,742 | |
Accumulated depreciation | |
| (1,342,650 | ) | |
| (1,239,986 | ) |
| |
| | | |
| | |
Property and equipment,
net | |
| 10,707,418 | | |
| 5,496,756 | |
| |
| | | |
| | |
TRADEMARK | |
| | | |
| | |
Trademark and Patents | |
| 458,954 | | |
| 458,954 | |
Accumulated amortization | |
| (55,082 | ) | |
| (50,696 | ) |
| |
| | | |
| | |
Trademark, net | |
| 403,872 | | |
| 408,258 | |
| |
| | | |
| | |
SECURITY DEPOSIT | |
| 1,000,000 | | |
| 1,000,000 | |
| |
| | | |
| | |
Total Assets | |
$ | 47,605,018 | | |
$ | 43,859,995 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
CURRENT LIABILITIES: | |
| | | |
| | |
Accounts payable | |
$ | 501,957 | | |
$ | 376,446 | |
Accounts payable – related parties | |
| 208,074 | | |
| 49,455 | |
Accrued expenses | |
| 161,779 | | |
| 91,838 | |
Deferred interest
payable | |
| 250,000 | | |
| - | |
| |
| | | |
| | |
Total Current Liabilities | |
| 1,121,810 | | |
| 517,739 | |
| |
| | | |
| | |
LONG TERM LIABILITIES: | |
| | | |
| | |
Deposit for debenture | |
| - | | |
| 5,000,000 | |
Debentures payable - Series C, net of discount | |
| 2,209,835 | | |
| - | |
Debentures payable - Series B, net of discount | |
| 4,359,186 | | |
| 4,037,568 | |
Derivative liability -Series B debentures | |
| 3,274,961 | | |
| 5,699,703 | |
Derivative liability - Series C debentures | |
| 1,206,532 | | |
| - | |
Derivative liability - warrants | |
| 4,924,378 | | |
| 5,235,682 | |
| |
| | | |
| | |
Total Long Term Liabilities | |
| 15,974,892 | | |
| 19,972,953 | |
| |
| | | |
| | |
Total Liabilities | |
| 17,096,702 | | |
| 20,490,692 | |
| |
| | | |
| | |
COMMITMENTS AND CONTINGENCIES | |
| | | |
| | |
| |
| | | |
| | |
STOCKHOLDERS' EQUITY: | |
| | | |
| | |
Series A Convertible
Preferred stock, $0.001 par value, 4,000,000 shares designated, 3,398,369 and 3,193,079 shares issued and outstanding, respectively | |
| 3,400 | | |
| 3,194 | |
Series B Convertible
Preferred stock, $0.001 par value, 2,857,143 shares designated, none issued and outstanding | |
| - | | |
| - | |
Series C Convertible
Preferred stock, $0.001 par value, 10,000,000 shares designated, none issued and outstanding | |
| - | | |
| - | |
Common
stock, $0.001 par value; 85,714,285 shares authorized; 56,564,190 and 54,620,993 shares issued and outstanding, respectively | |
| 56,564 | | |
| 54,621 | |
Additional paid-in capital | |
| 83,379,197 | | |
| 75,212,888 | |
Accumulated
deficit | |
| (52,930,845 | ) | |
| (51,901,400 | ) |
| |
| | | |
| | |
Total Stockholders'
Equity | |
| 30,508,316 | | |
| 23,369,303 | |
| |
| | | |
| | |
Total Liabilities
and Stockholders' Equity | |
$ | 47,605,018 | | |
$ | 43,859,995 | |
See
accompanying notes to the financial statements
Nanoviricides,
Inc.
Statements
of Operations
(Unaudited)
| |
For the Three Months | | |
For the Three Months | | |
For the Six Months | | |
For the Six Months | |
| |
Ended | | |
Ended | | |
Ended | | |
Ended | |
| |
December 31,
2014 | | |
December 31,
2013 | | |
December 31,
2014 | | |
December 31,
2013 | |
| |
| | |
As Restated | | |
| | |
As Restated | |
OPERATING EXPENSES | |
| | | |
| | | |
| | | |
| | |
Research and development | |
$ | 916,739 | | |
$ | 1,130,478 | | |
$ | 1,727,846 | | |
$ | 2,304,699 | |
General and administrative | |
| 899,916 | | |
| 620,934 | | |
| 1,775,942 | | |
| 1,335,495 | |
| |
| | | |
| | | |
| | | |
| | |
Total operating expenses | |
| 1,816,655 | | |
| 1,751,412 | | |
| 3,503,788 | | |
| 3,640,194 | |
| |
| | | |
| | | |
| | | |
| | |
LOSS FROM OPERATIONS | |
| (1,816,655 | ) | |
| (1,751,412 | ) | |
| (3,503,788 | ) | |
| (3,640,194 | ) |
| |
| | | |
| | | |
| | | |
| | |
OTHER INCOME (EXPENSE): | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| 81,702 | | |
| 14,501 | | |
| 121,025 | | |
| 24,061 | |
Interest expense | |
| (247,444 | ) | |
| (125,514 | ) | |
| (492,444 | ) | |
| (246,500 | ) |
Discount on convertible debentures | |
| (289,960 | ) | |
| (140,773 | ) | |
| (563,178 | ) | |
| (276,254 | ) |
Change in fair market value
of derivatives | |
| 391,216 | | |
| 639,703 | | |
| 3,408,941 | | |
| (3,786,130 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense),
net | |
| (64,486 | ) | |
| 387,917 | | |
| 2,474,344 | | |
| (4,284,823 | ) |
| |
| | | |
| | | |
| | | |
| | |
LOSS BEFORE INCOME TAX PROVISION | |
| (1,881,141 | ) | |
| (1,363,495 | ) | |
| (1,029,444 | ) | |
| (7,925,017 | ) |
| |
| | | |
| | | |
| | | |
| | |
INCOME TAX PROVISION | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
NET LOSS | |
$ | (1,881,141 | ) | |
$ | (1,363,495 | ) | |
$ | (1,029,444 | ) | |
| (7,925,017 | ) |
| |
| | | |
| | | |
| | | |
| | |
NET LOSS PER COMMON SHARE | |
| | | |
| | | |
| | | |
| | |
- Basic | |
$ | (0.03 | ) | |
$ | (0.03 | ) | |
$ | (0.02 | ) | |
| (0.16 | ) |
- Diluted | |
$ | (0.04 | ) | |
$ | (0.03 | ) | |
$ | (0.05 | ) | |
$ | (0.16 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common shares outstanding | |
| | | |
| | | |
| | | |
| | |
- Basic | |
| 56,557,352 | | |
| 50,031,363 | | |
| 56,066,776 | | |
| 48,851,696 | |
- Diluted | |
| 59,224,019 | | |
| 50,031,363 | | |
| 58,733,443 | | |
| 48,851,696 | |
See accompanying
notes to the financial statements
NanoViricides,
Inc.
Directors
0630
Statement
of Stockholders' Equity
For
the period from June 30, 2014 through December 31, 2014
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Deficit | | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Accumulated | | |
| |
| |
Series
A Preferred Stock: Par $0.001 | | |
Series
B Preferred Stock: Par $0.001 | | |
Series
C Preferred Stock: Par $0.001 | | |
Common
Stock: Par $0.001 | | |
Additional | | |
Stock | | |
During
the | | |
Total | |
| |
Number of | | |
| | |
Number of | | |
| | |
Number of | | |
| | |
Number of | | |
| | |
Paid-in | | |
Subscription | | |
Development | | |
Stockholders' | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Receivable | | |
Stage | | |
Equity | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, June 30, 2014 | |
| 3,193,079 | | |
| 3,194 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 54,620,993 | | |
| 54,621 | | |
| 75,212,888 | | |
| - | | |
| (51,901,400 | ) | |
| 23,369,303 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Series A Preferred Shares issued for Debenture
inerest July 2, 2014 | |
| 187,000 | | |
| 187 | | |
| | | |
| | | |
| | | |
| | | |
| - | | |
| - | | |
| 1,152,110 | | |
| | | |
| | | |
| 1,152,297 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Series A Preferred Shares issued for employee
stock compensation July 31, 2014 | |
| 2,572 | | |
| 2 | | |
| | | |
| | | |
| | | |
| | | |
| - | | |
| - | | |
| 23,632 | | |
| | | |
| | | |
| 23,634 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for consulting and legal services rendered on
July 31, 2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 543 | | |
| | | |
| 9,000 | | |
| | | |
| | | |
| 9,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for consulting and legal services rendered on
August 31, 2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 590 | | |
| 1 | | |
| 8,999 | | |
| | | |
| | | |
| 9,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Series A Preferred Shares issued for employee
stock compensation at August 31, 2014 | |
| 2,572 | | |
| 3 | | |
| | | |
| | | |
| | | |
| | | |
| - | | |
| - | | |
| 25,329 | | |
| | | |
| | | |
| 25,332 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Warrants issued to Scientific Advisory Board on August
15, 2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| - | | |
| - | | |
| 22,292 | | |
| | | |
| | | |
| 22,292 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common Shares issued in connection with warrant conversion,
August 15,2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 1,909,227 | | |
| 1,909 | | |
| 6,680,388 | | |
| | | |
| | | |
| 6,682,297 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for consulting and legal services rendered
on September 30, 2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 926 | | |
| 1 | | |
| 8,999 | | |
| | | |
| | | |
| 9,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Series A Preferred Shares issued for employee
stock compensation at September 30, 2014 | |
| 2,572 | | |
| 3 | | |
| | | |
| | | |
| | | |
| | | |
| - | | |
| - | | |
| 24,011 | | |
| | | |
| | | |
| 24,014 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for Directors fees at $3.94 per share on September 30, 2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 2,856 | | |
| 3 | | |
| 11,247 | | |
| | | |
| | | |
| 11,250 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common Shares issued in connection with warrant conversion,
October 1,2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 17,429 | | |
| 17 | | |
| 60,983 | | |
| | | |
| | | |
| 61,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Series A Preferred Shares issued for employee
stock compensation October 31, 2014 | |
| 2,572 | | |
| 2 | | |
| | | |
| | | |
| | | |
| | | |
| - | | |
| - | | |
| 18,763 | | |
| | | |
| | | |
| 18,765 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for consulting and legal services rendered on
October 31, 2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 2,500 | | |
| 3 | | |
| 8,997 | | |
| | | |
| | | |
| 9,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Warrants issued to Scientific Advisory Board November
15, 2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| - | | |
| - | | |
| 16,977 | | |
| | | |
| | | |
| 16,977 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for consulting and legal services rendered on
November 30 , 2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 2,624 | | |
| 3 | | |
| 8,997 | | |
| | | |
| | | |
| 9,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Series A Preferred Shares issued for consulting and
legal services rendered on November 30, 2014 | |
| 2,858 | | |
| 3 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 24,471 | | |
| | | |
| | | |
| 24,474 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Series A Preferred Shares issued for employee
stock compensation at November 30, 2014 | |
| 2,572 | | |
| 3 | | |
| | | |
| | | |
| | | |
| | | |
| - | | |
| - | | |
| 22,022 | | |
| | | |
| | | |
| 22,025 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for consulting and legal services rendered on
December 31 , 2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 3,103 | | |
| 3 | | |
| 8,997 | | |
| | | |
| | | |
| 9,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Series A Preferred Shares issued for employee
stock compensation at December 30, 2014 | |
| 2,572 | | |
| 3 | | |
| | | |
| | | |
| | | |
| | | |
| - | | |
| - | | |
| 18,846 | | |
| | | |
| | | |
| 18,849 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for Directors fees on December
31, 2014 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 3,399 | | |
| 3 | | |
| 11,247 | | |
| | | |
| | | |
| 11,250 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| - | | |
| | | |
| | | |
| (1,029,444 | ) | |
| (1,029,444 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| 3,398,369 | | |
| 3,400 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31, 2014 | |
| | | |
| | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 56,564,190 | | |
| 56,564 | | |
| 83,379,197 | | |
| - | | |
| (52,930,845 | ) | |
| 30,508,316 | |
Nanoviricides,
Inc.
Statements
of Cash Flows
| |
For the Six Months | | |
For the Six Months | |
| |
Ended | | |
Ended | |
| |
December 31, 2014 | | |
December 31, 2013 | |
| |
(Unaudited) | | |
(Unaudited) | |
| |
| | |
As Restated | |
| |
| | |
| |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net loss | |
$ | (1,029,444 | ) | |
$ | (7,925,017 | ) |
| |
| | | |
| | |
Adjustments to reconcile net loss to net cash used in operating activities | |
| | | |
| | |
Preferred shares issued as compensation | |
| 157,094 | | |
| 63,000 | |
Common shares and warrants issued for services | |
| 76,503 | | |
| 64,500 | |
Warrants granted to scientific advisory board | |
| 39,269 | | |
| 137,602 | |
Amortization of deferred compensation | |
| - | | |
| - | |
Depreciation | |
| 102,664 | | |
| 106,072 | |
Amortization | |
| 4,386 | | |
| 4,387 | |
Change in fair value of derivative liability | |
| (3,408,941 | ) | |
| 3,786,129 | |
Discount convertible debentures | |
| 563,178 | | |
| 276,254 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses | |
| (127,022 | ) | |
| (208,011 | ) |
Other current assets | |
| 150,000 | | |
| - | |
Deferred expenses | |
| 250,000 | | |
| - | |
Accounts payable - trade | |
| 125,511 | | |
| (18,978 | ) |
Accounts payable - related parties | |
| 158,619 | | |
| 176,025 | |
Accrued expenses | |
| 69,940 | | |
| 20,531 | |
| |
| | | |
| | |
NET CASH USED IN OPERATING ACTIVITIES | |
| (2,868,243 | ) | |
| (3,517,506 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Security deposit | |
| - | | |
| (1,000,000 | ) |
Purchase of property and equipment | |
| (5,313,326 | ) | |
| (2,357,983 | ) |
| |
| | | |
| | |
NET CASH USED IN INVESTING ACTIVITIES | |
| (5,313,326 | ) | |
| (3,357,983 | ) |
| |
| | | |
| | |
Proceeds from issuance of common stock and warrants in
connection with private placements of common stock, net of issuance costs | |
| - | | |
| 9,690,450 | |
Proceeds from exercise of warrants | |
| 6,743,295 | | |
| 210,626 | |
| |
| | | |
| | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | |
| 6,743,295 | | |
| 9,901,076 | |
| |
| | | |
| | |
NET CHANGE IN CASH | |
| (1,438,274 | ) | |
| 3,025,587 | |
| |
| | | |
| | |
Cash at beginning of period | |
| 36,696,892 | | |
| 13,923,245 | |
| |
| | | |
| | |
Cash at end of period | |
$ | 35,258,618 | | |
$ | 16,948,832 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: | |
| | | |
| | |
Interest paid | |
$ | - | | |
$ | - | |
Income tax paid | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
NON CASH FINANCING AND INVESTING ACTIVITIES: | |
| | | |
| | |
Series A Preferred stock issued as discount on Debentures | |
| 1,152,297 | | |
| - | |
See
accompanying notes to the financial statements |
NANOVIRICIDES,
INC.
December
31, 2014 AND 2013
NOTES TO
THE FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Organization and Nature
of Business
NanoViricides,
Inc. was incorporated under the laws of the State of Colorado on July 25, 2000 as Edot-com.com, Inc. which was organized
for the purpose of conducting internet retail sales. On April 1, 2005, Edot-com.com, Inc. was incorporated under the
laws of the State of Nevada for the purpose of re-domiciling as a Nevada corporation. On May 12, 2005, the corporations
were merged and Edot-com.com, Inc., the Nevada corporation, became the surviving entity.
On June 1,
2005, Edot-com.com, Inc. (“ECMM”) acquired Nanoviricide, Inc., a privately owned Florida corporation (“NVI”),
pursuant to an Agreement and Plan of Share Exchange (the “Exchange”). Nanoviricide, Inc. was incorporated
under the laws of the State of Florida on May 12, 2005.
Pursuant to
the terms of the Exchange, ECMM acquired NVI in exchange for an aggregate of 80,000,000 newly issued shares of ECMM common stock
resulting in an aggregate of 100,000,000 shares of ECMM common stock issued and outstanding. NVI then became a wholly-owned
subsidiary of ECMM. The ECMM shares were issued to the NVI shareholders on a pro rata basis, on the basis of 4,000 shares of the
Company’s common stock for each share of NVI common stock held by such NVI shareholder at the time of the Exchange.
As a result
of the Exchange transaction, the former NVI stockholders held approximately 80% of the voting capital stock of the Company immediately
after the Exchange. For financial accounting purposes, this acquisition was a reverse acquisition of the Company by
NVI, under the purchase method of accounting, and was treated as a recapitalization with NVI as the acquirer. Accordingly, the
financial statements have been prepared to give retroactive effect to May 12, 2005 (date of inception), of the reverse acquisition
completed on June 1, 2005, and represent the operations of NVI.
On June 28,
2005, NVI was merged into its parent ECMM and the separate corporate existence of NVI ceased. Effective on the same
date, Edot-com.com, Inc. changed its name to NanoViricides, Inc. and its stock symbol to “NNVC”, respectively.
NanoViricides, Inc.
(the “Company”), is a nano-biopharmaceutical company whose business goals are to discover, develop and commercialize
therapeutics to advance the care of patients suffering from life-threatening viral infections. We are a company with several drugs
in various stages of early development. Our drugs are based on several patents, patent applications, provisional patent applications,
and other proprietary intellectual property held by TheraCour Pharma, Inc. (“TheraCour”), to which we have the necessary
exclusive licenses in perpetuity. The first agreement we executed with TheraCour Pharma on September 1, 2005, gave
us an exclusive, worldwide license for the treatment of the following human viral diseases: Human Immunodeficiency Virus (HIV/AIDS),
Hepatitis B Virus (HBV), Hepatitis C Virus (HCV), Herpes Simplex Virus (HSV), Influenza and Asian Bird Flu Virus.
On February
15, 2010 the Company executed an Additional License Agreement with TheraCour Pharma, Inc. (“TheraCour”). Pursuant
to the Additional License Agreement, the Company was granted exclusive licenses, in perpetuity, for technologies, developed by
TheraCour, for the development of drug candidates for the treatment of Dengue viruses, Ebola/Marburg viruses, Japanese Encephalitis,
viruses causing viral Conjunctivitis (a disease of the eye) and Ocular Herpes. As consideration for obtaining these
exclusive licenses, we agreed to pay a onetime licensing fee equal to 2,000,000 shares (adjusted for the 3.5 to 1 reverse split)
of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”). The Series
A Preferred Stock is convertible, only upon sale or merger of the company, or the sale of or license of substantially all of the
Company’s intellectual property, into shares of the Company’s common stock at the rate of 3.5 shares of common stock
for each share of Series A Preferred Stock. The Series A Preferred Stock has a preferred voting preference at the rate
of nine votes per share. The Preferred Series A do not contain any rights to dividends, have no liquidation preference, and are
not to be amended without the holder’s approval. The 2,000,000 shares were valued at the par value of $2,000 (adjusted for
the reverse split).
Note 2- Restatement of Previously
Issued Financial Statements
In connection with the preparation of our unaudited financial
statements for the quarter ended December 31, 2014, we determined that in preparing our audited financial statements for the year
ended June 30, 2014, we inadvertently overlooked the anti-dilution provisions in certain warrants issued in connection with the
company’s private placements of securities. Specifically, the warrants issued contained certain
anti-dilution ratchet provisions that provided for an adjustment to the exercise price of the warrants if the company issued any
stock equivalent securities at a lower price in the future while the option was still outstanding. Adjustments to settlement
amounts by future equity offerings or contractual terms of other equity-linked financial instruments issued in a subsequent period
are not inputs to the fair value of a fixed-for-fixed opinion on equity shares. Accordingly, the warrants are not considered indexed
to its own stock and thus must be accounted for as derivative liabilities which require initial measurement at fair value and adjustment
to fair value in subsequent periods . The Company determined that the error caused a material understatement
of its derivative liability for the year ended June 30, 2014. As a result of this error, we filed the Form 10-K/A to restate our
audited financial statements for the year ended June 30, 2014 and 2013 on February 23, 2015 and the Form 10-Q/A to restate the
unaudited financial statements for the three month periods ended September 30, 2014 and 2013. The three and six month periods ended
December 31, 2013 contained herein have also been restated to reflect the correction of the forementioned error.
For the three and six months ended
December 31, 2013, the Company determined that its warrants issued in units with its common stock on September 10, 2013
should be accounted for as a liability which resulted in the reclassification of $3,154,975 from stockholder’s equity
to Derivative Liability – Warrants. Additionally, for the three and six months ended December 31, 2013, the Derivative
Liability was reduced by $328,887 and $40,145 respectively. The net adjustments reduced the Company’s reported loss for
the three and six months ended December 31, 2013 by $328,887 and $40,145, respectively.
Also in connection with the preparation of our unaudited
financial statements for the quarter ended December 31, 2014 we determined that in preparing our unaudited financial statements
for the quarter ended September 30, 2014, we inadvertently did not recognize a single compound embedded derivative included with
the issuer’s redemption rights in the Series C Convertible Debenture and the holders conversion right to receive coupon
interest in common stock of the issuer. The Series C Convertible Debentures were issued on July 2, 2014. The Company has restated
its financial statements for the three month period ended September 30, 2014 in the Form 10-Q/A filed on February 23, 2015 for
the quarter ended September 30, 2014 and 2013 . The net adjustment resulting from the recognition of the embedded derivative is
an increase of $1,879,428 to derivative liability and corresponding reductions in the Series C convertible Debenture liability
account for $1,453,122 and a reduction in additional paid in capital
of $426,306. Further information is available in our quarterly report Form 10-Q/A filed for the period ended September 30, 2014.
The combined impacts of the above
adjustments to the line items in our unaudited financial statements for the three and six months ended December 31, 2013 are
summarized in the tables below:
Balance
Sheet Data
| |
December 31, 2013 | | |
Net Adjustments | | |
December 31, 2013 | |
| |
(Unaudited) | | |
| | |
(Unaudited | |
| |
As Originally Reported | | |
| | |
As Restated | |
| |
| | |
| | |
| |
LONG TERM LIABILITIES: | |
| | | |
| | | |
| | |
Debentures payable - Series B | |
| 3,744,327 | | |
| - | | |
| 3,744,327 | |
Derivative liability -Series B | |
| 7,577,919 | | |
| - | | |
| 7,577,919 | |
Derivative liability -Warrants | |
| - | | |
| 3,114,830 | | |
| 3,114,830 | |
Total Long Term Liabilities | |
| 11,322,246 | | |
| 3,114,830 | | |
| 14,437,076 | |
| |
| | | |
| | | |
| | |
Total Liabilities | |
| 12,678,008 | | |
| 3,114,830 | | |
| 15,792,838 | |
| |
| | | |
| | | |
| | |
STOCKHOLDERS' EQUITY: | |
| | | |
| | | |
| | |
Additional paid-in capital | |
| 56,422,575 | | |
| (3,154,975 | ) | |
| 53,267,600 | |
Deficit accumulated during the development stage | |
| (46,264,946 | ) | |
| 40,145 | | |
| (46,224,801 | ) |
| |
| | | |
| | | |
| | |
Total Stockholders' Equity | |
| 10,210,668 | | |
| (3,114,830 | ) | |
| 7,095,838 | |
Statements
of Operations
(Unaudited)
| |
For the Three Months | | |
| | |
For the Three Months | | |
For the Six Months | | |
| | |
For the Six Months | |
| |
Ended | | |
| | |
Ended | | |
Ended | | |
| | |
Ended | |
| |
December
31, 2013 | | |
Net
Adjustments | | |
December 31,2013 | | |
December
31, 2013 | | |
Net
Adjustments | | |
December 31,2013 | |
| |
As Originally Reported | | |
| | |
As Restated | | |
As Originally Reported | | |
| | |
As Restated | |
OPERATING EXPENSES | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Research and development | |
$ | 1,130,478 | | |
| - | | |
| 1,130,478 | | |
$ | 2,304,699 | | |
| - | | |
$ | 2,304,699 | |
Refund credit research and development
costs | |
| - | | |
| - | | |
| | | |
| - | | |
| - | | |
| | |
General and
administrative | |
| 620,934 | | |
| - | | |
| 620,934 | | |
| 1,335,495 | | |
| - | | |
| 1,335,495 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total operating
expenses | |
| 1,751,412 | | |
| - | | |
| 1,751,412 | | |
| 3,640,194 | | |
| - | | |
| 3,640,194 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
LOSS FROM OPERATIONS | |
| (1,751,412 | ) | |
| - | | |
| (1,751,412 | ) | |
| (3,640,194 | ) | |
| - | | |
| (3,640,194 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
OTHER INCOME (EXPENSE): | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| 14,501 | | |
| - | | |
| 14,501 | | |
| 24,061 | | |
| - | | |
| 24,061 | |
Interest expense | |
| (125,514 | ) | |
| - | | |
| (125,514 | ) | |
| (246,500 | ) | |
| - | | |
| (246,500 | ) |
Discount on convertible debentures | |
| (140,773 | ) | |
| - | | |
| (140,773 | ) | |
| (276,254 | ) | |
| - | | |
| (276,254 | ) |
Beneficial conversion feature of
convertible debentures | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Change in
fair market value of derivatives | |
| 310,816 | | |
| 328,887 | | |
| 639,703 | | |
| (3,826,275 | ) | |
| 40,145 | | |
| (3,786,130 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other income
(expense), net | |
| 59,030 | | |
| 328,887 | | |
| 387,917 | | |
| (4,324,968 | ) | |
| 40,145 | | |
| (4,284,823 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
LOSS BEFORE INCOME TAX PROVISION | |
| (1,692,382 | ) | |
| 328,887 | | |
| (1,363,495 | ) | |
| (7,965,162 | ) | |
| 40,145 | | |
| (7,925,017 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
INCOME TAX PROVISION | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
NET LOSS | |
$ | (1,692,382 | ) | |
$ | 328,887 | | |
$ | (1,363,495 | ) | |
$ | (7,965,162 | ) | |
$ | - | | |
$ | (7,925,017 | ) |
Note 3 - Summary of Significant
Accounting Policies
Basis of Presentation –
Interim Financial Information
The accompanying
unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions
to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission 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 financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which 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 accompanying financial statements and
the information included under the heading “Management’s Discussion and Analysis or Plan of Operation” should
be read in conjunction with our company’s audited financial statements and related notes included in our company’s
form 10-K/A for the fiscal year ended June 30, 2014 filed with the SEC on February 23, 2015.
Reclassifications
Certain accounts in the June 30, 2014
financial statements have been reclassified to conform to the current period presentation.
For a summary
of significant accounting policies, see the Company’s Annual Report on Form 10-K/ Amendment 2 for the fiscal year ended
June 30, 2014.
Net Income
(Loss) per Common Share
Net income
(loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income
(loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding
during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average
number of shares of common stock 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 and warrants.
The following
table shows the number of potentially outstanding dilutive common shares excluded from the diluted net income (loss) per common
share calculation as they were anti-dilutive:
| |
Potentially Outstanding Dilutive Common Shares | |
| |
For the
Six Months Ended December 31, 2014 | | |
For the Six
Months Ended December 31, 2013 | |
| |
| | |
| |
Stock options | |
| | | |
| | |
| |
| | | |
| | |
Stock options issued on September 23, 2005 to the founders
of the Company upon formation with an exercise price of $0.35 per share expiring ten (10) years from the date of issuance | |
| 535,715 | | |
| 535,715 | |
| |
| | | |
| | |
Sub-total: stock options | |
| 535,715 | | |
| 535,715 | |
| |
| | | |
| | |
Warrants | |
| | | |
| | |
| |
| | | |
| | |
Warrants issued from June 15, 2006 to October 1, 2007 to investors
in connection with the Company’s equity financing with an exercise price of $3.50 per share expiring August 15, 2014 | |
| - | | |
| 520,286 | |
| |
| | | |
| | |
Warrants issued on August 22, 2008 to investors in connection with
the Company’s equity financing with an exercise price of $3.50 per share expiring August 15, 2014 | |
| - | | |
| 466,486 | |
| |
| | | |
| | |
Warrants issued from June 15, 2006 through May 15, 2010 to SAB for
services with an exercise price from $2.45 to $9.38 per share expiring February 28, 2015 | |
| 211,429 | | |
| 211,429 | |
| |
| | | |
| | |
Warrants issued on June 30, 2009 to investors with an exercise price of $3.50 per share expiring
August 15, 2014 | |
| - | | |
| 561,628 | |
| |
| | | |
| | |
Warrants issued on September 30, 2009 to investors with an exercise price of $3.50 per share
expiring August 15, 2014 | |
| - | | |
| 1,437,871 | |
| |
| | | |
| | |
Warrants issued from August 16, 2010 to May 15, 2011 to SAB for services
with an exercise price ranging from $5.15 to $6.34 per share expiring fiscal year ending June 30, 2015 | |
| 65,714 | | |
| 65,714 | |
| |
| | | |
| | |
Warrants issued from August 16, 2011 to May 15, 2012 to SAB for services
with an exercise price ranging from $2.80 to $4.94 per share expiring fiscal year ending June 30, 2016 | |
| 68,571 | | |
| 68,571 | |
| |
| | | |
| | |
Warrants issued from August 16, 2012 to September 30, 2013 to SAB for services with an exercise
price of $5.17 per share expiring fiscal year ending June 30, 2017 | |
| 68,571 | | |
| 68,571 | |
| |
| | | |
| | |
Warrants issued on September 10, 2013 to investors with an exercise price of $5.25 per share
expiring September 10, 2018 less Warrants exercised through December 31, 2014 | |
| 2,810,071 | | |
| 2,910,071 | |
| |
| | | |
| | |
Warrants issued on August 15, 2013 to SAB for services with an exercise
price of $5.17 per share expiring on August 15, 2017 | |
| 17,143 | | |
| 17,143 | |
| |
| | | |
| | |
Warrants issued on September 10, 2013 to Placement Agents as commissions with an exercise price
of $5.25 per share expiring September 10, 2018 | |
| 58,910 | | |
| 58,910 | |
| |
| | | |
| | |
Warrants issued on November 15, 2013 to SAB for services with an exercise
price of $6.56 per share expiring on November 15, 2017 | |
| 17,143 | | |
| 17,143 | |
| |
| | | |
| | |
Warrants issued on January 24, 2014 to investors with an exercise price of $6.05 per
share expiring January 24, 2019 | |
| 2,479,935 | | |
| - | |
| |
| | | |
| | |
Warrants issued on January 24, 2014 to investors with an exercise price of $5.25 per
share expiring January 24, 2019 | |
| 76,306 | | |
| - | |
| |
| | | |
| | |
Warrants issued on February 14, 2014 to SAB for services with an exercise
price of $3.98 per share expiring on February 14, 2018 | |
| 17,143 | | |
| - | |
| |
| | | |
| | |
Warrants issued on May 15, 2014 to SAB for services with an exercise
price of $4.11 per share expiring on May 15, 2018 | |
| 17148 | | |
| - | |
| |
| | | |
| | |
Warrants issued on August 15, 2014 to SAB for services with an exercise
price of $5.02 per share expiring on August 15, 2018 | |
| 17,148 | | |
| - | |
| |
| | | |
| | |
Warrants issued on November 15, 2014 to SAB for
services with an exercise price of $3.86 per share expiring on November 15, 2018 | |
| 17,148 | | |
| - | |
| |
| | | |
| | |
Sub-total: warrants | |
| 5,942,379 | | |
| 6,403,823 | |
| |
| | | |
| | |
Total potentially outstanding
dilutive common shares | |
| 6,478,094 | | |
| 6,939,538 | |
In addition the Company has issued
Convertible Debentures, to investors. A portion of the interest required to be paid on the debentures is payable in
restricted shares of the Company’s $0.001 par value common stock or in warrants, according to the terms of the
Debenture. The Company will need to issue 571,428 shares on January 15, 2015 and 571,428 shares of common stock at on January
15, 2015 and 571,428 warrants on January 15, 2016 relating to the interest to be paid on the debentures. Deferred interest
payable related to the Series B and C Debentures can be payable in shares of Common Stock at the average of the open and
close value on the date such interest payment is due at the option of the Holder.
The Company has also issued 3,398,369 of
$0.001 par value Convertible Preferred A shares to investors and others. Only in the event of a “change of control”
of the Company, each Series A preferred share is convertible to 3.5 shares of its new common stock. A “change of control”
is defined as an event in which the Company’s shareholders become 60% or less owners of a new entity as a result of a change
of ownership, merger or acquisition. In the absence of a change of control event, the Series A stock is not convertible into Common
Stock, and does not carry any dividend rights or any other financial effects. At December 31, 2014, the estimated number of potentially
dilutive shares of the Company’s common stock into which these Series A Preferred shares can be converted into, is 11,894,292.
The following represents a reconciliation of the numerators
and denominators of the basic and diluted per share calculations for income from continuing operations:
| |
For the three months ended | | |
For the six months ended | |
| |
December 31,
2014 | | |
December 31,
2013 | | |
December 31,
2014 | | |
December 31,
2013 | |
Calculation of basic loss per share of common stock: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Net loss attributable to common stockholders | |
$ | (1,881,141 | ) | |
$ | (1,363,495 | ) | |
$ | (1,029,444 | ) | |
$ | (7,925,017 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator for basic weighted average shares of common stock | |
| 56,557,352 | | |
| 50,031,363 | | |
| 56,066,776 | | |
| 48,851,696 | |
| |
| | | |
| | | |
| | | |
| | |
Basic loss per share of common stock | |
$ | (0.03 | ) | |
$ | (0.03 | ) | |
$ | (0.02 | ) | |
$ | (0.16 | ) |
| |
| | | |
| | | |
| | | |
| | |
Calculation of diluted loss per share of common stock: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Net loss attributable to common stockholders | |
$ | (1,881,141 | ) | |
$ | (1,363,495 | ) | |
$ | (1,029,444 | ) | |
$ | (7,925,017 | ) |
| |
| | | |
| | | |
| | | |
| | |
Add: Income impact of assumed conversion of Debentures | |
| (222,053 | ) | |
| - | | |
| (2,044,459 | ) | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Net loss attributable to common stockholders plus assumed conversions | |
$ | (2,103,194 | ) | |
$ | (1,363,495 | ) | |
$ | (3,073,903 | ) | |
$ | (7,925,017 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator for basic weighted average shares of common stock | |
| 56,557,352 | | |
| 50,031,363 | | |
| 56,066,776 | | |
| 48,851,696 | |
| |
| | | |
| | | |
| | | |
| | |
Incremental shares from assumed conversions of Debentures payable | |
| 2,666,667 | | |
| - | | |
| 2,666,667 | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Denominator for diluted weighted average shares of common stock | |
| 59,224,019 | | |
| 50,031,363 | | |
| 58,733,443 | | |
| 48,851,696 | |
| |
| | | |
| | | |
| | | |
| | |
Diluted loss per share of common stock | |
$ | (0.04 | ) | |
$ | (0.03 | ) | |
$ | (0.05 | ) | |
$ | (0.16 | ) |
Series B Debentures were excluded from the loss per share
calculation for the three and six months ended December 31, 2013 because the impact is anti-dilutive.
Recently Issued Accounting
Pronouncements
In June 2014, the FASB issued ASU
No. 2014-12, "Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved
after the Requisite Service Period." This ASU requires a reporting entity to treat a performance target that affects vesting
and that could be achieved after the requisite service period as a performance condition, and apply existing guidance under the
Stock Compensation Topic of the ASC as it relates to awards with performance conditions that affect vesting to account for such
awards. The provisions of this ASU are effective for interim and annual periods beginning after December 15, 2015. The Company
is currently evaluating the impact of this ASU.
In August 2014, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-15, “Presentation of
Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue
as a Going Concern” (“ASU 2014-15”). ASU 2014-15 is intended to define management’s responsibility to
evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related
footnote disclosures. Specifically, ASU 2014-15 provides a definition of the term substantial doubt and requires an assessment
for a period of one year after the date that the financial statements are issued (or available to be issued). It also requires
certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans and requires
an express statement and other disclosures when substantial doubt is not alleviated. The new standard will be effective
for reporting periods beginning after December 15, 2016, with early adoption permitted. Management is currently evaluating
the impact of the adoption of ASU 2014-14 on the Company’s financial statements and disclosures.
Note 4 - Financial Condition
The Company’s
financial statements for the interim period ended December 31, 2014 have been prepared on a going concern basis, which contemplates
the realization of assets and settlement of liabilities and commitments in the normal course of business. The Company
has a deficit accumulated from inception. In addition, the Company has not generated any revenues and no revenues are
anticipated in the short-term. Since May 2005, the Company has been engaged exclusively in research and development
activities focused on developing targeted antiviral drugs. The Company has not yet commenced any product commercialization. Such
losses are expected to continue for the foreseeable future and until such time, if ever, as the Company is able to attain sales
levels sufficient to support its operations. There can be no assurance that the Company will achieve or maintain profitability
in the future. As of December 31, 2014 the Company had cash and cash equivalents of $35,258,618. The Company has sufficient capital
to continue its business, at least, through December 31, 2016, at the current rate of expenditure. The Company therefore would
not be considered to have risks relative to its ability to continue as a going concern within the applicable guidelines.
While the Company
continues to incur significant operating losses with significant capital requirements, the Company has been able to finance its
business through sale of its securities.
On
September 5, 2014, NanoViricides, Inc. (the “Company”) accepted notices to exercise old warrants (See Note 9, below.)
for the purchase of an aggregate of 2,136,655 shares of the Company’s common stock at the exercise price of $3.50
per share. Actual proceeds received were $6,682,291. On July 17, 2014, the Company filed a registration statement on Form S-3 (the
“Form S-3”) registering an aggregate of 3,071,986 shares of common stock underlying warrants previously issued by
the Company in various private placement offerings between 2005 and September 2009 (the “Old Warrants”), as
described more fully in the Form S-3 (the “Registered Warrants”). The Form S-3 was declared effective by the
Securities and Exchange Commission on August 1, 2014. As of August 15, 2014, any Registered Warrants as specified above and
not previously exercised have expired.
Since May 2005,
the Company has been engaged exclusively in research and development activities focused on developing targeted antiviral nanomedicines. The
Company has not yet commenced any product commercialization. The Company has incurred significant losses from operations
since its inception, resulting in a an accumulated deficit of $(52,930,845) at December 31, 2014 and expects recurring losses
from operations to continue for the foreseeable future and until such time, if ever, as the Company is able to attain sales levels
sufficient to support its operations. There can be no assurance that the Company will achieve or maintain profitability
in the future. Despite the Company’s financings in 2014 and 2013 and a cash and cash equivalent balance of $35,258,618
at December 31, 2014, substantial additional financing will be required in future periods. The Company may require
additional capital to finance planned and currently unplanned capital costs, and additional staffing requirements during the next
twenty four months. The Company has, in the past, adjusted its priorities and goals in line with the cash on hand and
capital availability. The Company believes it can adjust its priorities of drug development and its Plan of Operations as necessary,
if it is unable to raise such additional funds.
Note 5 - Related Party Transactions
Related
Parties
Related parties
with whom the Company had transactions are:
Related
Parties |
|
Relationship |
|
|
|
Anil R. Diwan |
|
Chairman, President, significant stockholder and director |
|
|
|
Eugene Seymour |
|
CEO, significant shareholder, director |
|
|
|
TheraCour Pharma, Inc. |
|
An entity owned and controlled by significant stockholder |
|
|
|
InnoHaven, LLC |
|
An entity owned and controlled by significant stockholder |
|
|
|
Milton Boniuk, MD |
|
Director and significant stockholder |
Fixed
Assets
| |
December
31, 2014 | | |
June
30, 2014 | |
During the reporting period, InnoHaven, LLC, Transferred
title to 1 Controls Drive Shelton Ct to the Company for consideration of the costs incurred by InnoHaven, LLC in its
acquisition and renovation of the facility | |
$ | 4,222,549 | | |
$ | - | |
| |
| | | |
| | |
During the reporting period, InnoHaven, LLC, acquired fixed assets
on behalf of the Company from third party vendors and transferred such fixed assets to the Company | |
$ | - | | |
$ | 4,500,000 | |
| |
| | | |
| | |
During the reporting period, TheraCour Pharma, Inc. acquired fixed
assets on behalf of the Company from third party vendors and transferred such fixed assets to the Company | |
$ | 188,889 | | |
$ | 528,000 | |
Account
Payable – Related Party
| |
For the Six Months
Ended | |
| |
December 31, 2014 | | |
June 30, 2014 | |
| |
| | | |
| | |
Pursuant to an Exclusive License Agreement
and an Additional License Agreement we entered into with TheraCour Pharma, Inc., (TheraCour), the Company was granted exclusive
licenses in perpetuity for technologies developed by TheraCour for the virus types: HIV, HCV, Herpes, Asian (bird) flu, Influenza
and rabies, and others. In consideration for obtaining these exclusive licenses, we agreed: (1) that TheraCour can charge
its costs (direct and indirect) plus no more than 30% of direct costs as a Development Fee and such development fees shall
be due and payable in periodic installments as billed. (2) we will pay $25,000 per month for usage of lab supplies and chemicals
from existing stock held by TheraCour, (3) we will pay $2,000 or actual costs, whichever is higher for other general and administrative
expenses incurred by TheraCour on our behalf. Accounts payable due TheraCour Pharma Inc. (including a security advance): | |
$ | 208,074 | | |
$ | 49,455 | |
Research and
Development Costs Paid to Related Parties
| |
December 31, 2014 | | |
December 31,
2013 | |
| |
| | | |
| | |
Development and other costs charged by and paid to TheraCour
Pharma, Inc. pursuant to exclusive License Agreements between TheraCour and the Company for the development of the
Company’s drug pipeline. No royalties are due TheraCour from the Company at December 31, 2014 and 2013. | |
$ | 1,290,140 | | |
$ | 924,125 | |
Long
Term Debenture Payable Directors
| |
December | | |
December 31, | |
| |
31, 2014 | | |
2013 | |
Series B Convertible Debentures: | |
| | | |
| | |
| |
| | | |
| | |
Milton Boniuk | |
$ | 4,000,000 | | |
$ | 4,000,000 | |
| |
| | | |
| | |
Series C Convertible Debentures: | |
| | | |
| | |
| |
| | | |
| | |
Milton Boniuk | |
$ | 5,000,000 | | |
| - | |
| |
| | | |
| | |
Total Long Term Debentures Payable Directors | |
$ | 9,000,000 | | |
$ | 4,000,000 | |
Note 6 - Concentrations
Vendor
purchase concentrations for December 31, 2014 and 2013 are as follows:
| |
Net Purchases | | |
Accounts Payable | |
| |
For the six
months ended December 31, | | |
As of December
31, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
| | |
| | |
| | |
| |
TheraCour Pharma, Inc.-related party | |
| 1,290,140 | | |
| 45.6 | % | |
| 1,827,425 | | |
| 50.2 | % | |
| 1,374,835 | | |
| 68 | % | |
| 886,592 | | |
| 78 | % |
Kard Scientific, Inc. | |
| - | | |
| 0 | % | |
| 314,155 | | |
| 8.6 | % | |
| 123,570 | | |
| 25.4 | % | |
| 123,570 | | |
| 10.9 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total Purchases | |
| 1,687,133 | | |
| 100 | % | |
| 3,640,194 | | |
| 100 | % | |
| 487,426 | | |
| 100 | % | |
| 1,130,871 | | |
| 100 | % |
Note 7 -
Property and Equipment
Property and
equipment, stated at cost, less accumulated depreciation consisted of the following:
| |
December 31,
2014 | | |
June 30,
2014 | |
| |
| | |
| |
Building GMP
Facility | |
$ | 8,224,215 | | |
$ | 3,099,780 | |
| |
| | | |
| | |
Office Equipment | |
| 30,048 | | |
| 30,048 | |
| |
| | | |
| | |
Furniture and Fixtures | |
| 1,400 | | |
| 1,400 | |
| |
| | | |
| | |
Lab
Equipment | |
| 3,794,405 | | |
| 3,605,514 | |
| |
| | | |
| | |
Total Property and Equipment | |
| 12,050,068 | | |
| 6,736,742 | |
| |
| | | |
| | |
Less
Accumulated Depreciation | |
| (1,342,650 | ) | |
| (1,239,986 | ) |
Property
and Equipment, Net | |
$ | 10,707,418 | | |
$ | 5,496,756 | |
Depreciation
expense for the six months ended December 31, 2014 and 2013 were $102,664 and $106,072, respectively.
Note 8 -
Trademark and Patents
Trademarkand
patents, stated at cost, less accumulated amortization consisted of the following:
|
|
December
31,
2014 |
|
|
June 30,
2014 |
|
|
|
|
|
|
|
|
Trademarks
and Patents |
|
$ |
458,954 |
|
|
$ |
458,954 |
|
Less
Accumulated Amortization |
|
|
(55,082 |
) |
|
|
(50,696 |
) |
Trademarks
and Patents, Net |
|
$ |
403,872 |
|
|
$ |
408,258 |
|
Amortization
expense amounted to $4,386 and 4,387 for the six months ended December 31, 2014, and 2013, respectively.
Note 9
– Convertible Debentures
On February 1, 2013, the Company raised gross proceeds of $6,000,000
which includes $4,000,000 from a family investment office and a charitable foundation controlled by Dr. Milton Boniuk, a member
of the Company’s board of directors, through the issuance of our Series B Debentures. The investors purchased unsecured convertible
debentures with a 4-year term. The debentures bear an interest rate of 8% p.a., plus additional interest payable in restricted
common stock of 0.33, 0.33, and 0.34 pre reverse split shares in year 1, 2, and 3 respectively, and additional interest of 0.33
pre reverse split warrants to be issued in the fourth year, per $1 of principal. The Holder at its option may elect to receive
such coupon interest payment in shares of common stock and calculated on the average of the open and close value on the date such
interest payment is due. The warrants are priced at $1 on a pre-reverse-split basis. Post-reverse-split (Sept 2013), both the number
and price of the warrants and restricted shares are adjusted for even effect. The post-reverse-split exercise price of warrants
is $3.50 per warrant and the number of warrants issuable is (0.33/3.50) per $1 of principal, for even effect and will be valid
for 3 years after issuance. The investors can convert the principal and any accrued interest into common stock at a fixed price
of $3.50 per share. The Company can prepay the debentures, in which case the base interest rate shall increase by a 7% prepayment
penalty. The Company agreed to use its best efforts to register the interest shares and the shares issuable from the interest warrants
under a “shelf” registration statement provided same is available, in accordance with the provisions of the Securities
Act.
The following represents the balance of the Debenture payable
– Series B, net of discount at December 31, 2014 and June 30, 2014:
| |
December 31, 2014 | | |
June 30,
2014 | |
| |
| | | |
| | |
| |
| | | |
| | |
Proceeds | |
$ | 6,000,000 | | |
$ | 6,000,000 | |
Debt discount for bifurcated derivative | |
| (2,735,310 | ) | |
| (2,735,310 | ) |
| |
| 3,264,690 | | |
| 3,264,690 | |
| |
| | | |
| | |
Amortization of debt discount | |
| 1,094,496 | | |
| 772,878 | |
| |
| | | |
| | |
Debenture payable - Series B, net | |
$ | 4,359,186 | | |
$ | 4,037,568 | |
On July 2, 2014, (the “Closing
Date”), the Company accepted a subscription in the amount of $5,000,000 for a 10% Coupon Series C Convertible Debenture
(the “Debenture”) from Dr. Milton Boniuk, a member of the Company’s Board of Directors (the
“Holder”). The $5,000,000 funding of the Debenture had been received by the Company prior to June 30, 2014, the
year end reporting period and the Company has reported the said Debenture in the financial statements at June 30, 2014 under
long term liabilities. The Debenture is due on June 30, 2018 (the “Maturity Date”) and is convertible, at the
sole option of the Holder, into restricted shares of the Company’s common stock, par value $0.001 per share (the
“Common Stock”) at the conversion price of $5.25 per share of Common Stock. The Debenture bears interest at the
coupon rate of ten percent (10%) per annum, computed on an annual basis of a 365 day year, payable in quarterly installments
on March 31, June 30, September 30 and December 31 of each calendar year until the Maturity Date. The Holder at its option
may choose to receive such coupon interest payment in shares of Common Stock and calculate on the average of the open and
close value on the date such interest payment is due. The Company has the right, but not the obligation, to repay the
Debenture prior to the Maturity Date (the “Redemption Payment”). If the closing bid price of the Common Stock is
in excess of $5.25 when the Company notifies the Holder it has elected to prepay the Debenture (the
“Redemption Date”), the Company must redeem the Debenture by delivering to the Holder 951,381 shares of Common
Stock and any unpaid coupon interest in lieu of a cash Redemption Payment. If the Holder elects to receive the Redemption
Payment in cash, or if the closing bid price of the Common Stock is less than $5.25, the Company shall pay to the Holder a
Redemption Payment in cash equal to the principal amount of the Debenture, plus any accrued coupon interest, plus additional
interest of 7% per annum for the period from the Closing Date to the Redemption Date and warrants to purchase 619,048 shares
of Common Stock which shall expire in three years from the date of issuance at the exercise price of $6.05 per share of
Common Stock. The Company cannot conclude that it has sufficient authorized and unissued shares to settle the contract after
considering all other commitments that may require the issuance of stock during the maximum period the derivative instrument
could remain outstanding. This is due to the fact that the interest payments are payable in stock of the Company, at the
option of the Holder, based on the current market price of the common stock on the date such payments are due. Therefore, the
number of shares due as interest payments is essentially indeterminate and the Company cannot conclude that it has sufficient
authorized and unissued shares to settle the conversion feature. Accordingly, the Company bifurcated the embedded features
from the host contract and recorded them as a derivative liability at fair value. A debt discount was recognized for a
derivative liability associated with embedded features bifurcated from the Series C Convertible Debenture. For the three and
six months period ended December 31, 2014 the Company recognized amortization of this discount as an additional interest
charge to “Discount on convertible debentures” in the amounts of $126,070 and $241,560 respectively.
On July 2, 2014, in conjunction with the
issuance of the Company’s Series C Convertible Debentures, the Company issued 187,000 Shares of its Series A Convertible
Preferred stock (the “Series A) to Dr. Milton Boniuk, pursuant to the terms of the Debenture. Proceeds received in a financing
transaction are allocated to the instruments issued prior to evaluating hybrid contracts for bifurcation of embedded derivatives.
Since the Series A Convertible Preferred Stock is classified as equity, the proceeds allocated
to the Preferred Stock is recorded at relative fair value. The fair value of the Series A was $1,645,606 at issuance and the relative
fair value was calculated as $1,152,297. The remaining amount of the proceeds was allocated to the Debenture and a debt discount
of $1,152,297 was recorded to offset the amount of the proceeds allocated to the Series A. Then, the embedded derivative is bifurcated
at its fair value of $1,879,428 with the remaining balance allocated to the host instrument (Debenture). The total debt discount
will be amortized over the term of the Debenture using the effective interest method.
The following represents the balance of the Debenture payable
– Series C, net of discount at December 31, 2014:
Proceeds | |
$ | 5,000,000 | |
Debt discount | |
| | |
Series A Preferred | |
| (1,152,297 | ) |
Embedded derivative | |
| (1,879,428 | ) |
| |
| 1,968,275 | |
| |
| | |
Amortization of debt discount for
the six months ended December 31, 2014 | |
| 241,560 | |
| |
| | |
Balance at December 31, 2014 | |
$ | 2,209,835 | |
Note 10 - Equity Transactions
On September 5, 2014, NanoViricides, Inc.
(the “Company”) accepted notices to exercise old warrants for the purchase of an aggregate of 2,136,655 shares of the
Company’s common stock at the exercise price of $3.50 per share. Actual proceeds relating to the exercise of the old warrants
was $6,682,291 for the six months ended December 31, 2014. On July 17, 2014, the Company filed a registration statement on Form
S-3 (the “Form S-3”) registering an aggregate of 3,071,986 shares of common stock underlying warrants previously issued
by the Company in various private placement offerings between 2005 and September 2009, (“old warrants”) as described
more fully in the Form S-3 (the “Registered Warrants”). The Form S-3 was declared effective by the Securities and Exchange
Commission on August 1, 2014. As of August 15, 2014, any Registered Warrants as specified above and not previously exercised have
expired.
Unregistered Securities
As discussed in Note 9, on July 2, 2014,
in conjunction with the issuance of the Company’s Series C Convertible Debentures, the Company issued 187,000 Shares of its
Series A Convertible Preferred stock to Dr. Milton Boniuk, pursuant to the terms of the Debenture. The Company allocated the proceeds
received between the Debenture and the Preferred Stock on a relative fair value basis. The amount allocated to the Preferred stock
was $1,152,297.
In November, 2014, the Scientific
Advisory Board (SAB) was granted warrants to purchase 17,148 shares of common stock at $3.86 per share expiring in November, 2018. These
warrants were valued at $16,977 and recorded as consulting expense.
For the three months ended December
31, 2014, the Company’s Board of Directors authorized the issuance of 10,574 shares of its Series A Convertible Preferred
stock for employee compensation. The Company recorded an expense of $84,105.
For the three months ended December
31, 2014, the Company’s Board of Directors authorized the issuance of 8,227 shares of its common stock with a restrictive
legend for consulting services. The Company recorded an expense of $27,000.
For the three months ended December
31, 2014, the Company’s Board of Directors authorized the issuance of 3,399 shares of its common stock with a restrictive
legend for Director services. The Company recorded an expense of $11,250.
For the three months ended December
31, 2014, the Company estimated the relative fair value of the warrants granted quarterly to the Scientific Advisory Board on
the date of grant using the Black-Scholes Option-Pricing Model with the following weighted-average assumptions:
| |
2014 | |
| |
| | |
Expected life (year) | |
| 4 | |
| |
| | |
Expected volatility | |
| 45.19 | % |
| |
| | |
Expected annual rate of quarterly dividends | |
| 0.00 | % |
| |
| | |
Risk-free rate(s) | |
| 1.29 | % |
There is currently
no market for the shares of Series A Preferred Stock and they can only be converted into shares of common stock upon a change
of control of the Company as more fully described in the Certificate of Designation. The Company, therefore, estimated the relative
fair value of the Preferred A shares granted to various Employees and others on the date of grant. The Preferred Series A shares
fair value is based on the greater of i) the converted value to common at a ratio of 1:3.5; ii) the value of the voting rights
since the holder would lose the voting rights upon conversion. The conversion of the shares is triggered by a Change of Control.
The valuations of the Series A Preferred Stock as of December 31, 2014 used the following inputs:
| a. | The common stock price (post-reverse
split) was in the range $3.14 to $2.72; |
| b. | 56,450,600 to 58,321,521 shares outstanding
and Series A Preferred shares with 2,572 (post–split 9/10/13) issued monthly ; |
| c. | A 5.36% premium over the common shares
for the voting preferences; |
| d. | 67,511,039 to 69,428,256 total voting
shares and the monthly shares representing voting rights of 4.892% to 4.823% of the total; |
| e. | The conversion value is based on an
assumption for calculation purposes only of a Change of Control in 4 years from 3/1/13
and a remaining restricted term of 2.33 to 2.17 years; |
| f. | 35.53% to 31.95% restricted stock discount
(based on a restricted stock analysis and call-put analysis curve: 84.68% to 94.41% volatility,
0.10% to 0..13% risk free rate) applied to the converted common. |
Note 11 – Stock Options and
Warrants |
The following table presents the
combined activity of stock options issued for the reporting periods ended December 31, 2014 as follows:
Stock Options | |
Number of
Shares | | |
Weighted
Average Exercise Price per share ($) | | |
Weighted
Average Remaining Contractual Term (years) | | |
Aggregate
Intrinsic Value ($) | |
Outstanding at
June 30, 2014 | |
| 535,715 | | |
| 0.35 | | |
| 1.23 | | |
| 2,094,643 | |
Granted | |
| - | | |
| - | | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | | |
| - | |
Expired | |
| - | | |
| - | | |
| - | | |
| - | |
Canceled | |
| - | | |
| - | | |
| - | | |
| - | |
Outstanding at December
31,2014 | |
| 535,715 | | |
| 0.35 | | |
| 0.73 | | |
| 1,264,280 | |
As of December 31, 2014 there was
no unrecognized compensation cost.
Stock Warrants
Stock Warrants |
|
Number of
Shares |
|
|
Weighted
Average
Exercise
Price
per share
($) |
|
|
Weighted
Average
Remaining
Contractual Term
(years) |
|
|
Aggregate
Intrinsic Value
($) |
|
Outstanding at June
30, 2014 |
|
|
8,894,355 |
|
|
|
5.01 |
|
|
|
2.78 |
|
|
|
2,278,458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
34,296 |
|
|
|
4.18 |
|
|
|
3.88 |
|
|
|
- |
|
Exercised |
|
|
1,926,656 |
|
|
|
3.50 |
|
|
|
- |
|
|
|
- |
|
Expired |
|
|
1,059,616 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Canceled |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Outstanding
at December 31,2014 |
|
|
5,942,379 |
|
|
|
5.15 |
|
|
|
3.59 |
|
|
|
85,114 |
|
Of the above
warrants, 277,149 expire in fiscal year ending June 30, 2015; and 68,572 expire in fiscal year ending June 30, 2016; 68,572 expire
in fiscal year ending June 30, 2017; 68,568 in fiscal year ending June 30,2018; 5,459,518 in fiscal year ending June 30, 2019.
Note 12 – Fair Value Measurement
Fair value measurements
Fair value is defined as the price that
would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. When determining the fair value for applicable assets and liabilities, we consider the principal or most
advantageous market in which we would transact and we consider assumptions market participants would use when pricing the asset
or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. This guidance also establishes a fair value
hierarchy to prioritize inputs used in measuring fair value as follows:
● |
Level 1: Observable inputs such as quoted prices in active markets; |
● |
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and |
● |
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
At December 31, 2014 and 2013, the fair
value of derivative liabilities is estimated using option pricing models that are based on the individual characteristics of our
warrants, preferred and common stock, the derivative liability on the valuation date as well as assumptions for volatility, remaining
expected life, risk-free interest rate and, in some cases, credit spread. The derivative liabilities are the only Level 3 fair
value measures.
At December 31, 2014 and 2013, the estimated
fair values of the liabilities measured on a recurring basis are as follows:
| |
Fair Value Measurements at | |
| |
December 31, 2014: | |
| |
| | |
| | |
| |
| |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
| |
| | |
| | |
| |
Derivative liability – Series B debentures | |
$ | - | | |
| - | | |
$ | 3,274,961 | |
Derivative liability – Series C debentures | |
| - | | |
| - | | |
| 1,206,532 | |
Derivative liability – warrants | |
| - | | |
| - | | |
| 4,924,378 | |
Total derivatives | |
$ | - | | |
$ | - | | |
$ | 9,405,871 | |
| |
Fair Value Measurements at | |
| |
June 30, 2014: | |
| |
| | |
| | |
| |
| |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
| |
| | |
| | |
| |
Derivative liability – Series B debentures | |
$ | - | | |
$ | - | | |
| 5,699,703 | |
Derivative liability - warrants | |
| - | | |
| - | | |
| 5,235,682 | |
Total derivatives | |
$ | - | | |
$ | - | | |
$ | 10,935,385 | |
The following tables present the activity
for liabilities measured at estimated fair value using unobservable inputs for the six months ended December 31, 2014:
| |
Fair Value Measurement Using Significant | |
| |
Unobservable Inputs | |
| |
Derivative liability – Series B | | |
Derivative liability – Series C | | |
Derivative liability - warrant | |
| |
| | |
| | |
| |
Beginning balance at July 1, 2014 | |
$ | 5,699,703 | | |
$ | - | | |
| 5,235,682 | |
Additions during the year | |
| - | | |
| 1,879,428 | | |
| - | |
Change in fair value | |
| (2,424,742 | ) | |
| (672,896 | ) | |
| (311,304 | ) |
Transfer in and/or out of Level 3 | |
| - | | |
| - | | |
| - | |
Ending balance at December 31, 2014 | |
$ | 3,274,961 | | |
$ | 1,206,532 | | |
$ | 4,924,378 | |
Note 13 - Commitments and Contingencies
Operating Lease
The Company’s
principal executive offices are located at 135 Wood Street, West Haven, Connecticut, and include approximately 7,000 square feet
of office and laboratory space at a base monthly rent of $8,695. The term of lease expired on February 28, 2011 and is now on
a month-by-month basis.
Total rent expense at 135 Wood Street,
West Haven, Connecticut amounted to $52,170 and $52,170 for the six months ended December 31, 2014 and 2013, respectively.
On December
31, 2014, the Company entered into and consummated an Agreement for the Purchase and Sale of a cGMP-compliant pilot manufacturing
and lab facility at 1 Controls Drive, Shelton, Connecticut. The purchase price of the facility was comprised solely of the repayment
of the direct costs of the seller, Inno-Haven, LLC (“Inno-Haven”) incurred in acquiring and renovating the property
and the facility plus Inno-Haven’s closing costs in connection with the sale. The purchase price consisted of the repayment
of Inno-Haven’s acquisition and renovation expenses of $4,222,458 and closing costs of $77,480.
In addition
to the costs incurred by Inno-Haven, the Company undertook and paid for the costs of design and engineering to support its stringent
specifications. The Company also paid for certain additional equipment and fixtures, required for its specialized use of the facility.
These additional costs directly paid for by the Company amount to $5,145,329, as previously reported by the Company in prior filings,
and are not part of the purchase price reported above.
Legal Proceedings
On or about
January 18, 2012, the Nevada Agency and Transfer Company, as agent for service of process for the Company in Nevada, was served
with a Summons and Complaint in the case entitled Yidam, Ltd. v. Eugene Seymour, Anil Diwan, and NanoViricides, Inc. (Case No.
A-12-654437-B) answerable in the Eighth Judicial District Court of the State of Nevada – Clark County (“Court”).
The Complaint sought to compel inspection of the Company’s books and records. The Complaint further sought unspecified
“injunctive relief” in furtherance of the demand for inspection to which it is not entitled. The Complaint by
a holder of less than 1 percent of the common stock of the Company sought, inter alia, inspect documents and records of the company
to which it is not entitled and in a form and manner the Company argues is not authorized by statute. Management believed
that this lawsuit had no merit or basis Monetary damages had not been claimed and as a result no accrual had been made in
relation to this litigation. This action was dismissed by the court or withdrawn several times in a series of repetitive complaints
The Company
has vigorously defended this lawsuit. Following cross-motions for summary judgment and certain discovery as limited by the court,
the parties engaged in a settlement conference in March 2014, at which time an agreement was reached resolving the parties’
disputes in this matter and an identical repetitive complaint the same Plaintiff had filed with the United States District Court
for the District of Colorado. Pursuant to the Settlement Agreement, the Company deposited $150,000 with its attorney to be released
to reimburse the Plaintiff for a portion of its litigation expenses. However, disagreements later arose regarding the negotiated
resolution, precipitating, among other things, the Company’s application for court intervention and repeated status hearings.
Final settlement documents were fully exchanged on September 11, 2014. Upon the Plaintiff’s compliance with the terms of
the Settlement Agreement, the Company authorized counsel to release the reimbursement amount to the Plaintiff. An order dismissing
the foregoing lawsuit was entered on September 16, 2014.
There are no
other legal proceedings against the Company to the best of the Company’s knowledge as of the date hereof and to the Company’s
knowledge, no action, suit or proceeding has been threatened against the Company.
Note 14 - Subsequent Events
Management
has evaluated all events that occurred after the balance sheet date through the date when these financial statements were issued
to determine if they must be reported. The Management of the Company has determined that the following reportable subsequent event
is required to be disclosed:
On
January 23, 2015, NanoViricides, Inc. (the “Company”) held its 2014 Annual Meeting of Stockholders (the “Meeting”).
Of the 58,321,521 shares of common stock entitled to vote at the Meeting, 48,992,605 shares of common stock were present
in person or by proxy and entitled to vote and 3,313,218 shares of Series A Convertible Preferred Stock (“Series A Preferred
Shares”) were present in person or by proxy and entitled to vote, representing approximately 92% of the Company’s
outstanding voting capital stock.
At the Meeting,
the Company’s stockholders: (i) re-elected Stanley Glick, as director of Class III for a two-year term expiring at the 2016
annual meeting of stockholders and until his successor is duly elected and qualified or until his earlier resignation or removal;
(ii) approved an amendment to the Company’s Articles of Incorporation to increase the Company’s authorized capital
stock to 150,000,000 shares of common stock, par value $0.001 per share and 10,000,000 shares of preferred stock, par value $0.001
per share; and (iii)) ratified the appointment of EisnerAmper LLP as the Company’s independent registered public accounting
firm for the fiscal year ending June 30, 2015.
PART I
The following
discussion should be read in conjunction with the information contained in the financial statements of the Company and the notes
thereto appearing elsewhere herein and in conjunction with the Management’s Discussion and Analysis of Financial Condition
and Results of Operations set forth in the Company’s Annual Report on Form 10-K for the year ended June 30, 2014. Readers
should carefully review the risk factors disclosed in this Form 10-K and other documents filed by the Company with the SEC.
As used in
this report, the terms “Company”, “we”, “our”, “us” and “NNVC” refer
to NanoViricides, Inc., a Nevada corporation.
SPECIAL
NOTE ON FORWARD-LOOKING STATEMENTS
The information
in this report contains forward-looking statements. All statements other than statements of historical fact made in this report
are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial
position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,”
“estimates,” “could,” “possibly,” “probably,” “anticipates,” “projects,”
“expects,” “may,” “will,” or “should,” or other variations or similar words. No
assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking
statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly
from management’s expectations.
Although these
forward-looking statements reflect the good faith judgment of our management, such statements can only be based upon facts and
factors currently known to us. Forward-looking statements are inherently subject to risks and uncertainties, many of which are
beyond our control. As a result, our actual results could differ materially from those anticipated in these forward-looking statements
as a result of various factors, including those set forth below under the caption “Risk Factors.” For these statements,
we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. You should not unduly rely on these forward-looking statements, which speak only as of the date on which they were
made. They give our expectations regarding the future but are not guarantees. We undertake no obligation to update publicly or
revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by
law.
ITEM
I: BUSINESS
Organization
and Nature of Business
NanoViricides,
Inc. is a leading company in the application of novel nanomedicine technologies to the complex issues of viral diseases.
The nanoviricide®
technology enables direct attacks at multiple points on a virus particle. It is believed that such attacks would lead to the virus
particle becoming ineffective at infecting host cells. Antibodies in contrast attack a virus particle at only a maximum of two
attachment points per antibody.
The Company
develops its drugs, that we call a nanoviricide®, using unique platform technology. Our approach enables rapid development
of new drugs against a number of different viruses. A nanoviricide is a “biomimetic” - it is designed to “look
like” the cell surface to the virus. To accomplish this, we have developed a polymeric micelle structure composed of PEG
and fatty acids, that is designed to create a surface like the cell membrane, with the fatty acids going inside of the micelle.
On this surface, we chemically attach, at regular intervals, virus-binding ligands. The virus is believed to be attracted to the
nanomicelle by these ligands, and thereby binds to the nanoviricide using the same glycoproteins that it uses for binding to a
host cell. Upon such binding, a “lipid mixing” interaction between the lipid envelope of the virus and the nanomicelle
is thought to take place, leading to the virus attempting to enter the nanomicelle. Many different kinds of viruses are likely
to get destroyed in the process.
We engineer
the ligands to “mimic” the same site on the cell surface protein to which the virus binds. These sites do not change
no matter how much a given virus mutates. Thus we believe that if a virus so mutates that it is not attacked by our nanoviricide,
then it also would not bind to the human host cell receptor effectively and therefore would be substantially reduced in its pathogenicity.
Our success at developing broad-spectrum nanoviricides depends upon how successfully we can design decoys of the cell surface
receptor as ligands, among other factors.
The Company
currently has six drugs in development with very large commercial markets. These include (i) Injectable FluCide™ for hospitalized
patients with severe influenza, (ii) Oral FluCide™ for out-patients, (iii) DengueCide™, a broad spectrum nanoviricide
designed to attack all types of dengue viruses and expected to be effective in the Severe Dengue Disease syndromes including Dengue
Hemorrhagic Fever (DHS) and Dengue Shock Syndrome (DSS), (iv) HIVCide™ for HIV/AIDS, (v) HerpeCide™ for cold sores
and genital sores caused by HSV, and (vi) Broad-spectrum Anti-Viral Eye drops for adenoviral and herpesviral infections of the
external eye. In addition, the Company has research programs to develop drugs against Ebola and Marburg viruses,including the
Ebola virus that is the cause of the recent epidemic in West Africa, Rabies virus, as well as the recent MERS Coronavirus (Middle-East
Respiratory Syndrome). The Company also has a technology that we call “ADIF” or “Accurate-Drug-In-Field”
technology with which an effective drug can be developed against a novel virus right in the field using stockpiled nanoviricides®
precursors. The estimated market size for the current drug candidates is well in excess of $40 billion worldwide.
On January
23, 2015, subsequent to the reporting period, the Company conducted its Annual Meeting of Shareholders at the Hampton Inn, Stamford,
CT. Mr. Stanley Glick was reappointed as a Director, Class 3, to serve an additional 2-year term. Proposal of an amendment to
our Articles of Incorporation to increase the number of authorized shares of common stock to 150,000,000 shares and the preferred
stock to 10,000,000 shares was approved. The Company has no immediate plans for seeking any additional funding. However, the Company
had determined upon discussion with counsel and other stakeholders, that an expansion in the authorized capital was necessary
in order to improve the Company’s fiscal robustness and in order to avoid future potential risks in financing. With our
recent financings and after accounting for purchase of the Shelton facility, as of December 31, 2014, the Company has current
assets including security deposits and prepaid expenses of approximately $35.6 million .The Company continues to be frugal in
its expenditures, and has successfully held the rate of operational cash expenditures at approximately $2.9 million this quarter.
We believe we have sufficient funds in hand for more than two years of operations at the current rate of expenditure, and including
the projected expenditures. In addition, the selection of EisnerAmper LLP as the Company’s independent registered public
accounting firm for the 2015 fiscal year was ratified and approved. EisnerAmper is our independent auditing firm as of this quarterly
report.
In response
to questions from shareholders, the Company said that it now has sufficient production capacity for initial market entry of our
first Injectable FluCide drug candidate when approved, and that it also has sufficient capacity to fulfill all the manufacturing
needs of responding to the current Ebola epidemic, should any of our new anti-Ebola drug candidates move to further field application.
These initial revenue opportunities supportable entirely by our current production capacity at the Shelton plant could be in the
range of $100 million to $500 million, according to some estimates. The Company also stated that it is engaging into looking at
additional capacity expansion at the Shelton site, as well as looking into initial requirements analysis for a future full scale
manufacturing plant. As with our prior efforts, the Company intends to perform a country-wide site search for location of its
full scale manufacturing facility. The search will be based on various parameters including local, state and federal grants, financing,
tax abatement, and other available concessions, as well as attractiveness of the location for talented professionals that we will
need to hire at such a facility. At present, the Company has no plans for raising any financing that would be necessary for such
a full-scale manufacturing plant. The Company believes that as it gets closer to initial revenues, it would be able to finance
a full scale manufacturing facility using traditional non-dilutive or low-dilutive options. If the Company’s Ebola drug
candidate is successful, the Company believes that it would be able to attract manufacturing support from government grants and
contracts.
An Ebola virus
epidemic began in western Africa with an index case in December 2013. The epidemic was identified only in March/April 2014, as
it began to spread into multiple countries. It has continued to expand rapidly geographically, and also to grow exponentially
in spite of the serious efforts by the international community to contain it. As of February 3, 2015, the World Health Organization
(WHO) and respective governments have reported a total of 22,560 suspected cases and 9,019 deaths,though the WHO believes
that this substantially understates the magnitude of the outbreak ("Ebola data and statistics - Latest available situation
summary, 6 February 2015". World Health Organization. 6 February 2015. Retrieved 6 February 2015.). Sporadic cases have
occurred elsewhere in the world, including the United States, which were due to persons infected with Ebola virus traveling to
other countries. Secondary infections from such patients mainly to health care workers have also occurred. However, these local
outbreaks outside of West Africa have been successfully controlled so far with strong case management protocols as well as public
health measures, including quarantine.
The Company
identified that anti-Ebola drug development provided an opportunity for us to validate our rapid drug development platform, as
well as potentially to enter first-in-human studies quickly. Our strategy was based on the lethal nature of Ebola virus infection,
and based on the complete lack of effective treatments despite billions of dollars that have been spent in development. We therefore
re-engaged our anti-Ebola drug development program. Along the course, an anti-Ebola drug has also become a viable business proposition,
due to several legislative efforts and other changes. For example, Ebola has been added to the list of diseases that enable a
Priority Review Voucher (“PRV”) (see further details on PRV elsewhere in this report). In addition, substantial government
and non-profit funding has become available for anti-Ebola drug development recently, in response to the current epidemic in West
Africa.
In August 2014,
we announced that we restarted our anti-Ebola drug development program. In September 2014, we announced that we had completed
the design of anti-Ebola small chemical ligands that are designed to mimic the putative binding site on the Niemann-Pick C1 (NPC1)
protein in host cells, to which Ebola virus glycoprotein binds prior to gaining access to the cellular machinery for making its
own copies. In late October, 2014, we reported that the Company had executed a CRADA (Collaborative Research and Development Agreement
for Material Transfer) with the United States Army Medical Research Institute of Infectious Diseases (USAMRIID), for the evaluation
of our novel anti-Ebola nanomedicine drug by USAMRIID scientists in their BSL-4 facilities for activityagainst the deadly Ebola
virus. In late January 2015, subsequent to the reporting period, we announced that we have shipped several anti-Ebola nanoviricide®
drug candidates to a hi-security bio-containment facility in the US that is capable of performing evaluation of these drug candidates
in the required biological safety level 4 (BSL-4) environment. We now await testing of these drug candidates.
The Company has designed these novel
anti-Ebola broad-spectrum drug candidates such that they are expected to continue to work in spite of mutations in the field.
Using NanoViricides’s rapid
design platform, it took only 4 months from design to synthesis of the multiple drug candidates. These candidates are designed
to attack the Ebola virus at the site on the virus that does not change in spite of mutations because the virus uses this site
to bind to its cognate receptor in human cells, namely NPC1. Some of the candidates are designed to attack another conserved site
on the Ebola virus that is thought to be involved in the fusion process of the virus required for it to successfully enter the
cell.
The Company already has the capability
of producing sufficient quantities of a successful anti-Ebola drug in its new cGMP-capable facility in Shelton, CT, for combating
the current Ebola epidemic. This pilot scale manufacturing facility will be able to supply the successful nanoviricides drug candidate
in quantities needed for the treatment of patients in West Africa infected with the Ebola virus. NanoViricides, Inc. is one of
the very few companies that has the ability produce its drug candidates at this full-response scale.
The Company had previously developed
anti-Ebola drug candidates that demonstrated the validity and potential of the Company’s approach, based on cell culture
and animal testing conducted at USAMRIID in 2008-2009. At that time, the cognate receptor of the Ebola virus was still unknown
and the Company used certain heuristic approaches to design potential drug candidates for the purpose of validating our approach.
The Company had to de-prioritize this development in order to focus on the development of its lead drug candidate, Injectable
FluCide™, for treatment of hospitalized patients with influenza. The current outbreak in Africa has unequivocally demonstrated
the need for an effective, broad-spectrum, anti-Ebola therapeutic. NanoViricides engaged into the anti-Ebola drug development
with the highest priority in order to respond to this challenge.
The site at
which the Ebola virus binds to its cognate cellular receptor, namely NPC1, does not change, in spite of mutations. Thus the Company
believes that its new drug candidates would continue to work in spite of field mutations in the virus. This is unlike vaccines,
antibodies, siRNA, antisense, and several other therapeutic modes, which a virus can readily overcome due to mutations it acquires
in the field. In late January, 2015, the Company announced that it had sent several novel anti-Ebola drug candidates to a BSL-4
Hi-Security Biocontainment Laboratoryin the USA for testing. The Company reported that, in addition to attacking the NPC1 site,
some of the candidates were designed to attack another conserved site on the Ebola virus that is thought to be involved in the
fusion process of the virus, which is essential for it to successfully enter the cell.
Currently there
are neither any drugs nor vaccines against Ebola, although some vaccines and some drug candidates have advanced into clinical
trials. Recently, Chimerix Inc. announced that it has stopped the field clinical trial of its anti-herpes drug candidate, namely
brincidofovir, against Ebola after treating approximately ten patients. In addition, in a new publication in the journal mBio
(Kugelman, et al. mBio 2015;6(1):e02227-14), scientists at USAMRIID, Harvard University, and Massachusetts Institute
of Technology (MIT) studied genetic changes in the Ebola virus (EBOV) circulating in West Africa, and concluded that genomic drift
of the EBOV over time may be sufficient to block the action of otherwise potential therapies that target EBOV genetic sequences.
The types of potential drugs at risk include monoclonal antibodies and small-interfering RNA (siRNA) that are scheduled to be
evaluated during the current outbreak. This casts doubt as to how effective, if at all, zMAPP (MAPP Bio, an antibody cocktail),
TKM-Ebola drug candidate from TEKMIRA (an siRNA cocktail), and the Sarepta drug candidate (a modified oligonucleotide cocktail),
would be expected to be in the current outbreak. Hemispherx recently announced that its two drugs, Alferon®-N (a mixed natural
interferon alpha injection), and Ampligen® (a double-stranded RNA), were found to be effective in cell cultures and that Ampligen
protected 100% of ebola infected mice in a study conducted by USAMRIID scientists. However, both of these drugs act by exciting
the human immune response, and therefore, their effectiveness in severely ill Ebola patients can only be assessed in the field.
BioCryst is developing a broad-spectrum viral RNA Polymerase inhibitor against Ebola and other viruses. This drug, BCX-4430, is
in Phase I human clinical trials. A related drug, Avigan® (favipravir, or T-705), (being developed now by FujiFilm), has shown
promising results in Ebola infected patients in the field. Of 69 patients treated, only in a subset, i.e. those patients who had
limited viral load, Avigan reduced mortality to 15% from the historical control value of 30% mortality in the same two hospital
sites treating the patients, according a to a recent news release (http://www.nytimes.com/2015/02/05/science/ebola-drug-has-encouraging-early-results-and-questions-follow.html?_r=1).
The effect of the superior case management protocols employed in connection with the treatment need to be removed from the analysis
to evaluate the actual effect of the drug in such weak but promising signals. Nevertheless, the trial has been expanded and favipravir
may be made more widely available to patients. In contrast, a clinical trial of one of the Ebola vaccine candidates was stopped
in Phase I, another ebola vaccine candidate is in clinical trial at present, but statisticians have raised doubts about these
clinical trials in terms of producing statistically definitive results. Nevertheless, a vaccine would require vaccination of thousands
of times the number of people actually affected by the disease, and given the EBOV mutation effects, vaccines of this cycle can
no longer be expected to be effective to provide immunity against a future epidemic strain, similar to what is widely known in
the case of influenza.
Thus development
of a highly effective therapeutic against Ebola and related viruses such as Marburg remains an important and urgent unmet medical
need. We believe that NanoViricides is well poised to re-enter this field and should be able to develop an effective drug rapidly,
possibly in a timeline responsive to the current epidemic.
The current
epidemic Ebola virus, a Zaire Ebola virus variant, has been shown by to mutate in the field frequently. This raises significant
doubts regarding the success of standard antiviral approaches including vaccines, antibodies, antisense technologies, and siRNA
approaches. In spite of the mutations, however, the cognate receptor of the virus on the cells and how the virus binds to it does
not change. Fortunately, this receptor has now been identified for Ebola virus, as the Niemann-Pick C1 protein (NPC1), a cholesterol
transporter whose function is essential for health. An approach of blocking the cellular pprotein, NPC1in analogy to the development
of maraviroc to block CCR5 and thereby affect HIV/AIDS, is unlikely to be successful, because NPC1 function is essential to human
health. In contrast, the nanoviricides approach of attacking the virus itself by presenting to the virus a biomiteic surface like
a cell membrane studded with the same binding sites which the virus binds to, namely its site on NPC1, shows significant promise.
Sufficient structural information has been elucidated recently about Ebola virus-NPC1 interaction that it has become possible
for us to develop novel drug candidates against Ebola that the virus is unlikely to escape. In addition, since the NPC1 interaction
is essential for EBOV to cause disease, such a nanoviricide candidate is expected to have strong efficacy in the field, and would
be expected to remain effective in spite of mutations in the virus
In October
2014, the Company announced that it had signed a Cooperative Research and Development Agreement- Material Transfer Agreement (CRADA-MTA)
with US Army Medical Research Institute for Infectious Diseases (USAMRIID). USAMRIID will be able to perform cell culture as well
as animal testing of the Company’s new anti-Ebola drug candidates under this Agreement. Should a successful candidate be
identified, further development towards an Investigational New Drug (IND) Application and clinical studies as well as usage in
the field in the current epidemic in West Africa is possible. The World Health Organization (WHO) has recently established guidelines
for use of un-licensed novel anti-Ebola drug candidates in the field in an effort to help control the current epidemic. Additionally,
design and conduct of clinical trials in an active theater of a raging lethal epidemic has also become relatively clear in recent
months. Funding for manufacturing, supply of drugs, conduct of clinical trials, and other efforts, has become available from a
number of governmental and charitable organizations. We are currently awaiting results of in vitro studies of our anti-Ebola drug
candidates at USAMRIID.
The Company
has the ability to produce requisite large quantities of such a drug candidate in its new cGMP-capable manufacturing facility
in Shelton, CT. We may be able to manufacture thousands of doses in a single batch. For a highly effective drug, it has been estimated
that as few as 30 patients would provide statistically significant efficacy data on drug efficacy, because of the known high mortality
rate in untreated patients.
We continue
to achieve very strong performance in the testing of our other drug candidates as well. All of our biological testing is conducted
by third parties.
As part of
the advanced IND–enabling development of our Injectable FluCide drug candidate, we have continued to scale up our production
processes for both the backbone polymer and the ligands. We are now progressing to a 1Kg scale of production. We are working on
implementing in-process measurement and control instrumentation, in order to rapidly implement quality control of the processes.
This includes implementing some novel instruments that we believe are valuable in the process control for our nanomedicine polymeric
materials. We have been able to make up to 200g batches in our existing facility in West Haven. We believe that we will be able
to make as much as a few kilograms in a single batch in the new cGMP-capable facility in Shelton, CT.
We need to
make approximately 2.5Kg of our FluCide drug candidate for further Tox Package studies, because of the excellent safety demonstrated
by this drug candidate in safety and toxicology studies in both mouse and rat animal models.
In contrast,
if the course of treatment of a successful Ebola drug candidate is assumed to be a gram or less, we would be able to make thousands
of courses of treatment in a single batch. Our production capacity could thus be responsive to the current requirements for the
containment of the Ebola epidemic in West Africa.
Much of our
R&D work, until undertaking the Ebola program on a “war footing”, was focused on the IND-enabling development
of our anti-influenza drug candidate, Injectable FluCide. We have been actively studying different chemical processes and routes
of synthesis of the backbone polymer, the ligand, and the nanoviricide drug itself, which is a chemical conjugate of the two.
The objective of these studies is to develop pathways that will allow industrial manufacturing scale production of a well-defined
drug substance, so that multiple batches will produce consistent product. Our studies also involve the development of methods
of chemical and physical characterization of the materials at various stages in the entire production process. These studies also
include performing the syntheses at different scales, and at least sufficiently characterizing the products at different stages
to enable decision-making regarding different possible process variations. We are also continuing to develop additional tests
that are needed for analyses of samples from animals that will be generated during the safety/toxicology studies, and later in
the human clinical trials. Such tests are needed for estimating a drug’s distribution pattern in the body as well as the
time profile of the distribution. Such tests are also needed to decipher the metabolic fate of the drug. Since a nanoviricide
drug is not a simple small chemical or an antibody, development of these tests is relatively complex, and is taking a significant
amount of time. The work on FluCide continues, albeit at a reduced pace, due to the urgency of the anti-Ebola drug development
program.
The work on
production of the polymeric micelle backbone material is common to FluCide and the current anti-Ebola drug candidates, thereby
saving both time and money in these drug development processes.
We have been
able to produce the Injectable FluCide drug candidate in a batch as large as 200g in our existing facilities at present. We began
initial safety/toxicology studies with this batch of material in October, 2014. We have engaged BASi Toxicology Services of West
Lafayette, IN, to perform the IND-enabling safety/toxicology study for our Injectable FluCide drug candidate.
In late January 2015, subsequent
to the reporting period, we reported that an optimized FluCide® drug candidate was found to posses a good safety profile in
a GLP-like toxicology study in rats. These results are extremely important since they indicate that FluCide continues to look
very promising as one of the most advanced candidates in the Company’s drug development pipeline. The study was conducted
at BASi (Bioanalytical Systems, Inc., NASDAQ: BASI) in Evansville, Indiana. The study was performed in a cGLP-like fashion, compliant
with BASi Evansville standard operating procedures. BASi has over 40 years of experience providing contract research services
and niche instrumentation to the life sciences, primarily drug research and development.
No direct adverse clinical effects
were found upon administration of the FluCide candidate intravenously at doses of up to 300mg/kg/day for 14 days (a total of 4,200mg/kg)
in rats. Organs were examined for gross histological observations. Microscopic histological tissue analysis was also performed.
There were no adverse histological findings in gross organ level histological examination, nor were there any adverse findings
in microscopic histological analysis. Equally importantly, there were no meaningful effects observed on animal weight gain, food
consumption, hematology, or clinical chemistry at the end of the 14 day dosing period.
These results are in agreement with
the previously reported results of a non-GLP toxicology study in mice. The current study results also support the Company’s
positive findings in animal models of infection with different influenza A virus strains in which no safety or toxicology concerns
were observed. The Company has previously reported that many of its FluCide candidates demonstrated extremely high anti-influenza
activity in those models.
This study was developed in collaboration
with BASi and conducted by BASi in a c-GLP-like fashion in order to understand the safety parameters of FluCide intravenous dosing.
The next phase of the toxicology
package studies will involve larger animals, and will require much larger quantities of the drug candidate. The Company is in
the process of commissioning operations at the new facility at 1 Controls Drive, Shelton, CT, in order to perform the scale up
studies needed for making the large quantities of materials in a controlled manner. These upcoming studies will be performed in
cGLP compliant manner to provide safety and toxicology data that are required for an IND submission to regulatory agencies.
Injectable
FluCide is our most advanced candidate. This drug candidate has shown extremely high effectiveness in a lethal influenza infection
mouse model against two different types of influenza A virus, namely H1N1 and H3N2. The Company believes that this drug should
be effective against most if not all influenza A subtypes, and strains, including the novel H7N9 strain. The Company held a pre-IND
Meeting with the US FDA for its clinical drug candidate NV-INF-1 (i.e. Injectable FluCide) in the FluCide program in March 2012.
The Company obtained valuable advice and is developing this candidate towards an investigational drug application (“IND”)
to the US FDA as well as for similar applications to other international regulatory agencies. The Company recently performed a
short preliminary non-GLP study designed to guide the planned GLP Safety and Toxicology studies (“Tox Package”) that
are required for an IND filing. Previously, on October 7, 2013, the Company announced that in this small animal non-GLP safety/toxicology
study of NV-INF-1 drug candidate, even at maximum feasible dosage, the drug was well tolerated and that no adverse events were
found at study completion. . On December 2, 2013, the Company reported that detailed laboratory analyses of samples from this
non-GLP safety and toxicology study showed no overall systemic effects and no direct effects on the primary organs. This includes
liver and kidney tissues as well as liver and kidney function. This is important as the liver and kidneys are major organs involved
in drug toxicity. In addition, FluCide showed no adverse effects on the lungs from the treated animals. This is very important
because the respiratory system is a primary site of influenza virus infection and tissue damage. These strong safety findings
were seen at all doses tested, even at the maximum feasible dose (MFD). MFD was much higher than the therapeutic dose range used
to treat influenza virus infections in our animal model efficacy studies. FluCide was administered intravenously by tail-vein
injections or by infusion in this study. This non-GLP safety/toxicology study was conducted at KARD Scientific in Massachusetts.
Our recent safety and toxicology studies in rats have further corroborated the safety of FluCide.
These results
support the Company’s positive findings in animals that were infected with different influenza A virus strains. In those
studies, no safety or toxicology concerns were observed. The Company has previously reported that its FluCide candidate demonstrated
extremely high anti-influenza activity in lethal infection animal models using multiple influenza A subtypes. The extremely
high anti-influenza activity coupled with the strong safety data were the basis for the selection of this FluCide candidate for
further drug development. As previously reported, the results of this study will provide both the basis and focus for the GLP
safety and toxicology studies of FluCide that are required for the IND submission to the U.S. FDA. These GLP studies will be performed
on both large and small animals at the BASi facility in Indiana. The Company has started certain initial safety/toxicology studies
at BASi with the current product in hand. We need to perform further scale up and produce a much larger batch of the drug substance
in order to perform the full suite of the safety/toxicology studies. The quantity required for these studies was estimated to
be as much 2.5kg or more, because of the strong safety observed in preliminary studies. This scale-up will be performed at the
Company’s new cGMP-capable manufacturing facilities in Shelton, CT.
The Company
believes that these strong safety data bode well for our other drug programs as well. This is because a nanoviricide is built
of two parts – (1) a virus specific ligand, that is chemically attached to (2) a “nanomicelle” or polymeric
micelle based on our specific chemistries. It is reasonable to believe that the nanomicelle structures of our other drug candidates
should also be safe. In addition, we believe that we have chosen antiviral ligands for our other drug candidates in a very conservative,
safety-biased fashion.
The Company
is currently performing process development and scale up studies on its FluCide drug candidate in its existing facilities. This
activity is comprised of three parts: (a) Scale-up and characterization studies of the selected broad-spectrum anti-influenza
ligand in FluCide; (b) Scale-up and characterization of the nanomicelle-forming polymer in FluCide; and (c) Scale-up and characterization
of the FluCide resulting from chemical conjugation of the ligand with the nanomicelle. The scale-up studies were necessitated
to be performed at this early stage of our drug development because of the extremely high safety of FluCide that resulted in a
very large quantity requirement for the GLP Safety/Toxicology studies. The limitations of the current laboratory facilities impose
that we produce these materials in multiple batches at present, resulting in extended production and characterization time periods.
We were able to perform production of 200g batch in our current facilities. This quantity allowed us to initiate certain safety
studies.
The Company
has previously announced that its anti-dengue drug candidate in the DengueCide™ program achieved an unprecedented 50% survival
rate in a special mouse model that mimics the most severe dengue disease in humans. This study was performed by Professor Eva
Harris at the University of California, Berkeley.
On August 12,
2013, the Company announced that this anti-dengue drug candidate has been awarded an orphan drug designation by the US FDA. On
November 11, 2013, we announced that this anti-dengue drug candidate was also awarded an orphan drug designation by the European
Medicines Agency (EMA). These orphan drug designations provide the Company with several financial and other benefits that have
now enabled the Company to give a high priority to the development of this drug.
In addition,
the Company has developed a flexible, multi-product, pilot manufacturing facility capable of manufacturing any of its drug candidates
in c-GMP compliant manner. Construction of this facility was completed in July, 2014. It is now undergoing cleaning, validation
and fit-out for specialized equipment. We have started working in this facility, albeit to a very limited extent. This facility
will be able to provide the cGMP-compliant clinical drug substances for its future human clinical studies. (“c-GMP”=
current Good Manufacturing Practices, a set of guidelines developed by the US FDA that the manufacture of a drug must adhere to
for human clinical trials and future sales. Internationally, there are similar guidelines promoted by local regulatory agencies,
and ICH harmonization guidelines promoted by the WHO). A group of private financiers that includes our founder Dr. Anil Diwan
acquired an 18,000 sqft building on 4 acres with possibilities for expansion, in Shelton, CT, via Inno-Haven, LLC, a company formed
specifically for the purpose of acquiring the lab. This building was completely renovated to facilitate setting up a modern cGMP
drug substance manufacturing facility with injectable drugs capability, as well as supporting analytical and chemistry laboratory
facilities.
We assembled
a marquee team of experts to help with the design, engineering, architecture, and construction of this facility. Mr. Andrew Hahn
continues to provide overall stewardship for this project. He was formerly Senior Director of Engineering, Pharmaceutical Facilities,
Global Engineering, at the Bristol-Myers-Squibb Company Worldwide Medicines Group (BMS). He has almost 30 years of experience
in architecture, design and project management in the creation of new and refurbished facilities at Bristol-Myers Squibb Company.
Mr. Phil Mader and his firm, MPH Engineering, LLC (“MPH”), continue to help with the overall project management and
design engineering of the laboratory and cGMP pilot production facility. Prior to founding MPH, from 2000 to 2007, Phil Mader
served as the Senior Capital Project Manager at Bristol-Myers Squibb Company in Wallingford, CT (“BMS”). He was involved
in the design, implementation, and commissioning of various biology and chemistry laboratory projects within budget and in a timely
manner. Ms. Kathyann Cowles of ID3A, LLC, serves as the Principal Architect. Ms. Cowles, co-founder of Id3A, has over thirty
years of experience as a licensed Architect and Senior Project Manager for diverse and complex design and construction
projects in the academic, science, technology, corporate and research sectors. This team worked with the expert
advice and guidance of the Company’s Scientific Advisor, Dr. Harmon Aronson. Dr. Aronson is a well-known cGMP consultant
in the pharmaceutical industry, and was formerly Vice President of Quality Management at Biocraft Laboratories, a company that
was acquired by Teva Pharmaceuticals.
We evaluated
the lease versus purchase option regarding this facility. We commissioned an independent consultant report to help us with this
decision. Based on this report, the Board of Directors authorized the purchase of this facility. The purchase was completed in
December 31, 2014
Due to our
strong financial position resulting from these recent financings, the Company has purchased the state of the art 18,000sqft c-GMP-capable
Drug Manufacturing and R&D lab facility in Shelton, CT, instead of leasing it, from Inno-Haven, LLC. .
The Company purchased the facility
solely by repaying for the costs borne by Inno-Haven, LLC, in acquiring and renovating the property. NanoViricides’ Board
of Directors had approved the purchase of the facility on these terms in July 2014.
NanoViricides now intends to move
its operations to the new facility in a phased manner in order to minimize any potential impact on our ongoing projects. The Company
expects to manufacture its drug candidates for human clinical trials at the new facility. The Company further reports that all
of its drug development programs are progressing satisfactorily.
NanoViricides believes that its
cash in hand enables this purchase without impacting any of its drug development programs. Further, the Company believes that
this purchase represents a net positive cash flow impact as compared to the leasing option, over the long term.
All of the infrastructure systems
needed for production of the nanoviricides® drug candidates are now operational at the new facility, and have either been
validated by outside experts, or are in the process of such validation.
The 18,000 sqft building at 1 Controls
Drive, Shelton, CT, was completely renovated in order to build a modern, state-of-the-art c-GMP-compliant manufacturing facility
for the production of clinical scale quantities of a wide variety of injectable nanomedicines drug substances and drug products,
modern nanomedicines research and development facilities, as well as an on-site state-of-the-art nanomedicines analysis and characterization
facility. The new facility comprises a small office space, R&D Chemistry Labs, R&D Biology Labs, R&D Analytical Lab
and cGMP supporting Analytical Lab, cGMP-compliant raw materials handling and dispensing area, and c-GMP compliant Clean Room
Suites for nanomedicines production and product packaging processes. All of the R&D labs employ class 100,000 or cleaner air
systems. The clean room suites comprise class 10,000 air quality areas as well as class 1,000 and the ultra-clean class 100 air
quality areas (the class specifies the number of particles per 1,000 liters of air). This allows production and handling of nanomedicines
with minimal risk of entraining foreign particles. All of the R&D labs employ deionized water. For critical processes, WFI-quality
water is also produced on site in quantities needed to support the production scale (WFI = water for injection, comprises a specification
of water quality that specifies minimal endotoxins and maximum sterility).
The Company reported previously
that it had reached an agreement with Inno-Haven to purchase the building outright, rather than to lease it from Inno-Haven. Since
the decision to purchase the facility, NanoViricides has been conducting extensive due diligence. NanoViricides CEO, Dr. Seymour
and Kane-Kessler firm attorneys representing NanoViricides, helped by external consultants, have been performing due diligence
regarding this purchase with Inno-Haven executive Dr. Diwan. The extensive due diligence involved, a study of the original floor
plans and drawings, the final floor plans, engineering drawings, as well as installed equipment and lab furniture, as well as
a number of additional aspects of the purchase. The due diligence process also involved inspection of the accounts of Inno-Haven
and detailed accounting of actual costs involved in this project. The due diligence process further involved a study of the facility
description documents submitted by the construction management firm of MPH Engineering, LLC. In addition, the due diligence process
also involved a study of the reports on (a) the Lease vs. Purchase options for buying this facility, and (b) price of the facility
in comparison to other like facilities. These reports were commissioned from Nanotech Plus, LLC, a specialized consultancy firm,
by NanoViricides. These reports determined that the facility had a replacement value substantially in excess of $15 Million.
Dr. Diwan recused himself from the
NanoViricides’s processes pertaining to the lease or purchase of the facility including the discussions with consultants,
commissioning and study of reports, as well as the Board of Directors meetings and discussions.
Dr. Diwan originally purchased the
existing building and land at this location in August, 2011, using his savings, funds he had raised from a sale of his founders
stock under a 10b-5 plan, and certain private loans from other private parties. Inno-Haven, LLC was formed as a special purpose
limited liability company, with Dr. Diwan as its controlling member, to execute this project. The facility was intended to be
a stand alone contract manufacturing operation supporting multiple clients, including NanoViricides, Inc. Later, Inno-Haven obtained
additional non-bank commercial loans to further modify the facility as per the stringent specifications of NanoViricides, Inc.
At the time that Dr. Diwan engaged into this project, NanoViricides Inc. had limited finances available, and was unable to raise
funding to engage into this critical project on its own. NanoViricides common stock (NNVC) was trading on OTC bulletin board,
with limited trading volume. The Company had already identified in 2006 that cGMP manufacturing capability was going to be critical
for advancing its drug candidates towards human clinical trials and licensure. The Company diligently investigated contract manufacturing
as well as leasing of existing cGMP facilities to satisfy its needs. However, as a result of the novelty of its technology, it
became apparent that external parties did not have the necessary expertise. Dr. Diwan therefore took an extreme personal risk
in order to advance the Company’s goals, and engaged into this facility development project.
Subsequently, NanoViricides and
Inno-Haven executed a Memorandum of Understanding (MoU) in January, 2013, in which NanoViricides agreed to lease the facility
from Inno-Haven upon completion, with a right to purchase. NanoViricides, Inc. also commissioned external consultants for the
purposes of determining (a) fair lease ranges, and (b) the pros and cons of leasing as opposed to purchasing the facility. Based
on these reports, the Company determined that it was in the best interests of the Company and its shareholders to purchase the
facility rather than to lease it. Dr. Diwan recused himself from this entire process, including hiring of external consultants,
their reports, and the determination of the appropriate strategy.
Since February 2013, NanoViricides,
Inc. has raised more than approximately $48 million dollars. Therefore, the Company is now in a strong financial position and
is capable of purchasing the facility outright without adversely impacting its R&D programs. The Company also determined that
purchasing is the low cost option in the long term.
We will need
to set up new equipment at this facility and ensure that its performance is adequate. Thereafter we will need to conduct several
validation studies and also establish our new laboratories in the new facility. In addition, we will need to set up cGMP compliant
systems for working in this new facility. We will need to establish the scaled up manufacturing processes of our drug candidates
under cGMP guidelines in this facility. Only after that, the Company will be able to make cGMP-like material using the same processes
as c-GMP material but prior to undergoing the FDA registration process. Such c-GMP-like product can be used for clinical batches
for human clinical studies in several countries around the world. The Company is currently investigating all such options in order
to expedite the timeline to entering human clinical trials. The Company intends to contract out clinical batch fulfillments to
outside established contract manufacturers.
The Company
is now being recognized as a leader in nanomedicines, and particularly, in nanomedicines against viruses. Our CEO, Eugene Seymour,
MD, MPH, was invited to discuss the current Ebola outbreak “The Independents”, a show on the Fox Business News Channel
(FBN) on September 16th,, 2014, at 9PM EDT. He discussed some of the difficulties that could be encountered in attempts
to bring the Ebola epidemic under control. Dr. Seymour has extensive field experience in the area of infectious diseases. He has previously worked
on HIV/AIDS in Africa, Eastern Europe and Asia. Dr. Seymour was interviewed on the same show on FBN again on October
7th,, 2014, when he discussed the Company’s progress on a novel experimental Ebola drug. On August 12th, 2014,
we rang “The Opening Bell” ® at the New York Stock Exchange.
We are very
happy to report that NanoViricides won the prestigious “IAIR Award” in 2014 as the “Best North American Company
for Leadership in the Nanomedicine Sector”. These awards are given by the IAIR Group. IAIR (International Alternative Investment
Review) is a publication of EDITRICE LE FONTI® SRL, Milan, Italy. In addition, Anil R. Diwan, Ph.D., President, Chairman,
and co-Founder of the Company was recognized as the “2014 Researcher of the Year” by BusinessNewHaven, a business
journal, and the New Haven magazine, that serve the State of Connecticut. We are pleased with these recognitions and awards that
attest to our leadership position in the nanomedicines sector.
In August 2012,
we announced that we were successful in developing an anti-influenza drug candidate that was orally effective. We believe this
may be the very first targeted nanomedicine that is available via the oral route. Oral availability of FluCide would open up a
much larger market than the injectable version. The Company intends to continue to develop the injectable version for hospitalized
patients first. For severe, hospitalized cases of influenza, we are developing a concentrated solution that is administered by
“piggy-back” incorporation into the standard IV fluid supplement system that is commonly used in hospitalized patients.
In addition, we now plan to develop an oral version for out-patients and later also for pediatric patient populations. This oral
version will then replace the injectable drug that we were developing for out-patients.
In September
2012, we announced that the oral version of FluCide was also highly effective against a different strain of influenza A, namely
H3N2, in addition to the influenza strain of H1N1 that we had been using for development, in the same lethal animal challenge
model. This is an important indication that our drug candidates against influenza are indeed broad-spectrum, i.e. capable of combating
most if not all influenza viruses. We will need to perform animal studies against a few additional strains of influenza viruses
in order to substantiate that this drug is indeed a broad-spectrum drug candidate. Additional studies in cell cultures against
different strains of influenza are also planned. All of these studies are necessary for filing an IND application.
Nanoviricide
technology is built on the TheraCour® polymeric micelle platform technology. The design of these materials is like building
blocks. We can select components to achieve desired effects. This tailor-made customizability has many implications. It allows
us to (1) rapidly create a new drug against a different virus; (2) rapidly develop a drug with desired length of time for which
its effect should persist; and (3) quickly develop new drugs with different routes of administration; among many other benefits.
We had always
suspected that the polymeric nature of nanoviricides would enable a long drug effectiveness time frame, thus enabling infrequent
dosing. We have indications now that this is very likely true, from both FluCide™ and HIVCide™ programs. We have observed
sustained antiviral effects for a long time after last drug administration in various animal model studies.
Infrequent
dosing would translate into ease of patient compliance. Patient compliance is a major issue for all antiviral drug therapies,
and particularly for HIV/AIDS.
We have been
able to develop drugs using many different routes of administration with very little development time and effort.
Initially we
focused on developing only injectable formulations since these afford the maximum bioavailability of the drug inside the body.
We have also developed eye drop solutions against EKC in a very short time frame.
A skin cream
appears to be the right formulation for the treatment of oral and genital warts caused by HSV-1 and HSV-2. Last year we had already
observed that our drug candidates, in the solution form, were effective in cell cultures against at least two different strains
of HSV-1 in two different laboratories. We needed to make skin creams for conducting animal studies and selected different building
blocks for our backbone polymer, and built new drugs against HSV this year. The skin cream drug candidates against HSV were developed
within a matter of weeks. The formulation development itself took only a few days. In contrast, many drug development companies
spend years in formulations development.
We have successfully
developed what may be the first ever orally available targeted nanomedicine, in our Flucide program.
We demonstrated
that we can rapidly develop different formulations because of the inherent strength of the nanoviricide platform technology. The
technology also enables us to develop nasal sprays and bronchial aerosols. We plan to develop the appropriate formulations as
necessary.
We have limited
our expenditures on socially conscious projects such as “Neglected Tropical Diseases” (NTD’s), and “Bio-defense”
projects to the extent that participatory funding from third parties is available. To this end, we attempt to obtain grants and
contracts financing from government and non-government sources. We will continue to work on these programs as time and resources
permit. In addition, we continue to develop novel technologies such as ADIF™ (“Accurate-Drug-In-Field™”)
which may possibly represent one of the best scientific approaches against manmade and natural novel disease agents. Outbreaks
of natural, novel viral diseases, such as Ebola, MERS-CoV, SARS-CoV, H7N9 Influenza, and others, will continue to occur. At present,
there is no feasible therapeutic intervention for outbreaks of novel viruses, such as the new Ebola virus epidemic, and the MERS
coronavirus outbreak reported recently.
In order to
enhance our corporate governance and oversight, we added two marquee independent board members to our Board of Directors in May/June,
2013. Dr. Milton Boniuk is the Caroline F. Elles Chair Professor of Ophthalmology, in the Alkek Eye Center at the Baylor College
of Medicine, Houston, TX, a practicing ophthalmic surgeon, an astute businessperson, a renowned humanitarian, and a strong investor
in and supporter of the Company. Dr. Mukund S. Kulkarni, MBA, PhD, is currently the Chancellor of Penn State University, and continues
to be Professor of Finance. Together with Mr. Stanley Glick, Practicing CPA and Chair of our Audit Committee, we now have a majority
of independent board members.
We
have continued to successfully raise financing. We had previously completed a $6 million convertible debentures placement
with our prior investors with long positions in February, 2013. In addition, we completed a registered direct offering
of approximately $10 million on September 9, 2013, after reverse-split of our common stock by a factor of 3.5 old common
shares for 1 new common share. With the newly established stock price, subsequently, we met the eligibility criteria for both
NASDAQ and NYSE MKT. On September, 25, 2013, the Company’s common stock began trading on the NYSE MKT exchange under
the symbol NNVC. This uplisting was a major milestone for the Company and an important advance in the Company’s
corporate lifecycle. Subsequent to the uplisting, we raised approximately $20 million in January 2014, in a Registered Direct
Offering. Later, in July, 2014, we sold convertible debentures worth $5 million. In addition, in September 2014, we accepted
exercises of our old warrants at $3.50 per share, for a total of approximately $6.74 million.
On July 2,
2014, the Company reported that its common stock, NNVC, was added as a member of the U.S. small-cap Russell 2000 Index after the
equity markets closed on June 27, when Russell Investments reconstituted its comprehensive family of global indexes. Membership
in the Russell 2000, which remains in place for one year, is based on membership in the broad-market Russell 3000 Index. The stock
was also added systematically to the appropriate growth and value indexes.
With these
recent financings and after accounting for purchase of the Shelton facility, as of December 31, 2014, the Company has current
assets including security deposits and prepaid expenses of approximately $35.6 million. The Company continues to be frugal in
its expenditures, and has successfully held the rate of operational cash expenditures at approximately $2.9 million this quarter.
We believe we have sufficient funds in hand for more than two years of operations at the current rate of expenditure, and including
the projected expenditures.
We
believe we have sufficient funds in hand to complete Phase I and Phase IIa human clinical studies for at least one of our
drug candidates, and advance, at least, one additional drug candidate into human clinical studies. Our estimate is based on a
number of assumptions and cost estimates provided by outside parties. The Company itself does not have the expertise in
taking a drug through human clinical trials and as such depends upon outside experts to generate such estimates as well as to
help the Company formulate and conduct its drug development programs. As such. Thus, these estimates may be grossly in error
and there may also be hidden costs that we are not aware of.
Our strategy
is to minimize capital expenditure. We therefore rely on third party collaborations for the testing of our drug candidates. We
continue to engage with our previous collaborators. We also seek to engage with additional collaborators, as necessitated for
the progress of our programs.
In November
2013, we renewed our contract with the Professor Eva Harris lab at the University of California at Berkeley for evaluation and
development of our Denguecide drug candidate. With cases in Florida, Texas and recently in New York, in addition to 25,000 suspected
cases reported in Puerto Rico this past summer, dengue virus is clearly becoming an important pathogen of concern in the United
States.
We have engaged
Biologics Consulting Group, Inc., to help us with the US FDA regulatory submissions. We are also engaged with Australian Biologics
Pty, Ltd to help us with clinical trials and regulatory approvals in Australia. We believe that cGMP-like manufactured product
is acceptable for entering human clinical trials in Australia.
In addition,
we signed a Master Services Agreement with Public Health England (PHE), UK. We have also signed a new CRADA-Materials Transfer
Agreement with USAMRIID for the evaluation of our anti-Ebola nanoviricide drug candidates. We anticipate completing master services
agreements, after performing our due diligence, with additional parties in furtherance of our anti-viral drug development programs.
We have continued
to achieve significant milestones in our drug development activities. All of our drug development programs are presently at pre-clinical
stage. We believe we are advancing these programs at a faster pace than industry peers. We continue to test several drug candidates
under each program even though we may achieve extremely strong results with some of the candidates.
The Company
reports summaries of its studies as the data becomes available to the Company, after analyzing and verifying the same, in its
press releases.
In July-August
2011, we reported on the anti-HIV studies that were designed to discriminate the comparative effectiveness of different ligands.
We reported that our lead anti-HIV candidate achieved anti-HIV efficacy equivalent to a HAART (highly active anti-retroviral therapy)
triple drug cocktail in this recently completed animal study. Treatment with this lead anti-HIV nanoviricide reduced HIV levels
and protected the human T cells (CD4+/CD8+) to the same extent as treatment with the HAART cocktail. The three drug HAART cocktail
used for comparison in this study is one of the combination therapies recommended for initial therapy in humans. No evidence of
drug toxicity was observed in the case of nanoviricide drug candidates. We later reported that this lead anti-HIV drug candidate
achieved a long term anti-HIV effect with a much shorter dosing regimen and a markedly lower total drug dose than the HAART drug
cocktail therapy in a recent animal study. The antiviral effect of the anti-HIV nanoviricide (“HIVCide™”) continued
throughout the 48 days of study even though HIVCide dosing was discontinued after only 20 days. The clinical benefit of HIVCide
was found to be sustained for at least four weeks after the last drug dose. Treatment with the lead anti-HIV nanoviricide both
(1) reduced the HIV viral load and (2) also protected the human T cells (CD4+,CD8+), equally well as compared to treatment with
the three-drug HAART cocktail, at 24-days as well as at 48-days, even though the HIVCide treatment was stopped at 20 days. The
lead candidate is now undergoing further optimization.
In September
2013, we announced that we had further improved the HIVCide drug candidates, based on results of cell culture studies conducted
by Southern Research Institute, Frederick, MD. A broad-spectrum anti-HIV-I activity was demonstrated in that HIV-1 Ba-L, a CCR5-using
strain as well as HIV-1 IIIB, a CXCR4-using strain, were both inhibited equally well by two different nanoviricide drug candidates
in the standard MAGI HIV Antiviral Assay
A long and
sustained effect of HIVCide would lead to improved patient compliance, which is a sought after goal in HIV therapy. With this
new study, we believe that we are close to a “Functional Cure” of HIV wherein the patient can take treatment until
the viral load is undetectable and then stop treatment until an episode of virus reawakening occurs. Anti-HIV drug development
is very expensive and therefore the Company continues to keep this program at a lower priority than our other drug development
programs.
In September
2011, we announced that we have selected a clinical candidate, now designated NV-INF-1, for FDA submission in our highly successful
FluCide™ anti-influenza therapeutics program. The Company is now developing certain additional information on NV-INF-1,
with input from its FDA consultants, for the pre-IND application to the FDA. The Company is planning on two separate indications
for NV-INF-1: High strength dosage form for hospitalized patients with severe influenza, and a single course therapy for the out-patients
with less severe influenza. We are currently working on putting together the FluCide information in a pre-IND application to the
US FDA.
In July 2011,
we retained the Biologics Consulting Group to help us with our regulatory filings. This led to our pre-IND meeting request to
the US FDA in December, 2011, and a pre-IND meeting with the US FDA in March, 2012.
In July 2012,
we retained Australian Biologics Pty. Ltd., a regulatory affairs consulting firm, to coordinate the regulatory review and approval
to conduct the first human trials in Australia for Flucide™, the Company’s broad-spectrum anti-influenza drug. Australian
Biologics will also facilitate clinical trial site(s) selection and development of the clinical trials agreements. Dr. Jim Ackland,
the Manager of Australian Biologics Pty, Ltd, has extensive experience in this field. Prior to becoming managing director of this
company, he was Vice-President, West Coast and Asia Pacific operations for the Biologics Consulting Group, the Company’s
US FDA regulatory affairs consulting group. In the 1990’s, he was the Head of Regulatory Affairs, Vaccines, for the CSL
Group in Australia. The CSL Group is a global, specialty biopharmaceutical company that researches, develops, manufactures and
markets products to treat and prevent serious human medical conditions.
In August 2012,
we reported that oral effectiveness of anti-influenza FluCide drug was demonstrated in a lethal animal model. Certain anti-influenza
drug candidates under our FluCide™ program, when given orally, were nearly as effective as when administered as IV injections.
Two different anti-influenza drug candidates were tested in Oral vs. IV comparison, and both of them showed similar results that
indicated strong oral effectiveness. The results clearly demonstrated that oral administration of both of these FluCide drug candidates
resulted in substantially superior animal protection compared to oseltamivir (Tamiflu®), a standard of care for influenza
at present. The studies involved the same highly lethal animal model the Company has continued to use for its influenza drug development
program.
One of the
FluCide drug candidates, when administered orally, enabled the animals to survive as long as 347.4±4.6 hrs. (14.5 days),
and when given as an injectable, it allowed the animals to combat the lethal influenza infection for 376.8±7.5 hrs. (15.7
days). Another drug candidate (with a different anti-viral ligand), when given orally, resulted in the animals surviving for as
long as 301.3±5.2 hrs. (12.6 days), and when given as a tail-vein injection, for 349.0±3.9 hrs. (14.5 days). For
comparison, untreated control animals died in 119.5±1 hrs. (5 days), and oseltamivir (Tamiflu®) treated animals died
within just 181.7±4.6 hrs. (7.6 days).
The survival
data clearly showed that oral as well as IV administration of FluCide drug candidates was substantially superior to oseltamivir.
In addition, they showed that FluCide drug candidates when given orally had substantial efficacy, almost matching the effectiveness
of the injectable form given at 0.3X of the oral dosage level.
One of the
FluCide drug candidates, when administered orally, resulted in 1.30 log reduction (or 20X reduction) in lung viral load and matched
the viral load reduction on the same drug candidate given as an IV injection. Another drug candidate resulted in 1.23 log viral
load reduction when given orally and 1.31 log viral load reduction when given as an injectable. In contrast, oseltamivir (Tamiflu®,
given orally at 40mg/kg/d) resulted in only 0.6 log viral load reduction (or only 4X reduction) compared to negative controls.
These were the results of lung viral load measured at 108 hours post-infection (hpi). Further, at 180 hpi, the lung viral load
remained controlled at about the same level as at 108 hpi with the nanoviricide® drug candidates. In contrast, lung viral
load in the oseltamivir treated mice increased to the same level as the negative control (infected untreated) animals prior to
their death and the oseltamivir group exhibited a survival of only 182±4 hours.
The number
of lung plaques and plaque areas (resulting from the influenza virus infection) also were consistent with the data from the lung
viral load, and were minimal in the case of the nanoviricide drug candidates whether given as IV or orally. Oseltamivir treatment
did not protect the lungs of infected animals anywhere close to the protection afforded by the FluCide drug candidates.
These data
clearly demonstrated that both oral and IV treatment with nanoviricide drug candidates protected the lungs of the mice infected
with influenza virus equally well. It is also clear that this lung protection was the result of the substantial decrease in the
lung viral load. In addition, they show that FluCide drug candidates when given orally had substantial efficacy, almost matching
the effectiveness of the injectable form given at 0.3X of the oral dosage level.
In addition
to the antiviral effects, the oral FluCide drug candidates also led to generation of a strong antiviral antibody response. Two
different anti-influenza drug candidates were tested in Oral vs. IV comparison. One of the FluCide drug candidates, when administered
orally, resulted in 1866±90 micro-g/ml-plasma of anti-influenza antibody, and 1258±59 when administered as IV injections.
Another FluCide candidate, when given orally, resulted in 1491±37 ug/ml plasma of anti-influenza antibody, and 1151±53
when administered as IV injections. The untreated infected animals had 190±22 ug/ml antibody response, which was the weakest
of all, as expected. Of significance, oseltamivir (Tamiflu) resulted in only 950±64 ug/ml level of antibody response, which
was far less than the two oral FluCide groups (p-value <0.0003), and also substantially less than the two IV FluCide groups
(p-value <0.04). These p-values were determined for a comparison of FluCide groups against the oseltamivir group using the
most stringent parameters, viz. two-tailed, paired, t-test. A smaller p-value indicates a greater confidence that the difference
in observations cannot be a result of pure chance. These data also indicated that the antibody response was stronger when FluCide
was given orally rather than as IV injection.
The generation
of a strong antibody response is important. We believe that the strong reduction in viral load caused by FluCide treatment allows
the immune system to function normally and generate appropriate antibodies. A strong antibody response implies that the FluCide
drug candidates may also be useful as prophylactic therapy of uninfected health care workers and close associates of a patient
in addition to treatment of infected patients.
All of these
data also clearly demonstrated that both injectable and oral FluCide™ candidates were superior to oral oseltamivir (Tamiflu®,
Roche), a current standard of care for influenza, in all parameters evaluated.
No adverse
effects were found, indicating that the FluCide dose could be increased further to achieve much greater levels of effectiveness.
The oral FluCide
candidate development was the result of chemistry optimization program that the Company has been working on.
In September
2012, we announced that the oral FluCide™ drug candidates demonstrated dramatically improved survival in animals administered
a lethal dose of the H3N2 influenza A virus. Animals treated with the oral anti-influenza nanoviricide drug candidates survived
for much longer as compared to Tamiflu® treated animals.
In this H3N2
infection study, animals treated with the best of the oral FluCide™ nanoviricide drug candidates survived 15.6 days while
the animals treated with oral Tamiflu survived only 9.6 days. The control animals died within 5 days. The Company has previously
reported that animals treated with these same oral anti-influenza nanoviricides protected mice infected with the H1N1 influenza
A virus and were similarly substantially superior to oral oseltamivir (Tamiflu).
This is the
first demonstration of efficacy of the Company’s FluCide drug candidates against a completely unrelated type of influenza
A virus (viz. H3N2) in contrast to the H1N1 Influenza A virus that the Company has used for its recent development work leading
to its pre-IND application with the US FDA. H3N2 influenza virus is one of the multiple sub-types of influenza A that cause seasonal
epidemics. According to the CDC, influenza causes approximately 36,000 deaths every year in the U.S. alone. The Hong Kong Flu
pandemic of 1968-1969, which killed an estimated one million people worldwide, was caused by a variant strain of H3N2. The Company
believes an orally administered nanoviricide that protect against multiple influenza virus sub-types would be effective in season
after season of influenza epidemics. Such a highly effective, broad-spectrum anti-influenza drug is widely anticipated to be highly
successful.
The Company
believes that the anti-influenza drug candidates it has developed are broad-spectrum, i.e. they should work against most if not
all of influenza viruses. This is because, in spite of mutations and antigenic drift, all influenza viruses bind to the same cell
surface receptor called sialic acid, and the Company has developed small chemical ligands that mimic this receptor, to attack
the influenza viruses. These ligands are chemically attached to the Company’s polymeric micelle backbones that mimic the
cell membrane, to create the nanoviricides. The Company has previously shown effectiveness of its very early anti-influenza drug
candidates against two different strains of H5N1 Bird Flu virus in cell culture studies. The Company has since then improved the
ligands as well as the chemistries as reported from time to time.
The Company
intends to develop data about effectiveness of its drug candidates against certain unrelated influenza A viruses using both cell
culture studies and animal models in a reasonable manner. These data will be needed as part of the IND application that the Company
is working on. An IND application will be required for the Company to enter into human clinical trials.
Previously,
in June 2010, the Company reported successful studies in two different cell culture models of dengue virus type 2 infection. These
studies were conducted at the Prof. Eva Harris lab at the UC Berkeley. Our results were later confirmed and extended to animal
studies.
The Company
reported that its anti-Dengue drug candidates demonstrated significant protection in the initial animal survival studies of Dengue
virus infection, in an animal study protocol modeled to simulate the ADE syndrome. The best nanoviricide drug candidates demonstrated
50% animal survival in this uniformly lethal mouse model. The studies were performed in the laboratory of Dr. Eva Harris, Professor
of Infectious Diseases at the University of California, Berkeley (UC Berkeley).
Based on this
data, the Company believes that it is feasible to develop a single nanoviricide drug against all types of dengue viruses that
circumvents the primary issue of antibody-dependent enhancement (ADE) of dengue virus infection. ADE is thought to result in severe
dengue disease syndromes such as dengue shock syndrome (DSS) and dengue hemorrhagic fever (DHF).
In June, 2010,
we also reported that our anti-HIV drug candidates demonstrated efficacy in the recently completed cell culture studies using
two distinctly different HIV-1 isolates. These studies were performed in the laboratory of Carol Lackman-Smith at the Southern
Research Institute, Frederick, Maryland. These results corroborated our previous findings in Animal Studies. The Company had reported
that its best nanoviricide drug candidate against HIV was more than 25 times superior to a three drug combo anti-HIV cocktail
based on biomarker test response in all parameters tested. The parameters included improvement in human T cell populations in
the animal model and reduction in HIV viral load. The Company has since performed additional studies to optimize the HIV binding
ligand and has found ligands that are superior to the one that yielded these strong results. The Company now plans to deploy this
new anti-HIV ligand connected to the full strength polymeric micelle that we have also optimized as a new anti-HIV nanoviricide
drug candidate. We plan to test this optimized anti-HIV drug candidate in animal studies. Anti-HIV studies are extremely expensive.
As such, the Company’s HIVCide program has been slowed down with the current slow financial markets.
In August 2010,
we reported that our anti-HSV drug candidates exhibited almost complete inhibition of herpes simplex virus HSV-1 in cell culture
studies conducted in Professor Ken Rosenthal lab at the Northeastern Ohio Universities Colleges of Medicine and Pharmacy. These
studies employed the H129 strain of herpes simplex virus type 1 (HSV-1). H129 is an encephalitic strain that closely resembles
a clinical isolate; it is known to be more virulent than classic HSV-1 laboratory strains.
In March through
May 2011, the Company reported that further chemistry optimization led to dramatically improved antiviral efficacy with its optimized
FluCide™ drug candidates in its most recent animal study. In the influenza mouse lethal infection model, animals treated
with one of the optimized FluCide™ nanoviricide drug candidates survived beyond the stated full duration of study (21 days),
and those treated with two additional drug candidates survived almost the full duration of the study. Animals in these three groups
survived significantly longer (20.2 to 22.2 days) as compared to the animals treated with Oseltamivir (Tamiflu®) only 8.3
days. In addition, the post-infection treatment with these optimized FluCide™ drug candidates resulted in dramatic reduction
in the number of lung lesions that are caused by a lethal influenza virus infection. Four days post virus infection, animals treated
with three of the optimized FluCide™ nanoviricide drug candidates exhibited greater than 95% reduction in the number of
lung lesions as compared to the infected yet untreated control animals (p-values < 0.001). In contrast, animals treated with
Oseltamivir (Tamiflu®, Roche) showed only a 50% reduction. In another significant finding, no increase in the number or size
of the lung lesions was observed over the entire duration of the study in the FluCide™-treated animals. This was not the
case for the Oseltamivir-treated animals. This demonstrated that treatment with FluCide drug candidates provided clear and strong
protection against lung damage caused by the severe influenza infection. In addition, in this study, these optimized FluCide™
drug candidates achieved 1,000-fold reduction in the levels of infectious virus in the lungs of animals with a lethal level of
influenza virus infection. The amount of infectious virus in the lungs of the infected animals treated with three of the optimized
FluCide™ nanoviricide drug candidates was reduced by greater than 1000-fold as compared to the infected untreated control
animals (p-values < 0.001), four days after virus infection. In contrast, animals treated with Oseltamivir (Tamiflu®, Roche)
showed less than a 2-fold reduction in lung viral load at the same time point. This indicated a 500-fold greater reduction in
viral load by FluCide drug candidates over Oseltamivir. Of great clinical significance is the fact that 2 of the optimized FluCide™
drug candidates maintained this greatly reduced lung viral load at 7, 13 and 19 days after virus infection in this 21 day study.
Thus, treatment with the optimized FluCide drug candidates appeared to protect against the complete cycle of infection, virus
expansion and spread of infection in the lungs that follows the initial virus infection. This was not the case for the Oseltamivir-treated
animals. Animals treated with Oseltamivir (Tamiflu®, Roche) showed less than a 2-fold reduction in lung viral load at 4 days
and the viral load was increased at 7 days to the same level as that found in the infected, untreated control animals shortly
before their death.
In September
2011, we announced that we have selected a clinical candidate, designated NV-INF-1, for FDA submission in our highly successful
FluCide™ anti-influenza therapeutics program. The Company submitted a pre-IND application to the FDA for this clinical candidate
and held a pre-IND meeting with the US FDA in March, 2012. In addition, the Company is planning a high strength “piggy-back
infusion” dosage form for hospitalized patients with severe influenza. The Company will continue the development of these
two drug candidates towards an IND, based on the guidance it received in the first pre- IND meeting.
The studies
of biological testing of materials provide information that is relatively easy to understand and therefore readily reported. In
addition, we continue to engage in substantial work that is needed for the optimization of synthesis routes and for the chemical
characterization of the nanoviricide drug candidates. We also continue to work on improving the drug candidates and the virus
binding ligands where necessary. We continue to work on creating the information needed for the development of controlled chemical
synthesis procedures that is vital for developing c-GMP manufacturing processes.
A fundamental
PCT patent application, on which the nanoviricides® technology is based, has resulted in additional issued patents in Europe
and Korea since our last update in March 2014. As with issuances in other countries including the USA, these patents have been
allowed with a very broad range of claims to a large number of families of chemical structure compositions, pharmaceutical compositions,
methods of making the same, and uses of the same. The corresponding original “pi-polymer” international application,
namely, PCT/US06/01820, was filed under the Patent Cooperation Treaty (PCT) system in 2006. Several other patents have already
been granted previously in this patent family in various countries and regions, including Australia, ARIPO, Canada, China, HongKong,
Indonesia, Israel, Japan, Mexico, New Zealand, OAPI, Phillipines, Singapore, Vietnam and South Africa, and the USA. Prosecution
in several other countries continues. In May 2012, the US Patent (No. 8,173,764) was granted for “Solubilization and Targeted
Delivery of Drugs with Self-Assembling Amphiphilic Polymers.” The US patent term is expected to last through October 1,
2028, including anticipated extensions in compensation for time spent in clinical trials. This US Patent has been allowed with
a very broad range of claims to a large number of families of chemical structure compositions, pharmaceutical compositions, methods
of making the same, and uses of the same. The disclosed structures enable self-assembling, biomimetic nanomedicines. Estimated
expiry dates for these patents range nominally from 2026 to 2028 with various extensions accounting for delays in clinical trials.
Additional issuances are expected in Europe, and in several other countries around the world.
In addition
to this basic PCT application that covers the “pi-polymer” structure itself, another PCT application, PCT/US2007/001607,
that discloses making antiviral agents from the TheraCour family of polymers and such structures is in various stages of prosecution
in several countries, and has already issued in at least seven countries and regions. The counterparts of the international PCT
application have issued as a granted patent in Australia, Japan, China, ARIPO, Mexico, New Zealand, OAPI, Pakistan, and, South
Africa to date. Additional issuances are expected in Europe, USA, and in several other countries around the world. This patent
application teaches antivirals based on the TheraCour polymeric micelle technologies, their broad structures and compositions
of matter, pharmaceutical compositions, methods of making the same, and their uses. The nominal expiry dates are expected to range
from 2027 to 2029.
The patents
are being issued to the inventors Anil R. Diwan, PhD, Jayant G. Tatake, PhD, and Ann L. Onton, all of who are among the founders
of NanoViricides, Inc. The patents have been assigned to AllExcel, Inc., the Company at which the ground-breaking work was performed.
AllExcel, Inc. has contractually transferred this intellectual property to TheraCour Pharma, Inc.
NanoViricides,
Inc. holds exclusive, worldwide, perpetual, licenses from TheraCour Pharma, Inc. to these technologies and patents for a broad
range of antiviral applications and diseases that include all Influenzas including Asian Bird Flu Virus, Human Immunodeficiency
Virus (HIV/AIDS), Hepatitis B Virus (HBV), Hepatitis C Virus (HCV), Herpes Simplex Virus (HSV), Dengue viruses, Rabies virus,
Ebola/Marburg viruses, Japanese Encephalitis virus, as well as viruses causing viral Conjunctivitis (a disease of the eye) and
ocular herpes. NanoViricides currently holds two licenses in perpetuity to develop and sell drugs for the treatment of these viral
diseases. These licenses are provided for all the intellectual property held by TheraCour Pharma, Inc. that relates to our antiviral
licensed products. These licenses are not limited to underlying patents, but also include the know-how, trade secrets, and other
important knowledge-base that is utilized for developing the drugs and making them successful. In addition, these extremely broad
licenses are not limited to some specific chemical structures, but comprise all possible structures that we could deploy against
the particular virus, based on these technologies. In addition, the licenses are held in perpetuity by NanoViricides for world-wide
use. The licenses are also exclusively provided only to NanoViricides for the licensed products so NanoViricides is the only party
that can further sublicense the resulting drugs to another party, if it so desires. TheraCour cannot further license anything
in our licensed products areas because of the breadth of the license. The licenses can revert only in the case of a default by
NanoViricides. The terms of default are such that effectively TheraCour would be able to take the licenses back only in the event
that NanoViricides files bankruptcy or otherwise declares insolvency and inability to conduct its business. This structure is
standard in the licensing world as it saves the IP from being blocked from commercialization in lengthy and potentially fragmentary
bankruptcy proceedings.
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following
discussion should be read in conjunction with the information contained in the consolidated financial statements of the Company
and the notes thereto appearing elsewhere herein and in conjunction with the Management’s Discussion and Analysis of Financial
Condition and Results of Operations set forth in the Company’s Annual Report on Form 10-K/A for the year ended June 30,
2014. Readers should carefully review the risk factors disclosed in this Form 10-K/A and other documents filed by the Company
with the SEC.
As used in
this report, the terms “Company”, “we”, “our”, “us” and “NNVC” refer
to NanoViricides, Inc., a Nevada corporation.
PRELIMINARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report
contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations,
beliefs, intentions or strategies for the future, which we indicate by words or phrases such as “anticipate,” “expect,”
“intend,” “plan,” “will,” “we believe,” “NNVC believes,” “management
believes” and similar language. The forward-looking statements are based on the current expectations of NNVC and are subject
to certain risks, uncertainties and assumptions, including those set forth in the discussion under “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in this report. Actual results may differ materially from
results anticipated in these forward-looking statements. We base the forward-looking statements on information currently available
to us, and we assume no obligation to update them.
Investors are
also advised to refer to the information in our previous filings with the Securities and Exchange Commission (SEC), especially
on Forms 10-K, 10-Q and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ
from expected or historic results. It is not possible to foresee or identify all such factors. As such, investors should not consider
any list of such factors to be an exhaustive statement of all risks and uncertainties or potentially inaccurate assumptions
The nanomedicine
technologies developed by TheraCour Pharma, Inc. serve as the foundation for our intellectual property. The Company holds a worldwide
exclusive perpetual license to this technology for several drugs with specific targeting mechanisms in perpetuity for the treatment
of the following human viral diseases: Human Immunodeficiency Virus (HIV/AIDS), Hepatitis B Virus (HBV), Hepatitis C Virus (HCV),
Rabies, Herpes Simplex Virus (HSV), Influenza and Asian Bird Flu Virus. The Company has entered into an Additional License Agreement
with TheraCour granting the Company the exclusive licenses in perpetuity for technologies developed by TheraCour for the additional
virus types: Dengue viruses, Japanese Encephalitis virus, West Nile Virus, Viruses causing viral Conjunctivitis (a disease of
the eye) and Ocular Herpes, and Ebola/Marburg viruses. The Company may want to add further virus types to its drug pipeline. The
Company would then need to negotiate with TheraCour an amendment to the Licensing Agreement to include those of such additional
viruses that the Company determines it wants to follow for further development. We are seeking to add to our existing portfolio
of products through our internal discovery pre-clinical development programs and through an in-licensing strategy.
The Company
intends to perform the regulatory filings and own all the regulatory licenses for the drugs it is currently developing. The Company
will develop these drugs in part via subcontracts to TheraCour Pharma, Inc., the exclusive source for these nanomaterials. The
Company may manufacture these drugs itself, or under subcontract arrangements with external manufacturers that carry the appropriate
regulatory licenses and have appropriate capabilities. The Company intends to distribute these drugs via subcontracts with distributor
companies or in partnership arrangements. The Company plans to market these drugs either on its own or in conjunction with marketing
partners. The Company also plans to actively pursue co-development, as well as other licensing agreements with other Pharmaceutical
companies. Such agreements may entail up-front payments, milestone payments, royalties, and/or cost sharing, profit sharing and
many other instruments that may bring early revenues to the Company. Such licensing and/or co-development agreements may shape
the manufacturing and development options that the company may pursue. There can be no assurance that the Company will be able
to enter into co-development or other licensing agreements.
To date, we
have engaged in organizational activities; developing and sourcing compounds and preparing nano-materials; and experimentation
involving preclinical studies using cell cultures and animals. Several of the Company’s drug candidates have shown excellent
levels of efficacy and preliminary safety in animal studies in many different animal models against many different viruses. The
Company determined that its anti-Influenza program, “FluCide™”, was the most advanced and obtained and held
a pre-IND meeting with the US FDA for the same on March 29, 2012. The Company believes it has gained valuable guidance from the
FDA that enables us to develop and execute a product development plan for our anti-influenza drug candidate with the goal of filing
an Investigational New Drug (IND) application to the US FDA, and similar applications in other countries in the world.
As the Company’s
drug candidates progress towards human clinical studies, it has become necessary to enable that they can be produced under “current
Good Manufacturing Practices” (cGMP) guidelines of the US FDA, and other applicable international guidelines (such as WHO
and ICH guidelines, as well as other country-specific and region-specific guidelines). In the US, the US FDA requires that at
least two validated and consistent batches of the drug be produced under cGMP conditions before any human clinical trials can
be allowed. Some other countries may allow research product materials for certain phases of human clinical trials. The Company’s
management has studied the possibilities of contract manufacturing of its drug candidates over the last several years and has
concluded that building a small pilot scale manufacturing facility where the special needs of the manufacture of its nanomedicines
can be met is the most appropriate solution. This approach provides the highest level of control over the quality of the materials
and also keeps the intellectual property of the Company well protected. However, the Company lacked the capital and financial
resources to engage into such an expensive project. In 2011, Anil R. Diwan, the Company’s co-founder, created a separate
entity, Inno-Haven, LLC (“Inno-Haven”), and independently began the development of a nanomedicines manufacturing facility,
to serve the interests of a number of pharmaceutical start-up clients as a contract-manufacturing organization (CMO), including
NanoViricides, Inc. Inno-Haven purchased an 18,000 sq. ft. light manufacturing building on a 4.2 acre land lot in Shelton, Connecticut
in August, 2011. The purchase and related costs were financed by Dr. Diwan. Dr. Diwan had also agreed to provide personal guarantees
for potential loans and mortgages which could be drawn for the purpose of financing the building and construction costs.
No lease agreement
had been perfected with Inno-Haven. The Company engaged external consultants to help it determine whether it would be more economically
beneficial to the Company to either lease this facility or to purchase it outright from Inno-Haven, or to seek a different facility.
Subsequently, the Company’s Board of Directors authorized the acquisition of 1 Controls Drive from InnoHaven, LLC for the
total costs and capital invested by Inno-Haven in acquiring and fitting out 1 Controls Drive. Total rent expense paid to Inno-Haven
during this period amounted to $-0- for the three month periods ended December 31, 2014 and 2013.On December 31, 2014, the Company
closedon the purchase of the property located in Shelton, Connecticut. The purchase price of this 18,000 sq. ft, cGMP compliant
laboratory and clean room facility consisted of the repayment of Inno-Haven’s acquisition and renovation expenses of $4,222,458.54
and its closing costs of $77,480.22.
The Company
does not currently have any revenue. All of the Company’s products are in development stage and require successful development
through regulatory processes before commercialization. We have generated funding through the issuances of debt and private placement
of common stock and also the sale of our registered securities. The Company does not currently have any long term debt, other
than convertible debentures as disclosed earlier. We have not generated any revenues and we may not be able to generate revenues
in the near future. We may not be successful in developing our drugs and start selling our products when planned, or we may not
become profitable in the future. We have incurred net losses in each fiscal period since inception of our operations.
The Company’s Drug Pipeline
We currently
have, in early, active development, (1) an Injectible FluCide™ for hospitalized patients with severe influenza; (2) Oral
FluCide™ for outpatient – both of these drug candidates are expected to be active against Epidemic Influenzas including
the current novel H1N1/2009 “Swine flu” virus, H5N1 and other Highly Pathogenic Avian Influenzas (H5N, H7N, H9N HPAI,
Bird Flu), as well as common seasonal human Influenzas; (3) HIVCide, a potential “Functional Cure that is active against
both the R5 and X4 strains of HIV, (4) Eye drops against viral diseases of the eye such as Epidemic Kerato-Conjunctivitis (EKC)
and Herpes Keratitis, (5) HerpeCide against Herpes virus cold sores and genital Herpes, and (6) DengueCide against Dengue viruses.
In addition,
the Company restarted its anti-Ebola nanoviricide drug program in response to the current epidemic. We hope that this program
may lead to an effective drug against Ebola virus. Drug candidates based on the mechanisms by which the Ebola virus binds to and
enters the cell have been synthesized and have been sent for testing to an external laboratory in late January, 2015, subsequent
to the reporting period. We await the results of these tests.
Currently there
are no drugs or vaccines against Ebola. However, several drug candidates are being explored and some have entered field clinical
trials. Recently, Chimerix Inc. announced that it has stopped the field clinical trial of its anti-herpes drug candidate, namely
brincidofovir, against Ebola after treating approximately ten patients. In addition, in a new publication in the journal mBio
(Kugelman, et al. mBio 2015;6(1):e02227-14), scientists at USAMRIID, Harvard University, and Massachusetts Institute
of Technology (MIT) studied genetic changes in the Ebola virus (EBOV) circulating in West Africa, and concluded that genomic drift
of the EBOV over time may be sufficient to block the action of otherwise potential therapies that target EBOV genetic sequences.
The types of potential drugs at risk include monoclonal antibodies and small-interfering RNA (siRNA) that are scheduled to be
evaluated during the current outbreak. This casts doubt as to how effective, if at all, zMAPP (MAPP Bio, an antibody cocktail),
TKM-Ebola drug candidate from TEKMIRA (an siRNA cocktail), and the Sarepta drug candidate (a modified oligonucleotide cocktail),
would be expected to be in the current outbreak. Hemispherx recently announced that its two drugs, Alferon®-N (a mixed natural
interferon alpha injection), and Ampligen® (a double-stranded RNA), were found to be effective in cell cultures and that Ampligen
protected 100% of ebola infected mice in a study conducted by USAMRIID scientists. However, both of these drugs act by exciting
the human immune response, and therefore, their effectiveness in severely ill Ebola patients can only be assessed in the field.
BioCryst is developing a broad-spectrum viral RNA Polymerase inhibitor against Ebola and other viruses. This drug, BCX-4430, is
in Phase I human clinical trials. A related drug, Avigan® (favipravir, or T-705), (being developed now by FujiFilm), has shown
promising results in Ebola infected patients in the field. Of 69 patients treated, only in a subset, i.e. those patients who had
limited viral load, Avigan reduced mortality to 15% from the historical control value of 30% mortality in the same two hospital
sites treating the patients, according a to a recent news release (http://www.nytimes.com/2015/02/05/science/ebola-drug-has-encouraging-early-results-and-questions-follow.html?_r=1).
The effect of the superior case management protocols employed in connection with the treatment need to be removed from the analysis
to evaluate the actual effect of the drug in such weak but promising signals. Nevertheless, the trial has been expanded and favipravir
may be made more widely available to patients. In contrast, a clinical trial of one of the Ebola vaccine candidates was stopped
in Phase I, another ebola vaccine candidate is in clinical trial at present, but statisticians have raised doubts about these
clinical trials in terms of producing statistically definitive results. Nevertheless, a vaccine would require vaccination of thousands
of times the number of people actually affected by the disease, and given the EBOV mutation effects, vaccines of this cycle can
no longer be expected to be effective to provide immunity against a future epidemic strain, similar to what is widely known in
the case of influenza.
Thus development
of a highly effective therapeutic against Ebola and related viruses such as Marburg remains an important and urgent unmet medical
need. We believe that NanoViricides is well poised to re-enter this field and should be able to develop an effective drug rapidly,
possibly in a timeline responsive to the current epidemic.
The epidemic
and pandemic potential as well as the constantly changing nature of influenza viruses is well known. The HIV/AIDS worldwide epidemic
and the “curse of slow death” nature of HIV viral infection is also well known. Adenoviral Epidemic Kerato-Conjunctivitis
(EKC) is a severe pink eye disease that may lead to blurry vision in certain patients after recovery. Herpes simplex viral infections
cause keratitis of the eye, and severe cases of infection may sometimes necessitate corneal transplants. Oral and genital herpes
is also a well known disease. Degnue viral infection is also known as “ break-bone fever”. What is worse, that when
a patient is infected with a dengue virus a second time, if the virus is a different serotype, then it can cause a severe dengue
disease, or dengue hemorrhagic syndrome, with very high morbidity and a high rate of fatality. This is because, the aptient’s
immune system mounts an attack, but the antibodies that it generates, directed at the previous infecting virus, are not effective
against the new infection, and instead the new infecting virus uses them to hitch a ride into host cells that it infects more
severely. This phenomenon is called “Antibody-Dependent Enhancement” or “ADE” for short.
In addition,
we initiated a research program for the development of a nanoviricide against the MERS Coronavirus (“Middle East Respiratory
Syndrome”).. MERS is a new coronavirus similar to the SARS virus. It first appeared in 2012 in the Middle East. Since then,
about 400 cases have been reported to the World Health Organization; about a third have been fatal. While it has not spread easily
between humans, there have been outbreaks within families and in hospitals, where patients have infected paramedics, nurses and
doctors, reported the New York Times (http://www.nytimes.com/2014/05/03/health/mers-virus-found-in-united-states-for-first-time.html?_r=0).
The high fatality rate implies that if the virus changes such that its human-to-human transmission is more successful, then this
virus can cause significant public health problem, including a potential epidemic.There are no known drugs or vaccines against
the MERS coronavirus. No small animal models for testing MERS therapeutics were available until recently. Perlman and collaborators
have recently reported a mouse model (http://www.pnas.org/content/early/2014/03/05/1323279111.abstract). In this model, mice were
infected with adenovirus carrying the DPP-IV gene to make them susceptible to the MERS virus.
We were able
to create potentially useful drug candidates against MERS-CoV in a very rapid time frame, of less than two months, which included
synthesis scale-up to multi-gram quantities. This demonstrates how rapidly drugs can be developed using nanoviricides technology.
The MERS epidemic did not expand further and therefore we have put this program on the back burner.
Both the safety
and effectiveness of any drug has to be determined experimentally. The safety of a nanoviricide drug is expected to depend upon
the safety of the nanomicelle portion as well as the safety of the antiviral ligand. If one of drug candidates results in a viable
clinical candidate, this me be the fastest timeframe in which an antiviral drug has been designed, and advanced to clinical candidate
level.
Given the high
fatality rate associated with MERS infections, and small numbers of cases, the regulatory pathway for approval processes is uncertain.
However, progress has been made with fatal diseases such as Ebola in defining clinical pathways, and we anticipate similar development
model to be applied for MERS, if we restart this R&D program in the future.
We also have
research programs against Rabies virus, Ebola/Marburg family of viruses, as well as other Viral hemorrhagic fevers. We also have
a research program called ADIF(™) “Accurate-Drug-In-Field”, that we believe is the only way to combat a novel
viral threat right in the field before it becomes an epidemic like SARS, bird flu H5N1, Ebola, or other viral outbreak. The Company’s
ability to achieve progress in the drugs in development is dependent upon available financing and upon the Company’s ability
to raise capital. The Company will negotiate with TheraCour to obtain licenses for additional viral diseases as necessary. However,
there can be no assurance that TheraCour will agree to license these materials to the Company, or to do so on terms that are favorable
to the Company.
Research and Development Costs
The Company
does not maintain separate accounting line items for each project in development. The Company maintains aggregate expense records
for all research and development conducted. Because at this time all of the Company’s projects share a common core material,
the Company allocates expenses across all projects at each period-end for purposes of providing accounting basis for each project.
Project costs are allocated based upon labor hours performed for each project.
The Company
has signed several cooperative research and development agreements with different agencies and institutions The Company expects
to enter into additional cooperative agreements with other governmental and non-governmental, academic, or commercial, agencies,
institutions, and companies. There can be no assurance that a final agreement may be achieved and that the Company will execute
any of these agreements. However, should any of these agreements materialize, the Company will implement a system to track these
costs by project and account for these projects as customer-sponsored activities and show these project costs separately.
Requirement
for Additional Capital
As of December
31, 2014, we have current assets plus security deposits of approximately $39.6 millionthat is more than sufficient to fund our
operations through more than two years or December 31, 2016, at the Company’s current rate of expenditure, and including
the projected expenditure for certain human clinical trials.
With our current
funds we believe that we have sufficient funding available to perform Toxicology Package studies, and additional animal efficacy
studies, to move at least one of our drug candidates into an Investigational New Drug Application (“IND”) with the
US FDA or a similar application with an international regulatory agency, and to conduct Phase I and Phase IIa human clinical trials
of at least one of our drug candidates. In order to file an IND application, we also need to enable manufacturing of the drug
under US FDA guidelines called cGMP. This was the underlying basis for the purchase,of the cGMP manufacturing and R&D facility
in Shelton, CT,. This facility will enable cGMP manufacture of all of our drug substances. .
We believe
that we may also have sufficient additional funding in hand to take at least one more drug candidate into an IND application stage.
These estimates are based on various preliminary discussions and “soft” quotes from contract research organizations
that provide pre-clinical and clinical studies support. The estimates are also based on certain time estimates for achievement
of various objectives. If we miss these time estimates or if the actual costs of the development are greater than the early estimates
we have at present, our drug development cost estimates may be substantially greater than anticipated now. In that case, we may
have to re-prioritize our programs and/or seek additional funding. Also, additional funding, if available, will allow us to move
our other drug candidates towards IND filings. These additional funds will be needed to pay for additional personnel, increased
subcontract costs related to the expansion and further development of our drug pipeline, and for additional capital and operational
expenditures required to file IND applications. We will accelerate our business plans provided that we can obtain such additional
funding. We believe that we currently have adequate financing for our current business plan of operations.
The Company
does not have direct experience in taking a drug through human clinical trials. In addition, we depend upon external collaborators,
service providers and consultants for much of our drug development work. As such our projections and estimates may be significantly
off from actual future results both in terms of timeline and in terms of cost budgets.
We anticipate
that we will incur the following additional expenses over the next 24 months:
1. Research
and Development of $12,000,000: Planned costs for in-vivo and in-vitro studies for pan-influenza FluCide, Eye nanoviricide, HIVCide,
HerpeCide, Dengue, MERS-CoV, and Ebola/Marburg and Rabies programs.
2. Corporate
overhead of $4,000,000: This amount includes budgeted office salaries, legal, accounting, investor relations, public relations,
and other costs expected to be incurred by being a public reporting company.
3. Capital
costs of $2,000,000: This is the estimated cost for equipment and laboratory improvements.
4. Staffing
costs of $4,000,000: This is the estimated cost of hiring additional scientific staff and consulting firms to assist with FDA
compliance, material characterization, pharmaco-kinetic, pharmaco-dynamic and toxicology studies, and other items related to FDA
compliance, as required for development of necessary data for filing an Investigational New Drug with the United States Food and
Drug Administration.
5. If and when
we initiate human clinical trials for Injectable FluCide, we anticipate approximately $2 million in total costs for the Phase
I clinical trials, and approximately $5 million for the Phase IIa (virus challenge human efficacy study) clinical trials. In a
subsequent year, if Phase I and Phase IIa are successful, we anticipate approximately $10 million for Phase IIb human clinical
trials. These estimates are based on rough quotes from potential investigators, and assumptions relative to additional costs.
These estimates assume that FluCide is highly effective and therefore would require relatively few patients in each arm of the
each trial in order to establish statistically significant results.
We therefore
believe that we have sufficient funds in hand to take Injectable FluCide through the initial human clinical trials.
Due to its
current cash position, in addition to certain clinical trials for FluCide and another drug candidate, the Company anticipates
that it will also be able to expedite development of its other drug candidates, namely, DengueCide, Oral FluCide, HerpeCide™,
HIVCide™, and EKCCide™ into the FDA approval process. In addition, the Company was also able to undertake R&D
for a nanoviricide against the Ebola virus. We do not anticipate advancing an anti-Ebola drug candidate, if successful, into traditional
regulatory approval pathway at present. We believe that the current emergency and urgency of the Ebola epidemic in West Africa
has opened emergency use avenues for first-in-human application and studies of anti-Ebola drugs in West Africa, as announced by
the WHO, and based on recent advancement of certain drug candidates into human use against Ebola. We believe that, if successful,
we will then be able to attract funding from non-dilutive sources such as government grants and contracts, as well as from charitable
organizations, for advancing a potential anti-Ebola nanoviricide into further drug development into the normal drug development
pathway for a lethal disease, which follows the US FDA Animal Rule model.
The Company
anticipates it will have sufficient access to capital even if it decides to develop FluCide through Phase III on its own. The
Company believes it will continue to be able to successfully raise financing as needed. If we are unable to obtain additional
financing, our business plan will be significantly delayed.
The Company
has limited experience with pharmaceutical drug development. Thus, our budget estimates are not based on experience, but rather
based on advice given by our associates and consultants. As such these budget estimates may not be accurate. In addition, the
actual work to be performed is not known at this time, other than a broad outline, as is normal with any scientific work. As further
work is performed, additional work may become necessary or change in plans or workload may occur. Such changes may have an adverse
impact on our estimated budget. Such changes may also have an adverse impact on our projected timeline of drug development.
We believe
that this coming year’s work-plan will lead us to obtain certain information about the safety and efficacy of some of the
drugs under development in animal models. If our studies are not successful, we will have to develop additional drug candidates
and perform further studies. If our studies are successful, then we expect to be able to undertake further studies in animal models
to obtain necessary data regarding the pharmaco-kinetic and pharmaco-dynamic profiles of our drug candidates. We believe these
data will then enable us to file an Investigational New Drug Application, towards the goal of obtaining FDA approval for testing
the drugs in human patients.
Most pharmaceutical
companies expect 4 to 10 years of study to be required before a drug candidate reaches the IND stage. We believe that because
we are working in the infectious agents area, our studies will have objective response end points, and most of our studies will
be of relatively short durations. Our business plan is based on these assumptions. If we find that we have underestimated the
time duration of our studies, or we have to undertake additional studies, due to various reasons within or outside of our control,
this will grossly and adversely impact both our timelines and our financing requirements.
Ability to
manufacture our novel nanomedicines under cGMP conditions has been a limiting factor for us in advancing our drug candidates towards
clinical trials. Once the Shelton facility is fully going and once we have produced several batches of at least one of our drug
candidates at this facility under cGMP conditions, we will also have the ability to quickly develop cGMP manufacture of our other
drug candidates. We believe that this will then enable us to move our drug candidates into clinical trials in rapid succession,
limited only by the funding available and the personnel constraints that arise in small start-up pharma companies such as ours.
Management
intends to use capital and debt financing, as required, to fund the Company’s operations. Management also intends to pursue
non-diluting funding sources such as government grants and contracts as well as licensing agreements with other pharmaceutical
companies. There can be no assurance that the Company will be able to obtain the additional capital resources necessary to fund
its anticipated obligations beyond December 31, 2016. The Company currently has no long term debt other than the convertible debentures
as disclosed.
ITEM 3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market
risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange
rates and commodity prices. We currently have no foreign operations and are not exposed to foreign currency fluctuations. Our
primary exposure to market risk is interest rate risk associated with our short term cash equivalent investments, which the Company
deems to be non-material. The Company does not have any financial instruments held for trading or other speculative purposes and
does not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure.
The Company does not have any credit facilities with variable interest rates.
ITEM 4. CONTROLS AND
PROCEDURES
|
(a) |
Evaluation of disclosure
controls and procedures. |
We maintain
disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports
is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s
rules and forms and that such information is accumulated and communicated to our management, including our chief executive and
chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. Disclosure controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives,
and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Management has designed our disclosure controls and procedures to provide reasonable assurance of achieving the desired control
objectives.
As required
by Exchange Act Rule 13a-15(b), we have carried out an evaluation, under the supervision and with the participation of our management,
including our principal executive and principal financial officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as of June 30, 2014.
(a) Based upon an evaluation of the effectiveness
of disclosure controls and procedures, our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”)
originally concluded that as of the end of the period covered by the Annual Report on Form 10-K our disclosure controls and procedures
(as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) were effective to provide reasonable assurance that information
required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified
by the rules and forms of the SEC and is accumulated and communicated to management, including the CEO and CFO, as appropriate
to allow timely decisions regarding required disclosure. However, in connection with the preparation of our unaudited financial
statements for the quarter ended December 31, 2014 and 2013, we determined that in preparing our audited financial statements for
the year ended June 30, 2014, we inadvertently overlooked the anti-dilution provisions in certain warrants issued in connection
with the company’s private placements of securities Specifically, the warrants issued contained
certain anti-dilution ratchet provisions that provided for an adjustment to the exercise price of the warrants if the company issued
any stock equivalent securities at a lower price in the future while the option was still outstanding.
Also in connection with
the preparation of our unaudited financial statements for the quarter ended December 31, 2014 we determined that in preparing
our unaudited financial statements for the quarter ended September 30, 2014, we inadvertently did not recognize a single
compound embedded derivative included with the issuer’s redemption rights in the Series C Convertible Debenture and the
holders conversion right to receive coupon interest in common stock of the issuer. The Series C Convertible Debentures were
issued on July 2, 2014. The Company has restated its financial statements for the three month period ended September 30, 2014
and 2013.
(b) Changes
in internal control over financial reporting. The Company has established an independent Board of Directors comprising three independent
members. Under this Board the Company has established an Audit Committee, a Compensation Committee, a Nomination Committee, and
an Executive Committee. The Company has met or exceeded corporate governance standards of the NYSE MKT, a national exchange. On
September 25, 2013, the Company’s common stock was listed and began trading on the NYSE MKT.
Management’s
Report on Internal Control Over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a- 15(f)
under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles in the United States of America (“GAAP”). We recognize that
because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management
conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2014. To evaluate
the effectiveness of our internal control over financial reporting, management used the criteria described in Internal Control
– Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”).
Based on its evaluation under the Internal Control - Evaluation Framework, management originally concluded that our internal
control over financial reporting was effective as of June 30, 2014.
In connection with the restatement
discussed in Note 2 of the Notes to Financial Statements included in this Form 10-Q/A, management, including our Chief
Executive Officer and Chief Financial Officer, reassessed the effectiveness of our internal control over financial
reporting as of June 30, 2014. Based on this reassessment, using the COSO criteria, management has concluded that we did not
maintain effective internal control over financial reporting as of June 30, 2014 due to a deficiency in the controls over the
review of accounting for complex debt and equity transactions. Management concluded that this deficiency was a material
weakness as defined in the Securities and Exchange Commission regulations. This control deficiency resulted in the
misstatement of the Companys derivative liability and the related financial disclosures for the year ended June 30, 2014 and
the restatement of the unaudited financial information for the quarter ended September 30, 2014 . The Company has restated
the Company's financial statements for the three and six months ended December 31, 2013. The results of which are reported in
this Form 10Q at Note 2 to the financial statements.
Remediation Plan
We are in the process
of remediating this material weakness by, among other things, implementing a process of enhanced review of all financial transactions
including engagement of outside specialists to evaluate our financial transactions as they arise. The actions that we will
be taking are subject to ongoing senior management review and Audit Committee oversight. Management believes the foregoing
efforts when fully implemented will effectively remediate the material weakness recognized while preparing our unaudited financial
statements for the fourth quarter of 2014. As we continue to evaluate and work to improve our internal control over financial
reporting, management may execute additional measures to address potential control deficiencies or modify the remediation plan
described above and will continue to review and make necessary changes to the overall design of our internal controls.
Changes
in Internal Control Over Financial Reporting
There were no material changes in our internal
control over financial reporting (as defined in Rule 13a- 15(f) under the Exchange Act) that occurred as of December 31, 2014,
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to
time, we may be a party to legal proceedings in the ordinary course of our business in addition to those described below. We do
not, however, expect such other legal proceedings to have a material adverse effect on our business, financial condition or results
of operations.
On or about
January 18, 2012, the Nevada Agency and Transfer Company, as agent for service of process for the Company in Nevada, was served
with a Summons and Complaint in the case entitled Yidam, Ltd. v. Eugene Seymour, Anil Diwan, and NanoViricides, Inc. (Case No.
A-12-654437-B) answerable in the Eighth Judicial District Court of the State of Nevada – Clark County (“Court”).
The Complaint sought to compel inspection of the Company’s books and records. The Complaint further sought unspecified
“injunctive relief” in furtherance of the demand for inspection to which it is not entitled. The Complaint by
a holder of less than 1 percent of the common stock of the Company sought, inter alia, inspect documents and records of the company
to which it is not entitled and in a form and manner the Company argues is not authorized by statute. Management believed
that this lawsuit had no merit or basis Monetary damages had not been claimed and as a result no accrual had been made in
relation to this litigation. This action was dismissed by the court or withdrawn several times in a series of repetitive complaints
The Company
has vigorously defended this lawsuit. Following cross-motions for summary judgment and certain discovery as limited by the court,
the parties engaged in a settlement conference in March 2014, at which time an agreement was reached resolving the parties’
disputes in this matter and an identical repetitive complaint the same Plaintiff had filed with the United States District Court
for the District of Colorado. Pursuant to the Settlement Agreement, the Company deposited $150,000 with its attorney to be released
to reimburse the Plaintiff for a portion of its litigation expenses. However, disagreements later arose regarding the negotiated
resolution, precipitating, among other things, the Company’s application for court intervention and repeated status hearings.
Final settlement documents were fully exchanged on September 11, 2014. Upon the Plaintiff’s compliance with the terms of
the Settlement Agreement, the Company authorized counsel to release the reimbursement amount to the Plaintiff. An order dismissing
the foregoing lawsuit was entered on September 16, 2014.
There are no
other legal proceedings against the Company to the best of the Company’s knowledge as of the date hereof and to the Company’s
knowledge, no action, suit or proceeding has been threatened against the Company.
ITEM 2. UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On September
5, 2014, NanoViricides, Inc. (the “Company”) accepted notices to exercise old warrants for the purchase of an aggregate
of 2,136,655 shares of the Company’s common stock at the exercise price of $3.50 per share for aggregate proceeds of $7,478,292.50.
On July 17, 2014, the Company filed a registration statement on Form S-3 (the “Form S-3”) registering an aggregate
of 3,071,986 shares of common stock underlying warrants previously issued by the Company in various private placement offerings
between 2005 and September 2009, (“old warrants”) as described more fully in the Form S-3 (the “Registered Warrants”).
The Form S-3 was declared effective by the Securities and Exchange Commission on August 1, 2014. As of August 15, 2014, any Registered
Warrants as specified above and not previously exercised have expired.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibit
No. |
|
Description |
|
|
|
|
|
31.1 |
|
Rule
13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer |
|
|
|
|
|
31.2 |
|
Rule
13(a)-14(a)/15(d)-14(a) Certification of Chief Financial Officer |
|
|
|
|
|
32.1 |
|
Section
1350 Certification of Chief Executive Officer |
|
|
|
|
|
32.2 |
|
Section
1350 Certification of Chief Financial Officer |
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
|
NANOVIRICIDES, INC. |
|
|
|
|
|
/s/ Eugene Seymour,
MD |
Dated: February 23, 2015 |
Name: Eugene Seymour, M.D. |
|
Title: Chief Executive Officer
and Director |
|
(Principal Executive Officer ) |
|
|
|
|
|
/s/ Meeta Vyas |
Dated: February 23, 2015 |
Name: Meeta Vyas |
|
Title: Chief Financial Officer |
|
(Chief Financial Officer) |
Exhibit 31.1
Certification
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
I, Eugene Seymour, certify that: |
1. |
I have reviewed this quarterly report on Form 10-Q of NanoViricides, Inc.; |
2. |
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal over financial reporting; |
5. |
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
Date: February 23, 2015 |
|
|
|
/s/ Eugene Seymour, MD |
|
|
Name: Eugene Seymour, M.D. |
|
|
Title: Chief Executive Officer, |
|
|
(Principal Executive Officer) |
Exhibit 31.2
Certification
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
I, Meeta Vyas, certify that: |
1. |
I have reviewed this quarterly report on Form 10-Q of NanoViricides, Inc.; |
2. |
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal over financial reporting; |
5. |
The registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
Date: February 23, 2015 |
|
|
|
/s/ Meeta Vyas |
|
|
Name: Meeta Vyas |
|
|
Title: Chief Financial Officer, |
|
|
(Principal Accounting and Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Quarterly Report
on Form 10-Q (the “Report”) of NanoViricides, Inc. (the “Company”) for the quarter ended December 31, 2014,
the undersigned Eugene Seymour, the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of the undersigned’s knowledge and
belief:
|
(1) |
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: February 23, 2015 |
/s/ Eugene Seymour |
|
Name: Eugene Seymour, M.D. |
|
Title: Chief Executive Officer, |
|
(Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Quarterly Report
on Form 10-Q (the “Report”) of NanoViricides, Inc. (the “Company”) for the quarter ended December 31, 2014,
the undersigned Meeta Vyas, the Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of the undersigned’s knowledge and belief:
|
(1) |
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: February 23, 2015 |
/s/ Meeta Vyas |
|
Name: Meeta Vyas |
|
Title: Chief Financial Officer, |
|
(Principal Financial and Accounting Officer) |
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